As is often the case with extraction companies, Caledonia Mining's (CMCL) first half was an exercise in plate-spinning. Production from Blanket, the Zimbabwean gold mine under Caledonia’s de-facto control, was hampered by underground logistical constraints. Meanwhile, renewed efforts to keep a lid on outgoings were undone by unexpectedly low grades, which contributed to a rise in on-mine costs. Yet, include sustaining capital expenditure, and costs actually fell 9 per cent in the period to $856 (£660) per ounce, and are expected to drop to as little as $810 for 2017 as a whole.
With gold edging towards $1,300 and production increasing, both gross profit and the gross profit margin are growing. Three reasons explain why this was not reflected in the half-year bottom line: a higher tax rate, a higher share-based payment and an unfavourable comparison with last year, when Caledonia sold $3.2m of treasury bills. Still, Blanket is generating enough cash to keep confidence in the dividend and the balance sheet.
The other set of spinning plates is market recognition, which remains subdued despite floats in London, Toronto and New York. In an effort to boost investor interest in the shares, Caledonia recently shifted its US listing from OTCQX to the higher disclosure standards of the NYSE American. On average, analysts are forecasting pre-tax profit of $22.3m and adjusted EPS of 81¢ this year, rising to $28.8m and 108¢.
|CALEDONIA MINING (CMCL)|
|ORD PRICE:||510p||MARKET VALUE:||£54.1m|
|TOUCH:||500-520p||12-MONTH HIGH:||720p||LOW: 288p|
|DIVIDEND YIELD:||4.1%||PE RATIO:||10|
|NET ASSET VALUE:||592¢||NET CASH:||$9.3m|
|Half-year to||Turnover||Pre-tax||Earnings per||Dividend|
|30 Jun||($m)||profit ($m)||share (¢)^||per share (¢)|
^Shares adjusted for one-for-five share consolidation in Jun 2017 £1=$1.30
*Dividends paid quarterly in Jan, Mar, July & Oct