CALEDONIA Mining defied difficult operating conditions in Zimbabwe to unveil a 9% lift to its quarterly dividend – an increase it said was motivated by an increase in production and the stronger dollar gold price.
Steve Curtis, CEO of Caledonia, said the improvement in the dividend was also a reflection of the firm’s increased confidence in its business. “As we approach the end of the five-year investment programme at Blanket Mine, we anticipate the rate of capital expenditure will begin to reduce from the middle of 2020, which gives us greater flexibility to consider deploying some of our cash reserves on an increased dividend,” he said.
“As we reported in mid-November 2019 when we published the results for the third quarter of 2019, our financial performance has improved due to increased production and the continued higher gold price. This improvement has continued through the final quarter of 2019,” Curtis said.
Trading couldn’t be more difficult in Zimbabwe with power supply from the national grid under constant threat whilst foreign exchange restrictions imposed by Zimbabwe president Emmerson Mnangagwa’s administration has hampered the expansion of Blanket. Just over a year ago, Caledonia was saying the expansion programme was under threat.
By November, however, Caledonia said it was benefiting from a revised electricity tariff which allowed for the funding of imported electricity provided it is used exclusively to supply participating mining companies.
The increased dividend – equal to 7.5 US cents per share – is 9.1% better than the 6.875 cents paid quarterly previously.
Curtis said the central shaft of Blanket, to be commissioned in the fourth quarter of 2020, which would take production to 80,000 ounces a year of gold by the firm’s 2022 financial year. Production for the nine months ended September came in at 38,306 oz.
Curtis said the firm’s board would review future dividend distributions “as appropriate” whilst considering the balance between delivering returns to shareholders and pursuing new growth opportunities in Zimbabwe.
Caledonia said in March that it was considering investing in new opportunities in Zimbabwe once it had completed the Blanket expansion. “If you believe things will be better in five years’ time, you have to get in now,” Mark Learmonth, Caledonia’s CFO, told Reuters.
“We’re not talking about a big, producing mine,” he said. “We’re talking about advanced exploration or brownfield, but with good prospectivity. We plan to redeploy some of the surplus cash to be generated by the Blanket Mine,” he said.