CALEDONIA Mining approved its third dividend increase of the past 12 months, announcing today it would pay out 10 US cents per share owing to declining capital expenditure obligations from 2021, and an improved gold price.
The company, which operates a single asset, the Blanket mine in Zimbabwe, paid an eight cents/share dividend in July. Today’s announcement signals an 18% increase over the previous dividend, and a 45% increase from a year ago.
“The decision by the board to increase the dividend reflects our continued and increasing confidence in the outlook for the business,” said Steve Curtis, CEO of Caledonia Mining in a statement. “As we reported in our Q2 2020 (second quarter) results, the business continues to perform well supported by strong production and a firm gold price.”
Gold production for the first half of the firm’s 2020 financial year came in at 27,732 ounces, a 12.5% year-on-year improvement. Caledonia maintained its 2020 full year production guidance of 53,000 to 56,000 oz. It was also on track to achieve production of 80,000 oz by 2020 through the deepening of Blanket mine central shaft.
“As we approach the end of the six year investment programme at Blanket mine, we anticipate that the rate of capital expenditure will begin to reduce in 2021,” said Curtis.
He said the company would give thought to “new projects”. The company had previously floated the idea of embarking on a possible acquisitions. “We expect the combination of rising production and declining capital investment to give us greater flexibility to consider further increases in the dividend in addition to possible investment in new projects.”
Caledonia’s stability is remarkable when set against Zimbabwe’s economic woes. According to a Bloomberg News article earlier this month, Zimbabwe has never been lower with corruption, and economic mismanagement laying waste to a country once described as “a jewell by Tanzanian President Julius Nyerere.
In March, Caledonia circumvented crippling power shortages in Zimbabwe after signing an agreement to buy imported power which was cheaper than its previous supply. The company had also invested in power generators to keep the cogs turning.
It has also removed some legacy issues. Earlier this year it increased its stake in Blanket to 64% after cancelling a shareholder loan dating back to 2012 when the firm sold a stake in the mine to comply with the late former president, Robert Mugabe’s ‘indigenisation policy’.
Caledonia bought 15% of the mine’s shares from Fremiro Investments, a company that represented Zimbabwe’s National Indigenisation and Empowerment Fund among other shareholders.
Shares in the company are more than 150% higher on a 12 month basis. The company is primarily listed on the Toronto Stock Exchange.
