Gold miner Caledonia Mining achieved another strong performance in the financial year ended December 31, with its primary asset, the Blanket nine, in Zimbabwe having produced a record level 16 876 oz in the fourth quarter of the year.

Output for the quarter was up from the 14 985 oz produced in the fourth quarter of the prior comparable year, and took overall gold production for the year to 55 182 oz.

Owing to the strong performance during the financial year, basic earnings per share (EPS) for the year on an International Financial Reporting Standards (IFRS) basis were $3.82 a share compared with 99c a share in 2018.

IFRS EPS after adjusting for the net foreign exchange gain were $1.52c a share compared to 97c a share in 2018. EPS, after adjusting for other items including deferred tax and the profit on the sale of a subsidiary, were $1.44c a share for the year, compared to $1.32c a share in 2018.

CEO Steve Curtis on Wednesday said the higher production, combined with lower on-mine costs per ounce, as well as an improved gold price, resulted in a substantial increase in profit for Caledonia.

Gross profit for the year increased by 44% to more than $31-million.

On-mine costs per ounce for the year were $651 compared with $690 in 2018 owing to lower electricity costs in the first part of the year and lower on-mine administration costs owing to the devaluation of the Zimbabwe currency, Curtis said.

“The excellent financial and operating performance is particularly pleasing, given the difficult start to the year, and is testament to the resilience and tenacity of the management and workforce at Blanket, and at Caledonia,” Curtis commented.

He added that profit for the year had been further enhanced by a net foreign exchange gain of about $30-million. This gain, which was largely unrealised, was owing to the sharp devaluation of the Zimbabwe currency from February 2019 onwards, which reduced the US dollar values of bank loans and deferred tax liability, Curtis explained.

“If exchange rates remain unchanged, these unrealised losses will be realised from 2021 onwards as the deferred tax liability begins to unwind and the term loans begin to fall due for payment,” he said.

According to Curtis, Caledonia’s cash flows remain strong, despite continued substantial investment in the Central shaft.

Cash flows from operating activities were $23.9-million for the year, compared to $21.1-million for 2018.

Capital investment in the year, he added, was $20-million – the same as the prior year, and included about $1.5-million of unbudgeted expenditure on additional diesel generators to protect against the sharp increase in electricity outages from July 2019.

The Central shaft continues to be the main focus of Caledonia’s investing activities, and when the new shaft is commissioned towards the end of 2020, Blanket will be able to increase production to the target rate of about 80 000 oz of gold a year from 2022 onwards.

The shaft sinking phase of the project was completed in July 2019 and work has started on equipping the shaft, with the substantial capital investment period expected to be completed in the third quarter of this year.