CALEDONIA Mining Corporation (Caledonia) says it has revised downwards its gold production for this year due to low grade and electricity supply challenges in Zimbabwe.
The southern African country has been experiencing severe power cuts after losing generation capacity at its Kariba hydro plant because of low water levels. This has been worsened by state-owned utility company, Zesa Holdings’ (Zesa) failure to import electricity due to indebtedness but the country is working out a payment plan with regional utilities Eskom and Hydro Cahora Bassa.
The New York Stock Exchange-listed resources firm said gold production target at Blanket Mine (Blanket) is now expected to decline by 3 000 ounces.
“Due to the continued low grade and difficulties with electricity supply in July and early August, management has reduced full-year production guidance from the previous range of 53 000 to 56 000 ounces to a revised guidance range of 50,000 to 53,000 ounces,” Steve Curtis, Caledonia’s chief executive said in the company’s results for the quarter ended June 30, 2019.
“The electricity situation worsened considerably in July and early August and Blanket experienced frequent and long interruptions to its power supply. To address this problem Blanket Gold mine (Blanket) has procured additional back-up diesel generators which will be installed in the coming weeks,” he said.
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Curtis said the company has since had engagements with Zesa and the chamber of mines, which have led to Blanket signing a new electricity supply agreement in terms of which it will receive un-interrupted imported power at a lower cost than it previously paid.
Curtis further stated that the company is also at an advanced stage of evaluating a solar PV generating facility which would reduce Blanket’s dependence on grid power.
“Although the electricity situation has improved in recent days, we feel it prudent to continue to implement plans to protect Blanket from any recurrence of this problem,” he said.
The company’s 2019 earnings projections have however remained unchanged.
“Whilst it is disappointing to reduce production guidance, earnings guidance for 2019 remains unchanged at 86 to 117 cents per share due to a higher than anticipated gold price and lower than expected costs,” Curtis said.
Blanket’s gold production during the period was 12 712 ounces, which was marginally higher on the first quarter.
Apart from the electricity challenges, Curtis said production was also affected by lower than expected grade “as problems with mining dilution adversely affected the grade and mine production continued to be disrupted due to the instability of the incoming power supply”.
Meanwhile, the shaft sinking at Blanket’s Central Shaft is now complete.
“This is a major milestone and marks the successful culmination of five years’ work and approximately $45 million of capital investment.
“We look forward to commissioning the shaft in the second half of 2020 after which we can begin to increase production to the target level of 80 000 ounces in 2022,” said Curtis. newsdesk@fingaz.coSubscribe to The Financial Gazette