Blanket mine gold output dips 2,2%

Published: 14 May 2014

Gwanda-based gold producer Blanket Mine's gold output for the first quarter of the current year was down 2,2 percent due to 10 241 ounces compared to the prior period last year.

Production was adversely affected by lower head grade and low tonnage throughput, said management. Despite the slight decline in output, Blanket achieved gold sales of 12 210oz, which was a 2 percent improvement from the previous year's Q1 figure of 11 964oz.

The slight improvement was as a result of work in progress that was brought forward from the preceding quarter of 1 969 per ounce. Management said on-mine costs for gold sold in the period under review benefited from work in progress brought forward from the preceding quarter with a carrying value of $411/oz. Average realised gold price during the period under review was lower at $1 288/oz compared to $1 600/ oz in the prior comparable period. This resulted in lower gross profit amounting to $6 million, which was 33 percent lower than the $9 million posted in Q1, 2013.

Net profit attributable to shareholders was $3,5 million for the period, down from p.c.p figure of $4,6 million. Commenting on the results, Caledonia Mining Corporation CEO Stefan Hayden said: "New production areas have and are being developed and I am confident that the 2014 production target of 48,000 ounces will be achieved, with 52,000 ounces expected in 2015....Underlying costs at Blanket remain stable: there have been no significant increases in electricity or consumable costs and the 2014 labour negotiations have recently been finalised at an across-the-board increase of approximately 5 per cent. It is expected that Blanket's on-mine cash costs will decrease as production increases."

Toronto Stock Exchange-listed Caledonia owns 49 percent of the Blanket mine after its indigenisation was completed in 2012. Management says Blanket continues to implement its growth strategy which will result in production increasing to approximately 48,000 ounces of gold in 2014 and 52,000 ounces of gold in 2015.

Further increases in production are expected following the completion of the No. 6 Winze Project, which is intended to provide access to deeper resources below 750 meters. Blanket says the obligation to sell its gold through Fidelity Printers and Refiners has helped it reduce its working capital requirements. Fidelity Printers and Refiners is the country's sole buyer of the mineral after it resumed gold refining in December last year since 2008 following a policy directive by Government.

The resumption of refining has benefited the country in terms of providing feedstock for the resuscitation of the local jewellery industry and increasing the cost competitiveness of locally-produced gold.

Hayden said the gold producer itself was benefiting from selling its gold to Fidelity Printers and Refiners.

"Since the beginning of 2014 Blanket has sold its gold production to Fidelity Printers and Refiners. The new sales arrangements with Fidelity have reduced Blanket’s working capital requirement due to the earlier payment terms. Blanket has received all payments due from Fidelity in-full and on-time," said Hayden.
- BH24