'Gold price amendments to boost efficiency'

Published: 07 June 2015

Toronto Stock Exchange-listed gold producer Caledonia Mining Corporation (Caledonia) says government's move to amend gold pricing structures for its Zimbabwean gold mine will improve cost efficiency.

The group operates Blanket Mine (Blanket) in Matabeleland South. Steve Curtis, Caledonia chief executive, said the move was a "sign of commitment by government to the development of the country's mining sector".

"The company welcomes all encouraging movements from the Zimbabwean government towards further supporting the nation's mining industry, and Fidelity's announcement yesterday will also improve Caledonia's cost efficiency in future gold sales," he said.

Early this month, Fidelity Printers and Refiners Limited (Fidelity) amended their pricing and payment terms for Blanket by reducing the discount on gold sales to 1,25 percent from 1,5 percent.

Blanket, 49 percent owned by Caledonia, also saw a reduction in its royalty rate from seven percent to five percent in October 2014.

Meanwhile, Caledonia has announced a $70 million expansion to double output at the historic mine to 80 000 ounces by 2018.

Last year, its output beat its production forecasts but was lower than in 2013.

It came in at 41 836 ounces, which was 4,6 percent higher than its guidance of 40 000 ounces.

The company is targeting production for 2015 of around 42 000 ounces of the yellow metal.

Curtis said the group projected a subdued performance for 2015 because work was still in progress to expand operations.

"We will have a fairly flat production in 2015 because we need to get underground logistics in place, there will be nothing dramatic about output this and we expect figures to range from 40-45 000 ounces," he said.

The chief executive also said while the group was looking to expand and venture into different metals, the group had not yet located an opportunity.

"It would be nice to diversify into the other areas in the region and explore different commodities, but we have not found anything to match our capacity yet.

"The focus is currently on investment and developing the mine," he said, adding that the group's exploitation of the current mine was still relatively shallow in terms of Southern African standards.

Last year, Mark Learmonth, the miner's vice president of corporate development and investor relations, said they were targeting English-speaking countries in sub-Saharan Africa such as Namibia and Zambia in expansion.

Although Curtis was conservative with dividend projections for the group in 2015, he said the October dividend was going to be paid.
- dailynews

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