Caledonia Mining Corp Plc annual report, Q4 FY2023

Business context and reporting period

Caledonia Mining Corporation Plc’s Form 20-F is an audited annual report for the fiscal year ended December 31, 2023—not a standalone 2023 fourth-quarter filing. The company is Jersey-incorporated and operates principally in Zimbabwe, with Blanket Mine as its producing operation. It reports under IFRS in U.S. dollars.

Caledonia acquired Bilboes Gold in January 2023, adding a development-stage sulphide project and a small oxide operation. It also holds the Maligreen and Motapa exploration projects. Blanket is 64% owned by Caledonia.

Financial and operating results

• Revenue rose 3.0%, as the average realized gold price increased to $1,910/oz from $1,772/oz, partly offset by lower gold sales: 76,532 oz versus 80,094 oz.
• Total production was 78,466 oz, including 75,416 oz at Blanket and 3,050 oz at Bilboes. Blanket production fell 6.6% year over year, although tonnes milled rose 2.5% and recovery remained 93.8%. Q4 Blanket production was 20,172 oz, compared with 21,049 oz in Q4 2022.
• Gross margin decreased to approximately 28% from 44%; operating margin declined to approximately 10% from 28%. The net loss followed a $12.8 million tax expense despite $12.2 million of pretax profit.
• Cash from operations decreased to $14.8 million. Investing activities used $31.2 million, including $28.6 million for property, plant and equipment; financing provided $3.9 million. Net cash and cash equivalents moved to a deficit of $11.0 million from positive $1.5 million.
• Year-end cash and cash equivalents were $6.7 million, including $2.5 million restricted cash; overdrafts and term loans were $17.7 million. Solar loan notes were $7.1 million. Working capital was a surplus of $14.1 million, versus $6.0 million in 2022. The working-capital surplus coexisted with negative net cash because of the overdraft position.
• FY2023 capital expenditure on Blanket was $28.1 million. Group rehabilitation provisions were $11.0 million. Total equity was $264.2 million, compared with $193.5 million in 2022.
• Reported cost measures vary by scope and presentation: management cites Blanket on-mine cost of $912/oz and consolidated actual on-mine cost of $945/oz and AISC of $1,320/oz. Another reconciliation reports consolidated on-mine cost of $1,047/oz and AISC of $1,445/oz, reflecting different cost and ounce bases. These non-IFRS measures should be checked against the filing’s reconciliations.

Material changes versus the prior comparable period

• Production costs rose to $82.7 million from $63.0 million, and depreciation rose to $14.5 million from $10.1 million. Higher electricity and consumable costs, increased depreciation following useful-life revisions, and Bilboes oxide costs contributed.
• Administrative expenses increased to $17.4 million from $11.9 million, including $3.1 million of one-time advisory fees for the Bilboes acquisition and higher staffing and support costs.
• Foreign exchange shifted from a $4.4 million gain in 2022 to a $2.6 million loss in 2023, including $6.8 million of realized losses partly offset by $4.2 million of unrealized gains.
• Finance costs increased to $3.0 million from $0.7 million, primarily due to overdraft and loan-note interest. The company raised $16.6 million gross through 2023 equity placings and issued $7.0 million of solar bonds.
• Bilboes contributed $5.7 million of revenue but incurred $13.1 million in production costs. Its oxide mine was placed on care and maintenance at the end of September 2023 after waste stripping made operations uneconomic; an $0.85 million asset impairment was recorded. Leaching of ore already placed on the heap continued.
• Bilboes added $73.2 million of exploration and evaluation assets, and its acquisition consideration included 5.12 million Caledonia shares. Issued shares increased to 19.19 million at year-end from 12.83 million.

Outlook, risks and unusual items

• 2024 guidance is 74,000–78,000 oz of Blanket production; consolidated on-mine cost of $870–$970/oz; and consolidated AISC of $1,370–$1,470/oz, excluding CSR costs. Bilboes oxide production and cost guidance was withdrawn after operations were suspended.
• Management expects the Blanket central-shaft transition to improve operating efficiency and reduce electricity consumption over time. The 12.2 MWac solar plant supplied approximately 24% of Blanket’s average daily power demand and was classified as held for sale at year-end. A sale remained under negotiation; the buyer is expected to supply Blanket under a power agreement.
• Blanket’s 2023 reserve estimate increased to 519,000 oz attributable to Caledonia, from 246,000 oz in 2022, following drilling and resource reclassification. The Blanket mine plan has an estimated 11-year reserve life to 2034; management’s impairment analysis used a longer internal life-of-mine estimate that includes inferred resources. Bilboes reported 1.873 million oz of proven and probable reserves in its first Subpart 1300 estimate.
• Key exposures include Zimbabwe political, regulatory, foreign-exchange and cash-repatriation risk; changes in local currency and payment arrangements; gold-price volatility; power interruptions and water availability; rising input costs; permitting and project execution; and counterparty concentration. The local currency ZiG replaced the RTGS$ in April 2024; management noted rapid local-currency depreciation and procurement prepayments to reduce local-currency cash exposure.
• Although gold sales began to be split between Fidelity and offshore refiner AEG in 2023, the company remains exposed to Zimbabwean payment, banking and exchange-control arrangements. Management reported that year-end bullion receivables were subsequently received in full.
• Safety performance worsened on some measures: the filing reports one employee fatality in February 2023 and a contractor employee death in August 2023. Management said it reinforced safety procedures. A new tailings storage facility is required; its estimated cost is $25.1 million over 2023–2025, and construction was behind schedule.
• Management reported effective disclosure controls and internal control over financial reporting as of year-end. The auditor issued an unmodified IFRS opinion; the auditor did not attest to internal-control effectiveness because the company qualifies as an emerging growth company. Management stated it expects adequate resources to continue as a going concern.
• The board declared quarterly dividends of 14 cents per share during 2023 and in March 2024. Future dividends depend in part on operating performance and the ability to externalize funds from Zimbabwe.

Important facts for investors to verify

• Reconcile the reported on-mine cost and AISC figures, including the different scopes, ounces and exclusions used.
• Assess the sustainability of Blanket production and cost guidance, and the timing and funding of the central-shaft development and tailings facility.
• Track Bilboes sulphide feasibility work, required capital and financing, and whether the oxide operation can resume economically.
• Confirm progress and final terms for the proposed solar-plant sale and the long-term power-supply agreement.
• Monitor Zimbabwe currency, gold-sale settlement, foreign-exchange access and cash-repatriation developments, including the effect of ZiG conversion.
• Review liquidity and refinancing needs given the overdraft balance, near-term borrowing maturities, capital spending and dividend commitments.
• Verify the reserve and resource assumptions, rehabilitation estimates, and the implications of the reported fatalities and safety trends.