Gold miner Caledonia Mining, which owns 49% of the Blanket mine, in Zimbabwe, produced 11 948 oz of gold in the quarter ended March 31, an 8% year-on-year decrease as a result of lower grades but in line with expectations.

Its consolidated operating profit before tax for the quarter, however, increased by 105% year-on-year to $12.3-million, which the company said was entirely owing to exceptional gains of around $3-million on foreign exchange (FX), following the devaluation of the Zimbabwean currency and a $5-million profit on the sale of a subsidiary.

Excluding the FX gains and disposal profit, Caledonia’s adjusted earnings a share were 23c, which was 44c apiece lower than the corresponding quarter, owing to the lower production and higher mine costs.

Mine costs were about $794/oz, which was 15.6% higher compared with the $687/oz in the corresponding quarter, coupled with a lower average realised gold price of $1 284/oz, compared with $1 312/oz in the corresponding period.

"Notwithstanding the production difficulties experienced as a result of lower-than-expected production tonnage, unreliable electricity supply and lower mine grades, cash generation for the quarter was solid at $6.3-million, which is sufficient to support both capital investment in the Central Shaft project of $5.1-million and Caledonia's regular quarterly dividend, as well as maintain a healthy balance sheet, with net cash of $9.7-million at the end of March.

"Work on sinking the Central Shaft remains on track. I expect shaft sinking to be completed in the middle of this year after which a further 12 months will be needed to equip the shaft before it is commissioned in mid-2020 and we can begin to increase production to our target of 80 000 oz/y by 2022.

“This production increase will contribute significantly to reducing operating costs through economies of scale and we look forward to further increasing cash flows and earnings as the shaft is commissioned,” CEO Steve Curtis said in a statement on Tuesday.

The company maintained its full-year production guidance of between 53 000 oz and 56 000 oz for the year, while anticipating improved cost performance in the remaining quarters of the year.