Gold output at Caledonia Mining’s Blanket mine in Zimbabwe was up seven percent in the last quarter of 2018, the company reported, as it announced new contracts that will guarantee a stable gold price over the first half year.
Blanket Mine produced 14,952 ounces of gold in the quarter to December, Caledonia said in a statement on Monday. Total gold production for the year was 54,512 ounces, in line with 2018 production guidance which was in a range of 54,000 to 56,000 ounces. Caledonia forecasts 2019 output to come in broadly unchanged at between 53,000 and 56,000 ounces.
However, Caledonia says it remains on track to achieve production of approximately 80,000 ounces of gold per annum from 2021 following completion of the deepening of its main shaft this year. The Central Shaft is currently at a depth of 1,150 meters and will be sunk to a depth of 1,204 meters.
“It is anticipated that shaft sinking will be completed towards the middle of 2019 after which the shaft will be equipped and commissioned. Following an increase in exploration activity at Blanket, since early 2015 Caledonia has announced seven successive increases in the resource base as a result of which Blanket’s life of mine has been extended from 6 years as at the end of 2014, to 14 years as at the end of 2018,” the company said.
To hedge against possible price volatility, Caledonia also announced it has entered into gold price hedging contracts for the five months from February 2019 until June 2019 for 22,500 ounces of production through the purchase of put options with a strike price of $1,250 per ounce. This means Caledonia will get a minimum price of $1,250 per ounce of gold for the duration of the contracts.
The gold price has been firming over recent weeks, and was trading at around $1,289 per ounce on Monday.
Steve Curtis, Chief Executive Officer, said: “We are pleased to see consistent production performance from Blanket in the fourth quarter of 2018 to deliver 14,952 ounces for the quarter and 54,512 ounces for the full year. Until the Central Shaft has been commissioned in 2021, production from Blanket is expected to remain at broadly the same level as we achieved in 2017 and 2018. We therefore expect to produce between 53,000 and 56,000 ounces in 2019.”
Blanket finished 2018 with adequate mining and development infrastructure in place to deliver on this target, he said, and the company has made a good start to 2019.
“This part of the Central Shaft project is relatively capital intensive. In light of our significant capital expenditure commitments, we believe it is prudent to take advantage of the recent strengthening of the gold price and we have therefore secured a minimum received gold price of $1,250 per ounce for the 5 months to June 2019 whilst maintaining full upside exposure to the gold price through a cost effective option structure.”