Caledonia increases quarterly dividend again as gold output remains steady

Caledonia Zimbabwe
Caledonia looking to expand beyond Blanket Mine

Caledonia Mining has declared a further increased quarterly dividend of US$0.085 a share as stable production, cost control and high gold prices increase cash generation.

The company operates the Banket gold mine near Gwanda.

The dividend is a 13% increase on the previous quarterly dividend of US$0.075. Together with the January dividend increase from US$0.069, Caledonia has now effected a 24% increase since October 2019.

“Significant business resilience has been demonstrated through the Covid-19 pandemic, with gold production levels still within the range of 2020 guidance of 53 000 oz to 56 000 oz,” the company said in a statement on Monday.

Steady production, firm gold prices and cost control have generated more cash for the company this year.

“This has given the board confidence that the business can sustain a higher level of dividend distributions.”

Deepening investment

Caledonia expects to complete equipping of the new central shaft in the fourth quarter of 2020. Once commissioned, the shaft will boost cash flow. Annual output will rise 30% to 75 000 oz in 2021 and 80 000 oz from 2022, as capital expenditure drops and operational efficiencies improve due to the new shaft.

“As we approach the end of the five-year investment programme at Blanket mine, we anticipate the rate of capital expenditure will begin to reduce towards the end of 2020, which gives us greater flexibility to consider deploying some of our cash reserves on an increased dividend,” said CEO Steve Curtis.

“The board will review Caledonia’s future dividend distributions as appropriate while considering the balance between delivering returns to shareholders, pursuing the significant growth opportunities within Zimbabwe and maintaining a prudent approach to financial management,” Curtis said.

In May, Caledonia said it could use some of the extra cash to acquire small brownfield operations Zimbabwe, as part of a growth strategy beyond the shaft deepening project.

Blanket Mine has bucked the trend across much of Zimbabwe’s mining sector, where output has fallen due to Zimbabwe’s currency crisis and input shortages.