Caledonia Mining: We have enough stocks and cash to last the lockdown

Blanket Mine Caledonia Zimbabwe
Blanket Mine: new shaft to be commissioned 2020

Caledonia Mining says it has enough stock and cash to outlast lengthy lockdowns in Zimbabwe and South Africa, and its Blanket Mine will apply to continue operations.

Zimbabwe and South Africa have declared lockdowns to contain the coronavirus, and the measures have hit mines on both sides of the border. The Chamber of Mines in Zimbabwe forecasts output losses of as much as 60% in the coming quarter. On Sunday, the Ministry of Mines said mines should apply for special exemptions to remain open, but that they had to show what measures they are taking to prevent COVID-19 infections.

“Blanket Mine has applied for such an exemption on the grounds that: Blanket and its employee village can be quarantined from the surrounding area; and Blanket will re-configure its operations to reduce the risk of infections being transmitted amongst its employees,” the company said in a statement Monday.

Blanket would increase the “social-distancing” of employees as they enter and leave the underground workings, Caledonia says.

“This will reduce the number of employees who can work underground and will result in daily production running at approximately 70-80% of the target production rate. Blanket is permitted to continue operations at the reduced level until its application for exemption is dealt with by the authorities.”

Ahead of the lockdown in Zimbabwe, Caledonia said it had anticipated supply chain disruptions, and increased its stock of consumables at Blanket.

“Caledonia estimates that Blanket has adequate critical spares and mining consumables in its inventory to sustain uninterrupted gold production well past the expected duration of the supply interruption including allowing for a period of supply chain and inventory restocking after the end of the South African lockdown on 16 April.”

After a strong first quarter, Caledonia enters the uncertain lockdown in a stronger financial position than most companies in Zimbabwe. As at March 25, Caledonia had US$12.5 million cash-on-hand, which would cushion the mine should the lockdowns last longer than expected.

“The current cash on hand and existing term and overdraft facilities already in place at Blanket leave the business in a strong position to withstand an extended period of production interruption if it were to materialise.”

“Our first priority remains the safety and health of all of our employees and their families,” says CEO Steve Curtis.

“We approach this challenge with a strong balance sheet, adequate inventory levels and a healthy workforce. Caledonia, our employees and indeed the people of Zimbabwe have successfully overcome great challenges in their recent past. I have full confidence that we will deal with this current challenge in a similar manner.”

The Chamber of Mines estimates that Zimbabwe will lose at least US$400 million in mineral revenue due to the coronavirus crisis, which has slashed demand for commodities exported by Zimbabwe and shut down trade lines.

On Friday, President Emmerson Mnangagwa announced a 21-day shutdown to contain the spread of the virus. However, the Ministry of Mines has allowed mines to remain open, provided they apply for permission by submitting their precautionary measures.

“The applications should indicate clearly the nature and modus of operation during the lockdown period and the measures which will be taken to safeguard employees and other stakeholders from the potential spread of the COVID-19 virus. Once the application is lodged with the Chamber of Mines or Zimbabwe Miners Federation, the mining company in question may be allowed to continue operating pending a response from Government,” Mines Minister Winston Chitando said Sunday.

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