rmarc
3 years ago
Revisiting Caledonia Mining - No Developments On M&A And I Remain Bearish
Aug. 26, 2021 8:55 AM ETCaledonia Mining Corporation Plc (CMCL)1 Like
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Contributor Since 2015
- Disclosure: I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.
Summary
The company is on track to boost production at Blanket to 80koz per year by 2022.
The mine life stretches to 2034, but this is based on inferred resources.
Reserves at Blanket were just 527koz of gold as of the start of 2020 and Zimbabwe is a terrible mining jurisdiction.
Also, the Glen Hume property was impaired and there have been no updates on the potential purchase of the Isabella-McCays-Bubi mines.
I continue to be bearish and the short borrow fee rate stands at 1.69% as of the time of writing.
Bear icon
Maciej Koza/iStock via Getty Images
Investment thesis
In January, I wrote a bearish article on SA about Zimbabwe-focused gold miner Caledonia Mining (NYSE:CMCL). The company aimed to become a 500koz/year gold producer but the latest quarterly report looks unimpressive. Also, the Glen Hume property was impaired, and there have been no updates on the potential purchase of the Isabella-McCays-Bubi mines.
Caledonia's valuation has decreased significantly since my previous article but I remain bearish as the prospects for the company now look worse than before. Let's review.
Overview of the operations and the financials
In case you haven't read my previous articles on Caledonia, here is a quick overview of the operations. The company's main asset is a 64% interest in the Blanket gold mine, which is located on the northwest limb of the Gwanda Greenstone Belt in Zimbabwe. This is the largest gold mine in a belt which had 268 operating mines at its peak.
(Source: Caledonia Mining)
Blanket has so far produced over a million ounces of gold and its output stood at 16,710 ounces in Q2 2021. As you can see from the charts below, the grades have been decreasing over the past decade but the production has been improving as Caledonia keeps boosting the mined volume.
(Source: Caledonia Mining)
Caledonia's aim is to reach an annual production rate of 80,000 ounces of gold and is close to achieving this. Blanket is comprised of five significantly independent near vertical ore bodies and Caledonia the Central Shaft project last quarter. With this, July production reached almost 6,000 ounces. Overall, Caledonia has invested around $67 million into expanding its production rate since January 2015, which was fully funded from internal cash flows. This is impressive.
(Source: Caledonia Mining)
Blanket has a mine life stretching 13 years and is generating EBITDA of $14 million per quarter even before the expansion. Also, Caledonia has just around $0.2 million in debts and over $16 million in cash.
(Source: Caledonia Mining)
Why in the world would I be bearish on this one? Well, the main reasons are mining jurisdiction and reserves.
Zimbabwe is a terrible mining jurisdiction and this is why there are almost no mines left there today. The country has a history of nationalization plans for parts of its mining industry and is currently struggling with food and fuel shortages, electricity supply disruptions, soaring inflation, and an imploding currency.
Looking at the reserves, keep in mind that Blanket's 13-year mine life is based on resources. Sure, the mine has a very good track record of replacing reserves, but it's dangerous to base your mine life on inferred resources. As of January 2020, Blanket had proven and probable gold reserves of just 527koz.
(Source: Caledonia Mining, page 6 here)
If you take into account only measured and indicated resources, the mine life ends in 2026.
(Source: Caledonia Mining, page 131 here)
Oh and keep in mind that Caledonia owns less than two-thirds of Blanket, which means that the attributable reserves were just 337koz as of January 2020. With this in mind, Caledonia looks like a value trap.
Let's move onto why I think the prospects for the company now look worse than before. There are two main reasons. First, gold prices are lower today compared to January:
(Source: Gold Price)
Second, I'm unimpressed by the recent exploration and M&A developments. Caledonia disclosed in its Q2 financials that it impaired the Glen Hume property near Gweru following disappointing exploration results. That's $3.5 million down the drain.
(Source: Caledonia Mining, page 18 here)
In addition, there has been no development in regards to a rumor that Caledonia was planning to buy the mothballed Isabella-McCays-Bubi mines in northwest Zimbabwe. The latter is said to have the potential to produce over 200koz of gold per year. It seems that Caledonia Mining is back to focusing on Blanket and I just don't see a way the company can achieve its ambition of growing output to 500koz per year.
Caledonia has a market capitalization of $147.1 million as of the time of writing. Blanket had a net present value (NPV) of $191 million according to the May 2021 technical report.
(Source: Caledonia Mining, page 12 here)
Keep in mind that 64% of this sum is $122.2 million. In view of this, I think Caledonia looks overvalued and investors can take advantage of this by short-selling the shares. According to data from Fintel, the short borrow fee rate stands at 1.69% as of the time of writing.
Investor takeaway
I view Blanket as a relatively small gold mine that has pretty low all-in sustaining costs (AISC). The problem is that the mine is located in Zimbabwe and reserves are low. Caledonia has done a good job at Blanket over the past several years, but I just don't see a clear path to a production profile of 500koz per year anymore. The company is already valued at above its NPV and I think it deserves to be trading at a discount due to the jurisdiction. In light of this, I view the company as overvalued.
I see two major risks for the bear case at the moment. First, gold prices might increase in the future. Central banks across the world are currently injecting record amounts of liquidity into the financial system due to the Covid-19 pandemic and gold is seen by many investors as a safe haven against inflation and currency depreciation (personally, I prefer real estate). Second, Caledonia could have success on the exploration front over the next few years, thus significantly boosting reserves. This, in turn, would increase Blanket's NPV.
JD400
3 years ago
New Caledonia leaders agree terms for sale of Vale nickel mine
Mar 4, 2021 8:05AM EST
Political parties in New Caledonia on Thursday agreed new terms for the sale of Vale's nickel business, including a proposed majority stakeholding for local interests, seeking to resolve unrest over the planned sale.
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Adds Trafigura reaction, environment commitments
PARIS, March 4 (Reuters) - Political parties in New Caledonia on Thursday agreed new terms for the sale of Vale's VALE3.SA nickel business, including a proposed majority stakeholding for local interests, seeking to resolve unrest over the planned sale.
Brazilian miner Vale's VALE3.SA decision last year to sell its nickel mine and processing plant in the French Pacific territory to a consortium including Swiss commodity trader Trafigura TRAFGF.UL sparked fierce opposition from pro-independence groups.
Violent protests led Vale to shut down the site in December.
Under Thursday's agreement, pro-independence and loyalist leaders proposed that a 51% stake in the Vale operations be held by New Caledonia's provincial authorities and other local interests. Trafigura would have a 19% stake, less than the 25% planned in the initial sale deal with Vale.
The text released by the New Caledonian parties also mentioned a "technical and industrial partnership" with Tesla TSLA.O, under which the electric car company would source raw materials for batteries.
The parties also called for reinforced environmental standards and set a target for the mining complex to be carbon neutral by 2040.
Trafigura said it welcomed the political agreement.
"We're looking forward to operations resuming and for final completion of the transaction as soon as possible," a Trafigura spokesperson said.
Vale and Tesla did not immediately respond to requests for comment.
New Caledonia is the world's fourth-largest nickel producer behind Indonesia, the Philippines and Russia.
Demand for nickel, mainly used in making stainless steel, is expected to grow rapidly owing to increased demand for batteries for electric vehicle.
(Reporting by Gus Trompiz and Eric Onstad Editing by David Goodman )
https://www.nasdaq.com/articles/new-caledonia-leaders-agree-terms-for-sale-of-vale-nickel-mine-2021-03-04
NYBob
3 years ago
Caledonia lifts 2021 gold production guidance after record 2020 output
Caledonia's Blanket gold mine, in Zimbabwe
18TH JANUARY 2021
BY: MARLENY ARNOLDI
CREAMER MEDIA ONLINE WRITER
ARTICLE ENQUIRY SAVE THIS ARTICLE EMAIL THIS ARTICLE
FONT SIZE: -+
Aim- and NYSE-listed Caledonia Mining Corporation produced a record
57 899 oz of gold in 2020, meeting the top end of its revised increased
guidance for the year.
The company had its guidance set at between 55 000 oz and 58 000 oz last year.
About 15 012 oz of total output was produced in the fourth quarter
alone.
The company has set its gold production guidance for this year at
between 61 000 oz and 67 000 oz.
The company’s Central shaft at the 64%-owned Blanket mine, in Zimbabwe,
is due to be commissioned before the end of the first quarter,
extending the life of the mine to 2034, as well as increasing output.
Caledonia in December entered into option agreements on two properties
in Zimbabwe, delivering on its strategy of organic growth, while it
increased its dividend at the start of January to $0.11 apiece, marking
a 10% increase on the prior quarterly dividend of $0.10 apiece.
The company has increased its dividend four times in the last 15 months.
Caledonia is aiming to produce 80 000 oz/y from 2022.
EDITED BY: CHANEL DE BRUYN
CREAMER MEDIA SENIOR DEPUTY EDITOR ONLINE
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NYBob
3 years ago
Caledonia eyeing one of Zimbabwe’s largest gold mines
October 21, 2020 Staff Reporter Business 0
Photographer: Waldo Swiegers/Bloomberg
HARARE (Bloomberg) — Caledonia Mining Corp., is interested in buying one of Zimbabwe’s largest gold operations as it embarks on an aggressive plan to acquire more assets in the country, according to a person familiar with the details.
The Jersey-based gold producer is weighing an acquisition of Bilboes Gold Ltd.’s Isabella-McCays-Bubi mines, in northwest Zimbabwe, said the person, who asked not to be identified as the details aren’t public.
A Caledonia spokeswoman declined to comment.
Bilboes Chief Executive Officer Victor Gapare said the company is looking for investors but is not holding talks with Caledonia. “Every gold mine in Zimbabwe, without exception, is looking for money and it’s not a secret,” Gapare said. “Yes, we were on the market, but there is absolutely nothing in us talking to Caledonia.”
The mines can potentially produce more than 200,000 ounces of gold, making it the largest project by output in the country, said the person. Most of the Isabella-McCays-Bubi operations are currently mothballed as the owners search for investors, the person said.
Growth Plans
Caledonia, which has Cape Town-based fund manager Allan Gray as its biggest shareholder, would be able to return the mines to full production within a short period, said the person. They could be operated for more than a decade and would align with the company’s plans to grow its Zimbabwean presence. Raising financing for the deal depends on the nature of the final agreement, the person said.
The gold miner is ramping up production at its Blanket mine in the southwest of the country, and needs larger assets to expand. It sees potential in some mines which were shut down in the 1980s due to a lack of capital, Maurice Mason, the company’s vice president for corporate development said earlier this month.
Caledonia could increase its output more than eightfold through deals, to half a million ounces a year as the company considers investing $400 million in Zimbabwe over the next decade, the person said. This month, Caledonia CEO Steve Curtis signed a memorandum of understanding with the government to evaluate some of the gold assets of state-owned Zimbabwe Mining Development Corp., pending possible purchases.
NYBob
4 years ago
Caledonia eyeing one of Zimbabwe’s largest gold mines
October 21, 2020 Staff Reporter Business 0
Photographer: Waldo Swiegers/Bloomberg
HARARE (Bloomberg) — Caledonia Mining Corp., is interested in buying one of Zimbabwe’s largest gold operations as it embarks on an aggressive plan to acquire more assets in the country, according to a person familiar with the details.
The Jersey-based gold producer is weighing an acquisition of Bilboes Gold Ltd.’s Isabella-McCays-Bubi mines, in northwest Zimbabwe, said the person, who asked not to be identified as the details aren’t public.
A Caledonia spokeswoman declined to comment.
Bilboes Chief Executive Officer Victor Gapare said the company is looking for investors but is not holding talks with Caledonia. “Every gold mine in Zimbabwe, without exception, is looking for money and it’s not a secret,” Gapare said. “Yes, we were on the market, but there is absolutely nothing in us talking to Caledonia.”
The mines can potentially produce more than 200,000 ounces of gold, making it the largest project by output in the country, said the person. Most of the Isabella-McCays-Bubi operations are currently mothballed as the owners search for investors, the person said.
Growth Plans
Caledonia, which has Cape Town-based fund manager Allan Gray as its biggest shareholder, would be able to return the mines to full production within a short period, said the person. They could be operated for more than a decade and would align with the company’s plans to grow its Zimbabwean presence. Raising financing for the deal depends on the nature of the final agreement, the person said.
The gold miner is ramping up production at its Blanket mine in the southwest of the country, and needs larger assets to expand. It sees potential in some mines which were shut down in the 1980s due to a lack of capital, Maurice Mason, the company’s vice president for corporate development said earlier this month.
Caledonia could increase its output more than eightfold through deals, to half a million ounces a year as the company considers investing $400 million in Zimbabwe over the next decade, the person said. This month, Caledonia CEO Steve Curtis signed a memorandum of understanding with the government to evaluate some of the gold assets of state-owned Zimbabwe Mining Development Corp., pending possible purchases.
NYBob
4 years ago
conix thank you, Caledonia to evaluate Zim govt's minerals portfolio for development potential
Aim-listed Caledonia Mining will evaluate mining rights, properties and projects in the gold sector that are controlled by the Zimbabwe government with a view to assessing the potential to advance the development of these properties or projects.
Caledonia believes Zimbabwe is a highly prospective region for gold discoveries.
“Caledonia has assessed and continues to assess investment opportunities in the Zimbabwe gold sector that are privately owned.
"However, the government of Zimbabwe has a considerable portfolio of assets in the gold sector that are potentially very attractive and Caledonia and the government have, therefore, entered into an agreement whereby Caledonia is provided an opportunity to review this portfolio to determine whether they may be commercially developed for mutual benefit,” Caledonia notes.
"I am delighted we have reached this agreement, which will give Caledonia access to a new and much increased number of potential investment opportunities in the Zimbabwe gold sector.
"Over the years of operating in Zimbabwe, we have established a professional relationship with the appropriate bodies and have a strong performance, social and ethical record. We look forward to applying the same approach to any future opportunities in the country, developing the assets in the same responsible way we have done at Blanket, with any new developments including a local ownership structure and community engagement,” CEO Steve Curtis says.
He adds that the signing of this agreement is very timely, as the Blanket mine, Caledonia's current investment in Zimbabwe, is approaching the end of a multiyear investment of more than $60-million in a new shaft - the Central shaft.
When this project is completed later this year, Blanket's gold production is expected to increase from about 55 000 oz/y to about 80 000 oz/y from 2022 onwards.
“The increased level of production, in conjunction with the higher gold price, means that we should have the financial capacity to consider further meaningful investments in the Zimbabwe gold sector,” Curtis enthuses.
“Blanket mine has more than doubled its employment from less than 800 in 2006 to [about] 1 650; Blanket is also a major taxpayer in Zimbabwe and we expect this to increase substantially in the next few years. Caledonia is also an outstanding corporate citizen in Zimbabwe, having facilitated local ownership partnerships of Blanket mine since 2012.
"I am therefore pleased that Caledonia will apply its experience, technical expertise and its financial capacity to evaluate the portfolio of gold assets that are held by the government. I am confident that Caledonia will make an even larger contribution to the economy of Zimbabwe as a result of further investments in our gold industry,” says Zimbabwe Mines and Mine Development Minister Winston Chitando.
https://m.miningweekly.com/article/caledonia-to-evaluate-zim-govts-minerals-portfolio-for-development-potential-2020-10-06
conix
4 years ago
Caledonia to evaluate Zim govt's minerals portfolio for development potential
Aim-listed Caledonia Mining will evaluate mining rights, properties and projects in the gold sector that are controlled by the Zimbabwe government with a view to assessing the potential to advance the development of these properties or projects.
Caledonia believes Zimbabwe is a highly prospective region for gold discoveries.
“Caledonia has assessed and continues to assess investment opportunities in the Zimbabwe gold sector that are privately owned.
"However, the government of Zimbabwe has a considerable portfolio of assets in the gold sector that are potentially very attractive and Caledonia and the government have, therefore, entered into an agreement whereby Caledonia is provided an opportunity to review this portfolio to determine whether they may be commercially developed for mutual benefit,” Caledonia notes.
"I am delighted we have reached this agreement, which will give Caledonia access to a new and much increased number of potential investment opportunities in the Zimbabwe gold sector.
"Over the years of operating in Zimbabwe, we have established a professional relationship with the appropriate bodies and have a strong performance, social and ethical record. We look forward to applying the same approach to any future opportunities in the country, developing the assets in the same responsible way we have done at Blanket, with any new developments including a local ownership structure and community engagement,” CEO Steve Curtis says.
He adds that the signing of this agreement is very timely, as the Blanket mine, Caledonia's current investment in Zimbabwe, is approaching the end of a multiyear investment of more than $60-million in a new shaft - the Central shaft.
When this project is completed later this year, Blanket's gold production is expected to increase from about 55 000 oz/y to about 80 000 oz/y from 2022 onwards.
“The increased level of production, in conjunction with the higher gold price, means that we should have the financial capacity to consider further meaningful investments in the Zimbabwe gold sector,” Curtis enthuses.
“Blanket mine has more than doubled its employment from less than 800 in 2006 to [about] 1 650; Blanket is also a major taxpayer in Zimbabwe and we expect this to increase substantially in the next few years. Caledonia is also an outstanding corporate citizen in Zimbabwe, having facilitated local ownership partnerships of Blanket mine since 2012.
"I am therefore pleased that Caledonia will apply its experience, technical expertise and its financial capacity to evaluate the portfolio of gold assets that are held by the government. I am confident that Caledonia will make an even larger contribution to the economy of Zimbabwe as a result of further investments in our gold industry,” says Zimbabwe Mines and Mine Development Minister Winston Chitando.
https://m.miningweekly.com/article/caledonia-to-evaluate-zim-govts-minerals-portfolio-for-development-potential-2020-10-06
NYBob
4 years ago
Caledonia Mining Corporation Plc Completion of ATM Fund-Raising for
Solar Project, Block Admission Cancellation and Block Admission Return
(NYSE AMERICAN: CMCL; AIM: CMCL)
St Helier, September 4, 2020 -
Caledonia Mining Corporation Plc ("Caledonia" or the "Company") today announces that, further to its announcement on July 24, 2020 relating to a block admission application and an "At the Market" or "ATM" sales agreement with Cantor Fitzgerald & Co (the "ATM Sales Agreement"), the Company has now raised US$13m pursuant to the ATM Sales Agreement through the sale and issue of 597,963 shares in the Company (the "ATM Shares").
Following issue of the ATM Shares, the Company has a total number of shares in issue of 12,118,823 common shares of no par value each. Caledonia has no shares in treasury; therefore, this figure may be used by holders as the denominator for the calculations by which they determine if they are required to notify their interest in, or a change to their interest in, the Company.
As disclosed in the announcement on July 24, 2020, application was made to AIM for a block admission in respect of up to 800,000 new depositary interests representing the same number of shares in the share capital of the Company which will rank pari passu with the existing shares in issue.
Given that the Company has now raised the maximum amount of funds sought under the ATM Sales Agreement through the issue of the ATM Shares, the Company has cancelled the remaining portion of the block admission (202,037 depositary interests) effective as at September 7, 2020, representing the surplus shares that are not required to be sold and issued under the ATM Sales Agreement.
As previously mentioned, Caledonia expects to use the amount of net proceeds from the sales for investment in the construction of a solar power plant to supply electricity to Blanket Mine in Zimbabwe.
In accordance with AIM Rule 29 and Schedule 6 of the AIM Rules for Companies and in full satisfaction of the Company's obligation to make announcements of the utilisation of the block admission, the Company makes the following notification regarding its block admission facility:
(a) Name of company
Caledonia Mining Corporation Plc
(b) Name of the scheme
At the Market Sales Agreement
(c) Period of return
From July 27, 2020 to September 7, 2020
(d) Number and class of securities not issued under scheme
202,037 common shares of no par value each and an equal number of depositary interests
(e) Number of securities issued under scheme during period
597,963 common shares of no par value each
(f) Balance under the scheme of securities not yet issued at the end of the period
202,037 common shares of no par value each and an equal number of depositary interests
(g) Number and class of securities originally admitted and the date of admission
800,000 depositary interests in common shares of no par value - July 27, 2020
(h) Contact name(s) and telephone number(s)
Caledonia Mining Corporation Plc
Mark Learmonth
Maurice Mason
Tel: +44 1534 679 802
Tel: +44 759 078 1139
WH Ireland
Adrian Hadden/James Sinclair-Ford
Tel: +44 20 7220 1751
Blytheweigh
Tim Blythe/Megan Ray
Tel: +44 207 138 3204
3PPB
Patrick Chidley
Paul Durham
Tel: +1 917 991 7701
Tel: +1 203 940 2538
Note: This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation (EU) No. 596/2014.
Cautionary Note Concerning Forward-Looking Information
Caledonia Mining Corporation “gold miners are currently cream of the equity crop” say WHIreland
Article by: Darren Turgel 13th July 2020
https://www.directorstalkinterviews.com/caledonia-mining-corporation-gold-miners-are-currently-cream-of-the-equity-crop-say-whireland/412841166
Caledonia Mining Corporation plc (LON:CMCL) is the topic of conversation when WH Ireland’s Analyst Paul Smith caught up with DirectorsTalk for an exclusive interview.
Q1: With gold as high as it is and a solid production being delivered does this impact your forecast in any way?
A1: The current gold price – now above $1,800/oz for the first time since its last high in 2011 – is only good news for revenue, profit and cash generation from the mine. We will look to revisit our forecasts later in the year as the story of the inexorable gold price rise unfolds. We currently use a $1,685/oz gold price for 2020 and suffice it to say if the gold price remains above $1,800/oz for a sustained period we will have to provide an upward revision to our forecasts.
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Lowjack
3 years ago
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