15 November 2012

Zimbabwe: Blanket Mine Gold Output Reach All-Time High

CALEDONIA Mining Corporation says gold output at its local unit, Blanket Mine, reached an all-time high after increasing 33 percent in the third quarter from 9 743 ounces to 12 918 ounces produced during the same period last year. Output was 12 percent higher from 11 560 ounces produced in the last quarter, Caledonia said yesterday. Gold production from underground mining was the highest ever produced by Blanket since its first recorded production in 1906.

Revenues from gold during the quarter were at an average price of US$1 673 per ounce compared to an average sales price of US$1 599 in the preceding quarter and an average sales price of US$1 737 in the comparable quarter last year.

Mr Stefan Hayden, the president and chief executive said of Caledonia said: "The third quarter of 2012 showed a substantial improvement in gold production at the Blanket Mine in Zimbabwe.

"This was the highest quarterly gold production ever achieved by Blanket Mine since its first recorded production in 1906."

He said increased gold production, further improvements in gold recoveries and continued close attention to costs contributed to a reduction in average operating costs from US$547 per ounce of gold produced in the preceding quarter to US$508 per ounce of gold produced.

He added that Blanket Mine was now one of the lowest cost gold producers in both Africa and the rest of the world.

Blanket Mine's cash operating costs fell to US$508 per ounce of gold produced from US$547 in the preceding quarter and US$583 in the comparable quarter.

Gross profit (after depreciation and amortisation but before administrative expenses and the Indigenisation related expenses) was US$12,6 million, a new record high, which was 25 percent higher than the US$10 million achieved in the preceding quarter and 35 percent higher than the US$9,3 million last year.

Cash flow from continuing operations, before capital investment, was US$12,3 million compared to US$8,6 million in the last quarter and US$9,2 million in the comparable quarter. Net cash and cash equivalents generated per share in the quarter was US1,2 cents compared to US0,36 cents in the preceding quarter and US2,9 cents for the nine months to September 30, 2012 compared to US1,14 cents for the nine months to September 30, last year.

Blanket made payments in respect to taxes, royalties, licence fees, levies and other payments to the fiscus totalling US$8,4 million compared to US$7,9 million in the preceding quarter and US$3,8 million in the comparable quarter. Caledonia's strong operating performance was converted into an attributable net loss after tax of US$7,2 million after a non-cash, non-recurring charge of US$14,1 million due to the implementation of the indigenisation of Blanket Mine.

As an indigenised entity, Blanket can now develop and implement its long term growth strategy.

On October 11, 2012, Caledonia announced the completion of the indigenisation of Blanket following which Caledonia now owns 49 percent of Blanket.

The newly constituted Blanket board, which includes representatives of the indigenous Zimbabwean shareholders, has approved a capital investment programme for 2013 and a four-year growth strategy for 2014 to 2017. Work has commenced on a new development project at Blanket (the No. 6 Winze Project) which is expected to result in a 70 percent increase in ore production from 2015.

This programme will be funded from Blanket's internally generated cash and is expected to result in progressive increases in gold production over the next five years.

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