Production at the Blanket gold mine continues to perform in line with expectations and remains on track to achieve 50koz of gold for 2016. Alongside gold production, Caledonia Mining Corporation PLC (TO:CAL) is also steadily progressing Blanket’s ramp up to c 80koz by 2021 by implementing a series of planned mine expansions. To this end, a new ball mill has been installed, which will lift throughput capacity at Blanket by 20%, from 1,500tpd to 1,800tpd. Based on this announcement, we retain our 2016 forecasts published August.
On 4 October Caledonia declared its 14th quarterly dividend, paying US$0.01375 per ordinary share (5.5c annualised). Based on our end year EPS forecast of 23.5c, the annualised dividend cover is 4.3x, and is 3.7x covered by its cash position at end June 2016 (US$10.6m). A notable effect on the dividend payment for UK-based shareholders is a continued weakening of the cable rate, which has decreased a further 2% since our last note in August, and could extend its weakness as the prospects for a hard Brexit continue to firm. A weakened cable rate increases, in sterling terms, the value of the dividend.
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