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Blanket gold mine trims production forecast
14/10/2014 00:00:00
by Business Reporter
Blanket Mine to double gold output

GOLD production at Blanket Mine has been adversely affected by lower than anticipated tonnages and grades resulting to the company’s targets being reviewed downwards to 40,000 tonnes from 45, 000 tonnes. 

Gwanda-based Blanket Mine is the principal asset of Canada-based Caledonia Mining Corporation.

Caledonia acquired in the mine in 2006 and now owns 49 percent of the mine following implementation of indigenisation in September 2012.

In an operational update for the quarter ended September, Caledonia said tonnes mined and milled at Blanket did not increase sufficiently to offset the lower grade mined, although plant recoveries have remained strong.

During the quarter, Blanket mine produced 9,890 ounces of gold compared to 12,042 ounces over same period last year, representing an 11.9 percent decrease on production in Q2 2014 of 11,223 ounces.

“In light of the 31,354 ounces produced during the first 9 months of 2014, guidance for gold production in 2014 is reduced from 45,000 ounces to approximately 40,000 ounces,” the company said.

The group said gold production was adversely affected by lower than anticipated tonnages and grades being mined. The target grade for the year was 3.84g/t but in the first half of 2014, the achieved grade was 3.7g/t.

“In recent months the grade has fallen further due to lower than anticipated grades at AR Main and AR South, which are the two largest tonnage contributors to Blanket’s run-of-mine production,” said Caledonia.

The financial performance of Blanket and Caledonia in the third quarter 2014 has also been adversely affected by the further decline in the gold price during this period.

The company’s challenges were also exacerbated by changes to the taxation regime which dictates that the seven percent gold royalty payable to the government is no longer allowable for the purposes of calculating income tax.

However, from October, this effect will be partially neutralized by a reduction in the gold royalty rate from seven percent to five percent. 

The effect of lower than anticipated production and the lower gold price has to some extent been mitigated by a reduction in the cost per tonne of ore processed, which has been achieved by a combination of greater attention to cost control and the devaluation of the South African Rand against the US dollar. 


Caledonia expects to release its full results for the third quarter to September on November 13, 2014.

It is expected that the earnings per share for Q3 will be lower than in previous quarters with earnings for the full year to December 31, 2014 will be materially lower than current market expectations.

However Caledonia re-iterates that due to its strong balance sheet, it expects to continue the existing dividend policy of 1.5 Canadian cents per quarter in 2015. 

Management is reviewing the medium term capital investment programme at Blanket with a view to improving grades and increasing tonnage throughput by facilitating more rapid access to deeper level resources.

The revised programme will be finalised in Q4 of 2014. 

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