By Alois Vinga
THE Zimbabwe dollar’s continued depreciation has created huge savings for Toronto Stock Exchange listed miner; Caledonia Mining Corporation (CMC) through its Zimbabwe run Blanket Mine due to devalued bank loans and electricity bills.
The corporation’s chief executive officer, Steve Curtis acknowledged that an additional US$30 million on profits was prompted by the local currency’s depreciation.
“This gain, which is largely unrealised, was due to the sharp devaluation of the Zimbabwe currency from February 2019 onwards, which reduced the US$ values of bank loans and the deferred tax liability,” he said.
While electricity shortages have affected several companies in Zimbabwe, the mining giant also recorded huge savings on the current foreign currency charged tariffs because they are now cheaper compared to the previous multi-currency tariffs.
“I am also pleased to report an improvement in the operating environment in Zimbabwe. Although the country continues to face challenges, the introduction of the interbank rate early in 2019 allowed us to better protect our workers from the effects of high inflation,” Curtis said.
During the financial year ended December 31 2019, Blanket Mine’s strong performance which resulted in increased production, combined with lower on-mine costs per ounce and an improved gold price, resulted in a substantial increase in profit.
Profit for the year increased by 44% to over US$31 million while gross profit for the quarter was over 100%.
On-mine costs per ounce for the year were $651 compared to $690 in 2018 due to lower electricity costs in the first part of the year and lower on-mine administration costs due to the devaluation of the Zimbabwe currency.
Going forward, the mining group has positioned Blanket Mine to enable it to increase production to the target rate of approximately 80 000 ounces of gold per annum from 2022 onwards.
The shaft sinking phase of the project was completed in July 2019 and work has commenced on equipping the shaft and substantial capital investment period is expected to be completed in the third quarter of 2020.