Earnings call transcript: Caledonia Mining Q4 2024 earnings beat forecasts

Caledonia Mining Corporation (CMCL) reported its Q4 2024 earnings, significantly surpassing analysts’ expectations with an earnings per share (EPS) of $0.443 compared to the forecasted $0.16. The company also exceeded revenue projections, reporting $47.52 million against an anticipated $41.1 million. Following the announcement, the stock price experienced a modest increase of 1.89%, closing at $11.83. According to InvestingPro data, the company’s stock has shown strong momentum with a 23.38% return year-to-date, and analysis suggests the stock is currently undervalued. The company maintains an impressive gross profit margin of 50.51% and has consistently paid dividends for 13 consecutive years.

Key Takeaways

• Caledonia Mining’s EPS of $0.443 beat forecasts by $0.283.
• Revenue of $47.52 million surpassed expectations by $6.42 million.
• Stock price rose by 1.89% post-announcement.
• Record gross profit and improved net attributable profit compared to 2023.
• Strong operational performance at Blanket Mine.

Company Performance

Caledonia Mining demonstrated robust performance in Q4 2024, achieving a record gross profit of nearly $77 million, an 86% increase from 2023. The company also reported a net attributable profit of just under $19 million, a significant turnaround from a $4 million loss in the previous year. Operational efficiency improved, with Blanket Mine production rising by 1.6% year-over-year. InvestingPro analysis reveals the company maintains a strong financial health score of 3.01 (rated as GREAT), operating with a moderate debt level and a healthy current ratio of 1.44. For detailed insights and additional metrics, investors can access the comprehensive Pro Research Report, available for CMCL and 1,400+ other US stocks.

Financial Highlights

• Revenue: $47.52 million, up from the forecast of $41.1 million.
• Earnings per share: $0.443, exceeding the forecast of $0.16.
• Gross profit: Nearly $77 million, an 86% increase year-over-year.
• Net attributable profit: Just under $19 million, compared to a $4 million loss in 2023.
• Operating cash flow: Nearly $42 million, up from less than $15 million in 2023.

Earnings vs. Forecast

Caledonia Mining’s actual EPS of $0.443 was significantly higher than the forecasted $0.16, marking a surprise increase of approximately 176.88%. Revenue also exceeded expectations by $6.42 million, highlighting strong sales performance and operational efficiency.

Market Reaction

Following the earnings release, Caledonia Mining’s stock price rose by 1.89%, closing at $11.83. This movement reflects positive investor sentiment, as the company outperformed both EPS and revenue forecasts. The stock remains within its 52-week range, with a high of $16.95 and a low of $8.81. With a market capitalization of $228.08 million and a notably low PEG ratio of 0.13, analysis indicates significant potential upside. Discover more valuable insights and metrics with an InvestingPro subscription, including 10 additional ProTips and comprehensive valuation analysis.

Outlook & Guidance

For 2025, Caledonia Mining aims for stable production at Blanket Mine, targeting 800,000 tonnes from the shaft. The company is also exploring near-term growth opportunities and expects sustaining capital expenditure to be $30 million. The ongoing feasibility study for Bilbo’s project continues, with an extended timeline.

Executive Commentary

CEO Mark Learmonth expressed optimism, stating, "We’ve come through a fairly difficult eighteen months or so, and I’m hopeful that certainly Q4 and then into Q1, you’ll begin to see a substantial improvement." COO James Maphara emphasized the importance of safety, saying, "We wanted employees to have an identity that I need to follow rules because I want to."

Risks and Challenges

• Currency fluctuations in Zimbabwe could impact financial results.
• Unreliable power supply may affect production efficiency.
• Regulatory changes in mining laws could pose challenges.
• Market volatility in gold prices may influence revenue.
• Potential difficulties in exporting concentrate from Bilbo’s project.

Q&A

During the earnings call, analysts inquired about Caledonia Mining’s strategy for exporting concentrate, the impact of electricity challenges, and the development timeline for Bilbo’s project. The company clarified its tax rate of approximately 42% and discussed potential mitigation strategies for power supply issues.

Full transcript - Caledonia Mining Corporation (CMCL) Q4 2024:

Moderator: Ladies and gentlemen, welcome to the Caledonia Mining Q4 Results Presentation. I’d now like to hand you across to Mark Learmonth, the CEO. Mark, over to you.

Mark Learmonth, CEO, Caledonia Mining: Good morning or good afternoon, depending on where you are. Welcome to this webinar to discuss Caledonia’s results for the fourth quarter of twenty twenty four and for the year. I’m here in Jersey. I’m joined also in Jersey by Ross Gerardo, our CFO, who joined today. And then in Johannesburg, I’ve got James Maphara, our Chief Operating Officer and Luchta Gopari, an Executive Director, who is based in Harare, Zimbabwe.

And in case I need them, I’ve got accounting support in Johannesburg and Bulawayo. Okay. So shall we get into this? If you could move to the next slide, please, Dara. If you just move forward.

We’ve got the disclaimer next, which I think we just need to pause on. Okay, so that’s a presentation too much we’ve already dealt with. Okay, let’s move on to the summary. So record gross profit for the year of nearly $77,000,000 That’s up 86% from 2023. That pretty much slowed down to the bottom line with net attributable profit of just under $19,000,000 compared to a loss of $4,000,000 in the previous year.

That’s reflected in stronger operating cash flow, so that’s after tax and interest and working capital before CapEx and dividends. And that was nearly $42,000,000 compared to just less than $15,000,000 in the previous year. Production of Blanket was within guidance slightly towards the top end of the guidance range. And there was also continuing very small production of Bilbo’s oxides, which I’ll refer to very briefly. Last week, we so there’s a lot more information on these results as we go through this presentation.

Last week, we announced that we’re going to extend the period of time we need to look at the feasibility study for Bilbo’s. That gives us time to assess some factors, some of which have only materialized within the last month and to optimize the project economics. So we have a little bit more on that. We had some good exploration success at Blanket and Matapa, which has encouraged us to do more work in that area. So we have a slide on that.

And just to say that we, on Monday, we announced a further dividend of $0.14 for the quarter, making $0.56 for the year. And it’s fair to say also that we’ve had some fairly significant changes to the Board and to management over the course of the last year or so with James joining as CLO in May, and that’s given rise to a very substantial turnaround in the operating performance at the mine, particularly at the mine as opposed to the metallurgical plant. And you’ve seen also that we’ve refreshed the strength of the board with some recent board appointments. And then we’re joined today by Ross, who’s taken over from Chester as the CFO. So Ross is very welcome.

So shall we move forward next time? Before we get into this, I just want to touch very briefly on the delay in publication of the accounts. We put out a press release about a week ago, which notified people that we needed an extra week to evaluate an accounting issue that had been identified right at the end of the audit process. The accounting issue really relates to the calculation of deferred tax for the year thirty one December twenty nineteen. So this is about five or six years old.

And that then flows through into subsequent years. Just to be absolutely clear, this is an error relating to the calculation of deferred tax. It also flows through into the calculation of unrealized foreign exchange gains and losses. And then below that, it then flows through into profit after loss. I want to make it absolutely clear that this error had nothing to do with actual tax payments or any submissions that were made to the Zimbabwean tax authorities, but also make it very clear that this has nothing to do with cash.

So the accounts that we published this morning for the year to December 2024, they also include restatements of the prior year accounts for ’twenty two and ’twenty three. And at the back of the audited financial statements, I think note 40, you will find full disclosure of the various line items, which have been affected by this restatement. But in summary, it’s deferred tax, it’s IFRS profit and retained earnings. So, to be absolutely clear, there’s got nothing to do with cash or with actual income tax calculations. Okay.

Should we just move on to touch on the results themselves? Starting off with safety and production, it’s probably best if I hand over to James at this stage, if you just like to say a few words about safety and production, please.

James Maphara, Chief Operating Officer, Caledonia Mining: Thank you very much, Mark, and good day to you all. So on the safety front, I mean following the loss of life incident that we had on the September 21, which was the previous quarter, which we already reported on, we embarked on a journey to see real risk reduction and to put controls, better controls to make sure that we actually move up the cave with regards to our safety. We wanted to embark on a culture. A lot of you would remember I joined on the May 1 and we wanted you back and we realized that there was quite a lot of safety protocols that we left on and we had employees basically that followed safety protocols primarily out of obligation. And the idea is to want to move the dial where employees work, not because I have to follow rules because I have to, but you need employees to have an identity that I need to follow rules because I want to.

So over and above the internal audit that we did with regards to the incident that we had had, we decided to also put in place a number of measures, the first of which was to appoint a group ship manager, an experienced Group Ship Manager coming from Harmony, who himself put a structure in place with regards to ventilation, health and safety and split all the departments into the appropriate departments. You also look at five other areas that we will be embarking on so that we can actually have a better safety culture on the mine. The buckets will be to strengthen governance and risk management, to strengthen emergency preparedness, to strengthen safety practices, organizational capability and to move to look at the whole safety culture and improve it. So the safety culture, in terms of the safety culture, the flywheel has started to move. We started to tell now it’s a question of getting the momentum in place and we can already see the massive improvement that we are gaining with regards to that.

In the last quarter, which is the fourth quarter of Q4, we actually had 88 out of 100 accident free days, which is a marked improvement or the record within the safety history. In terms of production as well, we had a very good production quarter and we also had a very good end of year ending up on 19841 ounces, I mean, compared to Kodakay, which was 18,992 ounces. I will touch further on production with regards to the next slide. Over to you, Marc.

Mark Learmonth, CEO, Caledonia Mining: Yes. So we’ll go back to production in more detail later. But it’s fair to say across the board, a substantial increase in performance, obviously helped by the higher gold price. So the average realized gold price in the quarter was just over 2,600 compared to just over $1,900 in the comparable quarter. And for the year, it was just over $2,300 So for those of you who follow the gold market, that won’t come as a great surprise to you.

And clearly that supports the substantial increase in revenue, also supports the increase in gross profit, so $21,000,000 for the quarter and $77,000,000 for the year compared to clearly lower numbers previously. And I would have mentioned the increase in net profits attributable to shareholders. One thing I would just draw to your attention, we declared a dividend again, of $0.14 Just to reinforce the fact that previously, we used to declare dividends on a sort of metronomic quarterly basis. We’ve disclosed for several quarters now that that’s now been changed slightly so that we declare the dividend at the same time as the Board approves the accounts. It just sort of streamlines Board processes.

Now for most quarters, that doesn’t really make much of a difference. But for this particular, for the publication of Q4, it does mean that the dividend that we declared or we used to declare in and pay at the end of sort of March or something, that does get pushed out a bit. So there is a little bit of a phasing issue. But for the year, the total dividend is $0.56 and that hasn’t changed. Should we just go into a little bit more detail on production?

James, can I ask you to talk to this slide?

James Maphara, Chief Operating Officer, Caledonia Mining: Thank you very much, Mark. So as already previously stated, we had a very good end of year and Q4 in particular, ending up on 76,000 six hundred and 50 six ounces, which is a 1.6% improvement compared to 2023. The tonnes for 2024, which is 797,000 tonnes, 479 is a record as you can see from the graph, it’s a baseline that we actually hit those sort of numbers, which is a 3.5 higher than the 2023 number. And this was primarily as a result of three areas that we saw quite a good improvement. It was better utilization of Central Shaw, which is now fully operational after all the work that we’ve done over the years.

It was secondly as a result of better equipment availability that we have underground. And thirdly, it was also due to better labor productivity within our sections. As you see that the grade has remained almost the same for a number of years, almost from 02/1940 to where we are. But if you look at sort of year on year, we actually went down from 3.25 to 3.2, from 2024 to 2023. Although specifically quarter four was 3.18, Gram Speran quarter three, which we have already reported on, we had a fall off ground in one of our high grade stops called Eroica, which actually exposed our need for better availability with regards to mining space.

We have ever since embarked on better development. As you can see, our tonnage has been going up year on year, meaning to say that we actually need to open up more areas so that we can have better flexibility. This year’s development, which is really, really well improved and last year’s by end of year, will actually help us in the years to come with regards to flexibility. The reserve grade for blanket is sitting around 3.3 grams per tonne and we will not mine further than the three I mean not much higher than 3.2 grams per tonne, which is where we expect to land in this year. The mine had an excellent production year in 2024.

I mean, December month actually summed up, it was the icing on the cake where we ended up on 89,727 tonnes, a record for the month. I mean, we had never reached such a milestone. It’s actually exceeded our crushing and milling capacity at Blangat. We ended up with a stockpile of 8,487 tonnes, which we created. And it is good to report that actually that stockpile has been growing as well even in this financial year.

So if you look at the bottom graph, one of the graphs that you’d see is the recovery, I mean, which has been sort of taking an up and down movement. However, for the year, we ended up on 93.6% recovery, which is still very, very high and which is our plan. Last year, it was just higher at 93.8%, it was just higher than our plan, which is not really going to be sustainable. But by world class standards, 01/2006 is still quite a high recovery, which we have actually managed to keep there because of the work that we’ve done with regards to the oxygen plant that we’ve installed, the Nelson concentrators that we have been replenishing over the years to make sure that our free gold recovery is on point and the tanks that we’ve also been installing. So we can see that production is really stabilized.

This year, we have started off with a huge stock of 8,487 and we expect that this production should stabilize and be better going into the future. Thanks, Mark.

Mark Learmonth, CEO, Caledonia Mining: Yes, thank you, James. The difficulty we’ve always had or we’ve had over the last year or so has been our inability to blast the ore, frame the ore and hoist it. We had sort of, let’s say, breakdowns, there are breakdowns in that process somewhere. So what James has managed to do is, he managed to get this whole operation working much more cleanly, much more efficiently. We’re blasting, we’re trimming and we’re hoisting and growth of the stockpile is very welcome.

That’s something we’ve done before. Okay. So thanks very much, James. Should we move on to the next page? What this shows us for the quarter, it breaks down the consolidated results.

It shows you what’s been going on with Blanket, what’s been going on with Bilbo’s and Other, which is really sort of intercompany eliminations and head office costs. So you can see quite clearly the Blanket level revenue very strong. The royalty stays the same. The government royalty stays the same at 5%. Production costs at Blanket, broadly the same, about just $19,000,000 Although, we would like to get that down a bit.

Depreciation very slightly down a bit. That’s for sort of technical reasons. So gross profit is $20,000,000 compared to $11,000,000 in the previous quarter. Quarter on quarter, Bilbo’s has had very little impact. So there’s a slide coming later which shows how we’ve authorized the losses from Bilbo’s.

So at the moment, Bilbo, we’re continuing to re leach the heatpads at Bilbo’s, helped by the slightly higher gold price. And we’ll continue to do that for as long as that leaching process covers the direct costs. So it’s basically washing its face. And other, as I’ve said, is corporate and group adjustments. So should we move on to the next slide?

Okay. What you see is two graphs. Left hand side is the online cost. Right hand side is the all in sustaining cost. And it just basically shows how our costs have developed and progressed from quarter four twenty twenty three to quarter four twenty twenty four.

So looking at the online cost, you can see we had a benefit, seven percent -zero benefit as a result of putting build those back onto care and maintenance, negligible movement on power, some increase in labor. Part of that in the quarter would be we had to rely very heavily towards the end of the quarter on overtime and a special bonus system that we introduced specifically for December. Because truth be told, the first half of the fourth quarter was very difficult, largely because of sharp deterioration in the electricity supply. So had we not made those interventions, I suspect at the November, I think actually quarter four would look quite sick. But thankfully, we made those interventions and we pulled quarter four round very nicely.

And then an increase in consumables, which is largely costs relating to equipment, underground pumps, LHDs, that sort of thing. So that takes the that walks the cost up from what it was in 2023 to 2024. Then you can see on the right hand side, you’ve got how the all in sustaining cost moves, some increase due to online cost, some faffing around with share based expense and sort of accounting jibri pokery sustaining CapEx and procurement margin, okay? It is fair to say that management is very conscious that these costs are higher than we’ve had historically. And we are exploring ways over the course of the next few years to get down the online cost, particularly focusing on labor and electricity.

So use our labor more intelligently and actually reduce our electricity usage. And then at the all in sustaining cost level, that will obviously benefit from any reduction in the online cost, but also we’re looking at what we can do to reduce our sustaining CapEx. Sustaining CapEx does remain very high. 2024 sustaining CapEx was $19,000,000 which equates to about $240 an ounce. 2025, it will be about $30,000,000 which is about $400 an ounce.

And that really goes in that sustaining CapEx is going to things like development, which James has explained is important to improve our mine flexibility. It’s got to go into things like milling in the tailings facility. The work on the tailings, on the new tailings dam continues and clearly we need that because we need somewhere to deposit the waste. And we have continued to spend heavily on engineering to increase the robustness and the resilience of the equipment at Blanket. That higher level of sustaining CapEx will continue for 2025 and 2026 and then we’d expect it to begin to fall away from 2027 onwards.

Can we move on? Well, then this really just shows everything below gross profit. So we discussed revenue, we discussed online costs. The low gross profit, you’ve got net foreign exchange losses in the quarter, which were only $600,000 in the fourth quarter. For the year, they were much higher.

So it was very pleasing to see that the local currency, the ZIG, has stabilized in the fourth quarter and that’s continued through into the first quarter. So we’re not seeing a recurrence of the very substantial FX losses that we incurred in the first nine months of the year. Other is a rag bag of stuff. It primarily includes $2,000,000 of retirement costs. As you’ll recall in the third quarter, we initiated a retirement program, which affected just over 100 people, who are over the age of 60 for manual work and 65 for non manual.

And that’s an action that really should have been taken some time ago. So we bit the bullet, 150 people were retired. And I’m also pleased to say that as part of that retirement program, you have seen a very significant cultural shift at Blanket, which has contributed to the very strong performance in the fourth quarter. Tax is a combination of income tax, our old friend deferred tax, but also a significant component of withholding tax that we incur as we move money around the group. The NCI, the non controlling interest that is the minority’s blanket.

And that takes you down to adjusted earnings per share for the quarter, which was $44,300,000 compared to $0.02 in the fourth quarter of twenty twenty three. Okay. Should we move forward? Okay. This graph looks a bit stark.

But what I was trying to do here is to show, to split out gross profit of Blanket for gross profit at Bilbo’s. So Blanket’s in the top half. And you can see that gross profit in 2022 was $17,000,000 down to $11,000,000 Then in that first half of twenty twenty three, Blanket’s performance was really not very good, largely because of lower production and higher costs. And you can see now towards the back end of twenty twenty four, we’re now getting gross profit of $22,000,000 nearly $20,000,000 and then just over $20,000,000 So the point of this graph is to show that Blanket as a cash generative engine is back where it should be, okay? Then on the bottom half, you can see that Bilder has incurred losses of $3,000,000 2 million dollars and $1,000,000 in the first three quarters of twenty twenty three.

But in 2024, we’ve now quarterized that as Blanket is now or care and maintenance is just running so long as it will cover its operating costs. I just want people to understand that the cash drain that was coming out of Blanket’s poor performance and the cash drain that was coming out of Bilbo has now been dealt with. Okay, assuming on cash flow. So next slide, it’s quite a dense slide. But frankly, I think this is probably the most relevant slide of the whole thing because really it all comes down to cash at the end of the day.

So cash from operations before working capital, that’s the first line. 2024, it was $65,000,000 which equates to about $1,250,000 a week. In quarter four, it was $19,000,000 so that’s about $1,500,000 a week. So a very substantial improvement in the rate of cash generation in the fourth quarter compared to the previous three quarters, right? Below that, you’ve got the movements in working capital.

But what’s if you look at these closely, you’ll see that in the year, we absorbed $10,000,000 into working capital. And in the quarter, it was about $3,500,000 into working capital, quite a substantial amounts of money being absorbed into working capital. Really, there’s two main areas. One of those is inventories and prepayments. And we are one of the ways we manage our exposure to possible devaluation of the ZIG is to make sure that if instead of holding ZIG cash balances, we use the ZIGs to buy inventories or to make prepayments as a way to reduce our ZIG holdings.

So that has given rise to some increase in the inventories and prepayments. And then receivables has increased largely because of the high gold price, which just means there’s more money flowing through the system. So, there has been an absorption into working capital. The other area of significance here is net cash used in investing activities, which was $32,000,000 for the year and nearly $30,000,000 for the quarter. That is mainly sustaining CapEx at Blanket.

So of the $32,000,000 spent in the year, $27,000,000 was spent at Blanket. Of that $27,000,000 that’s broken down in the, I think, paragraph 4.4 of the MD and A, but that’s broken down to the main components being the work continued work on the tailings facility and on development. Builders in Matapa also absorbed $3,000,000 a year, and that was largely on the ongoing work on feasibility study and exploration at Matapa, which actually turned out to be rather good. Then the final thing would be cash used in financing activities. That’s a combination of the Caledonia dividend, which is just over just under $11,000,000 Dividends paid to the blanket minorities, which is about 1.6% offset against that will be increases in debt, which includes further modest issues of bonds to institutional holders in Zimbabwe movements in overdrafts.

So some improvements in cash, but we do intend at this high gold price to focus on improving our cash position. Okay. Should we just move on? And this again, very similar this slide, very similar to what I showed you about gross profit is intended to show how the quarter on quarter cash generation in the last sort of three quarters or so has improved after the sort of the dip, the sort of hiatus in late twenty twenty two and early twenty twenty three. Okay.

Let’s turn on let’s turn to the feasibility study. Wilco now is progressing well with support from DRA and other technical consultants. And the feasibility study will supersede the PEA that was published in June 2024. We put out a press release last week, the effect that we want to extend the timeline that we need to complete this feasibility study. And that’s for several reasons.

The first is to give DRA more time to do their work, but we also want to explore some new development options, which have become apparent. One of them will be the potential, and I say the potential, to export concentrate in the project. Previously, we thought that we’d have very strong indications that that would not be acceptable to the Zimbabwe government. So they wanted very strongly to have in country beneficiation. But now we understand that given the complexity of processing complex gold metallurgists such as Bilbo’s, Zimbabwe government may be more flexible on this.

If we can export concentrate, that will mean that we wouldn’t need to incur the whether we can get that for a short period of time or for the entire duration of the project remains to be seen. But if we can achieve that, that would significantly reduce the capital expenditure by removing the need to build a BIOX plant. It would derisk the project, particularly in the eyes of North American investors who are probably more wary about BIOX and investors elsewhere in the world. And they may also have implications for the eventual tailings facility. And then just looking at the tailings facility, currently the TSF is we intend to locate it on a very flat area in Bilbo’s.

We may be able to move it to an area at Matapa where we can effectively lean it against the hill and thereby reduce the need for one or more for the retaining walls, which again would get, would reduce CapEx. The tailings facility is the biggest component of the entire capital of the project. It’s nearly $100,000,000 So anything we can do to reduce that cost will benefit the project. But also having seen some good results coming out of exploration at Matapa, We want to continue to do more work at Matapa and potentially one day fold into the Bilbo’s feasibility study, a resource at the neighboring Matapa property, okay? So that’s the work that’s going on at Bilbo’s.

Just turning on to the next page, just to reiterate, and I think I’ve said this before, but just to reiterate our approach to funding Bilbo’s. Our objective is very simple, it is to maximize Calabay’s NPV per share. That really includes three elements to it. The first is to optimize the overall project economics, get the best internal rate of return we can get on the project. And that’s why we’re looking at areas that things like the potential impact of concentrates and or moving the tailings facility.

The next thing we want to do is to maximize the debt funding for the project within the constraints of financial prudence, okay? And the whole point of the system is to minimize equity dilution, okay? And so as part of that, we’re also evaluating the potential for near term revenue opportunities elsewhere in the portfolio, by which I mean re leaching, potential to re leach heat pads at Bovee, which is in the Bilbo’s property and at Matapa. We also think we may have some near term revenue opportunities at a blanket on an oxide resource that we found late last year. But in terms of debt funding, we think the project, the build bus project has a very high capacity for debt.

We think that non recourse debt is more likely to be limited by overall ANK’s lending constraints of about 65% to 70% of the total cost of the project. If it wasn’t for that, we believe that actually billables could carry more debt. But at this stage, there are three potential funding sources, which are coming into focus. They’re set out there. One of them is African DFIs.

The other one will be South African commercial banks working with ECRC cover. And the third is a resource specialist credit or private equity outfits. It could be one or any permutation of those three. But it’s safe to say whilst we’ve had preliminary engagement with all three of these groups, we can’t really get down and get dirty until we have a feasibility study completed, okay? But at this stage, all the indications that we’re receiving as the project is eminently fundable.

And we are focused now is on how do we optimize those projects economics that are due to minimizing dilution. Okay? Should we move forward? Just a word on exploration. At Matapa, the exploration focused on three areas which have historically been mined.

So that’s Matapa North, Matapa Central and Matapa South, very imaginative. But we’re very excited to have actually got good results from a new area called Mapudzi. Over the course of the year, we did just over 5,000 meters of RC drilling, 4,000 of DD drilling, and that shows widespread mineralization over a nine kilometer strike length. So this year, the program for this year is targeting shallow oxide potential at the Pudsey and then also the deeper sulfide reserves, which in due course, if we can find anything, would form part and parcel of the Bilbo’s project. So that’s Matapa looking very exciting.

And at Blanket, as you know, in May, we did a resource upgrade. We more than doubled our SK 1,300 reserves and a very substantial increase in resources. This year, we’re focused on increasing the confidence level of those resources to push more into reserves. But then we’re also now beginning to evaluate new areas, and that’s outside the existing mine footprint. So that’s on the Vande Ironstone formation, which is about 800 meters to the east of the current mining area.

And also, we believe we’ve got potential for some shallow oxide resources at Blanket. So, we’re beginning to look more expansively at Blanket instead of the traditional areas that we’re currently mining. So I think we’re pretty much finished. In terms of the outlook, as you can see with James, James as the new COO, we’re focused on maintaining stable production of Blanket. We want to get away from the gyrations that we’ve had over the course of the last two to three years.

We’re investigating near term growth opportunities across the portfolio, Blanket, Bilbo’s and Matapa. We continue to advance the work on Bilbo’s and how we can convert that into an asset, producing asset. We’re doing further exploration at Blanket and Matapa. And in the next year or so, we’ll continue to invest in Blanket with a view to achieving longer term cost reductions and improving the reliability and the resilience of the Blanket operation. So I think we’re finished, in which case we can open this to questions.

Moderator: Thanks very much for that, Mark. If I could ask people to please raise their hand if they would like to ask a question, then we will bring people in to ask the questions. If I could just pause for a second just whilst people raise their hands. Just give us one moment Okay. We’ve got our first question, which is from Nick Denham.

Nick,

Mark Learmonth, CEO, Caledonia Mining: if you

Moderator: could please unmute yourself and ask your question.

Mark Learmonth, CEO, Caledonia Mining: Can everyone hear me? Yes.

Nick Denham, Analyst: Okay. Good afternoon. Great. Thank you. Just a couple of questions.

One is, what is the status of the solar power project, the sale of that asset? That will be the first question.

Mark Learmonth, CEO, Caledonia Mining: Sometime this week, we expect. Next.

Nick Denham, Analyst: So the second question is to James. It’s a little bit about your sense of reliability of what you can produce out of the mine. I know we have a target that’s gold related. It seems to indicate that you should be able to pull out 800,000 tonnes out of the shaft, not necessarily process it in the next year. Is that the right sort of number we should be picking into our models?

James Maphara, Chief Operating Officer, Caledonia Mining: Yes, Nick. That’s the right sort of number. 800,000 we should pull out of the mine, yes.

Nick Denham, Analyst: Excellent. Okay. Welcome because that’s a very stable number. The third set of questions relates to Bobos and it’s back to you, I think, Mark. The tie in with getting a resource or a reserve out of Motapa is somehow gives me a sense that this could be almost like a year or two years to develop a reliable reserve that you could weave back into your feasibility study?

That’s the first question about the Bobos.

Mark Learmonth, CEO, Caledonia Mining: Yes, look, it will take us long as it takes to get the best project we can, okay? So if we feel we’ve got a project that works, that’s fundable based on what’s just what’s at Dorbos right now, that’s fine. We’ll run with that and we can introduce Metapa at a later stage. If we feel that the introduction of Metapa would materially affect the equity and the debt story, we owe it to ourselves to consider that, okay? So like I say, if you go back to what I said, we’ll consider things on the basis of net present value per share, okay?

And that includes the effect of any delay in the project, okay? High value of money. The various competing so the various sort of competing tensions will be optimize the project in terms of maximizing NPV, minimizing dilution and doing something quickly or slowly.

Moderator: Okay.

Nick Denham, Analyst: Sorry, no, that’s fine. Thank you. Second thing was you’re talking about maybe a change in the tailings dam strategy because you’re looking for a hill. But you also mentioned in passing that it could affect what you do. Now, obviously, the input there is if you are able to toll get your concentrates toll treated by somebody else, the nature and designation of the TSF is going to change.

Is that what you’re thinking about?

Mark Learmonth, CEO, Caledonia Mining: Correct. Yes. Now that really only works if we can get permanent permission to export concentrate. So if we only get temporary permission that will still mean that we’re going to need to set the tailing facility up from the outset so that it can receive material from a BIOX plant even if that BIOX may not be in place for two years.

Nick Denham, Analyst: One hundred percent. Okay. So finally, the toll concentrate idea is awesome. So I mean from an outsider’s perspective, but there does seem to be a other side of the coin, which you may be limited in scale and volume of those exports simply because one can’t imagine that too many people within the economic catchment area of your concentrates are going to be able to accept what you initially proposed to be your production?

Mark Learmonth, CEO, Caledonia Mining: Yes, correct. And I would just say this opportunity has emerged very recently. So we do need time to consider it. And there are swings around about, you’re quite right. So it’s something we need to consider.

But this has only materialized within the last four or five weeks.

Moderator: That’s great. Thanks very much for that. We’re now going to move on to Howie Flinker. Howie, if you’d like to unmute yourself and then talk to the team.

Howie Flinker, Analyst: Hello, Mark. Hello, Victor. Hi, Eric.

Mark Learmonth, CEO, Caledonia Mining: Hi, Eric. Hi, Eric. Hi, Eric.

Howie Flinker, Analyst: Hi, Eric. Hi, Eric. Hi, Eric. Hi, Eric. Hi, Eric.

Mark Learmonth, CEO, Caledonia Mining: Hi, Eric. We are net it’s in the slide somewhere. Our net cash would be let me just find it.

Howie Flinker, Analyst: I think your cash exceeds that.

Mark Learmonth, CEO, Caledonia Mining: You’ve got more cash than debt, yes. But the strategy will always be to have debts in country and cash out of the country. That will always be the strategy.

Howie Flinker, Analyst: Okay. Second, are your taxes going to be 42% as they seem to be in the fourth quarter?

Mark Learmonth, CEO, Caledonia Mining: Yes, pretty much. So if you were to look at the, in the MD and A, we break down the tax, We break it down into Zimbabwe income tax, Zimbabwe deferred tax, South African income tax and various bits of withholding tax. If you look at Zimbabwe income tax plus Zimbabwe deferred tax and express that as a look at that as a percentage of the gross profit, which equates pretty closely to Blanket’s PBT, you will actually find that that rate is about 20% odd, 20%, twenty four %. So that’s the underlying sort of upper commercial tax rate. They did commercial tax rate in ZIM is 24%.

On top of that, we incur tax leakage, I think it’s about $1,000,000 of withholding tax as we move things around the group. The management fees that we pay from Blanket to South Africa aren’t tax allowable in Zim, but they also incur a withholding tax. And then we have all of the expenses that we pretty much incur outside Blanket. So that will be in Johannesburg, Harare and here in Jersey, aren’t offsetable against profit because either here in Jersey it’s zero tax regime or there is no taxable profit. So you’ll find that our we’re doing the best we can, but you’re going to find that our effective tax rate does remain somewhat high because of structural inefficiencies, but not things that we can readily address.

Howie Flinker, Analyst: And the last question is probably some technical error. I got a weird announcement this morning.

Mark Learmonth, CEO, Caledonia Mining: Yes, so

Howie Flinker, Analyst: about 11,500 shares at $42 or something. Is that some technical error by the service provider?

Mark Learmonth, CEO, Caledonia Mining: I got quite excited about that. Yes, that was so that’s a company called Caledonia Investments, which is a UK investment trust. And somehow, I don’t know how it happened, but somehow their announcement ended up on our website. I think it’s been rectified.

Howie Flinker, Analyst: I thought it was odd, but I wanted to verify.

Mark Learmonth, CEO, Caledonia Mining: I got slightly excited about that as well.

Moderator: Our next question comes from Tate Sullivan.

Tate Sullivan, Analyst: You mentioned retirement expenses in 4Q. Are you within your cost guidance for 2025, are you planning more retirement expenses?

Mark Learmonth, CEO, Caledonia Mining: No. Well, there will be, but there’ll be game enemies. I mean, 104 people out of a workforce of 2,200 reflects the fact that we haven’t really well, we haven’t imposed this policy for very, very many years. And we have people doing pretty much full on physical exercise, physical jobs. I mean, even if you’re in a supervisory role, going underground is hard work in their mid-70s, and that was clearly inappropriate.

So the retirement policy will continue to be enforced, but it will now only affect a few people a year. So it will be nothing like the magnitude that we saw in 2024.

Tate Sullivan, Analyst: And then you paired if I might have misinterpreted, but in terms of the 4Q costs, or some of the higher labor costs associated with the lower availability of electricity and then so forth?

Mark Learmonth, CEO, Caledonia Mining: Yes. So maybe James can comment on this, but the first part of the quarter was terrible because we had some really serious electricity problems. It started raining, which meant that the grid collapsed. So we’re getting very poor power from the grid. Because it was raining, it was cloudy, which meant that the solar plant doesn’t work particularly well when it’s not sunny.

There was also an equipment failure within the solar plant, which we managed to rectify, but it was a bit of a problem for some time. So I think pretty much, I mean, I’ll hand out to James in a minute. But I think by the time we got to the November, things are looking a bit bleak. So James had to do some fairly fancy footwork to get his team together to raise morale and get them focused on delivering in December. James, do you want to talk about what you said?

Because it bloody worked, whatever you did, hey?

James Maphara, Chief Operating Officer, Caledonia Mining: Yes. Thanks, Mark. I mean, we had a very bleak start to the quarter. I mean, we had like Mark is saying, we had Zesa’s infrastructure is not that well equipped. I mean, they collapsed with the rains, we had quite a lot of high rains this last rain season.

So they agreed part of they supply us, the way failure had not been done. So we actually had to jump in with a lightning strike that actually caused some of our transformers to be banned. We had to run around and get that equipment to start operating again. Solar was not working, but we then regrouped the troops to say guys, I mean, we need to get what we need to get. We’ve got bit of spring capacity within the plant that we also utilized.

And unfortunately, it meant that we had to spend the midnight kettle and we worked sometimes through Sundays to try and get the production machine going again. I have to say it worked.

Mark Learmonth, CEO, Caledonia Mining: Yes, it worked. I mean, so I don’t like to see people having to work overtime and work hard, but yes, they were paid for it. They were incentivized to do it. They had they left they finished the quarter with the tails up. And clearly, that now continued into this year.

And it’s a virtuous circle. The mine is performing well. They’re getting production bonuses. Everyone’s happy. So it’s a virtuous circle.

Tate Sullivan, Analyst: And then my last question, thank you. Great context. And is for 2025 costs, Mark, is the greatest variable, you mentioned slight impact from higher employee costs, but is it higher costs of consumables, unpredictable electricity or another factor?

Mark Learmonth, CEO, Caledonia Mining: Yes, that’s the one that is least predictable is electricity because to be honest, if the grid collapses and or we have the solar plant works very well. The solar plant works better than we’d expected. But when it’s cloudy, but I don’t just mean super cloudy, just a gossamer thin cloud, piece of cloud, that will reduce your power generation by about two thirds. So if we have any interruption to power, that means we’ve got no choice, we have to run the diesels and they’re very expensive. So that for me is the biggest cost risk.

And over the course of the next two years, we’ve taken the decision as the Board that we must look at ways to try and insulate ourselves further, if not completely, from the vagaries of the grid because this situation is not going to get better and we must fix it. Thank

Moderator: you very much for your question. I’d now like to invite Duncan Hay to ask his question.

Duncan Hay, Analyst: Just going back to Bilbo’s and the concentrate sales scenario, you mentioned time value of money, which suggests that you don’t want to hang around too long sort of waiting for approval. But would the is the strategy initially to try and get sort of no commit an ideal scenario would be that you sell concentrate, there’s no commitment to put in the buyouts. Is that sort of preferred? But if you have to compromise, then the priority would be to sort of get moving on the project and try not to not hold out too

Mark Learmonth, CEO, Caledonia Mining: long? Yes. So I mean, the lever the government’s typically got is they’ll allow you to export concentrate for a period of time, say two years, during which or after which you then supposed to put in a plan that can do the in country beneficiation. And if you fail to do that, then you’ll be hit with punitive taxes. So that’s very much that could be one option unless the government just decides that frankly, they’d rather have a project than not have a project, in which case export concentrate forever.

Duncan Hay, Analyst: Yes. Which I suppose because that’s what they’ve been doing on the platinum side, isn’t it? They’ve been they’ve reduced the platinum, reduced yes.

Mark Learmonth, CEO, Caledonia Mining: Yes, the platinum side, that’s where they have actually held out and forced the platinum producers to do low income tree beneficiation. But I think there seems to be an increasing pragmatism from government, so we’ll explore it.

Moderator: Yes. Okay. All right. Thank you. Thanks very much.

We have got no further questions at the moment. So Mark, maybe back to yourself for any closing remarks.

Mark Learmonth, CEO, Caledonia Mining: No, look, it was a strong, a substantial improvement 2024 compared to 2023. Very pleased to see stability of the ZIG and that’s continued into 2025. Very pleased to see an improvement in cash generation and much better reliability in terms of mine performance. And we’re genuinely very excited about some of these near term opportunities, which could make a significant contribution to our cash generation. So I think we’ve come through a fairly difficult eighteen months or so, and I’m hopeful that certainly Q4 and then into Q1, you’ll begin to see a substantial improvement.

So look forward to sharing that with you. Thank you.

Moderator: Thanks very much, Aurelie. That concludes the presentation today and look forward to speaking to you again soon.

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