Caledonia Mining Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: Caledonia reported a 30% revenue increase to $65 million and a 147% rise in net profit to $20 million, driving operating cash flow up to $28 million and ending the quarter with a net cash position of $26 million (including deposits).
  • Positive Sentiment: Blanket Mine delivered a record Q2 production of 21,070 ounces, leading management to raise full‐year guidance to 77,500–79,500 ounces backed by an average realized gold price near $3,200/oz.
  • Positive Sentiment: The sale of the solar plant generated $22.4 million in proceeds and an $8.5 million profit, while locking in a long‐term power supply contract and freeing capital for core mining operations.
  • Positive Sentiment: Feasibility work on the Bilbo’s project is advancing, with a phased development approach, tailings facility relocation to Mutapa and funding strategies designed to reduce upfront capex and minimize equity dilution.
  • Neutral Sentiment: A $2.8 million exploration program at Matapa plus expanded drilling on the Blanket lease are underway, yielding early encouraging results for resource replacement and new target areas.
AI Generated. May Contain Errors.
Earnings Conference Call
Caledonia Mining Q2 2025
00:00 / 00:00

There are 11 speakers on the call.

Operator

Five results presentation for Caledonia Mining. Today, we are joined by Mark Lerman, who's the CEO, and he is going to introduce the webinar and start his presentation. Mark, over to you.

Speaker 1

Yes, Scott. So, yeah, welcome to the q two twenty twenty five results presentation for Caledonia. Could we just move on to the forward looking statements and disclaimer, which I trust you will you will read and digest? So it's taking a bit of time. Okay.

Speaker 1

Let's move forward to the to the presenting team. As as Scott said, I'm Mark Lemont, Caledonia's CEO. I'm here in Jersey today. I'm joined by Ross Gerard, our recently joined CFO. He's at, he's in Johannesburg and will run us through the financial results.

Speaker 1

We've got James Mufara, our chief operating officer, who's joining us today from Blanket Mine. Victor Capari in France will talk will briefly update us on the Bilbos project. And Craig, vice president technical services based in Johannesburg, will talk to us briefly about the ongoing exploration at Bilbo's and and Matapa. And Morris, vice president corporate developments and investor relations, will deal with any other tricky questions that may may arise. So shall we, should we just move move forwards?

Speaker 1

Okay. Well, look, it was a a very strong financial quarter underpinned by, excellent, production. So the financials are strong. Revenue up 30% to 65,000,000, A net profit attributable to shareholders up by a 147 to just over 20,000,000, and adjusted earnings per share was up by a 155%. On the on the opinion, that was a very strong, operating cash flows.

Speaker 1

Operating cash flows rose to 28,000,000, and we closed the quarter with 8,000,000 of net cash. In addition to that, we had another $18,000,000 of fixed term deposits. So if you regard fixed term deposits as cash, which I just go say I do, that's about $26,000,000 of cash. From an operating perspective, Blanket mine had an excellent production quarter, just over 21,000 ounces in the quarter, which is a record for any second quarter. And on the back of that, we've increased full year guidance to a range of 77 and a half to 79 and a half thousand ounces.

Speaker 1

And all of this was really underpinned by a stronger gold price. We realized just under $3,200 an ounce. As you'll aware, in the quarter, we closed the sale of the solar plant, which realized, 22,400,000.0. I'll be clear. We never intended to own that solar plant.

Speaker 1

We only had to own it to get it built, and it was always the intention to sell it. Part of the sale is that we've secured a, a long term supply contract for Blanket, so we just released the capital for use elsewhere in the in our core business, which is developing and running gold mines. And as you'd be aware, we've got a very strong growth pipeline. We're continuing a pace with the build based feasibility study. We're looking at cost saving options and a phasing approach to try and minimize the upfront capital cost of the of the project.

Speaker 1

We can update you on that shortly. We've got a $2,800,000 exploration program proceeding at Matapa which is going well. It's also fair to say that the exploration of Blanca is also going very well. That exploration of Blanca has got two aspects to it, the first is just simply resource replacement, so just making sure that we replace the resources that we're depleting, but also probably with some excitement is new areas within blanket lease which we've never had the money or the management tech management depth to do. I mean I'll be turning our attention to that and we're getting some quite good results out of that.

Speaker 1

So just in a bit more detail, just turning on to the next page. James will talk to us about safety and production, but it's pleasing to see an improvement in our safety performance. The total injury frequency rate for the quarter and for the half year has improved. Clearly there's always further work to do, but it's good to see the general direction of travel is in the right way. James will also talk about production which I've mentioned, I've mentioned the average gold price, revenue up from £50,000,000 to £65 for the quarter, up from 88 to 121,000,000 for the half year, and gross profit of 33,800,000.0 for the quarter, which excludes the 8 and a half million dollar profit on the, on the sale of solar.

Speaker 1

So adjusted earnings per share for the quarter were about a 114¢ for the, for the quarter, that includes about 44¢ from the, profit on the sale of solar, so that equates to about 70¢ from operations and that compares to approximately 40¢ that we made from operations in the first quarter. So even stripping out the benefit of, solar, it's been a subs it's been a good it's been a very good quarter. Should we just, move forwards? And, you know, a lot of people, as we look forwards, look at how how far we've gotta go in terms of climbing the hill to deliver the bilboes project. It's also worth looking backwards to see how far we've come over the course of the last ten years.

Speaker 1

And so what we see here is a a ten year ten year graph from Bloomberg, which shows the gold price, the, the VanEck GDXJ index, and our share price, including dividend reinvestments. And it shows you that over that ten year period, the gold price has gone from a 100 to just over 300. The the GDXJ has gone up from a 100 to just over 400, and Caledonia mining has gone from a 100 to over a thousand. So it's it's a a great performance over the last ten years. But during that period, all we've done is take blanket from about sort of 40,000 ounces to, to, 80,000 ounces.

Speaker 1

The growth trajectory ahead of us is even is even more exciting. And I think what underpins our our performance over the last ten years are two things. First of all, minimizing dilution, and that is we say that in terms of funding bilbos, our objective is to minimize dilution. We really mean it. I mean, we delivered great returns over the last ten years by keeping a very tight lid on equity dilution.

Speaker 1

There's no reason why we're gonna depart from that now. And the second is the importance of dividends. Now, clearly, don't give we don't we don't have a dividend policy in terms of a dividend payout, but we we really understand the importance of dividends in terms of shareholder returns. And in certain markets, particularly Zimbabwe, which is a good source of equity for us, and great and great support, you know, the dividend is crucial there. So the dividend is is, again, baked into our appreciation of how we run this business.

Speaker 1

Just moving forward. So I think it's also worth worth making a few comments about, in Zimbabwe. Look. We operate in Zimbabwe every day. And when you're so close to the coal face, it's sometimes quite difficult to step back and appreciate, you what's been going on there and frankly over the last five years or so we really have seen some some very encouraging signs in Zimbabwe.

Speaker 1

Physical security, which has never really been an issue in Zimbabwe, remains but it's become much more of a serious issue in other jurisdictions in Africa. And it's just worth noting that, whilst many other places have got worse, Zimbabwe hasn't got worse and in some respects they're getting better. Foreign exchange, the foreign exchange environment in Zim has historically been super turbulent. What we've seen over the last eighteen months or so is increased stability and further moves to liberalize the local market, the local foreign exchange market. Clearly, there's further work to do, but, we are seeing increased liquidity for selling the local currency, the zig, in the willing buyer, willing seller market, which is good, and we're also seeing more more stability in the zig dollar exchange rate, which is underpinned by continued financial rectitude on the behalf of the Reserve Bank of Zimbabwe.

Speaker 1

So long may that continue. We wouldn't have achieved the results we have done without a high quality local workforce, and one of the things that's happened behind the scenes over the course of the last year or so is that we've substantially changed our management team relocating people or taking people on in in Zimbabwe, and we wouldn't have achieved the record production that we did in in the second quarter after a very creditable first quarter without high quality local management. And so, you know, it goes without saying that we we that the management team in Zimbabwe really has got experience, they've got quality, and about 50% of the current management, senior management team at Blanket, about sort of the top 25 senior managers. Of those top 25, about half of them have been with us for a year or less. Clearly, there's an electricity problem in Zimbabwe.

Speaker 1

It produces less electricity than it needs, but the government over the course of the last two years has has taken several initiatives to try and ameliorate that situation for people like, the big users like Caledonia. So or Blanket. We were a member of what's called the intensive energy user group, which means that we can, import power from the South African power pool or the Southern African power pool where there was no shortage of, of of power availability, so we can actually import that. It's also fair to point out that the Zimbabwean authorities have been very quick to fast track the permitting for independent power projects, be they solar or stand alone coal fired power stations. I think all of that's reflected in the, in Zimbabwe's ranking in the Fraser Institute survey, which was published recently.

Speaker 1

And that showed that Zimbabwe has come up from the absolute bottom of the table, and it now ranks, eighth out of the, 17 African countries which are covered by the the survey. So we are seeing encouraging signs in, in Zimbabwe, and we hope that those signs are that progress continues. So so with those introductory comments, I'll I'll hand over now to, Ross, who will run us through the, the financials. So, Ross, over to you.

Speaker 2

Thank Mark, and good afternoon, everyone. It's my absolute pleasure to talk you through the financial results for this quarter and reiterating what Mark said. It was another excellent quarter. So if we can turn to the next slide please. Just talking through some of the headline numbers that were referred to, gold revenue was up at 65,300,000.0 which was up some 30% on the comparative quarter.

Speaker 2

This was driven by that good gold production up at 21,000 ounces in addition to the benefit of a really good realized gold price of $3,186 per ounce, which was up some 38% on the comparative quarter of 2024. This obviously meant that there was a higher royalty during the period that you'll see on right hand side of the table. Importantly, the delivery of those ounces, was really driven by higher grades and plant recoveries, and James will talk to those a little bit later in the presentation, but that did drive our production costs, which were up some 18% for the quarter. We will do a bit of a a deeper dive into those production costs in a in a moment, but the end result to the high level was that gross profit number of $33,800,000 for the quarter, which was up 48% and, another quarterly record, so a fantastic, result. If we turn to the next slide, we'll just talk about that gross profit.

Speaker 2

I love this slide, and it's a very simple slide with a a great trajectory, but, the two key messages to take away is, the the change in billbows and and the fact that it's, no longer having a negative impact. So that's indicated by the orange line. Importantly, the trajectory of of Blanket where you see that significant increase in profit all heading on in the right direction. And and I I guess we've we've got to keep that trajectory going. So really great delivery across the year and looking forward in terms of a gross profit profile.

Speaker 2

But if we turn to the next slide, we'll do a bit more dive and deeper dive into those costs and you'll remember from the from the first quarter result where we spoke around our our guidance, where we're sitting from a cost perspective slightly above our guidance range. You can see on the on the left hand side, we we're now bringing that back within range, albeit still at the top end of the range. So costs are very much still part of our our focus and and, you know, we've got a number of, key initiatives that we we've got in play that will, address that. And overall, we believe that the full year guidance range is still on track and will be achieved. But you'll see that the three key pillars of our cost base in terms of labor, consumables and power indicated in those slides.

Speaker 2

I guess from a labor perspective, the key changes are really around the payments of higher production bonuses. A key component of that labor cost was almost 2,000,000 cost that went through in terms of bonuses over time and holiday pay is really around delivering those tons, but also addressing certain breakdowns during the period, that we had to address and and well done to to the team to get on top of that. Consumables, was really above budget by around $3,000,000, and a large portion of that was around those zinc purchases where, we've spoken about mobilization of zinc, purchasing items like lime, nobles, some construction materials. So there was a lot of million dollars that we spent in terms of accessing the willing buyer willing seller market there, but also some overruns in terms of spend in terms of our TMMs and also some of the engineering and repairs and maintenance and electrical engineering works that sat within that consumables bucket. This was partially offset by the power savings that you see in the lighter blue column there and again credit to the team.

Speaker 2

Know this is a key initiative that we've articulated very clearly in terms of having a stated objective or a project in terms of addressing a certain area and you can see the benefits of some of those power savings coming through. So well done again in terms of a key delivery. Moving to the right in terms of what it means for all in sustaining CapEx, you know, the the online costs that we've just spoken about, they've they've the flow through, so you'll see a 7.4% increase in terms of comparative quarter there. But the big bucket was that sustaining CapEx bucket. And again, that CapEx spend is on track for our full year guidance.

Speaker 2

Traditionally, our second and third quarter are bigger quarters in terms of spending from a CapEx profile perspective. It's probably fair to say that the previous quarter in terms of comparing to this time last year was probably on the lower side just because of funding constraints. But I guess the overarching message here is our CapEx profile is on track. We're spending it in the right buckets and we believe that full year guidance profile will be met. So great performance in terms of our individual cost profiles and if we move to the next slide, we'll look at some of those costs below the gross profit line.

Speaker 2

That net foreign exchange loss line item, you know, that's obviously a big area of constant focus for us. We are managing to deploy our ZIG balances and a a key position, and that is being able to access that willing buyer, seller market. That run rate is is lower than than the comparative quarter. You'll see that that's dropped, and that is a combination of both realized and unrealized losses. So it's about a one third, two thirds split in terms of the full six month period.

Speaker 2

But we're pleasantly pleased with the results in terms of where we sit for the half year, but it is an area of constant focus in terms of deployment and and managing our exchange risks. The corporate line item that you see there, a lot of that includes, some one off costs, in terms of restructuring that, market alluded to, that has come through in that first half, but also some additional, equity share based payments expenses that have come through and that's just based on the metrics and the performance to date. The big items are the sale of the solar and the profit coming through. So you'll see 8,500,000.0 as an individual line item coming through. And then equally down at the tax expense line, the good performance, the good revenues, and and and activity that occurred has obviously resulted in a higher tax expense, but we've also included the the the tax on the solar sale in that line item.

Speaker 2

And whilst that number has increased, I think it's very important that, you know, paying our way and paying paying taxes is very important. So it's a pleasing pleasing result in terms of good performance and and actually across both royalties, taxes paid, and tariffs, we we're certainly a major contributor in terms of Zimbabwean economy economy and and paying paying our government share our fair share to governments. So it's a pleasing result. But overall, a a a a great performance, you know, ending with a profit for the period of $23,600,000. And you'll see the the earnings per share there of a 113.9, cents per share, and adjusting for that for the solar as market indicated, you would back out approximately $0.44 from that so comparing just shy of $0.45 for the comparative quarter against $0.70 for this quarter it's great step up in terms of performance.

Speaker 2

So if we can move to the next slide, we'll talk a little bit more about the cash flow. Our cash flow from operations is, you know, we've really done well. We've generated some strong cash. There has been the net increase in the working capital. There's been that deliberate increase in working capital, particularly around stores and prepayments where we've deployed and tried to use our ZIG balances and have local purchases.

Speaker 2

You know, there are some changes in that net line in terms of timings of shipments of payments and receipts, but overall, there's a deliberate position in terms of working capital to make sure that we can be robust with our operations. But the key areas that I want to speak about are our capital expenditures. So you'll see from that operating activities or cash generation, we've been able to deploy our funds across investing in our capital expenditures, some 20 almost 21,000,000 for the six months in terms of capital expenditure. We've received proceeds from our sale of our solar of 22,000,000, and and equally, we've been able to deploy those funds into fixed term deposits and and some derivatives. So, it's it's been a very solid quarter and in fact six months in terms of both generating cash and closing the period with some $8,200,000 of cash with that further 18,000,000 sitting in terms of deposits.

Speaker 2

So effectively a $26,200,000 cash balance. So if we move to the next slide, you'll see the breakdown of that 26,200,000.0 on the right hand side of the slide, both in terms of where that cash sits across the various jurisdictions, but importantly, the build across the comparative periods in terms of our trajectory in terms of treasury and cash. I would highlight that the the balance, the 4,000,000 sitting in Zimbabwe, that's abnormally high. It was really around timing and and deployment of funds. So it was really timing of that.

Speaker 2

But overall, the 26,000,000 and actually, if if you exclude the overdraft facilities, so on a gross basis, we're actually just shy of 40,000,000 in terms of cash balances. And post the half year result, we've been able to continue to build that 26,000,000 up to 30,000,000 in terms of our pro form a net cash position on basically this last week's cash balance position. The graph there shows that buildup of cash, so it's very important and I think the key thing or key takeaway is that we try to pull that cash balance to a $50,000,000 plus number by the end of the year in terms of really having a solid treasury position. We move to the next slide. The the one thing that we would like to highlight and and you'll see in in the published results is that we will be taking, advantage of, some, applicable exemptions.

Speaker 2

So in terms of our quarterly reporting, we'll having be following a reduced disclosure regime or reporting disclosure. So for both first quarter and third quarter going forward, you know, we will have a much reduced financial both MD and A and financial set of results coming out. We are fully committed to our transparent and timely disclosure. So we'll give you all the material information and select financial, results coming through, but you won't see the full sale, set of MD and A financial and financials that you've historically seen. That is only for first and third quarter, for the full year and obviously half year, it'll be part of the normal cadence and you'll get the full deep dive and narrative that's going forward.

Speaker 2

So with that, a very solid quarter and half year, and I think we we we're well set, to enter the second half of the year and and deliver on a on continued good performance. And with that, I'll chain hand over to James Gufara, our COO.

Speaker 3

Thank you very much, Ross. Thank you very much, Mark, for the opening remarks as well. Good afternoon to you all. If we can move to the next slide. As Mark, and Roche have already alluded to, we have had a very good and solid, you know, half year, and this quarter was particularly very good.

Speaker 3

We brought, to the market area that we had a very, very stringent look at our health and safety programs on the mind as part of our value of care, and we've always said we would want to improve in terms of our performance, thereof. Quarter two delivered a marked improvement from quarter one in terms of our health and safety, you know, criteria that we're looking at. The number of accident free days actually increased in the quarter from 83 to 85, and the total injuries themselves actually reduced. The lost time injuries went down as well from four to one. And the significance of the lost time is showing the severity of the accidents that we are having.

Speaker 3

They are of low energy accidents that we're actually having witnessing. In the quarter, we also had quite a number of bow ties that we actually completed so that we could look at all the significant unwanted events that we want to deal with, and 52 of them were actually completed in the quarter. As part of our culture journey to cease that employees work safer and better with time at Blanket Mine, we started to profile our employees for risk propensity, which is their propensity to take risks, and we started with their supervisors. And we will look at this journey going forward so as to look at, you know, continuing to improve health and safety. But as we would appreciate, health and safety is like sweeping water uphill.

Speaker 3

You need to be constantly at it. If you stop, it will come back to you. So, keep obviously our eyes open with regards to health and safety issues. If you may go to the next slide, please. So in terms of the grade and the terms, which is our traditional reporting line, you would see that the orange line is the grade and the blue the top line, the dark blue line represents the tonnage.

Speaker 3

We're pleased to report that we had a record production in terms of tons that were milled. We actually ended up on 204,915 tons for the quarter against a plan of a 193,000, which is actually 6%, 11,000 tons or 6% above what we set as the plan. We also realized that in this quarter, we actually had a welcome improvement in the grade from from the last quarter ending up above plan at 3.31 grams per ton, representing a 3% better than better than the plan. This was a welcome, you know, improvement, and it's a result of our continued focus on the increase in flexibility and our look at the development that we have been increasing over the years. In terms of the bottom graph, which actually represents the ounces and the recovery, you will see that we produced the record ounces that Mark alluded to, which is in record production for any second quarter.

Speaker 3

And that was underpinned by, you know, a record recovery of 94.41%. We've actually managed to get to this number by three key initiatives that we actually introduced in the quarter. The first one was the introduction of tank, number nine to optimize the residence time, so that we could actually recover better. The second one was to look at reagent dosage and optimize that so that we could have efficient leaching and efficient adsorption. We also started to have enhanced and our process control through short intervals with the new management team that we've actually put at the at the plant.

Speaker 3

This total all these initiatives resulted in a record quarter two production in terms of this as alluded by Mark earlier. If you may turn to the next graph, please. So this graph shows how we actually achieved the ounces, that this was not a once of all. This was not, that we did right at the end of the quarter. It was we produced consistently throughout the quarter, feeding the the plant with consistent grade and consistent tons, and thereby producing the record production.

Speaker 3

You can see that the top line, the orange line is the cumulative, the adjusting, the the the what we what we actually did, and the bottom line or the line which is deeper, Paypal, is actually the line for the budget. You can see that from the first month, is the April month, we actually while we had a budget of 5,818 ounces, we already superseded that. We continued at a steady rate throughout the whole quarter ending up on 21,070 ounces. This supersedes the quarter two ounces for last year, which were sitting on 20,774 ounces and also better than the quarter the same quarter two ounces for 2023, which was sitting on seven 70,400 ounces. So this is really, really a record, production and done the right way consistently throughout the quarter.

Speaker 3

We may turn to the next, graph, please. So this this is a very nice graph which actually points out to how well the team is doing all around. So it's while the team has actually achieved record production ounces, they have also done it in a very responsible way. You can see that in terms of reserve generation, we actually added reserves in terms of the reserves that we actually generated. This is as a result of better development, which which was done by the team.

Speaker 3

I mean, thanks to, you know, Alton and Newton for doing this massive development being over their development targets over the quarter. And this is this is result actually us putting back some pounds and some reserves back into the into the iceberg. If we may go to the next graph, please. Thank you. I will hand over to Victor.

Speaker 4

Thank you. Thank you, James. Thank you, Mark. Can we move to the next slide, please? What we would like to up to do today is to update you on where we are with the Bilbos feasibility study.

Speaker 4

The work on the Bilbos feasibility study is continuing at a very satisfactory pace. The work has confirmed that the project has robust economics with a high debt capacity. The main areas which we have been evaluating include consideration of moving the tailing storage facility to Motapa to the Motapa property, which is just next door to the Bilbo's property. Really, the benefit of this would be lower construction costs because of the topography. Whereas at Bilbo's, it's rather a flat piece of land where we would need to put the the tailings facility.

Speaker 4

At Mutapa, we'll benefit from the topography. So it will reduce the the earthquakes which we have to do there. The other consideration which we have been looking at is really looking at a phased approach to the project starting at a smaller level, at a smaller scale level, and then ramping up to full capacity. This really looks at the issues of financial prudence at the end of the day just to make sure the amount of capital we are raising is not excessive. We've also been exploring short term revenue opportunities across our asset portfolio.

Speaker 4

This would actually help in terms of the financing of the project. With regards to the funding, as usual, our aims

Speaker 1

We seem

Speaker 5

to have lost Victor.

Operator

Yeah. We seem to have just a minor issue on Victor's.

Speaker 1

Should I

Speaker 6

Martin, maybe maybe

Operator

if I could ask you just to to continue if you lost Victor's son.

Speaker 1

Yeah. I don't know if Victor can hear me. Victor, I think I think we should put Victor on mute because he's lost his he's lost his linkage. Yeah. So Victor was saying in terms of funding, our aims our aims, we've said this before, but we mean it, is to maximize net present value per share, and that is balancing growth and minimizing equity dilution.

Speaker 1

And that's why I started off with that graph, which shows the extent to which we've we've outperformed the GDXJ. That's largely because we've not diluted shareholders and that's in our DNA. So, Victor said that the the reason we're looking for a smaller scale phased approach is to, minimize the amount of debt we take on and hopefully to avoid completely any any equity dilution, but with a prudent level of gearing. So in terms of the funding options we're looking at, the the non equity funding options, we're looking at nonrecourse project finance, and there's a handful of, of African development finance, funders who've expressed interest. We're looking at a modest amount of mezzanine funding on the basis that it is substantially cheaper than our cost of equity and also asset, asset backed loans.

Speaker 1

So the final funding decision will clearly follow the feasibility study and will depend on funder timelines. Some of these funders may not be quick, but, it will do the best we can. So I think that's probably the best update I can give on on bilboes. Sorry, Victor, if you can we just lost you partway through. I don't know if you can hear me.

Speaker 4

Yeah. No. I can hear you. Can you hear me now?

Speaker 1

Yeah. But we just just finished. We just finished. You're saying Yeah.

Speaker 4

Okay. Is that filthy Yeah.

Speaker 1

I could

Speaker 4

hear you at the end.

Speaker 1

That filthy French Wi Fi connection we got. Sorry. Should we should we move on and talk about We'll

Speaker 4

talk to the next yeah.

Speaker 1

Craig?

Speaker 4

I'll hand over to Craig who will take us through the Botapa exploration.

Speaker 5

Thank you. Thank thank you, Victor. Thank you, everybody. Good afternoon. Just while we're on the slide, I just want to touch briefly on blankets for people that are not aware.

Speaker 5

On the June 23 we published a blanket deep drilling press release. So that's why there's not much about blanket actually in here. Continue with our deep drilling program. We continue to get expected grades, in some cases, much better. Carrying on with the woods and main and the whole intention is to maintain our resource base at kind of the 3,000,000 ounces, which delivers a mining reserve plan of about ten years.

Speaker 5

So that's kind of what that drilling is focused on. The CEO alluded to the fact that we're also looking at other opportunities. We haven't, I haven't got results to share with anybody but one thing that I wanted to leave in people's minds is that if you visit the Blanket property, the one thing that you won't see at Blanket is an open pit. If you go visit a number of other mining properties in Zimbabwe, well, guess what? They all, you know, they all started off with open pits and progressed underground.

Speaker 5

So if you can go on to Mutapa, if you can go to the next slide. Reminder of what we are doing for the year. So we have a $2,800,000 budget for the year, it's mainly comprised of about 21,000 meters of reverse circulation drilling and just over a thousand meters of diamond drilling and why that weight is like that is that the previous year it was about fiftyfifty of diamond drilling versus reverse circulation. We now have we feel enough information on the geology to actually put the weight of the drilling into reverse circulation. The targets are Metarpen North and it's predominantly to define a sulphide resource below historical oxide pits.

Speaker 5

There's about 16,000 meters of drilling there in total. A second target is Muthpudzi. The intention there is to have a look at predominantly the oxides going into the upper sulfides and why this is the case is simply at Mapuzi there's no historical open pits on-site. So we do believe that if all the work is done and it is amenable to heap leaching that the potential is there to define an oxide mineral resource that can come onto our books in the near future. A little bit of further exploration at Metapa South.

Speaker 5

And to date, we have drilled about 50% of our budget. We're just under 10 we're just under 10,000 meters. All of this drilling will be updated once we have sufficient assays coming in. So although we've drilled about 50% of our budget from the assays that we submitted to the local labs, the Zimbabwe labs, accredited labs. We've only received about 40% of those assays back and so I mean it's very frustrating for us, but in kind of a Zimbabwean context it's actually very encouraging.

Speaker 5

The reason for the slow turnaround is it's not just us that are submitting hundreds of samples. There's another there's a number of other companies that are on the scene and quite clearly in this higher gold price environment have pulled the trigger on exploration, which are, you know, which I think bodes well for Zimbabwe. I think it's completely under explored, maybe not well understood, but there's significant potential for the country. If you can just go on to the next slide, it's just a brief overview of Mertarpen North. It's made up of those open pits that you see, the previous pits, the Boomegate, Jupiter and Shoal.

Speaker 5

The blue line boundary or the blue line that you see there is the bulbous property to the north. It's about 200 meters away. All the red dots is all of the first pass drilling we did during 2024 and all of the yellow dots represent the drilling that we have done and complete to date. So there'll be about 50% more of those dots. The targeted aim here and so as I said, so as we receive the assays in and we have a bulk of results that we can release, we will put out an update.

Speaker 5

But the main goal is by year end we want to have defined a sulfide mineral resource that we can declare and we can move into quite probably a study phase. If we go on to the next slide, which just shows which shows the Mopudzi area. So the picture is a bit blurry, the Google Earth is not very good on that imagery. But you can see there's no open pit mines or open pit holes. Once again all of the red is what was the first pass drilling in 2024, a bit of wider space drilling.

Speaker 5

All of the yellow is what we've done to date and Mapudzi is slightly different to the other Matapa areas because it's focused mainly on abandoned iron formation. It's got a bit of sharing. We're getting some good grades, we're getting some good wits, but we'll update the market on that as we go forward. So with that, I'll hand back over to Mark for any closing comments.

Speaker 1

Good. Thank you, Craig. Should we just move move to the last page? Okay. So in terms of outlook, the objective of blanket is to achieve the target range of 75,500 to just under 80,000 ounces, Keep keep doing the investment to modernize and update the the mine with an increasing focus on on cost containment and eventually cost reduction.

Speaker 1

Continue with the investment of Blanket to do, as Craig outlined, depletion replacement, but also looking at Blanket at potential for near term revenue opportunities. We'll continue looking at, continue to work on the feasibility study at Bilbo's, looking at ways to, the project's a great project, looking at ways to make it better and typically in ZIM we've always had to battle against things bad things that have caught us sort of unexpectedly. I think in this situation, we're actually trying to make the best of of good things, so build on good things that are happening for the benefit of, of investors. But then clearly, as Craig outlined, continue exploring at, Metapo looking at oxides and, and sulfides. So, you know, there's there's a lot happening.

Speaker 1

And I gotta say these results give a very, very nice sort of launching pad for further further activity. So with that, we'll we'll pause for any further questions.

Operator

Very much. We if people who would like to ask a question, if we'd ask them to please raise their hand. We'll just pause for a few seconds to wait for people to ask raise their hands in order to ask a question. We're going to start with our first question, which is from Ian Jocelyn. Ian, I'm going to enable you to talk.

Operator

Ian, if you could please ask your question when you're ready.

Speaker 7

Can you hear me? Yes. Okay. Good. My question related to the fact that you're generating large amounts of cash, your performance last quarter is to be commended.

Speaker 7

I also like the idea of you're trying to improve on the joint Bilbos Metabo project. You're trying to find ways of making it return greater greater return on a on a given capital. And I also like the idea of you being totally anti dilution. I'm absolutely in favor of that. So, obviously, there's an old equation.

Speaker 7

The more equity you have to put into a project or the more cash you've got to put into project, the less you get shafted by various financial institutions. So if it comes to it, you're getting close to pulling the trigger on the project. What would your view be on suspending dividends in order to, ensure that you had more cash to offer the project and therefore had to borrow less, therefore had to or or even raise equity less and therefore not get, what's the word, future profits expropriated by institutional, organizations.

Speaker 1

I'm gonna say you've a very you've got a very jaundiced and jaded view about the about the investor community. We'll we'll we'll put that on one side.

Speaker 7

Forty years experience.

Speaker 1

Well yeah. Okay. The the the dividend, as I outlined at the at the outset, the dividend is very, very important, particularly in Zimbabwe. And you're you're right. I mean, purely objectively, if we were if we were short of money and had to raise money, the other thing to do would be to suspend or cut the dividend.

Speaker 1

I've gotta tell you, we're working towards a, an outcome where we can not not dilute by raising equity. Now that's still a work in work in progress. But the the other imponderable would be the adverse effect on the share price if we did cut the dividend or impair the dividend. Frankly, you don't know what that what what that impairment would be until you've done it, by which time it's too late. So all all I can say to you is that we've worked for, I don't know, ten years or so to build up a position as a as a trustworthy, credible dividend payer.

Speaker 1

And everything you say is right, but for us to throw that away would be, would be unfortunate. So I can't give you a straight answer to that question. Minimizing equity dilution alongside maintaining the dividend and eventually growing the dividend, they're too irreconcilable, but our job is to try and reconcile them. That's all I can say.

Speaker 7

No. I've not my my main my main point wasn't that you should do it, but that you would be what's the word? You're clearly open to the idea, and I I fully understand and I accept that there could be an adverse share price movement. Although it wouldn't be rational because you'd be using the foregone dividend, hopefully, into a project that would yield greater greater returns.

Speaker 1

The difficulty with this conversation is that people may walk away from this conversation feeling that I'm I'm hinting that we're gonna get a dividend. I'm absolutely not saying that. The other side of the coin is we do we never give a dividend guarantee. If you want a guaranteed revenue stream, go and buy a Swiss bond. So, you know, I'm I'm trying to sort of I'm trying to navigate between the those two the the of those two two outcomes, and and trying to do a great job of it.

Speaker 1

But, you know, the dividend is super important to us as a as a management tool. We know we know it's important to certain of our target markets, and, that's all I can say.

Speaker 7

Okay. Understood. Thanks.

Operator

Thanks very much. We're going to go to our next question, which is from Mike Kozak. Mike, please unmute yourself when you're ready to ask the team a question.

Speaker 8

Very, very good. Thanks. Can you

Speaker 6

guys hear me okay? Yes.

Speaker 8

Yes. Okay, great. Yes. Good afternoon, Mark and team. Congrats on the very good quarter and the solid cash flow build.

Speaker 8

It's nice to see. I had two questions on Bilbos. The first one, if you've already answered it, I apologize. But the the first one was the feasibility study. Do you have an approximate timeline for when that is gonna be completed and released?

Speaker 1

Not really because the the ongoing work about the smaller scale option is, is is of an intermediate period of time. That's why I can't help you on that at this stage, I'm afraid.

Speaker 8

Okay. And then okay. My second question, which might was kinda curious to the extent you can comment. You did mention I know it's scaled down or, you know, kind of slightly slight change of scope. What kind of quantum for reduction in initial CapEx are we talking?

Speaker 8

Right? I think the PEA was I think it was three hundred and three hundred and ten million. Is that is it a number now closer to 200? Is it a two fifty?

Speaker 1

I think I think you gotta accept that the the if you were to re if you were to progress with a 240,000 ton a month project, those capital costs will have gone up. Capital costs have gone up across the industry. So, again, I can't I can't really give you guidance on that. We've got a number, but, I mean, to start dribbling out information piecemeal is isn't gonna help anybody because anything I give you is gonna be inadequate, and you're gonna want more. All all it but one of the one of the things that's clear, and you'll understand this, is that the the capital intensity of a smaller project is is higher than for a bigger project, and that's something we've got to bear in mind.

Speaker 1

Okay? But the other side of the coin is do we lose do what we lose on higher capital intensity, do we gain in in respect of, reduced financial jeopardy from taking on a high amount of debt and reducing or obviating completely the need for equity dilution? There's a lot of balancing to take place here. That's the problem.

Speaker 8

Got it.

Speaker 1

Okay. No. I appreciate it. But fundamentally, what we talk just be clear. We're not talking about how to make this project work, okay, from, no.

Speaker 1

We're talking about how to make this project the best it can be, which is a different thing.

Speaker 8

Got it. Okay. I appreciate that color. I'll jump back in queue. Thank you.

Speaker 4

Thank you.

Operator

Thanks very much. And we're going to take our next question from Howie Flinker. Howie, please go ahead. I'm going to unmute you. Ready to, ask your question.

Speaker 9

Can you hear me? Yep. First, there's a typo. Yep. In the

Speaker 1

Thank you.

Speaker 9

In the printed income statement, the four columns say six months ended. The two left hand columns should be three months ended, and the two right hand, six months.

Speaker 1

Yeah. You said you wanted that a few minutes ago, which we've got. So thank you on that. We'll correct.

Speaker 9

I wanted to point that out. Second, what is the tax rate on the capital gain of the solar plant?

Speaker 1

I wish I hadn't asked that question. It is lower than we'd expected.

Speaker 9

But there is some there is some tax.

Speaker 1

There is some tax, but it's not what we'd expected it to be.

Speaker 9

Okay. But not zero. I I

Speaker 4

thought it might be

Speaker 1

It's not that's not my view.

Speaker 9

Thought it might be might be zero. Yeah. And finally, if you were to cut the dividend in the future, you could expect your stock to drop 20 or 25%. You haven't to ponder that.

Speaker 1

Well, that's that's the point I was making. Yeah. Yes. And say and you don't know you don't know what the level of effect will be until you till you've done it. By the time you've done it, it's too late.

Speaker 1

I can I can think of some fairly salty sort of analogies, which I use internally with the management team, which I don't really Connie's on this call, but it's one of those things you can't do without full full and careful consideration? And frankly, even when you do it, you don't know where the outcome's gonna take you.

Speaker 9

You're in a great position of having future growth in Motapa or Bilbos, and producing gold at 33 or $3,400 generates a lot of cash inflow.

Speaker 1

Correct. And so, again It's

Speaker 9

a great position to be in.

Speaker 1

And that's the point I was trying to make it earlier. I mean, what we're looking at now is how to make this project the best it can be recognized Yeah. The gold recognize the fact the gold price is higher, therefore, our organic cash generation is better, but also with an eye to the potential for near term revenue opportunities, which are as yet indistinct but are coming into focus, which would further further, enhance that. And what we're trying to avoid is a situation where, you know, we we rush ahead and, frankly, over dilute. And then in three years' time, we've said we've raised equity, which frankly we didn't need to do because no one's gonna thank us for that.

Speaker 9

Agreed. Alright. That's it for me. Thanks. Nice nice job, guys.

Speaker 1

Thank you, Howard.

Speaker 9

You're welcome.

Operator

Thank you, Howard. Just a reminder, people would like to ask a question, please raise your hand. The next quest next question is going from Nick Dinham. Nick, please go ahead.

Speaker 1

Come on, Nick. Don't be shy.

Speaker 6

Can you hear me?

Speaker 1

Faintly. Faintly.

Speaker 6

Okay. I'll try to speak up here. Okay. Thanks very much. Yeah.

Speaker 6

Congrats. Awesome. Just a couple of questions. You've been building stockpiles. I haven't yet got to the detail of what those stockpiles look like now, and it obviously underpins your production expectations.

Speaker 6

What is your stockpile strategy going forward?

Speaker 1

Okay. I think can we the stockpile is slightly irritated you're raising it because it's it's what? It's about 30,000 ounces. So 30,000, sorry, 30,000 tons. So if we're producing we're processing about 2,000 tons a day, it's it's two weeks.

Speaker 1

I mean, you know, a two week stockpile is is is even on the skinny side. So, you know, the the fact that we're we're actually talking about having a stockpile of that size is a source of some embarrassment, and it kind of highlights where we're coming from. So the idea would be to build a stockpile in the ordinary course of events of up to six months and and then leave it. But there's no intention with the the rates of the rates of blasting, tramming, and hoisting, if this is where you're gonna go, isn't sufficiently above what we're currently processing to justify further investment to increase production. It's just ordinary course of business to have a stockpile.

Speaker 6

Okay. Thank you. And the other you're obviously getting some surprises on the grade side. Maybe you can elaborate. Somebody can elaborate a little bit on that.

Speaker 1

I think I'll I'll probably hand that one over to Craig before I make a fool myself. Craig?

Speaker 6

Yeah. Well,

Speaker 5

good afternoon, Nick. Yeah. So kind of the deeper we go on kind of the deeper we go on some of the blanket ore bodies specifically around b around BEQR and our old favorite Roika, The grades that we are drilling out, and can't remember that in 2023, we did our first real big resource update. So we may have been a little bit conservative on those grades because it was the first time that Caledonia was actually doing it. But we are finding that what what's the term that on you know that on the ground in in situ grades tend to be a little bit higher.

Speaker 5

And so we've got quite a big drive on dilution controls on you know mining guys have heard this before on quality mining and things like that. So all of these things add up together and give us a bit of a grain sweetener.

Speaker 6

Thank you. So when next you do your reserve estimate, which is gonna be post the end of the year, we can maybe expect to see some great improvements for the reserve as a whole. Is that where we're going with that, Craig?

Speaker 5

I don't think it's untoward to maybe see a slight uptick. It will, of course, depend on if we have mined all the high grade, you know, then you've got no high grade left to raise the reserve grade. But I think it's gonna be maintained or with a slight uptick.

Speaker 6

Thanks. A last question or two here, it's it's back to Blanket. What is what dividends has Blanket produced in this period in this first six months period?

Speaker 1

Ross, I guess, are you able to answer that?

Speaker 2

So there was a $99,000,000 dividend declared, but that included both the Caledonia side and the Blanket side. So, yeah, there's a $10.10 10.7, so seven net to to Caledonia that came through after the NTIs or minor minority distributions.

Speaker 6

So sorry. I didn't Just

Speaker 2

just over 10 just short of $1,111,000,000 or I mean, was 10,600,000.0 from a blanket perspective.

Speaker 6

Blanket. 11,000,000 came from blanket. Yeah. Okay. Yeah.

Speaker 6

Okay. And then, obviously, linked to that question is the one I asked previous in the previous quarter. When will your NCRs be do you now think your NCRs will be fully repaid, fully drawn down?

Speaker 2

Hopefully by the end of the year or very early in next year.

Speaker 6

Okay. Right. Thank you. And then final final question for Maurice. There's some discussion about alternative sources of energy.

Speaker 6

What are you thinking about, and how will this be will this be within, do you think, within the blanket side of things, or do you think this will be Caledonia doing this?

Speaker 1

Okay. Can I can I can I inter intercede that? Our thinking's moved on. We we we took on a a a very, very good local local chap to help on capital projects with enormous experience in the, Zimbabwean power sector. And, we were thinking about so solar's not great.

Speaker 1

I mean, solar's fine, but it only works when the sun shines. And, really, you need you need a a backup facility, which is pretty much the grid. Otherwise, you run the risk of losing production. So solar, I'm afraid, is not the answer. We were looking at other forms of captive, captive power, but, actually, the solution we we we've seem to have latched onto, we're doing further work on that, is to put in a a connection to the one thirty two k v sort of backbone structure in Zimbabwe, which should substantially reduce the, which should improve the the quality of of the power that we're getting and actually go a long way towards addressing some of the problems we've been facing.

Speaker 1

So at the moment, in terms of alternative sources of power, that's been overtaken by a proposal that we're working on now, which is to put in a a sort of a I think it's about a 17 kilometer, $10,000,000 connection to the one thirty two k v k v backbone, which should materially address our problems.

Speaker 6

Would that go in Caledonia? Would that go into blanket accounts?

Speaker 1

Yeah. Blank because blanket would benefit. Yeah. It's blankets. Okay.

Speaker 6

Alright. Thank you very much.

Operator

Okay. Can you just remind us if you like to ask ask a question? Next question is from Yun Luo. Yun, please go ahead.

Speaker 10

Guys, can you hear me? Yep. Very good. First of all, congratulations on record breaking quarter for breaking records. Question for James.

Speaker 10

James, or maybe for the for all of you, can you give us a steer as to how quarter three production is going today? And in particular, our recovery is being maintained at around 94 and a half cents.

Speaker 1

I've gotta hold on. Go ahead. Ewan, I've gotta say you are naughty in that we've just upgraded our guidance to between whatever it is and whatever it is. So, I mean, you know, we've just we've just told you what production is gonna be for the rest of the year. So I don't know why you think we're gonna give you a different answer from what we've what we put in the press release two weeks ago.

Speaker 1

So having said that, James, what's your answer?

Speaker 3

So yeah. So production is going pretty good, I mean, for for the third quarter. And, yeah, we we've got a very good metallurgical team. I mean so, yeah, we are we are sticking to our guidance that we put out.

Speaker 10

Okay. Thank you for that one. Let's see. Just going on the list of my questions. Nick has already asked several of them.

Speaker 10

Are you able to speak more, just just to Craig, about, the new discovery as, the at Blanket? Is that the the one at that? Is that another quartz reef, or is that a disseminated reef?

Speaker 5

Another disseminated reef. It's part of the blanket ore body. So we have we have what we call Blanket 1234, five, six, and so now this one has been termed Blanket 7. So it's early days yet. You know, it was a triangle of holes that picked up the zone that had good grades.

Speaker 5

So now obviously, we've got to grow it and see where does it go. You know, we've you know, we've got to start pinning it out.

Speaker 10

Okay. Thank you very much. That's all my questions for today.

Speaker 1

Thank you, Joe.

Operator

Thanks very much. We have no further questions at the moment. So what I'd like to do is pass back to Mark for any final and closing remarks.

Speaker 1

Okay. Well, Thank you. Thank you all for for joining us today. It's been a it's been a good performance from the from the from the entire team, and I I thank them for that. And we look forward to doing it all again in in mid November.

Speaker 1

So thank you very much.

Operator

Thanks very much. That now concludes the webinar.

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