Q3 2024 Caledonia Mining Corp PLC Earnings Call
Speaker Change: Okay ladies and gentlemen, welcome. Good afternoon, welcome to this call to discuss Caledonia's results for the third quarter.
Speaker Change: financial and operating results. We'll also discuss the preliminary results of the the exploration program at Metapa which we published this morning and I'll also make some brief comments regarding the progress at Bilbo's.
I'm joined this afternoon by James Mufarra.
who's our Chief Operating Officer, he joined us in May.
by Chester Goodburn, our CFO.
Chester Goodburn: And a new person, a new face, I think, to most of you will be Craig Harvey, who's our Vice President, Technical Services, and he's responsible for our exploration activities.
Chester Goodburn: so he will say a few words about what we're doing at Metapa and then I'm joined by Victor Gopari who's a director and he will field questions relating to Bilbo's and or the general environment in Zimbabwe.
Chester Goodburn: Before we get into the presentation, I just want to make a couple of observations. The first is that Caledonia is changing.
Chester Goodburn: very rapidly and that's reflected in the three announcements that we published this morning. First of all we've got the financial operating results which largely reflect the performance at Blanket.
Chester Goodburn: It's fair to say that production has stabilised from what was a difficult period of lockdown.
Chester Goodburn: currency instability. We are accustomed to managing these risks and in the course of the presentation
Chester Goodburn: will set out some of the steps that we're already taking to address these areas and will also outline some other issues, which at this stage, it's too early to quantify the effect or indeed the timing of when it will come into effect.
Chester Goodburn: So we've got the financial operating results relating to the effectively blanked.
Chester Goodburn: We've got very encouraging results from MATARPA, which reaffirms and reconfirms our strategy of investing in Zimbabwe to create a mid-tier Zimbabwe-focused gold producer, and I think that strategy is now being vindicated.
Chester Goodburn: by what we're seeing at Matarpa, and clearly we continue the dividend. The third press release this morning was the continuation of the dividend. We have attractive and competing calls on our capital across the business.
Chester Goodburn: but maintaining returns to shareholders remains a key part of our strategy. So, with that, we'll get into the presentation. Regrettably, we do... Sorry, just go back a minute, Camilla. Let me just deal with that.
Chester Goodburn: So yes, we had a fatality at the mine in late September. James will talk a little bit more about that.
Chester Goodburn: Just under 19,000 ounces of gold were produced in the quarter.
Chester Goodburn: But let's just note that wasn't a record production quarter, so we're very comfortable with a production run rate of just under 19,000 ounces and we remain on track to
Chester Goodburn: to achieve the full year guidance of anything between 74,000 and 78,000 ounces. As I mentioned, encourage your results at MATARPA, which Craig will talk about in a moment.
Chester Goodburn: We've also announced the forthcoming sale of the solar plant, that's been operating slightly better than expected.
Chester Goodburn: We built it at a cost of about $14 million. We're selling it for just over $22 million.
Thank you.
Speaker Change: is to get the power that's generated from that solar project so by no means losing the
Speaker Change: the benefit of getting that reliable power and in addition the new owner is now evaluating a second stage of that solar plant so we can release the capital and use the capital elsewhere in our business.
Speaker Change: Already mentioned the fact that we've declared another dividend of 14 cents and we'll talk a bit more about Bill Close but we're continuing with the feasibility study and we're making some progress now on funding options for that project. So moving on, I think
Camilla Horsfall
Speaker Change: I think I've dealt with most of these things. I mentioned production, gold prices benefiting from higher gold prices, an average price in the quarter of over 2,400. That's resulted in improved revenue, improved gross profit.
Speaker Change: But at the net profit attributable to the shareholders, as Chester will outline, we then suffered the headwinds of continued foreign exchange losses and some other unusual expenses, which Chester will outline in due course.
Speaker Change: So I think with that we're going to move into the, yeah, so can I ask James to just run through the review of the operations of Blanket. James, could you do that?
James: Thank you very much, Mark. I mean, good afternoon to you all.
As Mark already alluded to.
Speaker Change: We regret to inform you that we lost one of our treasured employees, a JECAMA assistant, on the 21st of September.
Speaker Change: The said employee was in the process of installing support when this fall of ground actually occurred, fatally trapping him.
Speaker Change: despite all our efforts with the rescue team to try and bring him out to surface and you know resuscitate him unfortunately he succumbed to the injuries that he had suffered in this ball of ground
Speaker Change: As an organization, Caledonia, we will strongly believe in a culture of care and growth. And this is something that we treasure ourselves with. We also believe in...
Speaker Change: total or real risk reduction all the time and we believe in learning from the incidents that would have happened.
Speaker Change: We have given the employees family support and we've also supported the government with the investigation that they actually took out with regards to the employee that lost their life.
Speaker Change: Subsequent to the accident, we actually employed the services of DuPont or DSS Plus to do a total diagnostic on our operations in order to see the whole of our value chain with regards to safety and health.
Speaker Change: This work, we believe, will assist us in our quest for Seroham on our minds. We should believe, and totally and thoroughly believe, that it is both a moral imperative and an operational imperative.
Speaker Change: on the production of the quota. I'm glad to announce that in terms of development, we actually came in close to 7% above our plan for the quota.
Speaker Change: This is good with regards to our future flexibility that we will need because the development is opening up our future possibilities of flexibility.
Speaker Change: In terms of terms, we're neck-and-neck with regards to what our plan was.
Speaker Change: However, we set back because our grade was just around 4% below our plan for the quarter.
Speaker Change: This was as a result of a fall of ground that we had at the beginning of July in one of our stops, Iroika, and we couldn't actually quickly and in time have the flexibility to replace this stop. As a result, we actually suffered this drop in our grades, in our asset grades.
Speaker Change: We have ever since moved back into better stops to stabilise the grid but it was a little bit too late to recover the quota at that moment.
Speaker Change: As a result of the great drop that we had, we actually ended up with our ounces just over 6.9% below for the quarter.
Speaker Change: The improvement that we see in the development and the achievement that we see with our targets at the moment will ensure that in the future, we will isolate ourselves from incidents of inflexibility that happened to us in the previous quarter. Thank you, Mark.
Okay, I think we'll move on to...
Speaker Change: Finance, can I, Chester can I ask you to run through these pages dealing with finance please?
Thank you all.
Chester Goodburn: QLDs remain flat at 5% of revenue, and production costs have increased by 2.9%, so it's good to see the cost of Bulbos coming down, and also the revenues of Bulbos covering the all-income costs for Bulbos.
Speaker Change: Production costs at Blanket has increased and as Mark has said we've got some cost initiatives to improve on that and we'll get to that in a bit. And then depreciation has decreased and that's due to lower ounces.
I was quite pleased to see the Grace Prophets.
an increase of 77% for the quarter.
Speaker Change: When we look at the production costs, this is on a per ounce sold basis, you can see that the wages and salaries have increased, and that should be due to additional aid counts that we've employed at the blanket.
Speaker Change: as well as over time that we spend, and we've got some initiatives to turn that around.
Speaker Change: Consumables increased, predominantly due to once-off repairs and maintenance that we've done.
in our engineering and metallurgical plant.
Speaker Change: and that shouldn't reoccur. So I'm not too concerned about consumables.
Speaker Change: Other than that, repairs and maintenance charge, we can see that our prices are really good and there's actually been a slight reduction in our variable consumable costs on a per ounce basis.
Speaker Change: Electricity has increased the blanket and that's due to higher maximum demand charges that we are receiving. If you exceed a certain demand charge or electricity load at the mine's grid
In addition, there will also be a penalty if you...
Speaker Change: have a low power factor that comes out of your grid and that has also increased our electricity charges at Blanket Mine, but we've got some initiatives and some of them have already been or is about a week away from being implemented.
Speaker Change: Online costs and administration at the mine has increased predominantly due to the replacement of costs due to the volatility that we've seen.
Speaker Change: in the ZIG, and all your local suppliers have increased the cost, and we can see the effect of it. But it's not a big increase in absolute terms.
Speaker Change: All those, I've spoken to that before. That's covered by the revenues and on a break-even basis.
If we look at the waterfall of our Q3 23
Speaker Change: And now that compares to our current online cost, so we've decreased the cost significantly at bulbous oxide, so good to see.
Thank you for tuning in. Bye.
Power, labor, consumables, and other has increased, as said before.
Speaker Change: And we can see that our oil and steam costs also increased.
Speaker Change: That's pretty much due to an increase in our share price that increases the share-based expense. That's actually a big cost to heed.
as our investors would be happy with increased share price.
Speaker Change: We've revised our cost guidance for 2024, our online cost guidance is now set at $950 to $1050 per ounce.
Speaker Change: and all these same costs are set at $1,450 and $1,550 per ounce, and that's increased predominantly due to the labor and the power costs, which we'll come on to in a bit.
So these are our cost control initiatives. Firstly power, we
Speaker Change: We're about two weeks away of installing power factor correction equipment. That's expected to save approximately $1.3 million per annum. And that should take effect in 2025, the full 2025, being installed in a couple of weeks.
Speaker Change: We are planning to convert our central shaft winder from AC to DC, and the efficiencies that you gain from a power use perspective will also decrease your cost by $1.2 million.
Speaker Change: That should be implemented within 2025, so you'll see the full effect of that coming in 2026, and part of it coming in 2025.
Speaker Change: What we've already done is to increase our waste payload, wasting speed, and improved the...
Speaker Change: sequencing of our waste at Central Shore. That's helped us to increase efficiency in our operations and that's already taking effect so it's good to see that coming in place.
Speaker Change: And we also plan to replace equipment with more energy efficient equipment. And that will come through in time. It's not something that you will see immediately taking effect, but we are looking at more energy efficient equipment.
Speaker Change: Then, from a solar plant perspective, we're looking to get an external authority to build a phase two.
We expect that to be approximately 8 megawatts.
Speaker Change: and the rate that it saves, we'd say it was approximately $1.6 million. Now this wouldn't come with a capital cost for us, we'll just be buying the power from a third party and in turn save on our OPEX.
Speaker Change: Further, on salaries and wages, we reside under 6 people of a certain age and plus at a cost of $2.1 million. That's included in other expenses, so it's not part of our OPEX, but it's expected to save our OPEX going forward by approximately $400,000.
Speaker Change: And also, in addition to that, it brings about some efficiencies that we could generate by modernizing MIME. We're planning to do quite a few IT initiatives, and hopefully that helps with the implementation of that too.
Speaker Change: We also plan to implement a new biometric clocking system that should track staff at the Blanket Mountain. So that's tracking of our staff movements, see where we can gain efficiencies on time studies.
Speaker Change: and better and more efficiently allocate our staff at Blanket Mine.
Speaker Change: In addition to this, this is the help of the rostering and pre-authorisation of overtime, so it also to allocate labour better to various areas and also crack that, but also look at the overtime and make sure that this overtime gets pre-approved, so we know why we're spending money on overtime.
Speaker Change: So, we believe that could help quite a bit in helping to...
and many just staff members.
Speaker Change: Just before Chester goes on, so all those initiatives, some of them are very close to being implemented, some of them will be implemented next year, we can quantify the benefits arising from those and we're pretty clear on the timing.
Speaker Change: Some of the things, you know, replacing old equipment with more energy efficient equipment.
Chester Goodburn: the effect, the benefit we can get from the introduction of the biometric clocking system. At this stage, it's too early to quantify the benefits that we might reap and also the timing thereof, but we should start to see some progress in terms of cost of production for early next year.
So go on, Chester.
Chester Goodburn: So, the gross profit, as I said, has gone up by 37%. I'm very pleased with that.
Speaker Change: Net foreign exchange losses that was quite significant in the quarter we incurred 3.1 million
Chester Goodburn: of foreign exchange losses. 800,000 of that would be intercompany foreign exchange losses that are not eliminated. That's also unrealized and we don't expect that to realize. So I'm not too concerned about that. That's due to the strengthening of the RAND.
Chester Goodburn: So really not an issue there but what we see is 2.3 million dollars worth of losses in Q3 due to the devaluation of the ZEG.
Chester Goodburn: We'll get down to detail on how we manage that and how that is broken down, but for the year we've suffered in total an amount of $9.3 million worth of loss now.
That's significant for our business
Chester Goodburn: and we can no longer ignore that and say it's not a cost related to our business. We've seen this in every quarter throughout and we've also not counted that back for our adjusted earnings to share.
Chester Goodburn: We look at this as quite a serious cost and we try to mitigate the effects of devaluating currencies as far as we can. We'll get onto that in a moment.
Chester Goodburn: And the other, that's where we include the $2.1 million of retirement fees, so that you won't see again.
Chester Goodburn: won't be repeated, and the tax expense increased due to IAGRA's profits during the quarter.
Chester Goodburn: You can see the foreign exchange breakdown for nine months and we've got the ZIG and the RTGS. Now the ZIG is a new currency. The RTGS was abolished in 5 April 2024.
Chester Goodburn: And you can see, I was quite pleased to see that we've got a very small cash and cash equivalents loss of about $2,000 when we had the ZIG, and that's how we manage that is to spend the ZIG. We try and spend it on efficient.
We do spend a lot of fiscal costs.
Chester Goodburn: to ensure that our cash gets converted to inventory, that we can use at the mine, rather than keeping it in a dollar that could suffer the volatility that we've seen in this currency.
Chester Goodburn: In the first quarter, we had a conversion method where it locked up our cash and that incurred $3 million worth of losses under RTGS.
Chester Goodburn: And other than those two, I'd say that the most significant ...
Chester Goodburn: One of the items that contribute to our foreign exchange would be the bullion sales receivable and the battery sales receivable and the conversion and receipt of that cash.
is very much outside of our control as we...
receive our cash from Fidelity.
Chester Goodburn: when they are ready to face. Normally that happens in about 10 days, 10 to 14 days, but still in that 10 to 14 days if there's a significant devaluation that's like we've seen with the zig, you know, it's still...
Chester Goodburn: comes down to the thick shell bottom line in terms of losses.
Can I just make a point?
that people may not understand.
There's no market for the, there's no properly traded liquid.
Chester Goodburn: market for the Zimbabwe currency, the exchange rate, the official exchange rate.
Chester Goodburn: is just set by a committee and it typically steps down, devalues in big steps, so case in point would be the devaluation of the ZIG.
Chester Goodburn: from about 13.7 to, I think, about 23 nearly 50% devaluation. That happened in a space of a few seconds.
Chester Goodburn: So it makes it very difficult, the magnitude and the speed of these devaluations makes it very difficult to manage, but there is no hedging mechanism and there's no exchange rate which allows you to move ahead of the curve.
Sorry, Chester Gould? Yeah.
Speaker Change: I think that covers it. So my mitigation to prevent volatility in the zig and losses in the zig is not to out any zig as far as you can. So we try to spend that to our own expenditures.
Speaker Change: What I was also pleased about is the cash generation. That's before the working capital changes. And again, we've got a quarter, over $16 million for the quarter. If you see our $46 million that we generated for nine months, that's more than double what we generated last year.
Speaker Change: And it's good to see that every quarter this year, our cash generation has been consistent and it's been a lot higher than 2023, so it's good to see the shift turning around from 2023 to now.
Speaker Change: Good gas generation. We have spent some money on safety stock to ensure that we've got stairs available.
Speaker Change: and bolster our production and not have any delays in terms of production. We don't want that, especially at the current gold prices. And we've also increased our prepayments for long-lead items, and that would be reflected in the capex consumed in Q4.
Speaker Change: Predominantly in about 1.4 million of that prepayments relate to the ZIG, where it makes some prepayments to buy stock rather than all the cash.
Speaker Change: So, that has significantly affected our cash flow, but not in a bad way. It helps us to ensure our production, get some safety spares, and also ensure that we don't suffer the evaluations in the ZIG. So, it's just changed form.
Speaker Change: We expect that to turn around over the longer term, and it's good to see that safety equipment on the shelves.
Speaker Change: On that, CapEx, that's well controlled. We still expect CapEx to come in at $30.8 million a blanket. So no unexpected CapEx. There might be some that roll over into next year, but the absolute number hasn't changed and that shouldn't affect. So I'm happy to see the cash generated again in this quarter.
Speaker Change: Good, thank you. Thank you, Chester. Can I ask Craig to run us through the results, the MATARPA results, which again we announced this morning? Craig, can I leave you to do that, please?
Craig Harvey: As we can see on the map just to the right there, we have bulbous, which shares a common boundary. So it's, you know, I mean, they're right next to one another.
Craig Harvey: Metapa has three main trends, so we have basically the northern, central and southern trend.
Craig Harvey: These three trends in total are just over 9kms in strike length, so it's a fairly expensive piece of ground.
So, for this year, what our focus was
Craig Harvey: It was to test the continuation of sulphide zones below the historic overhoop and pit oxide that was mined, typically during the 19th century.
Craig Harvey: during the 80s and 90s under Anglo-American and so clearly we have quite a bit of data from Anglo, you know, some old billing databases, some underground working plans from previous operators as well.
Craig Harvey: And then we wanted to trench across the Matapa property to have a look for prospective new areas that might not have been found or had been looked over.
Craig Harvey: So, we had drilled just over 9,500 metres of drilling, a combination of diamond and reverse circulation drilling. That was from a total of 68 holes.
Thank you. Bye bye.
The End of the World War II
Craig Harvey: The grade in general is very, very similar to Bilbo's, so again I've got to stress that it's very widely spaced. It's about 150 to maybe 200 metres between drill holes, so it's early days.
Craig Harvey: The widths may be a little bit thinner than Bulba's. There's still a lot of work to act, to actually be done. So, you know, just looking at the graves, I mean, those are six holes of...
Craig Harvey: As I said, 68. In the press release, it will be available on our website as well. The full details are there. You can have a look through all the holes.
Craig Harvey: But something that sort of stuck out is that, yes, quite clearly, sulfides continue at depth at similar grades.
Craig Harvey: But of great satisfaction is Caledonia has defined an area on the eastern portion of the Matapa central trend, and we call it Mpuzi.
Craig Harvey: And so it's the fourth hole there, the NPZ RC number 2.
Craig Harvey: That's just one of the holes that is from there. And so, as you can quite clearly see, you know...
Craig Harvey: Pretty decent grade, very, very shallow, sitting at 12 meters below the surface.
Craig Harvey: and it does appear to be oxides, alright, so oxide material and this is quite significant in the fact that
Craig Harvey: The bulbous that we have, it currently still has two oxide heap leach processing plants.
Craig Harvey: The closest, well, they're about the same. The one's three and a half cows away, the other one's 3.2 cows.
Stop.
Craig Harvey: So, we have drilled some extra holes, they are in the tables, in the, in the, in the
Craig Harvey: in the press release, there are nine holes drilled, six of which have greyed.
Craig Harvey: and of great interest is of all of the intersections in the Mpuzi area.
Craig Harvey: Eight of the 15 intersections that we actually report with GRADE are above 15 metres.
Craig Harvey: So, 50 metres and shallower. The average of those eight intersections is 4.21 grams per tonne. And so we can drop out that high-grade one of, you know, 10.95, and the average comes back at 2.6.
Craig Harvey: So it's very, very exciting for us going forward into 2025 and 2026. Our focus is going to be on clearly the Mputsi area. We are pretty sure and pretty confident that
the potential for near-term oxide
Craig Harvey: Mineralisation is there, and clearly we'd like to get that into the bank.
Craig Harvey: The second focus is going to be drilling on the Matapa North area, which is directly basically along the Bulbos-Matapa shared boundary.
Uhm...
and then to focus on the Pudsey area.
Craig Harvey: to get that onto our books, and then the Maputi area, very, very exciting.
Craig Harvey: Thanks Mark, I don't know if you have any comments. Okay, thank you, thank you Craig. Shall we move on?
Okay, just start.
Speaker Change: Just a few words about Bill Bowers. We continue to do work on the feasibility study, so there's no update there. All the information you see on this slide.
Speaker Change: published a feasibility study in the first quarter of next year.
Speaker Change: our thoughts about funding. Clearly we had some internal thoughts when we bought Bilbo's.
We've now had those validated by a specialist.
Speaker Change: Data Advisor, and we're now in the process of beginning to engage with prospective funders.
Speaker Change: We're looking at what seems to be coming into focus would be
Speaker Change: senior debt and mezzanine debt so we'll continue to flesh those out and then in due course very much in the hands of
Speaker Change: of the speed at which the fund has moved, but in due course we'd then be able to announce the senior lender and the debt arrangers. But I can't really give any indication as to how long that will be, but that's making good progress.
I think we're moving on.
So look in terms of in terms of outlook
Speaker Change: The blanket or immediate area of focus is to maintain production at about 75,000 ounces a year. As you've heard, we do need to pay closer attention.
to the cost.
Speaker Change: electricity and labour. Some of the initiatives we're taking we're able to quantify, some of them at this stage we can't quantify and we can't put precise timing but we're beginning to make progress there.
Speaker Change: At Bilbo's, we expect to publish the feasibility study in the first quarter and as I've said, we are making progress on various funding options and as Craig's just outlined to you, we've got exciting results at MATARPA
Speaker Change: from three areas that were pre-known and then from one new area which effectively we found. And we'd expect that exploration to continue maybe a couple of years before we get to a
Speaker Change: a maiden resource, but given its immediate proximity to Bilbo's, anything we find at Matarpa
Speaker Change: should give rise to very substantial spinaches as a combined Bilbo's Metarpa operation. So we've taken about half an hour to go through that. I mean, we can now open this out to questions. Camilla, do you want to do you want to share that?
Speaker Change: That's fine. Can I just ask that you raise your hand if you have any questions? Can I also say, people can type them, but the problem with typed questions is sometimes it's...
Speaker Change: You may not get the nuanced answer that you're looking for, so you probably get a better quality of answer if you actually raise your hand and do it verbally rather than written, but of course if you don't want to do that we can manage.
Speaker Change: The only question so far is about having the drawing on slide 14 available on the website. Yes, we can do that. It's also in the press release. There's a question here from Ian Jocelyn, so I'm just going to unmute you now.
And you should be able to speak.
Hello.
Can you hear me? Yes.
Speaker Change: You can hear me? No? Okay, good. Right. Yes, I think I had a similar question last time around, but it's kind of, you've, you've highlighted it, I think, today. It's to do with the account where you, you obviously have the IAS EPSs and then you have your own adjusted. And I, you've touched on something I was going to talk about anyway, but
Speaker Change: and when I look at your notes the difference I think that correct me if I'm wrong but the main difference between the IAS EPSs and the adjusted ones are one FX which clearly you've alighted on as being of concern and I think the other the other factor was I think minority interests
which obviously takes up quite a large chunk of the
after tax
and Camilla Horsfall.
Speaker Change: Well, Chester can answer that question, but I would, yeah, Chester, I'll leave you to answer that question if you would. So first, again, with NCI, we show what is EPS and attributable basis. Secondly, we don't deduct the ethics. The ethics that we do deduct would be the intercompany ethics that I spoke about.
Chester Goodburn: It's not that big. It's not the significant portion. Significant portion relates to the Zik losses. And that's still deducted from EPS and adjusts to EPS.
Speaker Change: So what's the main difference? What accounts for the main difference between...
Speaker Change: the deferred tax and some foreign exchange that we don't see as structural to our business. What we've done in the past was to remove the foreign exchange because we have foreign exchange gains for
Speaker Change: I've always said 2020, 2021, and 2022. So we removed those profits from what Chester needs to share.
Speaker Change: Because we didn't feel that was part of our business and we didn't want to show a number without that.
Speaker Change: When we look at 2023 and 2024, you see large foreign exchange losses. And now for this year, because we've seen significant losses of about 9.3 million, we deducted the foreign exchange losses that pertains to the ZIM operation.
Speaker Change: We still deducted that from the equivalent, so we didn't count it back in the adjusted earnings per share and CELC.
You mentioned minority interests.
Speaker Change: Yeah, so we want to show an example that's an attributable profit to our business. So we count that back.
Speaker Change: But isn't that... I mean, perhaps I'm not understanding, but isn't that money paid out, which...
It's a long thing.
Hold on, hold on. Lee. Lee.
Speaker Change: When we adjust the foreign exchange movement, we only adjust it for our share of that foreign exchange movement. Clearly, those foreign exchange movements are incurred a blanket.
Speaker Change: and so the minority is a blanket, they have to stand behind their share of that, I think that's the confusion. The calculation of earnings per share is based on attributable earnings per share, so that's after the NCI.
Speaker Change: Right, okay, so really minority interest is them standing behind their share of the losses. No, they have to, absolutely, yeah. Oh no, that's fine, that's fine. It just had a line minority interest, so I thought possibly you were just adding back their total.
Speaker Change: So what we do, the adjustment for foreign exchange, the adjustment is further adjusted for the NCI component and the extent of any tax relief on the foreign exchange loss.
Speaker Change: gotcha okay so it's effectively yeah it's the two words misled me into me thinking
I've got you, okay. Could I ask another question?
Speaker Change: Sure, it's to do with, I think you gave examples of putting in extra inventory to try to ensure that...
Speaker Change: If you hit low grades, you're able to have flexibility, perhaps more faces to do the mining. I was just wondering if you could give me an example of...
of how the extrinsic...
will help you.
Speaker Change: in the event that we have another event such as happened at Eroica. The build-up of inventory...
Speaker Change: is to make sure that if we've got enough backup stock in case say pumps fail, we're putting some new pumping systems on the bottom level of the mine, on 34 level, if those pumps fail that means that we end up with too much water at the bottom of the mine. Similarly we're having to, we bought
Speaker Change: to mean that we're spending, instead of holding ZIG cash, we spend the ZIG cash and we buy whatever it is we can buy that we use in the business to minimize our foreign exchange exposure.
Bye.
Speaker Change: Okay I understand and I just one last question obviously it's interesting and quite exciting that you discovered ox oxides in in Tarba and I think you mentioned you know you're looking at a two-year horizon
Speaker Change: for any sort of development. So would that include doing some shallow mining for
picking out the ox.
Speaker Change: Yeah, look, if we can, don't forget we had a very unhappy experience of oxide mining.
Speaker Change: a couple of years ago, so we certainly don't want to repeat that. But, if we can get our hands on relatively shallow oxides...
Speaker Change: we will do, and we can put it through the existing heat leach facilities at Bilbo and turn it into cash as quickly as we can. So if that's economically viable, we will do it.
Speaker Change: but we're not going to fall into the same, literally the same pitfall that we fell into in early 2023. So yes, it makes sense, clearly, but on a prudent basis.
Speaker Change: And could you remind me what happened at Bilbo's because obviously you thought that you could do it there?
but it didn't.
Speaker Change: It turns out that the stripping ratio was too high, so we will be able to access the remaining oxides at Bilbo's in due course as part of the broader sulphide package, but on a standalone basis it just wasn't cost effective.
around. Yeah.
Gotcha. Okay, so that's been very helpful. Thank you.
Speaker Change: We do actually have some written questions, which are quite detailed. Camilla, shall I try and address these written questions? Yeah, OK. The first question was, please explain the circumstances surrounding the fall of ground in Eroica. Craig or James, do you want to talk about what happened in Eroica, the fall of ground early in the third quarter?
Yep, so...
Thank you.
Speaker Change: It was forming a whole structure, some of the people that understand this would remember.
Speaker Change: So it was probably a whole structure and in between you would obviously form a world.
where our teams were supposed to proactively...
Speaker Change: identify that, feel this urge, and be in a position to carry on with work.
Speaker Change: Unfortunately, we did not do that time actually, and as a result, when they were trying to put in support, they did unfortunately not put in temporary support. The risk was not perceived to the extent to which it was.
Speaker Change: and the fall of ground happened, unfortunately, when they were still there and we lost the man.
Okay, and then the further question was the
Speaker Change: the incident at No. 4 shaft that disrupted hoisting. That was quite simply, a piece of equipment was being lowered down the No. 4 shaft. It broke loose, it fell down the shaft and caused some damage to the shaft infrastructure. And that lost us about, what, a week's worth of hoisting up No. 4 shaft, was that correct?
Yes, it was a weak sweat off, I think.
Speaker Change: Yes, but that's now been resolved. There's a very detailed question about the, which I think Chester, I'll ask Chester to deal with this, the difference between IFRS
Speaker Change: production costs on page 11 of 20.1 million and blankets production costs on page 12 of 19.3 million. Chester are you able to address that easily or does that require an email to the to the questioner?
Speaker Change: This is a Mardi Gras email, so if you'd like to select a page.
Speaker Change: Seven, that's food production costs shown on the slide, not page 11.
Speaker Change: I don't know, this is written so I don't know if page 11 probably refers to the MD&A or something or maybe the accounts, I don't know what documents have been referenced in. 19.3 million, I'm going to assume.
Speaker Change: A few things, yeah, but if it doesn't answer, let's do it on email.
19.3 is the cost at blanket
Speaker Change: We do incur some costs at a group level, that gets added to that.
Speaker Change: and you also get the Bulldozer's costs. So Reta Beely is sending me messages whilst we're having it. So Reta Beely, please, if you send me your email address, and then I'll forward your email to Chester, and Chester will deal with this over email. It's a bit too detailed to go into on a call like this.
So the question is the reallocated employee costs.
into the Shared Services Centre.
Speaker Change: it's about 2.4 million dollars for 2024. Those are costs that we will need to carry as we go forwards with Billbows, so yes those will be recurring costs.
Speaker Change: where we are at the moment is we're effectively building up
Speaker Change: a head office infrastructure so there's not just Blanket and Caledonia as it currently stands but Blanket plus Caledonia plus Bilbo's as we will be in the future.
Speaker Change: And so we are in this uncomfortable period now until we get billboards up and running of carrying those costs. Now clearly when billboards are up and running...
Speaker Change: to fall very, very substantially as we spread those shared services costs and the higher head office costs over substantially more production. So, it will work its way out in a wash over the course of the next couple of years, but, you know, we need to have got Bill Burns up and running.
Chester Goodburn: Okay, so the question was, our funding in Zimbabwe, the overdraft facilities and working capital, Chester, do you want to talk about liquidity in Zimbabwe? Yeah, so as we go forward, and Mark mentioned it now, we've got some cost initiatives.
That should bring down our operating costs going forward.
Chester Goodburn: so that will increase the cash generation. We don't see the working capital outflows. We don't see that carrying on, going forward. We just got the safety spares to ensure that we don't have any delays in our production, so we don't see that.
Cash.
coming through, or cash expense coming through, cash outflow.
Chester Goodburn: So yeah, our cash position should improve going forward, and for the short period of time when we've increased our inventory, we will be utilising the full facility before the end, but it should normalise going forward.
The point of those facilities is to use them.
Speaker Change: And I'd note that the blanket is very undergeared. Maybe if I could add to that, I mean Mark did mention this other blanket that he's planning to sell for...
Speaker Change: $22 million after CGT, which generates about $19 million. Blanket's very profitable at these gold prices, so you should see an increase in the cash flows coming through in 2025. So all these factors will improve our cash flows going forward.
Speaker Change: The final question was the adoption rate of the ZIG and do locals still primarily transact in dollars? I guess the person who's best placed to answer that is Victoria. Are you able to talk about the...
the general acceptance or non-acceptance of the ZIG in-country.
Victoria: Thank you, Mark. At the moment, if you look at the...
Victoria: the global transactions in ZIM, what you'll find is that the US dollar is somewhere between 70 and 75% and moving up to probably somewhere between 75 and 80%.
Victoria: So, approximately 20-30% of transactions in ZIM are mainly ZIG. So, there is a level of acceptance.
Speaker Change: where you have to use it anyway. But for us, because we get some of that money in ZIN dollars, in ZIG, like Chester says, we use it to pay taxes and buy some local consumables.
and I think the other trend in Zimbabwe.
Speaker Change: is the extent to which people just don't use banks anymore. Do you want to talk about that Victor, the sort of de-banking?
Victor Gopari: A lot of Zimbabwe, to a large extent, also operates a cash economy, because you find the general public
Victor Gopari: Because most of the businesses have gone informal, and because of unemployment, a lot of people are informal traders, informal traders. So, those transactions in that side of things is mostly cash.
Victor Gopari: So you find most of those transactions actually use dollars rather than zigs.
Speaker Change: Okay, right, that deals with those written questions. Any further questions, Camilla? Yes, there are. So Howard Blinker wants to ask a question.
How is your unmuted?
Can you hear me? Yeah.
Speaker Change: Oh, good. I have a few questions. Craig, you cited one hole in Metapa. Did you say 1.5 meters or 5.0 meters?
Speaker Change: I'm not quite sure what... You said 15 or 50 meters of some grade, and I didn't know which one you meant.
Speaker Change: No, it's the fourth hole that's listed there, so it is at around 15 metres below surface.
Speaker Change: It's 4 metres down the whole intersection at a grade of 10.95. Oh, I see. A 50 metres down hole. Okay, I misunderstood. No, no, no, no. No, it is 50 metres below the surface. On 5. On 5, below the surface.
and the maximum width is four meters. Got it. Okay.
Speaker Change: and Chester, could you please explain, no I'll rephrase that, is the large increase administrative expense attributable to expenses at Bilbo's and Metabo or is that something else?
Chester Goodburn: If you look at our admin expense, it's increased quarter on quarter, increased by approximately a million. Yeah. And so that's predominantly cost to do the feasibility study. So we've...
Chester Goodburn: We've both put our horses there to complete that. Okay. Howard, that's the point I was making earlier, which is as we've got, we can't just, over the course of the next few years, we've got to build up an owner's team to build this project and then run the project.
And so we will be having costs.
Speaker Change: at a head office level or a group level to build this project. That's what I thought. I wanted to clarify that in my mind. Yeah, and the other slight problem arising from those, sort of follow-on problem arising from those, is those costs aren't actually tax deductible because they're not in a taxable entity.
Speaker Change: That's one of the reasons why our effective tax rate looks quite high, because we've got costs sitting in areas that aren't making profit and therefore are not having tax deductions. Again, that will all wash out eventually once we've got billboards up.
Speaker Change: You preempted my next question about taxes. Is the foreign exchange loss also tax-deductible or not really? It's partial.
Yes, which is most of it's real life portion is.
Speaker Change: Okay, and you also said you're going to save 1.2 million of electrical expense.
compared to
Speaker Change: Now, I think you made a comparison now. Does that mean that the financier owning the solar plant?
will actually save you another $1.2 million?
Speaker Change: Yeah, so the solar plant, I've said it's saving would be $1.6 million.
Speaker Change: and 1.6 yeah so we're planning to get somebody else to build that so it would be it would be a ppa that we enter and the cost would be cheaper than
Speaker Change: And that estimate's based on a mixture of using Janset's or the utility. So that's what we'll be saving to, instead of using the utility at a higher cost, we'll be using the solar plant at a cheaper cost, and that should save us about $1.6 million.
Speaker Change: And is that also 1.6 million cheaper than what it is now or cheaper than what the utility would charge? Currently, we're selling the plant,
Speaker Change: And we're going to generate cash for that, but it would be cheaper than that Phase 1. It's cheaper than what we pay at the moment. That's the point. Oh, great. Oh, great.
Speaker Change: And second to last question, no a point, Chester on your cash flow statement at the bottom
It looks as if you're ending balance.
Speaker Change: is a negative $7.6 million. And I think you meant the cash outflow net was $7.6 million because you do have $7.2 million on your balance sheet. So the last label on that statement is a little misleading. You might want to clarify that.
Speaker Change: Michael, let's have a look. We'll get back to you. And Victor, finally, could you please tell me what inflation has been in the most recent month, maybe October in Zimbabwe, if you know?
Speaker Change: Well, if you look at the U.S. dollar inflation, it was less than one percent.
Victor Gopari: and the U.S. dollar inflation and the ZIG inflation, if my memory serves me right, might have been around 37 percent. I think that, to my colleagues, does any one of you remember
Speaker Change: No, I could find out. I could find out, but I need to sort it about a bit. I couldn't do it easily on this call. Victor, did you say six or seven percent in ZIG or 1.6?
Speaker Change: No, no, no. I say the U.S. dollar inflation was less than 1%.
Victor Gopari: month-on-month, and the ZIG inflation was probably around 37%. I have to double-check that.
Before I confirm
That's okay. 3-7 you said, right?
Speaker Change: Yeah, no, don't hold me on that figure. Approximately, approximately. I have to double check it and send it to you. I just wanted to make sure I heard correctly. OK. Yeah, no, I have the figure.
Speaker Change: Official U.S. dollar inflation was unchanged at 0.7% in October, while the ZIG inflation soared to 37.2% month-on-month after the Arab visit devalued the local unit at the end of September. These are figures released by Zinssat.
Speaker Change: Howie, I just checked the cash flow. It seems right, eh? No, the cash flow is right. The label makes it appear as if your ending balance was a negative $7.6 million. And I think what you meant with the cash outflow was $7.6 million. Because cash on hand is $7.2.
Speaker Change: Yeah, I'll send you an email when I've got it. It could be negative.
Speaker Change: because the balance sheet shows 7.2 million in actual cash and the label on the cash flow statement makes it look negative. That's the liabilities too.
Dr. Smith, Dr. Smith, Dr. Smith
We've got...
Speaker Change: Okay. Howard, have you got any more questions? No, Camilla, thanks. Mark, thanks. Okay, there's one more question from Nick Dinnan.
The End
Nick, you're unmuted.
Speaker Change: Okay, thank you very much. Okay, Craig, you're very interesting discovery in the topic. Do you have a sense of how long the strike is on the undiscovered area?
Craig Harvey: On that particular one, from what we've outlined from our trenching, it's about 800m of strike and it's made up of
to possibly three zones of various widths.
Craig Harvey: Having seen the aerial photos, the satellite photos of the area, it looks fairly well trodden.
Craig Harvey: that the area has been worked for extensive periods of time. So how many more, is it possible that there are many more undiscovered similar types of occurrences in that area?
from a sort of structural point of view.
Craig Harvey: There's quite a number of, or quite a bit of folding and shearing that takes place at the sort of northern end of the booby green, greenstone belt. And as we know, gold loves shears and bends and things like that. So.
Craig Harvey: If we look at who our neighbours are, or our closest
people and if you had a look on PeopleEarth
Craig Harvey: You would also notice further to the north is a couple of other
Craig Harvey: historic pits, which if memory serves me correctly, or if my eyeball is working, it's part of the Bourbons properties.
Craig Harvey: or very close to it. We have Lonely Mine, which is sitting on a structure to the south of the top of it. It runs into the Bulborbs Holdings. And Lonely Mine
Craig Harvey: I'm not going to quote a number because I'll probably get it wrong. I'll switch numbers around. It was a million ounce producer from what I understand. So I think the camp that we're in, and this might be a good term for it, is that, you know, bulbous and the top or whatever.
Craig Harvey: it's probably that Bulbo's mining cap is going to become the future name for this area because I really do think that there's a lot of exciting potential in this specific area.
Speaker Change: So Greg, coming back to Metoppa, how much of Metoppa have you done, have you covered systematically?
to find these possible outstanding oxide ore deposits.
Speaker Change: Yep, so we've covered about 60% of the area with trenches or what we want to do. I think it's now standing at just on 13,000.
13,000 metres
Speaker Change: out of a budgeted total of 22,000 meters, I think. And so we've put a, you know, and I said that we have completed activities for 2024. So as we enter the rainy seasons, it just becomes very, very difficult, becomes costly.
Speaker Change: We have to keep the trenches dry. So we'll pick up the remainder of the trenching activities and other surface activities from probably about the end of March and then run from March until the beginning of November of next year.
Okay, thanks.
Thank you, Nick.
There's one more question from Ewan Lowe.
Speaker Change: Hi guys, congratulations on the very interesting results from Motapa. Sorry I joined late, so this may have been asked already. But have you done any test work yet on the Motapa soil sites? I understand it's very early days, so probably not, but just curious.
Speaker Change: So have we done any what work? Test work. Test work, okay. Sorry, Gregor. Yeah, so at this stage we haven't done, but what I can say is that we have put
Speaker Change: sample material through our assay laboratory at Isabella, which is on the Bilbo's property, specifically for bottle roll tests. And then those samples are
Speaker Change: to be sent off for fire assays, and then obviously what that gives you is it gives you an indication of what the...
oxidation levels, so if you've got a
Speaker Change: fire assay of two grams per tonne and a bottle roll of one gram per tonne.
Speaker Change: it means that you can realistically under oxide heat each condition.
Speaker Change: expect to get somewhere near the one gram per tonne. So it's very early days. So we have the oxides that we're going to have a look at. And then as we go forward, we will also generate sample material.
Speaker Change: for metallurgical testing on the sulphides at Matapa to see if they are amenable to the proposed bulbous plant.
Speaker Change: What's the depth of weathering? Is it just Motarpath Central that you see oxide potential?
Speaker Change: No, so I mean on Metoppa North, Metoppa Central, Metoppa South
There's been historic oxide mining down to
Speaker Change: are two depths approaching somewhere between 30 and 40 metres. The weathering profile does change, it's not quite uniform, but I think in general we could look at a 20, possibly a 25 metre depth of weathering.
Okay, thanks very much.
We're good?
Are there any further questions? No, I think that's it.
OK.
Just pause for...