Gold miner Caledonia Mining’s second quarter, which ended 30 June, saw a significant operating recovery at its Blanket mine in Matabeleland South, with production increasing by 18% from the previous quarter as grades improved.
Combined with a strong gold price environment, this delivered materially higher revenues.
While still lower year-on-year—as the second quarter of 2025 was a record period due to exceptional grades—the quarter-on-quarter improvement is clear and is expected to continue in the second half of the year, Caledonia pointed out.
Initiatives to increase production at Blanket are expected to materialise towards the end of the third quarter, with management confident of a strong operating performance in the second half of this year, particularly in the fourth quarter.
Increased sustaining capital in the second half is expected to result in production levels at Blanket from 2027 that are higher than current guidance.
Workstreams on the Bilboes project in Matabeleland North, meanwhile, are proceeding as planned, with good progress highlighted on raising the final elements of the funding package; front-end engineering design has started, and procurement for the first tranche of long-lead-time equipment is in progress.
Blanket produced 17,360 oz of gold during the quarter, an 18% increase on the preceding quarter owing to improved access to high-grade mining areas. The grade continued to improve in July.
The average feed grade in the quarter was 2.9 g/t, compared with 2.5 g/t in the preceding quarter and 3.4 g/t in the comparative quarter.
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Operating improvement initiatives at Blanket, including the transition to a seven-day operating schedule and improved access to higher-grade mining areas, are beginning to deliver positive results and support expectations for higher production and lower on-mine costs per ounce in the second half of the year.
Revenue increased by 16% year-on-year to US$75.9 million, mainly due to a stronger realised gold price; it also increased 14% quarter-on-quarter from US$66.4 million, reflecting improved production in the period under review.
The average realised gold price increased by 34% to US$4.259/oz sold compared with the comparable quarter of 2025, but was 12% lower than the preceding quarter.
Consolidated gold sales (which include gold production from Bilboes, where limited production continues) were 17,811 oz.
Sales exclude 3,589 oz of gold finished goods inventory on hand at the end of the quarter, which was sold immediately post-period.
Gross profit increased by 16% year-on-year to $39,2 million, owing to higher gold sales revenues arising from a stronger average realised gold price, partly offset by lower ounces sold; this also increased by 22% quarter-on-quarter from US$32,1 million, reflecting improved production and sales.
On-mine costs in the quarter and half-year, which include considerable employee benefits costs that do not reflect core operating activities, were also adversely affected by the lower grade in the quarter.
On-mine costs in the quarter were US$1,675/oz sold, 49% higher than the comparative quarter but 3,7% lower than the US$1,740/oz sold in the preceding quarter.
All-in sustaining costs (AISC) decreased by 3% to $2,678/oz sold compared with the preceding quarter owing to the higher grade.
Earnings before interest, taxes, depreciation, and amortisation increased by 16% year-on-year to US$45,8 million, including US$11,5 million of gains arising from the revaluation of derivative financial instruments.
Excluding the US$11,5 million net fair value gain recognised in the quarter and the US$8,5 million gain on the sale of the solar plant recorded in the comparative quarter, profit after tax increased by 23% to US$18,5 million.
Basic earnings per share increased to US$1,36, up 28% on the comparable quarter and 71% from US$0,80 in the preceding quarter, reflecting increased profitability supported by favourable gold prices and positive fair value adjustments.
Net cash generated from operating activities increased from US$28.1 million to US$28.4 million.
Net cash and cash equivalents increased to US$167.8 million from US$8.2 million at June 30, 2025, reflecting continued cash generation from operations and the receipt of proceeds from the convertible senior notes issued in January.
The group’s liquidity position is said to provide considerable financial flexibility to support the Bilboes project.
It is expected that the first physical on-site activity will start in October, comprising the construction of contractor accommodation and related infrastructure works.
The Blanket mine’s production guidance for the year remains at 72 000 oz to 76 500 oz, while on-mine cost per ounce guidance has been increased to a range of US$1 600/oz to US$1 800/oz sold, up from US$1 500/oz to US$1 700/oz sold.
The increased guidance recognises the inclusion in on-mine operating costs of dividends payable to Blanket employees, which arise from the 10% shareholding in Blanket owned by an employee trust, among others.
The AISC guidance range has also increased to between US$2 500/oz and US$2 700/oz sold, up from US$2 100/oz to US$2 300/oz.
The increase includes the impact of higher royalty expenses and US$4 million to prepare for possible oxide mining and processing operations at Blanket.
Capital expenditure (capex) guidance for the group in 2026 was US$178,9 million, comprising sustaining capital investment of US$43 million at Blanket, US$132,1 million of growth capex at Bilboes, and US$3,8 million of exploration at Motapa.
Revised capex guidance for the group this year has been reduced to US$103,3 million; the planned capex at Bilboes included in this does not reflect any change in the project timetable, scope, or costs, but rather a better understanding of the timing of deposits required for long-lead-time equipment.
Management anticipates that gold production at Blanket in 2027 will exceed the previous guidance of 72 000 oz to 76 500 oz, owing to increased run-of-mine production arising from the introduction of the seven-day shift and the potential for oxide mining at the K-pits.
The increased AISC guidance for 2026 includes $3.5 million for planned upgrades to the crushing and carbon-in-leach plants at Blanket to process the increased rate of ore production.
Management is finalising the governance and procurement aspects relating to this incremental expenditure.
It states that the timing and quantum of increased gold production in 2027 will be determined by the timescale required to complete the necessary work, which is currently being finalised.
Management is also finalising a resource estimate for the K-pits and is assessing the timing of any increased production, the required capital expenditure, and the resultant effect on on-mine and AISC.
It expects that firm guidance for 2027 regarding production and operating costs will be provided after the 2027 budgeting exercise is completed at the end of this year. —Mining Weekly
