Caledonia Mining Corporation Plc (AMEX:CMCL) Q2 2025 Earnings Call Transcript

Caledonia Mining Corporation Plc (AMEX:CMCL) Q2 2025 Earnings Call Transcript August 13, 2025

Unidentified Company Representative: Good afternoon, and welcome to the Q2 2025 results presentation for Caledonia Mining. Today, we are joined by Mark Learmonth, who is the CEO, and he is going to introduce the webinar and start the presentation. Mark, over to you.

John Mark Learmonth: Thank you, [ Scott ]. So yes, welcome to the Q2 2025 results presentation for Caledonia. Can I just move on to the forward-looking statements, the disclaimer, which I trust you will read and digest. Sorry, it’s taking a bit of time. Okay. Let’s move forward to the presenting team. As Scott said, I’m Mark Learmonth, Caledonia’s CEO. I’m here in Jersey today. I’m joined by Ross Jerrard, our recently joined CFO. He’s in Johannesburg and will run us through the financial results. We’ve got James Mufara, our Chief Operating Officer, who’s joining us today from Blanket Mine. Victor Gapare in France will briefly update us on the Bilboes project. And Craig, Vice President, Technical Services, based in Johannesburg, will talk briefly about the ongoing exploration at Bilboes and Motapa.

And Maurice, Vice President, Corporate Development and Investor Relations, will deal with any other tricky questions that may arise. So should we just move forward? Okay. Well, look, it was a very strong financial quarter, underpinned by excellent production. So the financials are strong, revenue up 30% to $65 million and net profit attributable to shareholders up by 147% to just over $20 million and adjusted earnings per share was up by 155%. Underpinning that was some very strong operating cash flows. Operating cash flows rose to $28 million, and we closed the quarter with $8 million of net cash. In addition to that, we had another $18 million of fixed term deposits. So if you regard fixed term deposits as cash, which because I do, that’s about $26 million 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 77,500 to 79,500 ounces. And all of this was really underpinned by a stronger gold price. We realized just under $3,200 an ounce. As you’d be aware, in the quarter, we closed the sale of the solar plant, which realized $22.4 million. I’ll be clear, we never intended to own that solar plant. 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 long-term supply contract for Blanket. So we just released the capital for use elsewhere in our core business, which is developing and running the gold mines.

And as you’d be aware, we’ve got a very strong growth pipeline. We’re continuing at a pace with the Bilboes feasibility study. We’re looking at cost saving options and a phasing approach to try and minimize the upfront capital cost of the project. Victor can update you on that shortly. We’ve got a $2.8 million exploration program proceeding at Motapa, which is going well. And it’s also fair to say that the exploration of Blanket is also going very well. That exploration of Blanket has got 2 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 the Blanket lease, which we’ve never had the money or the management depth to do.

Q&A Session

We’re now turning our attention to that, and we’re getting some quite good results out of that. So just 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 million to $65 million for the quarter, up from $88 million to $121 million for the half year and gross profit of $33.8 million for the quarter, which excludes the $8.5 million profit on the sale of solar.

So adjusted earnings per share for the quarter were about $1.14 for the quarter. That includes about $0.44 from the profit on the sale of solar. So that equates to about $0.70 from operations, and that compares to approximately $0.40 that we made from operations in the first quarter. So even stripping out the benefit of solar, it’s been a very good quarter. Can we just move forward? And a lot of people, as we look forward, look at how far we’ve got to 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 10 years. And so what we see here is a 10-year graph from Bloomberg, which shows the gold price, the VanEck GDXJ index and our share price, including dividend reinvestments.

And it shows you that over that 10-year period, the gold price has gone from $100 to just over $300. The GDXJ has gone up from $100 to just over $400 and Caledonia mining has gone from $100 to over $1,000. So it’s a great performance over the last 10 years. But during that period, all we’ve done is take Blanket from about sort of 40,000 ounces to 80,000 ounces. The growth trajectory ahead of us is even more exciting. And I think what underpins our performance over the last 10 years is 2 things. First of all, minimizing dilution. And that is, we say that in terms of funding Bilboes our objective is to minimize dilution. We really mean it. I mean, we delivered great returns over the last 10 years by keeping a very tight lid on equity dilution.

There’s no reason why we’re going to depart from that now. And the second is the importance of dividends. Now clearly, we don’t give — we don’t have a dividend policy in terms of dividend payout, but 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 support, the dividend is crucial there. So the dividend is again baked into our appreciation of how we run this business. Just moving forward, I think it’s also worth making a few comments about 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 what’s been going on there.

And frankly, over the last 5 years or so, we really have seen some very encouraging signs in Zimbabwe. 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. It’s just worth noting that whilst many other places have got worse, Zimbabwe hasn’t got worse, and in some respects, getting better. Foreign exchange, the foreign exchange environment in Zim has historically been super turbulent. What we’ve seen over the last 18 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 stability in the ZiG/dollar exchange rate, which is underpinned by continued financial rectitude on the behalf of the Reserve Bank of Zimbabwe. So a long way 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 Zimbabwe. And we wouldn’t have achieved the record production that we did in the second quarter after a very creditable first quarter without high-quality local management. And so it goes without saying that we — 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, that’s 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. It produces less electricity than it needs. But the government, over the course of the last few years, has taken several initiatives to try and ameliorate that situation for people like — the big users like Caledonia or Blanket. We’re 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 is no shortage of power availability, so we can actually import that. And 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. And that showed that Zimbabwe has come up from the absolute bottom of the table, and it now ranks 8th out of the 17 African countries, which are covered by the survey. So we are seeing encouraging signs in Zimbabwe, and we hope that those signs are — that, that progress continues. So with those introductory comments, I’ll hand over now to Ross, who will run us through the financials. So Ross, over to you.

Ross Ian Jerrard: Thank you, 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 $65.3 million, which was up some 30% on the comparative quarter. This was driven by that good gold production, up 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 the right-hand side of the table.

And importantly, the delivery of those ounces, which 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 deeper dive into those production costs in a moment, but the end result to the high level was that gross profit number of $33.8 million for the quarter, which was up 48% and another quarterly record, so a fantastic result. If we turn to the next slide. Well, let’s talk about that gross profit. I love the slide, and it’s a very simple slide with a great trajectory. But the 2 key messages to take away is the change in Bilboes and the fact that it’s no longer having a negative impact, so that’s indicated by the orange line.

And importantly, the trajectory of Blanket, where you see that significant increase in profit all heading on in the right direction. And I guess, 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. But if we turn to the next slide, we’ll do a bit more dive — a deeper dive into those costs. And you’ll remember from the first quarter results where we spoke around our guidance where we’re sitting from a cost perspective slightly above our guidance range. And you can see on the left-hand side, 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 focus. And we’ve got a number of key initiatives that 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 3 key pillars of our cost base in terms of labor, consumables and power are indicated in those slides. I guess, from a labor perspective, the key changes are really around the payments of higher production bonuses. So a key component of that labor cost was almost $2 million cost that went through in terms of bonuses, overtime and holiday pay is really around delivering those tonnes, but also addressing certain breakdowns during the period that we had to address and well done to the team to get on top of that. Consumables was really above budget by — at around $3 million. And a large portion of that was around those ZiG purchases where we’ve spoken about mobilization of ZiG purchasing items like lime, mill balls, some construction materials.

So there was about a $1 million 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 T&Ms 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, a credit to the team. 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 key delivery. Moving to the right in terms of what it means for our all-in sustaining CapEx. The on-mine costs that we’ve just spoken about, they’ve 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. 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 our 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.

Net-net foreign exchange loss line item, that’s obviously a big area of constant focus for us. We are managing to deploy our ZiG balances and a key position in that is being able to access that Willing Buyer Willing Seller market. That run rate is lower 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 1/3, 2/3 split in terms of the full 6-month period. 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 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 Mark had 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. And so you’ll see $8.5 million as an individual line item coming through. And then equally down at the tax expense line, the good performance, the good revenues and activity that’s occurred has obviously resulted in a higher tax expense. that we’ve also included the tax on the solar sale in that line item. And whilst that number has increased, I think it’s very important that paying our way and paying taxes is very important. So it’s a pleasing result in terms of good performance and actually across both royalties, taxes paid and tariffs, we’re certainly a major contributor in terms of Zimbabwean economy and paying our government share — our fair share to government. So it’s a pleasing result.

But overall, a great performance, ending with a profit for the period of $23.6 million. And you’ll see the earnings per share there of $1.139 per share. And adjusting for the solar, as Mark had indicated, you’d 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 a great step-up in terms of performance. 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 — 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.

There are some changes in that net line in terms of timing 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 expenditure, some $20 million — almost $21 million for the 6 months in terms of capital expenditure. We’ve received proceeds from our sale of our solar of $22 million. And equally, we’ve been able to deploy those funds into fixed term deposits and some derivatives. So it’s been a very solid quarter and in fact, 6 months in terms of both generating cash and closing the period with some $8.2 million of cash with that further $18 million sitting in terms of deposits.

So effectively a $26.2 million cash balance. So if we move to the next slide, you’ll see the breakdown of that $26.2 million 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 balance, the $4 million sitting in Zimbabwe, that’s abnormally high. It was really around timing and deployment of funds. So it was really timing of that. But overall, the $26 million. And actually, if you exclude the overdraft facility, so on a gross basis, we’re actually just shy of $40 million in terms of cash balances. And post the half year result, we’ve been able to continue to build that $26 million up to $30 million in terms of our pro forma 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 build that cash balance to a $50 million plus number by the end of the year in terms of really having a solid treasury position. We move to the next slide. The one thing that we would like to highlight, and you’ll see in the published results is that we will be taking advantage of some applicable exemptions. So in terms of our quarterly reporting, we’ll having — be following a reduced disclosure regime or reporting disclosure. So for both the first quarter and third quarter going forward, we will have a much reduced financial, both MD&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&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 will be part of the normal cadence and you’ll get the full deep dive and narrative that’s going forward. So with that, a very solid quarter and half year. And I think we’re well set to enter the second half of the year and deliver on continued good performance. And with that, I’ll hand over to James Mufara, our COO.

James Mufara: 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 Ross have already alluded to, we have had a very good and solid half year, and this quarter was particularly very good. We brought to the market area that we had a very, very stringent look at our health and safety programs on the mine as part of our value of care. And we have always said we would want to improve in terms of our performance thereof. Quarter 2 delivered a marked improvement from quarter 1 in terms of our health and safety 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 4 to 1. And the significance of the lost time is showing the severity of the accidents that we are having, they are of low energy accidents that we’re actually having witnessing. In the quarter, we also had quite a number of bowties 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 [ seize ] 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 the supervisors, and we will look at this journey going forward so as to look at continuing to improve health and safety.

But as we would appreciate, health and safety is like sweeping water up here. You need to be constantly at it. If you stop, it will come back to. 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 tonnes, 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. We’re pleased to report that we had a record production in terms of tonnes that we milled. We actually ended up on 204,915 tonnes for the quarter against a plan of 193,000, which is actually 6% — 11,000 tonnes or 6% above what we set as a plan. We also realized that in this quarter, we actually had a welcome improvement in the grade from the last quarter, ending up above plan at 3.31 grams per tonne, representing a 3% better than the plan.

This was a welcome improvement and is 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 a record production for any second quarter. And that was underpinned by a record recovery of 94.41%. We’ve actually managed to get to this number by 3 key initiatives that we actually introduced in the quarter. The first one was the introduction of tank #9 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 process control through short interval controls with a new management team that we have actually put at the plant. Total all these initiatives resulted in a record quarter 2 production in terms of ounces as alluded by Mark earlier. If you may turn to the next graph, please. So this graph shows how we actually achieved the ounces, but this was not a once-off all. This was not that we did right at the end of the quarter. It was we produced consistently throughout the quarter, feeding the plant with consistent grade and consistent tonnes and thereby producing the record production. You can see that the top line, the orange line is the cumulative, they are adjusting what we actually did and the bottom line or the line which is deeper purple is actually the line for the budget.

You can see that from the first month, which 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 2 ounces for last year, which were sitting on 20,774 ounces and also better than the quarter — the same quarter 2 ounces for 2023, which were sitting on 70,400 ounces. So this is really, really a record production and done the right way consistently throughout the quarter. You may turn to the next graph, please. So 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 was done by the team. I’m in thanks to Elton and [ Newton ] for doing this massive development being — over their development targets over the quarter. And this is the result actually us putting back some ounce, some reserves back into the iceberg. If we may go to the next graph, please. Thank you. I will hand over to Victor.

Victor Robinson Gapare: Thank you, James. Thank you, Mark. Can we move to the next slide, please? What we would like to do today is to update you on where we are with the Bilboes feasibility study. The work on the Bilboes 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 tailings storage facility to the Motapa property, which is just next door to the Bilboes property. Really, the benefit of this will be lower construction costs because of the topography. Whereas at Bilboes, it’s rather a flat piece of land where we would need to put the tailings facility.

At Motapa, we’ll benefit from the topography. So it will reduce the earthworks, 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. This would actually help in terms of the financing of the project. With regards to the funding, as usual, our aim is [Technical Difficulty] —

John Mark Learmonth: We seem to have lost Victor.

Unidentified Company Representative: We seem to have just a minor issue at Victor’s — Mark, maybe if I could ask you just to continue while Victor is silent.

John Mark Learmonth: Yes. I don’t know if Victor can hear me. Victor, I think we should put Victor on mute because he’s lost his linkage. Yes. So as Victor was saying, in terms of funding, 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. And that’s why I started off with that graph, which shows the extent to which 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 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 equity dilution, but with a prudent level of gearing.

So in terms of the funding options we’re looking at, the non-equity funding options, we’re looking at non-recourse project finance. And there’s a handful 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-backed loans. So final funding decision will clearly follow the feasibility study and will depend on funder time lines. Some of these funders may not be quick, but we’ll do the best we can. So I think that’s probably the best update I can give on Bilboes. Sorry, Victor, if you can — we just lost you part way through. I don’t know if you can hear me.

Victor Robinson Gapare: Yes. Now, I can hear you. Can you hear me now?

John Mark Learmonth: Yes, but we just finished. We just finished you section.

Victor Robinson Gapare: Yeah, I could hear you at the end.

John Mark Learmonth: Is that filthy French Wi-Fi connection you’ve got us on. Should we move on talk about Motapa —

Victor Robinson Gapare: Move on to the next —

John Mark Learmonth: Yes.

Victor Robinson Gapare: I’ll hand over to Craig, who will take us through the Motapa exploration.

Craig Harvey: Thank you. Thank you, Victor. Thank you, everybody. Good afternoon. Just while we’re on the slide, I just want to touch briefly on Blanket for people that are not aware. On the 23rd of June, we published a Blanket deep drilling press release. So that’s why there’s not much about Blanket actually in here. We continue with our deep drilling program, we continue to get expected grades, in some cases, much better, carrying on with the works and the whole intention is to maintain our resource base at kind of the 3 million ounces, which delivers a mining reserve plan of about 10 years. So that’s kind of what the 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 want 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 started off with open pits and progressed underground. So if we can go on to Motapa, if we go to the next slide. A reminder of what we are doing for the year. So we have a $2.8 million budget for the year. It’s mainly comprised of about 21,000 meters of reverse circulation drilling and just over 1,000 meters of diamond drilling. And why that weight is like that, is that the previous year, it was about 50-50 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 Motapa North and it’s predominantly to define a sulfide resource below historical oxide pits.

There’s about 16,000 meters of drilling there in total. A second target is Mpudzi. 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 Mpudzi, 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 on to our books in the near future. A little bit of further exploration at Motapa South. And to date, we have drilled about 50% of our budget. 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’ve 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. The reason for the slow turnaround is it’s not just us that are submitting hundreds of samples, 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 I think bodes well for Zimbabwe. I think it’s completely underexplored, maybe not well understood, but there’s significant potential for the country. If we can just go on to the next slide, it’s just a brief overview of Motapa North. It’s made up of those open pits that you see, the previous pits, the Boomgate, Jupiter and Shawl. The blue line boundary or the blue line that you see there is the Bilboes 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 completed to date. So there will 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. 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 Mpudzi 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.

All of the yellow is what we’ve done to date. And Mpudzi is slightly different to the other Motapa areas because it’s focused mainly on a banded iron formation. It’s got a bit of sharing. We’re getting some good grades. We’re getting some good widths, 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.

John Mark Learmonth: Thank you, Craig. Should we just 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 doing the investment to modernize and update the mine with an increasing focus on cost containment and eventually cost reduction. Continue with the investment at Blanket to do, as Craig outlined, depletion replacement, but also looking at Blanket a potential for near-term revenue opportunities. We’ll continue looking at — continue to work on the feasibility study at Bilboes, looking at ways to — well, the project is a great project, just 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 good things. So build on good things that are happening for the benefit of investors. And then clearly, as Craig outlined, continue exploring at Motapa, looking at oxides and sulfides. So there’s a lot happening. And I’ve got to say these results give a very nice sort of launching pad for further activity. So with that, we’ll pause for any further questions.

Unidentified Company Representative: [Operator Instructions] We’re going to start with our first question, which is from Ian Joslin.

Ian Joslin: My question related to the fact that you’re generating large amounts of cash, your performance last quarter is to be commended. I also like the idea of you’re trying to improve on the joint Bilboes, Motapa project. You’re trying to find ways of making it return greater return 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, 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. And therefore, had to — or even raise equity less and therefore, not get what’s the word, future profits expropriated by institutional organizations.

John Mark Learmonth: I’m going to say you’ve got a very jaundiced and jaded view about the investor community. We’ll put that on one side.

Ian Joslin: 40 years’ experience.

John Mark Learmonth: Well, yes, okay. The dividend, as I outlined at the outset, the dividend is very, very important, particularly in Zimbabwe. And you’re right. I mean, purely objectively, if we were short of money and had to raise money, the obvious thing to do would be to suspend or cut the dividend. I’ve got to tell you, we’re working towards an outcome where we cannot dilute by raising equity. Now that’s still a work in progress. But 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 impairment would be until you’ve done it, by which time it’s too late. So all I can say to you is that we worked for, I don’t know, 10 years or so to build up a position as a trustworthy credible dividend payer.

And everything you say is right, but for us to throw that away 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, the 2 irreconcilables, but our job is to try and reconcile them. That’s all I can say.

Ian Joslin: No. 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 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 returns.

John Mark Learmonth: The difficulty with this conversation is that people may walk away from this conversation feeling that I’m hinting that we’re going to cut or curtail the 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 I’m trying to sort of — I’m trying to navigate between those 2 — the [ siller and truthiness ] of those 2 outcomes. And I’m not sure I’m doing a great job of it. But the dividend is super important to us as a management tool. We know it’s important to certain of our target markets, and that’s all I can say.

Unidentified Company Representative: We’re going to go to our next question, which is from [ Mike Kozak ].

Unidentified Analyst: Congrats on the very good quarter and the solid cash flow build. It’s nice to see. I had 2 questions on Bilboes. The first one, if you’ve already answered it, I apologize. But the first one was the feasibility study. Do you have an approximate timeline for when that is going to be completed and released?

John Mark Learmonth: Not really because the ongoing work about the smaller scale option is an indeterminate period of time. So I can’t help you on that at this stage I’m afraid.

Unidentified Analyst: And my second question, which I was kind of curious to the extent you can comment, you did mention — I know it’s scaled down or kind of just slight change of scope. What kind of quantum for reduction in initial CapEx are we talking, right? I think the PEA was — I think it was $310 million. Is that — is the number now closer to $200 million? Is it a $250 million?

John Mark Learmonth: No, I think you’ve got to accept that the — if you were to progress with a 240,000 tonne a month project, those capital costs will have gone up. Capital costs have gone up across the industry. So again, I can’t really give you guidance on that. We’ve got a number, but I mean, to start dribbling out information piecemeal isn’t going to help anybody because anything I give you is going to be inadequate and you’re going to want more. But one of the things that’s clear, and you’ll understand this is that the capital intensity of a smaller project is higher than for a bigger project, and that’s something we’ve got to bear in mind, okay? But the other side of the coin is, do we lose — what we lose on higher capital intensity do we gain 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. But I mean, fundamentally, what we talk — just to be clear, we’re not talking about how to make this project work, okay, from like — no. We’re talking about how to make this project the best it can be, which is a different thing.

Unidentified Company Representative: And we’re going to take our next question from Howey Flinker.

Howard Flinker: First, there’s a typo. In the printed income statement, the 4 columns say 6 months ended. The 2 left-hand columns should be 3 months ended. And the 2 right hand, 6 months.

John Mark Learmonth: Yes, you said we needed to do that a few minutes ago, which we’ve got. So thank you on that. We’ll correct.

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

John Mark Learmonth: I wish you haven’t asked that question. It is lower than we had expected.

Howard Flinker: But there is some tax?

John Mark Learmonth: There is some tax, but it’s not what we’d expected it to be.

Howard Flinker: Okay. But not 0. I thought it might be — I thought it might be 0. And finally, if you were to cut the dividend in the future, you can expect your stock to drop 20% or 25%. Do you have to ponder that?

John Mark Learmonth: Well, that’s the point I was making. So, and you don’t know what the hell this effect will be until you’ve done it. And by the time you’ve done, look, it’s too late. I can think of some fairly salty sort of analogy, which I use internally with the management team, which I don’t really use on this call. But it’s one of those things you can’t do without full and careful consideration. And frankly, even when you do it, you don’t know where the outcome is going to take you.

Howard Flinker: You’re in a great position of having future growth in Motapa or Bilboes and producing gold at $3,300 or $3,400 generates a lot of cash inflow. That’s a great position to be in.

John Mark Learmonth: 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, recognize the fact that the gold price is higher, therefore, our organic cash generation is there, 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 enhance that. And what we’re trying to avoid is a situation where we rush ahead and frankly, over dilute it. And then in 3 years’ time, we’ve said we’ve raised equity, which frankly, we didn’t need to do because no one is going to thank us for that.

Unidentified Company Representative: [Operator Instructions] The next question is coming from Nic Dinham.

Nic Dinham: Congrats, awesome. Just a couple of questions. You’ve been building stockpiles. I haven’t yet got the detail of what the stockpiles look like now, and it obviously underpins your production expectations. What is your stockpile strategy going forward?

John Mark Learmonth: The stockpile is — I’m slightly irritated you’re raising it because it’s with what, it’s about 30,000 ounces — sorry, 30,000 tonnes. So if we’re producing — we’re processing about 2,000 tonnes a day, it’s 2 weeks. And a 2-week stockpile is even on the skinny side. So the fact that 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 6 months and then leave it. But there’s no intent — the rates of blasting, trimming and hoisting, if this is where you’re going to 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.

Nic Dinham: And the other — you’re obviously getting some surprises on the grade side. Maybe you can elaborate — somebody you can elaborate a little bit on that.

John Mark Learmonth: I think I’ll probably hand that one over to Craig before I make a fool of myself. Craig?

Craig Harvey: Yes. So kind of the deeper we go on some of the Blanket ore bodies, specifically around BQR and our old favorite Eroica, the grades that we are drilling out — and kind of 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’s the term, that on the ground, the in situ grades tend to be a little bit higher. And so we’ve got quite a big drive on dilution controls on — 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.

Nic Dinham: So when you do your reserve estimate, which is going to be post the end of the year, or we can maybe expect to see some grade improvements for the reserve as a whole. Is that where we’re going with that, Craig?

Craig Harvey: 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, then you’ve got no high grade left to raise the reserve grade. But I think it’s going to be maintained or with a slight uptick.

Nic Dinham: And last question or 2 here. It’s back to Blanket. What dividends has Blanket produced in this period, in this first 6 months period?

John Mark Learmonth: Ross, I guess, are you able to answer that?

Ross Ian Jerrard: Yes. So there was a $9 million dividend declared, but that included both the Caledonia side and the Blanket side. So yes, there’s a $10.7 million, so $7 million net to Caledonia that came through after the NCIs or minority distributions. Just short of $11 million or I think it was $10.6 million from a Blanket perspective.

Nic Dinham: From Blanket, $11 million came from Blanket.

Ross Ian Jerrard: Yes.

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

Ross Ian Jerrard: Hopefully, by the end of the year or very early in next year.

Nic Dinham: And then final question for Maurice. There’s some discussion about alternative sources of energy. 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?

John Mark Learmonth: Okay. Can I intercede that? Our thinking has moved on. We took on a very good local chap to help on capital projects with enormous experience in the Zimbabwean power sector. And initially, we were thinking about — solar is not great. I mean the solar is fine, but it only works when the sun shines. And really, you need 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 power. But actually, the solution we’ve seem to have latched on to we’re doing further work on that is to put in a connection to the 132 kV sort of backbone structure in Zimbabwe, which should substantially reduce the — which should improve the quality of the power that we’re getting and actually go a long way towards addressing some of the problems we’re facing.

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 sort of a — I think it’s about a 17-kilometer $10 million connection to the 132 kV backbone, which should materially address our problems.

Nic Dinham: Would that go in Caledonia? And would that go into Blanket accounts?

John Mark Learmonth: Because Blanket will benefit, yes. It’s Blanket’s.

Unidentified Company Representative: [Operator Instructions] Next question is from [ Eun Lou ].

Unidentified Analyst: First of all, congratulations on a record-breaking quarter for breaking records. Question for James. James, or maybe for all of you, can you give us a steer as to how quarter 3 production is going to be? And in particular, our recoveries being maintained at around 94.5%.

John Mark Learmonth: I’ve got to say you are naughty, in that we’ve just upgraded our guidance to between whatever it is and whatever it is. So I mean, we’ve just told you what production is going to be for the rest of the year. So I don’t know why you think we’re going to give you a different answer from what we put in the press release 2 weeks ago. So having said that, James, what’s your answer?

James Mufara: Yes. So production is going pretty good, I mean, for the third quarter. And yes, we’ve got a very good metallurgical team. I mean — so yes, we are sticking to our guidance that we put out.

Unidentified Analyst: Let’s see, just going on the list of my questions. Nic has already asked several of them. Are you able to speak more, this is to Craig, about the new discovery at Blanket? Is that — the one at depth. Is that another quartz reef or is that disseminated reef?

Craig Harvey: It’s another disseminated reef. It’s part of the Blanket ore body. So we have what we call Blanket 1, 2, 3, 4, 5, 6, and so now this one has been termed Blanket 7. So it’s early days yet. It was a triangle of holes that picked up the zone that had good grades. So now obviously, we’ve got to grow it and see where does it go. We’ve got to start pinning it out.

Unidentified Company Representative: 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.

John Mark Learmonth: Okay. Well, thank you all for joining us today. It’s been a good performance from the entire team, and I thank them for that. And we look forward to doing it all again in mid-November. So thank you very much.

Unidentified Company Representative: Thanks very much. That now concludes the webinar.