Caledonia Mining Corporation Plc (AMEX:CMCL) Q3 2025 Earnings Call Transcript

Caledonia Mining Corporation Plc (AMEX:CMCL) Q3 2025 Earnings Call Transcript November 10, 2025

Caledonia Mining Corporation Plc misses on earnings expectations. Reported EPS is $ EPS, expectations were $0.78.

Operator: Good afternoon, and welcome to the Q3 2025 results presentation for Caledonia Mining. Today, we’re joined by Mark Learmonth, who’s the CEO, and he’s going to introduce the webinar and start his presentation. Mark, over to you.

Mark Learmonth: Thank you. Thank you very much, Julie. Should we open the slide deck? [Indiscernible]. Move on to the forward-looking statement and disclaimer page. Next page, there you go. And then the presenting team. So yes, I’m Mark Learmonth, Caledonia’s Chief Executive; joined by Ross Jerrard, the CFO, who will run us through the financial numbers. James Mufara, the Chief Operating Officer, will talk to us about operations. Victor will say a few words about Bilboes and Craig will — Craig Harvey will talk to us about the — some of our exploration initiatives. Can we just move to the next page? Okay. The first thing I’ll point out is that, as you probably noticed, we no longer publish the standard sort of management discussion and analysis and the detailed financial statements.

So quarters 1 and quarter 3 will produce what we’ve done this morning, which is like a truncated version, but I think that’s more than adequate for conveying the substance of what we’re doing. But as we get into the presentation, first, we must recognize that we had a fatality during the quarter, and we extend our condolences to the family and the colleagues of the man who tragically lost his life. James will talk to us more about what we’ve done in the aftermath of that to comprehensively review our safety procedures and safety practices, and what we’re doing to strengthen our risk management and workforce protection. So James will go into that in some more detail. It was a solid performance operationally. Production at Blanket was just over 19,000 ounces, and we sold just over 20,000 ounces.

And that was clearly — we’ve clearly been helped by the rising gold price. So the gold price is up 40% quarter-on-quarter, comparable quarter to this quarter to just over $3,400 an ounce, which drove a strong improvement in revenue and also profitability. So revenue up 52% to $71 million and EBITDA up 162% to $33 million. Ross will clearly provide more information on the financials. With respect to Bilboes, as we say in the RNS, we expect to give an update as to where we are and where we’re going with that imminently. So Victor is on hand to say something. But frankly, until we’ve imminently said something, there’s not a great deal we can say at this stage. And then Craig will run us through the exploration programs at Blanket and Motapa, which we’re advancing and which is showing very, very encouraging results.

And then finally, I’ll just remind you all that in addition to these results, we’ve this morning declared another quarterly dividend of $0.14 a share. So with that, can I hand over to James to run us through the operating results? James, over to you.

James Mufara: Thank you very much, Mark. Good day to you all. It is very sad that — I mean, in this quarter, we actually have to report a loss of life incident that occurred at our Blanket mine. In this very quarter, one of the things that why it’s — this tragic is we have seen quite a serious improvement in terms of our health and safety parameters, and that’s in terms of lost time injuries, in terms of environmental conditions underground, ventilation conditions underground, we have seen an all-round improvement and accident-free days, we’ve seen quite a serious improvement. However, we still suffered this loss of life in which the gang leader who was conducting — in the process of conducting secondary blasting actually had a premature detonation and he lost his life.

Secondary blasting operation is an operation where we break some of the bigger rocks that could have been generated during the time of primary blasting, so that you can send them through into our ore buses and be in a position to take them out to surface. Immediately after this accident, we embarked on an investigation, thorough investigation and extensive investigation to determine the root causes of this accident. We had also reported — we reported also this to the government who also actually conducted a thorough, extensive investigation on their own to determine this root cause and possible areas where we can see improvements. The investigation is complete now and action plans that we found out are currently being implemented to avoid any possible recurrence of these significant unwanted events.

So one of the key issues that we still need to deal with is the issue of our employees and higher risk appetite that we see within the operations. If you can just go to the next slide, please. And the next one. In terms of the slides that are now showing, I mean, you will see that and this depicts a consistent delivery that we are now witnessing at Blanket mine from the third quarter of 2024 to now, you can see that the delivery has almost reached a steady state. I mean almost delivering at the same level. This is the recipe to good production and actually consistency, that’s what a plant wants, the plant wants consistent delivery, and this is what we’re beginning to see. This has been brought about mainly by 3 issues, but there is obviously a lot more other issues behind this.

And the first one is the introduction of the short interval control system that we see on the mining and the metallurgical side, where production is managed on the short interval control basis. The second reason is that we have seen is that there’s been a consistent tonnage throughput, because now the plant we can feed from the stockpile, and we are in a position to see consistent throughputs due to feeding from the stockpile. The third reason for this consistent performance that we see with the tonnage and steady-state performance is because with the improvement in development that we embarked on starting the end of last year and even carrying on with this year, we are seeing an improvement with regards to flexibility as we are opening up better and more areas for production underground.

However, on the center of graph, you will see that there is an unfavorable drop in the orange line, which is the grade line. The reason for the drop in the grade line is linked to the loss of life accident that we had on the 22nd of September, where we stopped our high-grade areas for up to 20 days while investigations were actually going on. You will see that this year also a negative impact in terms of our recovery, which is on the graph below on the line — on the graph below where the graph shows that the recovery also took a negative dip, because of the grade that actually went down. The good news, however, is that the recovery for the year-to-date is still on plan, and we still expect to finish the year high with regards to our recovery.

If you may just turn to the next graph, the next — the table shows how our mining metrices were above plan for the quarter, which is actually showing a healthy production throughput throughout the whole quarter in terms of our tonnes broken, trimmed, hoisted. And most importantly, in terms of our development to generate new areas where we will mine from. You will see that we were green in these areas, and it’s very important to be healthy in all these areas. This is consistent production all around. Achieving development will also help us to make sure that our flexibility going forward is going to be better, and this will actually positively impact in terms of employee productivity. The only color which is not green is the grade color, which we have already explained that some of the higher grade areas, we had to stop them after the loss of life accident that we unfortunately suffered on the 22nd.

And because of that, we actually see that the grade was at 3.4 grams per tonne. However, if you can just carry on to the next table, we see that, at Blanket, we are on course to meet the increased guidance. On this presentation, you will see that the tonnes milled are still about 7% ahead of our desired run rate for the year-to-date. Also important, however, also is the issue with regards to the tail grade, which remains at 0.2 grams per tonne, I mean, which is our plan consistently very, very low, which is showing that our recovery within the plant has remained consistently very, very high. The ounces for the year to date is still, even in the end of the quarter, still 3,000 ounces ahead, clearly showing that Blanket is on course to meeting the increased production guidance as given out to the market.

If we can just go to the next graph, which shows that we are still securing the future. This production has not just been to meet today’s need, but it’s also securing the needs of tomorrow. You can see that in terms of our reserve generation, which was positive for the quarter. We have met today’s production, but without destroying our ability to meet production targets within the future. So although our set out goal at the beginning was simply not to deplete reserves, we because of better production, better development actually added reserve ounces as well in the quarter due to better production. This is a healthy state to be in. If you can just go to the last one, which talks about our focus on productivity. You will see that Blanket being a mine that has been in operation from 1904, some of the areas are further and further from the shaft barrel and deeper as well.

There is a need for us to improve productivity and introduce technology within our mining space. We have seen that ourselves is mining. I mean we are price takers and the only area in which we can actually improve our competitiveness is if we can improve productivity. We have thus embarked on implementing technology in the mine, so that we can better position ourselves to be more productive going forward. In this example, I’ve just given 3 of the areas that we have chosen to embark on, which is engineering areas, and one of them being introducing men carriages or men riding. This is but the improved impact in terms of phase time, so that people are on the phase in good time and also so that people have got energy when they arrive on the phase.

So we have started to implement this within our working areas as a way of increasing productivity, and dealing with increased cost that invariably come with an aging operation. And most importantly is the technology that we are improving. We are doing a lot of the work in-house, as a result, it’s costing us less to actually implement this technology. We intend to continue to increase and implement this technology to both increase productivity, and also increase the health and safety of our employees. I’ll hand over to Ross for the financial section. Thank you.

Mark Learmonth: Thank you, James. So Ross, do you want to run us through the finance, please?

Ross Ian Jerrard: Thank you, Mark, and thank you, James. My pleasure. Good afternoon, everybody. It’s my pleasure to run through the financial results. And as what James described, it’s been a challenging quarter, but certainly well delivered. So if we can turn to the next slide, a quick overview of our financial results and a summary. You’ll see gold sold is up 9% to 20,000 ounces against gold produced of just over 19,000 ounces, solid quarter there. I will highlight that those gold produced ounces are the Blanket ounces. There were some 437 ounces that was generated from Bilboes, that we don’t account on this table just in order to calculate our on mine costs, et cetera. So a very solid set of numbers in terms of ounces produced and sold.

Just dropping down below that first line, you’ll see the on-mine costs, which were up 27% quarter-on-quarter. That’s driven by our sort of traditional elements of electricity, labor, and consumables. That increase was incurred this quarter, as James has indicated, there were additional volumes that were having to be processed and moved to compensate for some of those lower grades. And importantly, the teams had to be shifted around because of the unfortunate incidents. So when we’re comparing against those areas that were planned to be or scheduled to be worked, there were a number of moving parts that obviously resulted in additional costs. But also additional volumes having to be moved, offset by that lower grade, which obviously came at a cost, and that has driven our on-mine costs.

Dropping down to our all-in sustaining costs for the quarter, you will see that they have equally moved up some 40%, and that’s predominantly due to those on-mine costs that I’ve just mentioned, but also the higher gold prices impacted our royalties, and that’s dropped down into the impact of our all-in sustaining. Overall, a really good result driven by that gold price that Mark had mentioned at $3,434 an ounce, which was a really pleasing result, and has really benefited the operations and the results that we will talk to. So moving to the next slide, and we’ll talk a little bit about the profit and loss. Happy to report another sort of quarterly revenue number of $71 million, which is back on those good ounces produced and all-time gold prices.

You’ll see that royalty number has similarly increased in line with those revenues. And those production costs were up, as I mentioned, in terms of additional volumes moved at a lower grade. Depreciation has largely been in line for the quarter. And I’m very pleased to report on those net foreign exchange losses where we’ve continued to benefit from access to the willing buyer, willing seller market, and being able to deploy our [ ZIG ] component. And if you look in the 9 months column, you’ll see that we’re just under $3 million compared to $10 million number for the same time last year. So we’re really pleased with that result in terms of delivery in the income statement. Our corporate line items have increased, and that’s due to a higher equity share-based payment valuation that was driven by the share price.

But also a number of one-off expenses that you’ll see in that year-to-date number in terms of some of the corporate team reshuffle. And then lower down below the line, that tax expense is higher, and that’s due to the good operational performance and the benefit of the gold price. But you must remember the gold — the solar sale that’s been included in that number. And importantly, from a cash flow perspective, includes the capital gain on that solar plant sale. So if we quickly move on to the next slide and talk about cash flows. The net cash inflow from operating activities was a very solid number at just a shade under $14 million for the quarter, impacted by some large negative working capital movements of around $8 million. Those are timing in terms of some investments in terms of consumables and then the traditional working capital movements in terms of ounces, gold sales receivables and the like.

Tax payments, as I’ve mentioned, included that $2 million in terms of cash outflows. And — but then lower down in terms of capital expenditure, we’re largely on track for the year. We’re not readjusting our forecast spend, and we’ve continued to invest and deploy money into our fixed term deposits. So you’ll see we’ve got $18.5 million now sitting on fixed deposits, and they all sit offshore here in Jersey. So a really pleasing result year-to-date. You’ll then see the $14.7 million worth of dividends that have been made year-to-date, split in terms of $6.6 million for our NCIs and $8.1 million for Caledonia shareholders and comprising of 3 quarterly dividends that have been paid in the 9 months. And as Mark mentioned, we’ve declared our customary quarterly dividend of $0.14 per share earlier today.

Importantly, we closed the period with $7.3 million of cash and cash equivalents at the end of the quarter. And if we want to move to the next slide, we’ll see where those funds are held, and also importantly, from a liquidity position, where we sit. So in terms of having cash on hand of $15.6 million. We’ve got those fixed term deposits that I mentioned of $18.5 million. And then we’ve got some bullion on hand and gold sales receivables at the end of the quarter. But overall, including our bank facilities, we have a total liquidity of just over $44 million, which places us in a very healthy position and have the ability to deploy funds against some meaningful projects, which is very exciting. I know James has spoken about around cost initiatives, but I just wanted to turn to the next slide, and I guess, take a minute to look at our cost profile, which has been an ongoing team exercise.

And I just wanted to highlight or take a minute to really look at our cost base against others. And we’ve been benchmarking our cost profile against our similar African peers. Admittedly, they’re in South Africa versus us in Zim. But looking at mines that we compare to in terms of operating under conventional mining methods, and also those mines operating underground mines and at depth, we’re not out of line and actually quite — compare quite favorably against similar mines. You can see those metrics in terms of depth, tonnes milled per annum and also the human element, I guess, the number of people that operate those mines. And our mines, as James had indicated, really, it’s around where we’re operating now. Blanket is a very different mine from 5 years ago, where 60% of its ore was really extracted from a depth of approximately 750 meters or 760 meters.

And now we’ve got a big component of our ore coming up from a depth of over a kilometer. And so in terms of tonnes and tonne meters hoisted and all the metrics that we’re looking at, this all comes at a cost. So those key components of both productivity, but also our electricity costs and our tonnes of meters and additional loads that we’re having to put on that electricity or the power requirement when operating at depth has a significant impact on our cost base when producing an ounce profile of around that 80,000 ounces per annum. And there are a number of initiatives that we’ve got on the go, as James has indicated, and we’ll be hopeful that we’ll be able to bring those to account and have a meaningful impact on our cost base going forward, but it’s unlikely that we will return to historical levels in terms of the cost profile when operating in a very much closer to the surface and lower volumes being used.

So on that basis, you would have seen in the announcement this morning that we have updated our cost guidance for 2025. So if you move to the next slide, please. Whilst the gold production and the previously guided gold ranges in terms of ounces and capital expenditure were maintained, we have looked at our cost base and looked at the volume movements and what it’s meant for how we exit the year in preparing our outlook for next year. And we’ve increased our guidance ranges, both on-mine costs by increasing it to just over 10% to a range of $1,150 ounce to $1,250 per ounce. And equally, on our all-in sustaining costs, we’ve increased it for — at 9.5% to a range of $1,850 to $1,950. And we believe that that is very reasonable and considered outlook in terms of as we exit this year and conclude on the final quarter.

So we’re really excited. It is mining, and there has been some challenges, and I think the team has dealt with that very well. But as we sit today and as we look for our outlook for 2025, we’re really excited in terms of being able to deliver a really solid 2025. So with that, I’ll hand it back to Mark, and I think it’s going to Craig to talk a bit about exploration.

Mark Learmonth: Yes. Thank you, Ross. So Craig, can you just talk us through the exploration at Motapa and at Blanket please?

Craig Harvey: Thanks, Mark. Well, I can do that for you. So I’ll just — if we can go on to the next slide. So just very quickly, what we’re doing at Motapa, the budget for the year is about — just over 27,000 meters of drilling. At the end of Q3, we had done just under 20,000 meters. It’s about 71%, 72% complete. We expecting to complete the drilling campaign during Q4. I did mention, I think, in the last quarterly that there were some issues with the laboratories in Zimbabwe. That seems to have been sorted. We have caught up quite a number of assays. So I am expecting to have a maiden resource declaration for Motapa, specifically Motapa North during H1 of 2026. If we could go on to the next slide then. So this is — this is just — when I talk Motapa North, I mean, obviously, it’s those nice pretty colored zones that you see on that map there.

But that blue line that represents the Bilboes, which is our current project that everybody knows about and the Motapa area. So from Motapa to the Bilboes boundary is literally 200 meters, and it’s another 250 meters to the Isabella South pit. So quite clearly, what we’re doing at Motapa and Motapa North should in all aspects have an impact on the Bilboes project going further. So currently, with all the drilling that we’ve done, we drilled and we’ve defined some mineralized zones over a strike length of approximately 2,500 meters. It remains open to the Northeast, still have some gaps between the historic old pits that we’ve got to do. Motapa North, its main thrust is oxide, sorry, not oxide, sulfide mineral resources below the current pits down to a depth of about 200 meters.

So all of this, once the drilling campaign is complete during this year, we’ll take 1 month or 2 months to get the assays in, and we’ll have a maiden resource declaration for Motapa North early next year. If we go on to the next slide, some of the other drilling that we’re doing. So this is about 500 meters south of Motapa North. It’s the area to call Mpudzi. We’re finishing up our drilling campaign here. So we’ve sort of drilled about 1,000 meters on strike. It remains open probably for at least another 1,000 meters to the Northeast. It’s an area that hasn’t been open-pitted in the past. So this program is slightly different where we are focusing on the potential for oxides, clearly, drilling some deeper holes to get an understanding of what the sulfide mineralization looks like.

But this program will carry on in 2026, and we’ll report drilling results as and when they will come in. If we could go on to the next slide, and I’ll take us through Blanket quickly. So Blanket, we’ve got the underground, as we all know, and we’ve also got the surface. So with the underground exploration drilling, it’s all of the long-haul drilling that we’re doing, typically holes 250 meters to 450 meters deep. If we can go on to the next slide, I can then show you where the areas are that we’re drilling. So to the south or to the right of the slide that you see, so we’ve got ARS, which is AR South, we’ve got the Blanket Quartz Reef, which is BQR, and then all of the Blanket orebodies, and we’ve got 7 of them. So you can see there 34 levels, you can see the little blue traces that are running there.

So we currently drilling below 34 level. And a lot of our intersections are now on kind of the 36 level mark. On the Blanket orebody side, half yearly drilling results. So probably at the end of this year, we will publish a set of drilling results for Blanket. On the northern side, on the left-hand side, you can see some long-haul traces there. So that is Lima, where we are now filling in the drilling below 22 and 34 level. We’ve drilled the one next to it, Eroica, extensively. And we’ve got 30 and 34 level that can quite easily develop north towards Lima and pick up that orebody and then carry on mining like that as well. If you could go to the next slide. So in the past quarter and the previous quarter, Blanket started a surface exploration program.

So if all the geologists out there, if there are any on the call, a very simplified geological map showing kind of the host rocks that we’re looking at. All the blue vertical lines are the trenches that we have done. So that was a start of the exploration activities. That’s over a strike length of 600 meters, the trenches are approximately 200 meters long. And out of this, we have identified an area that’s approximately, yes, it’s approximately 50,000 square meters surface exploration area that has got nominal gold values. If you look carefully, you can see some colored bars that are next to the trench lines. I can’t put values on this yet. We haven’t released anything to the market, but it gives you an indication of mineralization in those trenches.

So during Q3, we have instituted a Reverse Circulation Drilling program, spaced 25 by 25 meters apart, drilling to a depth of about 45 meters. And the intention of this is quite clearly, if we have sources of ore that are probably amenable to heap leaching, Blanket mine will have access to, hopefully, an additional source of low-cost surface ounces that also do not require to take up capacity in our current plant environment and capacity that we have. And so my last closing remark on Blanket exploration on surface is if you look at an aerial map of, for instance, Bilboes, that’s covered with historical open pits. If you look at an aerial map of Blanket, there are no open pits. And it’s just really a function of the age of the mine when Blanket first started, it went underground very, very quickly.

But quite clearly, along our lease area, this should be the first of a couple that we would see like this. This program is expected to finish up late December, so kind of early Q1 of 2026, we should have a full exploration report on this as well. With that, I’d like to hand back to Mark. All done.

Mark Learmonth: Thank you, Craig. At the outset, I had indicated that Victor would talk about Bilboes. But the fact of the matter is that, as I also said, we’re about to provide a very detailed update on Bilboes imminently. And so at this stage, there’s nothing really Victor can say other than just repeat the word imminently. So apologies for getting that slightly wrong. So in terms of outlook, we remain on track to achieve the increased production guidance for 2025. So we’re about, sort of notwithstanding a few headwinds in Q3, we’re about 3,000 ounces ahead of where we expected to be at the beginning of the year, which is good. Craig has given you a good sense of the very encouraging drilling taking place at Blanket, both at depth and at the surface.

Motapa, we’re looking to convert the drilling into a maiden resource early next — first half of next year, which should validate the acquisition of that asset some time ago. As I said, Bilboes’ feasibility study, news on that is imminent. And we continue to look closely at cost management to see to what extent we can try and get those costs down somewhat, but acknowledging that Blanket is now a fundamentally different mine to what it was 5 years ago, and we’re not going to go back to the days of enjoying the days of producing gold at $850 an ounce. So with that, we can open it up to questions.

Q&A Session

Operator: [Operator Instructions] And our first question comes from Nic Dinham.

Nic Dinham: I have several questions, tidy up some details here. On the mining side, there’s a lot more broken ore registering than actually hoisted. Could we have an explanation for that? And also from you, James, I think what are your immediately available ore reserves at the moment? I think you’ve got a sort of South African standard when you talk about that?

Mark Learmonth: James, do you want to deal with those questions?

James Mufara: Yes. So obviously, in this particular quarter, we broke more, but we had — I mean, if you look at the year, for instance, we are within the normal standard of plus or minus 2%, the difference between what we broke and what we hoisted. But in this particular quarter, we had — we broke slightly more, and this is simply because of our hoisting constraints, the stoppages that we had with the loss of life in some of the areas, and we let, but you will see that that will correct out this quarter. Then in terms of the immediately available sort of phase length, we are still very — I mean we’re still quite low. We’re looking at maybe at the moment 2 months to 3 months. We need to move that up with a little bit more development that we need to do that with the flexibility.

We are happy that we are already over 5% above for the year. And we are seeing — we are actually mining — we’re actually putting back into our reserves. So we should see a big correction within the next year. And I think within the next 3 years to 4 years, we should be in a position to be maybe 3 months to 6 months or better, so that we can have better flexibility.

Nic Dinham: And here’s a question which I always run off you, Ross. What are you expecting from dividends from Blanket this year? And will that bring that horizon for the end of the facilitation loans any closer than quarter 1, which you spoke about last time. Obviously, things have materially improved.

Ross Ian Jerrard: Hello, Nic. Yes, absolutely. So those loans basically will be paid off by the end of the year or January at the latest. So certainly earlier than originally talked about in terms of end of — sort of Q1 next year. And then, yes, in terms of planning for the remainder of the year, we’re originally targeting — well if I deal with in cash, we were targeting a $50 million sort of cash balance to have been distributed and be sitting in Jersey by the end of the year. I think that’s more likely to be between $40 million and $42 million, that type of level in terms of distributions that come through the chain. So we’ve had $45 million that have been distributed up from Blanket, both during the quarter and post in terms of dividends, and we continue to look to build our offshore bank account up closer to that $40 million mark.

Nic Dinham: Sorry, Ross, if you can just explain again what is the quantum of dividends that Blanket will distribute over this year, given where things are at the moment? What will the total look like? Is that the number you mentioned?

Ross Ian Jerrard: Yes. So those are the numbers that we’ve already done sort of $45 million. And depending on performance and the like, we’re probably going to get between sort of $15 million to $20 million additional distributions that happen within this remainder of the year. That’s obviously impacted by timings in terms of when those dividends actually get declared and the distributions get distributed up the chain. So we’ve done $45 million, it will probably be $60 million to $70 million in terms of actual distributions that come up from Blanket.

Operator: Our next question comes from [ Joseph Tarsh ].

Unknown Analyst: My question is mainly for Mark. So you’ve talked in the past about how your goal is to avoid further common shareholder dilution as you fund the growth of the business. And with the favorable gold prices in 2025, Blanket, you’re really starting to harvest some of the fruit of Blanket and the previous investments there. So my question is, how much do you intend to retain cash to fund the future development projects and potentially other acquisitions in Zimbabwe, as opposed to increase the dividend? And effectively, if a common shares needed to be issued, again, raise your cost of capital and doing so, as I think in hindsight, has been the case following the dividend increases with Blanket?

Mark Learmonth: Okay. I’m not sure I heard all of that correctly. The upshot is that we — there were several questions embedded in that. We’re not looking at any further acquisitions in Zimbabwe. I think our plate is full. That’s the first thing to say. Secondly, we do have a very substantial capital investment program in the Bilboes project, and that will become clearer imminently. And in that context, it would not be appropriate to increase the dividend. Having said that, our planning going forward is to maintain the dividend. Now clearly, we’re not going to promise to maintain the dividend. But we don’t see the dividend increasing, and we will do our level best to avoid reducing the dividend. I think that’s all — I think those are the answers to the questions you raised. Is there anything I’ve not answered? It’s quite a complex question. Is there anything I’ve not answered?

Unknown Analyst: I think that gets to the meat of it. Maybe just as a follow-up, if you were to have a general idea of when dividend increases would occur again, would it be after the current projects with Bilboes and Motapa are substantially completed?

Mark Learmonth: Well, it would be after Bilboes is completed. And let’s be very clear. We’re doing Bilboes not for fun. We’re doing Bilboes to increase cash generation and thereby increase our ability to pay dividends. That’s entirely what we’re about. I mean we’ve been paying dividends now for about 12 years or so. And if you look at the returns that we’ve generated for shareholders over the course of the last 10 years or so, I think it’s a 1,000% return compared to gold going up threefold and the GDXJ going up fourfold. So we substantially outperformed both gold and the GDXJ. And a major contribution to that has actually been the effect of those continuous dividend payments over the last 10 years to 12 years. So paying a dividend is deeply embedded in our DNA.

And I would hope that our past actions in terms of maintaining and then increasing the dividend should give shareholders a high degree of comfort that we’re going into Bilboes and other projects with a view to increasing the dividend. It’s very important.

Operator: Our next question comes from Tate Sullivan.

Tate Sullivan: I think [indiscernible], sorry for background noise. Is any of the work that you have done on Motapa going to factor into the feasibility study for Bilboes?

Mark Learmonth: No, it’s far too, that would — it’s far too early. It will take a maiden resource at Motapa early next year is just a staging post. To complete that work at Motapa will take — Craig, what, 3 years, 3 years or 4 years?

Craig Harvey: Yes, I’d say a timeline of 3 years or 3 years to 5 years.

Mark Learmonth: Yes. So that — if we were to — if we’re hoping to fold Motapa into Bilboes at the get-go, that would introduce a delay of many years into the project, which I’m not sure on this as we stand. So look, it is all — if you think about the Bilboes project, the first 6 years will be mining in the Isabella-McCays area. And then the latter 4 years will be mining Bubi, which is more remote. In the intervening period, that gives us plenty of time to finish the geological work at Motapa and then in due course to fold Matapa into Bilboes as the Isabella-McCays material runs out. But at this stage, there’ll be no benefit to shareholders in deferring the project.

Tate Sullivan: And then for Blanket, you mentioned in the press release a plan of scheduled engineering work on winders and shafts. I’m sure that — and then storing and then accumulating the ore for uninterrupted milling. Is this all planning for 2026 engineering work?

Mark Learmonth: Your line is very poor. Could you kind of repeat the question because I couldn’t pick up all of it.

Tate Sullivan: Yes. You mentioned some scheduled engineering work on winders and shafts for Blanket. Is that all planning for 2026?

Mark Learmonth: James, correct me if I’m wrong, but I think it’s that sort of a relatively quiet period over the December, January ’26, ’27. James, is that correct?

James Mufara: Yes, it is correct, Mark. Yes. So ’26, ’27, we’re going to have the AC-DC conversion, yes.

Mark Learmonth: Yes. And let’s be clear, the whole point is to have a stockpile so that we can see our way through that hiatus without interrupting production.

Operator: There are no other raised hands. So follow-up, which is from Nic Dinham.

Nic Dinham: Yes. So I missed a question for Craig here. When, Craig, do you think you’ll be in a position to do a reserve upgrade at Bilboes — at Blanket? And when would that result in a technical report summary?

Craig Harvey: So we are currently busy with one. So during Q1, late Q1, we will have a new technical report out. We’ll have a revised capital, and we’ll have revised resources. And obviously, with the life of mine, we’ll have a revised reserve estimate as well.

Operator: We’ve got another question from [ Yuvan Lowe ].

Unknown Analyst: Congratulations on the strong financial results. I’ve got a couple of questions. Perhaps first for James. So in relation to the development that has been done, could you just talk specifically to Eroica and BQR?

Mark Learmonth: James?

James Mufara: Yes. So I mean we obviously now, at the moment, I mean, in terms of the development, nothing has really changed in terms of Eroica and BQR, I mean we are developing reserves in that area. We still have got crews also that are busy mining in that area. I wouldn’t say off the top of my head, it could be around, Craig, maybe 15% of our production is coming from there. These are still high-grade areas. We’re still seeing good values in Eroica and the BQR area. But we also — that we also had the loss of life was also in BQR, for instance. But we are confident that with the development that we’re doing at the moment, we should be in a position to open good reserves in the next 2 years, 3 years, like we say, and we are accelerating development there.

Unknown Analyst: On a related note, but this time directed to Craig. So the discoveries at Sheet or in the position of Sheet are very interesting. I know you’re focusing on the oxide for heap leach right now. But have you done any deeper holes? Does there appear to be an extension at depth to Sheet? Is it disseminated sulfides or is it [ quartz ]?

Craig Harvey: Yes. So that surface exploration that I showed there sits, as I say, it’s 250 meters to the east of Sheet. When we extrapolated underground because, obviously, we’ve got the whole claim of our underground workings, it appears as though this area hasn’t been mined. So there is a potential for a previously unknown or unmined orebody to be sitting in the footfall of Sheet 250 meters to the east. So we’re going to tackle the surface. And in the meantime, we have — we are in the process of procuring slightly stronger, better electrohydraulic rigs that we can drill from 9 level on from Sheet drives that we have there to actually have a look if this does carry on down.

Mark Learmonth: Sorry, Yuvan, does that finish you? You done?

Unknown Analyst: Yes. Thank you very much.

Mark Learmonth: I can see we’ve got a typed question, which I think falls — I mean, Ross, can you pick it up at the bottom? It seems to really fall into your bailiwick. Can you see them?

Ross Ian Jerrard: Sorry Mark. I didn’t seen enough, reading through.

Mark Learmonth: Yes. I mean, the first question is what’s effectively the downside gold price scenario, which — below which we couldn’t sustain the dividend? So I think that’s the first question. Are you able to answer that?

Ross Ian Jerrard: Yes. So on that one, that would be sort of $1,850 would be the low price that — or downside scenario in the short term and that we’ve modeled on that side.

Mark Learmonth: Okay. And the second one refers to lease liabilities. I don’t quite understand what the question is about lease liability. Cash used for payments of lease liabilities has been increasing year-on-year. What’s the long-term capital allocation strategy for managing these increased lease debt? I don’t quite know what lease liabilities were referring to?

Ross Ian Jerrard: Yes, not sure either in terms of the leases.

Mark Learmonth: We’re conspicuously ungeared. I mean we do have some loan notes, which initially were issued by the solar company. And then when we sold the solar company, we Caledonia deliberately took those loan notes over, because we’re interested in helping to further develop the emergence of a debt capital market in Zimbabwe. And so we’re keen as a company to continue to build those relationships with high-quality Zimbabwean institutions. So we have those liabilities. Then the other liabilities are really the nature of very short-term overdraft facilities. And as you can see, we’ve pretty much repaid to the latter half of those to go during this quarter. So I’m not quite sure what the lease liabilities are.

Ross Ian Jerrard: It’s probably related to some of the property leases and the new buildings and some of the signing of those leases. But again, not material in the total scheme of the proceeding here.

Mark Learmonth: Okay. Two further questions. First, what’s the percentage tonnage being hoisted by #4 in Central Shaft? So currently, the percentage — I think for the whole of this year, the target is for about 62% to come up Central Shaft and the balance to come up #4 Shaft. And so I think the point that Ross was making is if you look at that in terms of tonne meters, in 2020, we hoisted 630,000 tonnes from a depth of 760 meters. So that’s about 450 million tonne meters. If you take — if we’re going to hoist — this year, we’re going to host about 830,000 tonnes. If 62% of that is coming from 100 meters, that effectively increases the tonne meters to about nearly 900 million. So we’re using pretty much twice as much power to hoist, which is, I think, the point that Ross was trying to make.

And the second question is, was the pressure on production cost broad-based or unique too? The pressure on production costs has been across the board. So we’re continuing to see increased labor costs, and that’s a combination of overtime, and I’m going to say bonus payments based on production exceeding targets. In terms of trying to manage overtime, one of the things we’re doing is we’ve introduced a clocking time attendance system, which is allowing us now to get a better handle as to how and why overtime is being incurred. And one of the things we want to do going forwards is to try to improve the roster and improve the way we use labor, so that the workers get to and from their places of work much more quickly. And therefore, they’re less tired, and they also do less overtime.

So I think that’s the initiative on labor. On consumables, we’ve looked over the last 5 years. I mean, on our consumables, about 1/3 is what we call variable consumables, which is cyanide, drill steels, explosives, and that sort of stuff. Over the course of the last 5 years, we’ve actually become more efficient across the board in terms of our usage of cyanide, explosives, drill steels, kilos per tonne milled. But in every case, we’re finding that the unit cost is going up, particularly in the case of, say, rods, where the average increase per annum over the last 5 years has been about 12%, I think. So we are seeing costs generally going up. And then the third one would be — yes, it’s not just labor, that’s electricity and that’s consumables.

Within consumables, the conspicuous offender, I guess, at this stage would be the cost of running the TMMs both in terms of overtime and consumables. And that reflects the fact that some of these TMMs, the underground trackless equipment is getting old, and we need to seriously now consider whether it’s economic keeping and repairing old and reliable stuff, or buying new stuff, which is more reliable and less prone to breaking down. So I hope that — and then on top of — sorry, also on top of the final point to that question, within the quarter, we did incur some additional costs relating to repairing a ball mill, one of the big ball mills found. And whilst we could work around it in terms of maintaining tonnage throughput, it meant that we did incur some extra costs to fix that ball mill.

But primarily, the increase in costs, I guess, is structural, not specific. I hope that answers the question. Any further questions?

Operator: No further raise hands. So over to you for any closing remarks.

Mark Learmonth: Let me just make sure there’s no one. Okay. Look, thank you very much for joining us. It was a — I characterize the quarter as being a solid quarter. It creates a good foundation. And as we say, the real news flow is going to be the imminent news flow relating to Bilboes. So thank you all for joining us. Thank you very much.