Earnings Labs

Caledonia Mining Corporation Plc (CMCL)

Q4 2020 Earnings Call· Sun, Mar 21, 2021

$22.98

-5.55%

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Transcript

Steven Curtis

Management

Well, good morning, ladies and gentlemen, and thank you for joining the 2020 Results Presentation of Caledonia Mining. It's a pleasure to actually present these results, and you'll understand why as we run through the very successful financial results, operational results and just a general update for Caledonia. So let's proceed without any further ado. The disclaimer, most of you will be familiar with, and we have to put it up there. So there it is for you. Now moving on to the 2020 highlights. It really is encouraging and pleasing to be able to talk to highlights in a year that most of us look back and wish had never happened. 2020 was a tough year from a COVID perspective, affected every single one of us. Luckily, the -- COVID had a minimal effect on Blanket Mine. We had 1 case at the mine during 2020, but the structures that have been put in place, the discipline that is demonstrated by the staff saw us through the COVID pandemic, and it did not affect our overall operating results at Blanket Mine to the actual extent that we recorded a record production of 58,000 ounces. And Blanket, as it always does, had very well controlled costs. Obviously, there were some exceptional costs because of COVID, and Mark will talk about those just a little bit later when we get into the financial review. A very, very good strong set of financial results, high production, a higher gold price arena. I'm not going to elaborate too much on the financial results because Mark is going to talk about them, but there are 4 very, very important points. Turnover hit the $100 million level, 32% increase above previous years. Gross profit hit $46 million, 50% increase. And adjusted earnings per share hit…

Mark Learmonth

Management

Thank you, Steve. So just looking at some of the highlights. Steve discussed the production level, nearly 58,000 ounces, that was a record. So production was 5% up. The gold price was obviously higher, so that's a 27% increase in the gold price. So both of those contributed to revenue of bang on $100 million, a 32% increase. Gross profit was up by 50% to $46.7 million. And the adjusted profit attributable to shareholders was also up by about 55% to $23.8 million. And adjusted profit, we strip out from the foreign exchange gains and losses. And in the previous year, we also incurred -- had a substantial profit arising on the disposal of a subsidiary. So we strip out that background noise and gives you a very pleasing increase in attributable profit. Earnings per share, as Steve mentioned, was just over $2 a share, so that puts us a current [ PE ] of about 7. And as Steve has already mentioned, we have progressively increased the dividend pretty much quarter-on-quarter, which means the overall dividend paid in 2020 was $0.335, which was about 22% higher than the $0.275 that we paid in the previous year. Looking at the profit and loss. I've already mentioned revenue, the royalty stays the same, it stays at 5% of revenues. Production costs appear to go up quite a bit by about 20%, so from $36 million to $43.7 million. That does include a fairly sizable component of what I call noncontrolled costs, and I'll come back to that in a bit more detail later on. So clearly, you see gross profit up from $31 million to $46 million. G&A also appears to step up from about $5.6 million to $8 million. That's largely driven by higher insurance and higher wages and salaries,…

Steven Curtis

Management

Thank you, Mark, and excellent being able to talk to numbers that look like that. And as I said before, very, very proud of the team at Blanket and the Caledonia team to have held the ship together and to really produce fantastic results for the shareholders. So yes, so the outlook we've spoken about before, 80,000 ounces in 2022, the infrastructure that our operational people have got is greatly advanced on where we come from. We've got a new 6-meter diameter 4-compartment shaft going down to 1,200 meters, giving us access to deeper ore for longer. So the future of this mine is guaranteed for the next 14-odd years to 2034, and that just shows that there is value in this business. It doesn't matter that it's been operating for over 110 years. It is a great ore body or a collection of ore bodies. And we're very excited about the future. We've invested heavily. Mark's already spoken about how cash-generative this business really is. But if you put it in context, the Central Shaft alone has consumed $67 million worth of investments since January 2015, and all of that is being generated by the mine in Zimbabwe during some lower gold times, some production periods that were lower than what we've seen. It just shows a good operation will always be there to deliver and give you the flexibility that you look for as a management team. The opportunities in Zim, we've looked at many over a long period of time, and we were very happy to announce 2 last year. The Connemara North property, now this is the one that is in sort of late-stage of planning. There are no drills operating there right now, but we've got 18-odd months to do an exclusive exploration project there.…

Mark Learmonth

Management

I think that's everything, Steve, so I think we're finished. Thank you.

Steven Curtis

Management

Very good. So thank you once again for your time, and look forward to talking to you as this year rolls out and we have the opportunity to release further quarterly results. So thank you for your time, and cheerio.