HARARE-Toronto listed gold miner, Caledonia Mining Corporation said on Tuesday it was on track to achieve its annual targets of between 53 000 and 56 000 ounces at Blanket Mine in Zimbabwe, after suffering an eight percent slowdown during the quarter ended March 31, 2019.

Output retreated by 7,6 percent during the review period to 11 948 ounces, from 12 924 ounces during the prior comparable period in 2018, according to financial results for the review period.

Chief executive officer, Steve Curtis said output had surged in April, with volumes in line with targets.

“We maintain our full year production guidance of 53 000 to 56 000 ounces for 2019,” Curtis said in a commentary on first quarter results.

“I am pleased to report that production in April was almost exactly as planned and we are confident that production will improve in the remainder of 2019. I look forward to an improved cost performance in the remaining quarters of the year as we anticipate that the beneficial effects of improved production will be felt in the subsequent quarters of 2019. The early part of the quarter was made more challenging by some significant macroeconomic disruptions. In particular, the continuation of the currency peg between domestic currency and the US dollar caused severe hardship to our employees in Zimbabwe due to their reduced purchasing power which had repercussions for employee morale. The removal of the currency peg in late February resulted in a devaluation of the local currency and allowed management to take steps to remediate the situation of our employees,” he said.

Subsequent to the devaluation of the Zimbabwean currency in February, Caledonia reported a “one-off positive financial impact on its results, with a foreign exchange gains of $3,3 million arising on the revaluation of assets and liabilities, Curtis said.

“Notwithstanding the production difficulties experienced as a result of lower than expected production tonnage, unreliable electricity supply and lower mine grade, cash generation for the quarter was solid at $6,3 million – sufficient to support both capital investment in the Central Shaft project of $5,1 million and Caledonia’s regular quarterly dividend as well as maintain a healthy balance sheet with net cash of $9,7 million at the end of March,” said Curtis.

Revenue for the review period dropped to $15,9 million, from $18 million during the comparable period in 2017.

But consolidated operating profit before tax of $12,3 million for the quarter was 105 per cent higher than Q1 2018 although this increase was entirely due to gains of $3,3 million and a profit on the sale of a subsidiary of $5,4 million.

Attributable profit after tax was also substantially higher than the comparable quarter in 2018 at $9,3 million, again due to exceptional items which outweighed lower gross profit.

Operating cash flows for the quarter were $6,3 million, from $7 million in 2018.

“Company’s balance sheet remains strong with net cash of $9,7 million as at 31 March 2019,” said Curtis.

“Work on sinking the Central Shaft remains on track. I expect shaft sinking to be completed in the middle of this year after which a further 12 months will be needed to equip the shaft before it is commissioned in mid-2020 and we can begin to increase production to our target of 80 000 ounces per annum by 2022. This production increase will contribute significantly to reducing operating costs through economies of scale and we look forward to further increasing cash flows and earnings as the shaft is commissioned,” said Curtis.