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TORONTO, ONTARIO--(Marketwired - March 31, 2015) - Caledonia Mining Corporation (News - Market indicators)(OTCQX:CALVF)(AIM:CMCL) ("Caledonia" or the "Company") announces its operating and financial results for the fourth quarter ("Q4" or the "Quarter") and the year ended December 31, 2014 (the "Year"). All results are reported in Canadian dollars unless otherwise indicated. Following the implementation of indigenisation in September 2012, Caledonia owns 49 per cent of the Blanket Mine ("Blanket") in Zimbabwe. Caledonia continues to consolidate Blanket and the operational and financial information set out below is on a 100 per cent basis unless indicated otherwise.
Commenting on the results for 2014, Steve Curtis, Caledonia's CEO said:
"2014 was another challenging year due to the lower gold price and lower production. Despite the tough environment Caledonia still generated $3m of cash and paid $3.2 million in dividends to its shareholders after $6.8m was invested at the Blanket Mine. Blanket also achieved a creditable All-in Sustaining Cost of $969 per ounce of gold (2013: $973/oz) for the year albeit on 8.3% fewer ounces of gold production.
"Towards the end of 2014 Caledonia announced a revised investment plan under which approximately $70 million will be invested at the Blanket Mine over the next 7 years, with the objectives of doubling production and reducing costs. Implementation of the revised plan remains on track.
"In December 2014 the Company published a Preliminary Economic Assessment which confirmed the robust economics of the revised plan which has an internal rate of return of 267 per cent.
"Caledonia's cash generation in 2014 remained strong and Caledonia increased its net cash from C$23.4 million to C$26.8 million as at December 31, 2014.
"The commercial environment in Zimbabwe continues to show signs of improvement. In Q4 of 2014 the royalty rate payable to the Zimbabwe government was reduced from 7 per cent of turnover to 5 per cent. In early 2015 the discount payable on gold sales was reduced from 1.5 per cent to 1.25 per cent and the 2015 round of wage negotiations has been settled rapidly with an average increase agreed at 3 per cent."
Shareholder Conference Call
A presentation of the 2014 results and outlook for Caledonia is available on Caledonia's website (www.caledoniamining.com). Management will host a "Question and Answer" call at 10am Toronto time on April 2, 2014. Details for the call are as follows:
Date: April 2, 2015
Time: 10.00 Toronto/1500 London /1600 Johannesburg, Zurich, Frankfurt
Operating and Financial Review
Dividend Policy and Shareholder Matters
On November 25, 2013 Caledonia announced a revised dividend policy in terms of which it intended to pay a dividend of 6 Canadian cents per share in 2014, split into 4 equal quarterly payments of 1.5 Canadian cents per share. The first quarterly dividend was paid on January 31, 2014 and subsequent quarterly dividends were paid at the end of April, July and October and at the end of January 2015. It is currently envisaged that the existing dividend policy of 6 cents per annum paid in equal quarterly instalments will be maintained in 2015. Caledonia will consider further dividends thereafter in the context of the prevailing commercial environment and expects to provide guidance for dividend payments in 2016 at about the time of the Q2 results, expected to be released in August 2015.
Strategy and Outlook
Caledonia's Board of Directors (the "Board") and Management have reviewed alternative expansion and diversification plans for Caledonia and have concluded the best returns on investment remain at the Blanket Mine in Zimbabwe, which continues to be cash generative in the current adverse market conditions and offers investment returns that exceed alternative opportunities.
On November 3, 2014, Caledonia announced its revised investment plan ("Revised Plan") and production projections for the Blanket Mine. The objectives of the Revised Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up. The infrastructure improvements will include the development of a "Tramming Loop" and the sinking of a new 6-meter diameter Central Shaft from surface to 1,080 meters.
The increased investment pursuant to the Revised Plan is expected to give rise to an increasing production profile that is expected to result in additional production from resources currently in the inferred category of approximately 70,000-75,000 ounces in 2021, this being in addition to projected production in 2021 from current mineral reserves of approximately 6,000 ounces. The Revised Plan is also expected to improve Blanket's long term operational efficiency, flexibility and sustainability.
An independent Preliminary Economic Assessment (the "PEA") and a revised supporting technical report dated December 1, 2014, entitled "A Technical Report on the Blanket Mine in the Gwanda Area, Zimbabwe" (the "Technical Report") relating to the Blanket Mine, with an effective date of December 1, 2014, was prepared in respect of the Revised Plan by Minxcon Consulting (Pty) Ltd. ("Minxcon"), in compliance with National Instrument 43-101 - Standards for Disclosure of Mineral Projects of the Canadian Securities Administrators ("NI 43-101") . The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is therefore no certainty that the PEA will be realized. The key conclusions arising from the PEA are as follows:
- the Internal rate of Return arising from the Revised Plan was calculated at 267 per cent4;
- the Net Present Value for the Blanket Mine arising from reserves and the inferred resources used in the Revised Plan was calculated at US$147 million4; and
- of the gold that will need to be produced, so that the cumulative cash flow arising from the Revised Plan becomes positive (i.e. the "Payback Area"), only 3 per cent will come from resources that are currently classified as inferred.
Implementation of the Revised Plan remains on plan. Progress on the implementation of each element which make up the Revised Plan is summarised below:
Management and Board changes
On November 18, 2014, Mr. Hayden stepped down as President and Chief Executive Officer and Mr. Steve Curtis was appointed as Caledonia's President and Chief Executive Officer ("CEO") in succession to Mr. Stefan Hayden.
Mr. Curtis, a Chartered Accountant with over 30 years' experience, was previously Caledonia's Chief Financial Officer ("CFO"). Mr. Curtis has been a key member of Caledonia's management team since he joined Caledonia in April 2006 and was elected to the Board in 2008.
Mr. Curtis will be supported in his role as President and CEO by Caledonia's existing management team which has been expanded over the last 15 months and comprises Mr. Dana Roets, the Chief Operating Officer, and Mr. Mark Learmonth the Chief Financial Officer and formerly Vice President, Investor Relations and Corporate Development.
Mr. Learmonth is a Chartered Accountant and had 15 years of investment banking experience in London and Johannesburg before joining Caledonia in 2008. On December 6, 2014, Mr. Stefan Hayden resigned as a non-executive director of Caledonia.
The Consolidated Financial Statement for the year ended December 31, 2014 and the Management Discussion and Analysis for the quarter and year ended December 31, 2014 are available from the Company's website www.caledoniamining.com and from SEDAR.
- Expenses relating to the Zimbabwe indigenisation transaction were previously included in Administrative expenses. These expenses are now presented separately as they are relevant to the understanding of Caledonia's financial performance. The presentation of comparative figures has been aligned accordingly.
- EPS is a non-IFRS measure which aims to reflect Caledonia's ordinary trading performance. The adjusted EPS calculation excludes any share based expense arising on the implementation of indigenisation, impairments, tax adjustments in respect of prior years and foreign exchange profits and losses, all of which are included in the calculation of EPS under IFRS. Refer to Section 10 of the company's published MD&A for a discussion of non-IFRS measures
- The EPS for 2012 has been restated based on the 10:1 consolidation that took place in that year.
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