Caledonia Mining – Discounted gold – Caledonia Mining (Caledonia) has had a good start to 2018 and its share price is up 22.5% year to date. Caledonia produced 56.1koz of gold during 2017, marginally beating its guidance for production of 54-56koz, despite suffering from electricity shortages and underground logistical issues (which it says that it has since addressed). The company advises that it remains on track to deliver output of 80,000 ounces (80koz) of gold by 2021 (all funded from internally generated cash flow). With capital expenditure peaking this year, there is the potential for a marked improvement in cash-flow generation, opening up the possibility of dividend increases beyond 2019.

In addition to an improving political backdrop in Zimbabwe, Caledonia will also benefit from an increase in the country’s export credit incentive, from 2.5% to 10% of sales, for 2018. Caledonia expects to see an increase in income of US$5.1m as a result. Despite these developments, Caledonia is trading at a marked discount to QuotedData’s NAV estimate of 884.7p per share.

Caledonia’s Blanket mine was Zimbabwe’s first fully indigenised mining operation. Caledonia has a 49% interest in the mine although, through the structure of its indigenisation arrangement, it participates in the mine’s cash flow at the much higher level of 77%.

Caledonia Mining – Discounted gold

Caledonia is a gold-mining company with an operating mine in the southern region of Zimbabwe that is expected to produce between 55 and 59koz of gold in 2018 (company guidance).

The company’s shares trade on London’s AIM (symbol: CMCL), the Toronto Stock Exchange (symbol: CAL) and, since July 2017, the NYSE American exchange (symbol: CMCL). A five-for-one share consolidation was undertaken in conjunction with the NYSE American listing in order to comply with that exchange’s US$5 minimum share-price criteria. As at 3 July 2018, Caledonia had 10.6m shares outstanding and a market capitalisation of £66.3m.

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CMCL : Caledonia Mining – Discounted gold