Caledonia Mining’s (CMCL) third-quarter results indicate the Blanket mine operating in line with expectations, bar a minor slip in the head grade, which is already improving through Q416. As such, revenue and costs remain in line with expectations and the company remains on track to meet its FY16 production target of 50koz Au. The main impacts to the company’s cash flow are non-operational, relating to share-based payments, negative forex movements (with rand strengthening affecting certain costs), as well as a non-recurring cost relating to due diligence on an investment opportunity. As a result, we downgrade our 2016 adj. EPS estimate 25% from 24c to 18c, while noting that this still represents a year-on-year increase of 123% and a low P/E of 6.7x (cf FTSE Mining Index average of 27.1x). Caledonia’s dividend yield is currently 4.5%.

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