2024/2025 Blanket guidance and update
Nic Dinham
Blanket guidance and update: Caledonia Mining (CMC) released details of Blanket Mine’s 2024FY production as well as its 2025FY forecasts. On-mine, ASIC and capital budgets were also updated.
Blanket production: Blanket Mine has stabilised its ability to hoist ore at c. 200,000t/q. The mill’s processing capacity of 800,000tpa may now be the system bottleneck.
Blanket 2024FY output: Now that it can fill the mill, Blanket’s gold output will depend on its grades. The 2024FY gold grades were affected by a rockfall that impeded access to its high-grade Eroica stope. As a result, Blanket’s gold output of 76,656oz was little changed from the previous year.
Blanket 2025FY output: CMC forecasts similar levels of gold production in 2025FY. Reserve grades of 3.29g/t indicate that long-term gold output may average around 78,000oz/a.
Blanket 2024FY costs: Costs remain an area of concern for management. On-mine costs are expected to reach $1,000/oz in 2024FY, an increase of nearly 10% from 2023FY. A similar increase is expected in 2025FY, despite ongoing cost-cutting initiatives.
Capex 2024FY: Blanket invested $29m of capex in 2024FY. This was higher than predicted, due partly to the decision to upgrade the TSF design to GISTM standards. About $4m remained unspent at year-end.
Capex 2025FY: 2025FY’s capital forecast is now guided to $35m compared to the July 2024 TRS forecast of $27m. Capex in 2026FY and 2027FY is also likely to increase from the TRS forecasts of c. $14m/a to $25m and $30m respectively.
Capex intentions: The capex increases are partly the result of recent resource and reserve upgrades that have redefined Blanket from a short-life mine to one that should sustain operations for at least 17 years. Some elements of the revised capex plan will slow production cost increases.
What it means: The latest guidance and forecasts are cash negative to previous forecasts and expectations and may place pressure on Blanket’s ability to fully support CMC’s other interests. Fortunately, the imminent sale of the Solar Power Project (SPP) as well as the strong gold price should place these concerns on the back burner in 2025FY and into 2026FY.
Earnings: We have revised our 2024FY BEPS forecasts down to USD91c/s as a result of the delay in the sale of the SPP, which has an embedded after-tax profit of $6m. The sale should take place in Q1 2025 and contribute to a BEPS increase to USD119c/s in 2025FY.
Valuations: For valuation purposes, the guidance to higher costs and capex is offset by the higher gold price. Our valuation range based on a lower-than-spot gold price is now $10.47/s to $12.48/s which is a premium to the current share price
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