Caledonia Mining — Expansion on track, a gold mine with purpose

Caledonia Mining — Expansion on track, a gold mine with purpose

FY17 saw Caledonia Mining (CMCL) marginally beat its 54-56koz gold production guidance, drive down AISC costs, its head grade increase (which had a corresponding positive effect on gold recoveries) and add significantly to its code-compliant resource base. In relation to its investment plan to lift production to 80koz by 2021, we see capex peaking this financial year (FY18), which will then allow significantly improved free cash flow generation. Coupled with an improved political environment and regulatory changes seemingly favouring gold miners (with a key objective of improving Zimbabwe’s domestic US$ currency supply), Caledonia is very well placed to capitalise on the long-overdue opening up of one of Africa’s prime geological and mining gems.

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Written by

Caledonia Mining

Expansion on track, a gold mine with purpose

Q4 & FY17 results

Metals & mining

1 May 2018

Price

687.50p

Market cap

£73m

US$/£:1.39

Net cash (US$m) at 31 December 2017

11.3

Shares in issue

10.6m

Free float

95%

Code

CMCL

Primary exchange

AIM (CMCL), TSX (CAL)

Secondary exchange

NYSE American (CMCL)

Share price performance

%

1m

3m

12m

Abs

27.9

26.7

32.9

Rel (local)

19.9

29.4

28.1

52-week high/low

687.5p

415.0p

Business description

Caledonia Mining mines gold at, and maintains management control over, its main operating asset, the 49%-owned Blanket gold mine in southern Zimbabwe. It is also progressing its understanding of a number of promising satellite projects close to Blanket.

Next events

Q1 results

May 2018

Analysts

Tom Hayes

+44 (0)20 3077 5725

Charles Gibson

+44 (0)20 3077 5724

Caledonia Mining is a research client of Edison Investment Research Limited

FY17 saw Caledonia Mining (CMCL) marginally beat its 54-56koz gold production guidance, drive down AISC costs, its head grade increase (which had a corresponding positive effect on gold recoveries) and add significantly to its code-compliant resource base. In relation to its investment plan to lift production to 80koz by 2021, we see capex peaking this financial year (FY18), which will then allow significantly improved free cash flow generation. Coupled with an improved political environment and regulatory changes seemingly favouring gold miners (with a key objective of improving Zimbabwe’s domestic US$ currency supply), Caledonia is very well placed to capitalise on the long-overdue opening up of one of Africa’s prime geological and mining gems.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/16

62.0

19.6

106.9

28.4

8.9

3.0

12/17

69.8

22.4

79.0

31.4

12.1

3.3

12/18e

74.7

24.9

170.4

27.6

5.6

2.9

12/19e

80.8

33.9

223.1

0.0

4.3

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Production and costs beating guidance

Caledonia produced 56,133oz Au in FY17, a y-o-y increase of 11.4%, at all-in sustaining costs (AISC) of US$847/oz, a y-o-y decrease of 7.1%. This resulted from an improving gold grade (a recent concern of investors, and one which should now be readdressed to the upside as the mine delves deeper into higher-grade resources) and higher tonnes processed from improving milling efficiency.

Blanket rights issue

With the Zimbabwean government relaxing indigenisation requirements for gold miners, the Blanket gold mine is to undertake a US$4m rights issue underwritten by CMCL’s Zimbabwean subsidiary. Since this time we have seen CMCL announce that Blanket will receive an increased Export Credit Incentive (10% cf 3.5% previously). As a result we consider the rights issue may not be required. However, if this rights issue takes place it would likely leave CMCL again owning a controlling c 51% share of the Blanket mine.

Valuation: Peak capex forces DCF higher

Our model has been adjusted for Q417 and FY17 results. All other forward-looking assumptions remain unchanged from our previous note. Caledonia’s net cash position at end FY17 was US$11.3m (note: end-year payables grew to US$12.7m largely due to a deferred ZESA payment), and we see this level increasing to US$14.9m in 2018 (net of dividend payments totalling US$2.9m) before we see a material shift in FCF generation in 2019, when we forecast net cash increasing 45% to US$21.6m. With capex peaking in FY18, our DCF valuation reflects this strong FCF generation resulting from a successful investment plan (IP) build-out. This drives our DCF up 4.8% from 869p (FY17) to 911p on an FY18 basis.

FY17 keeps IP on track, FY18e production c 57koz Au

A comparison of Caledonia’s Q4 results with our estimates is given in Exhibit 1 below. Revenue and royalty payments rose in line with improving gold production during the quarter (see Exhibit 3 for tonnes milled, gold grade, recovery and gold production data), with revenues received and royalties paid exceeding our estimates by 10% and 18% respectively. Note that CMCL’s revenue line includes refining costs and a revised 10% export incentive credit reimbursement (tax deductible, for 2018 only, reverting to our long-term 3.5% assumption for each year thereafter) paid by the Zimbabwean government, which could be viewed as a means of stimulating gold production in-country. On 4 April, Caledonia announced that it had been granted the ECI uplift to 10% by the Zimbabwean government. We do not yet consider this marked increase in the ECI as sustainable in the long term and so only assume it lasts for 2018, and will adjust future years ECI on a rolling basis. It could be viewed as a short-term measure to try and force artisanal gold miners in-country to formalise their operations and sell gold through the Zimbabwean reserve bank, rather than receiving informal/unregulated, paper-based monetary payments from these small artisanal gold mines. We see the export incentive credit scheme as growing in importance as the Zimbabwean government seeks to regain entry to global capital markets, potentially re-instate the Zimbabwean dollar (surely a prerequisite to obtaining debt on international markets) and as a means of alleviating the crippling effects of a domestic shortage of US dollars, to which its currency is pegged.

Operating costs came in a fraction lower than our forecasts, resulting in a 6% increase in gross profit over our Q417 forecast, alongside the improvement in revenue during the quarter. Although mine-site operating costs were stable quarter-on-quarter, the effects of a strengthening South African rand during Q417 on Caledonia’s wage payments resulted in an increase in G&A to US$1.4m, 16% above our forecast of US$1.2m. However, FY17 G&A came in at US$5.9m, a y-o-y reduction of 18.2%, resulting from lower advisory and consultancy fees. Caledonia attempted an acquisition which fell through and resulted in elevated advisory and consultancy costs of US$7.9m in FY16.

Exhibit 1: Q417 quarter-on-quarter comparison with Edison estimates

Q417e

Q417

% Change

Revenue (including refining costs and rebate)

17,830

19,599

10%

Royalty

(834)

(986)

18%

Operating costs

(9,263)

(9,188)

-1%

Depreciation

(953)

(1,014)

6%

Gross profit

 

6,779

8,411

24%

G&A

(1,183)

(1,370)

16%

Share based payments

-

(369)

-

Foreign exchange gain/(loss)

-

(396)

-

Other income

-

535

-

Operating profit

 

5,596

6,811

22%

Net interest

135

(7)

N/A

PBT (FRS 3)

 

5,731

6,804

19%

Tax (excludes deferred tax charge)

(14)

(2,815)

N/M

Deferred tax

(1,683)

-

N/M

PAT (FRS 3)

 

4,034

3,989

-1%

Minority interest

(891)

(757)

-15%

Attributable profit

 

3,143

3,232

3%

EPS (IFRS)

29.7

29.5

-1%

Source: Caledonia Mining, Edison Investment Research

Production schedule changes – 11koz reduction in 2019

As reported in Caledonia’s 10 November 2017 announcement titled ‘Extension of Central Shaft Project’, the company has had to make a significant near term adjustment to its gold production estimates. The main change is an 11koz reduction in estimated gold production for FY19, with 61koz now estimated, as opposed to previous guidance of 72koz. A further 10koz in 2020 gold production has also been made by Caledonia (see Exhibit 2 below). These meaningful shortfalls are due to ongoing constraints at the No. 4 Shaft, which handles the vast majority of material handling and transport of ore and waste to surface. We have previously commented (please refer to our September 2017 update note) that the underground tramming loop’s completion served to alleviate material handling bottlenecks underground. However, Caledonia in the aforementioned 10 November 2017 announcement states that its tramming loop, along with the deepening of the Central Shaft to allow for an extended Blanket mine life to greater depths, forced it to pare back short-term production targets. The following table details the changes in Caledonia’s short-term production compared to our previous production schedule and how gold production of 80koz (we estimate 80,688ozs Au) is still maintained for 2021:

Exhibit 2: CMCL gold production revisions over Blanket ramp-up period to 80koz by 2021

2018e

2019e

2020e

2021e

2022e

Tonnes milled (000's)

564

570

640

720

673

Revised Gold Production (koz Au)

59

61

68

80

80

Old gold production (koz Au)

64

72

78

81

80

% change

-7.5%

-15.5%

-12.5%

-0.6%

0.0%

New Edison EPS

170

223

345

446

364

Old Edison EPS

148

314

452

462

412

% change

14.8%

-28.9%

-23.8%

-3.5%

-11.6%

Source: Edison Investment Research and Caledonia Mining

Exhibit 2 above provides detail over the adjustment we have made to our model and the amount of gold produced per annum by the Blanket gold mine. Note that FY18 (2018) EPS is up 14.8% compared to our Q317 results note published January 2018, whilst production has decreased 7.5%. This is explained through the increased export incentive credit scheme, from 3.5% (in our January 2018 note) to 10% as announced by Caledonia 4 April 2018. We only apply the 10% ECI rate to our FY18 forecasts, with it kept constant at 3.5% thereafter. Whilst gold production remains unchanged from 2021, underlying tonnes have increased by c 11% per annum which we consider implies a commensurate c 8% reduction in forecast gold grade long-term (ie 2021 to 2026) from 4.0g/t Au to 3.7g/t Au.

Deeper inferred resources left out of valuation for now

Previously (in our Q317 results note, published January 2018) we maintained production as per Caledonia’s investment plan ending 2026. The company’s recent decision to extend the Central Shaft accommodates a further five years of production, according to Caledonia, with production as per the revised production schedule given in the 10 November 2017 announcement ending 2031 (as opposed to 2026 previously). However, with our aforementioned grade and tonnage adjustments through to 2026, and noting that the entirety of the additional gold production from 2027 to 2031 being sourced from inferred mineral resources, we consider it prudent to omit this production (from 2027 to 2031) until further geological confidence over the grade and quantum of these inferred resources is established. Our valuation horizon is therefore maintained until 2026, with upside clearly linked to the inferred resources being upgrade in confidence. We expect Caledonia to be able to furnish the market with this information post-Central shaft completion and achieving 80koz gold production by 2021, which should then free up drilling locations along the 22 Level.

Taxation: Changes reflect revised treatment of management fee

Caledonia’s FY17 overall effective taxation charge reflects its ongoing high level of capital expenditure and a revised treatment by the Zimbabwean tax authority of CMCL’s management fee.

Caledonia’s overall effective tax rate in FY17 was 42.2% (FY16: 41.0%), and its income tax rate was 18.3% (vs the headline rate of 25.75%), reflecting the deductibility of its high capital expenditure associated with the implementation of its investment plan. We note that withholding tax increased by a significant 142%, from US$503k to US$1,222k. Caledonia states that this was due to a change in the tax treatment of its management fee. Previously, Caledonia’s management fee, paid from the Blanket mine to Caledonia Mining South Africa (CSMA) was taxed as income, however, we now understand that it is taxed as a dividend, thereby incrementally increasing withholding tax.

Note that the export credit incentive scheme is 100% tax deductible, and our tax calculations do not include any ECI payments to the Blanket gold mine.

Costs coming down in tandem with production rising

A core reason for investment in Blanket is to fully realise the high level of operational gearing available due to the high level of fixed costs. As fixed costs remain flat, the more gold ounces a company produces, the lower its unit costs become. This is most clearly evidenced through the on-mine unit costs, as detailed in the following exhibit:

Exhibit 3: Actual and forecast on-mine costs 2015-26e

Source: Caledonia Mining, Edison Investment Research

With gold production forecast at around 57koz for 2018 (under our assumptions), unit costs should remain relatively flat moving only slightly from US$633/oz for FY17, to US$634/oz for FY18. However we do note that there is an indication Caledonia is operating at levels below this with on-mine costs per ounce reported for Q417 at US$556/oz.

Production: Following an upward path towards 2021

The Blanket gold mine demonstrated improved performance resulting from additional measures put in place over the year to help alleviate haulage bottlenecks and improve waste haulage capacity. Tonnes milled increased 6.0% y-o-y from 142,169t to 150,755t, and 10% q-o-q, from 136,064t to 150,755t. This pattern of improved operational performance (clearly visible in the trend of increasing tonnes milled and quarterly gold production, LHS in Exhibit 4 below) continues in line with Caledonia’s ramp-up in production at Blanket to 80koz in 2021.

Exhibit 4: Quarterly production data since launch of Blanket IP

Source: Caledonia Mining and Edison Investment Research

Exhibit 4: Quarterly production data since launch of Blanket IP

Source: Caledonia Mining and Edison Investment Research

Central Shaft development and mid-shaft loading

The Central Shaft is the name given to the capital project most critical to a successful implementation of the IP launched in 2014, and which has been subsequently revised. Originally planned to a depth of 1,080m below surface, the current depth of the shaft is 990m below surface, corresponding to 30 level in Blanket’s mine layout. The Central Shaft has been designed to become the main access and egress route for personnel at Blanket, and the main haulage route to transport ore and waste to surface. Its completion will alleviate a considerable burden on the existing and smaller capacity No 4 Shaft, allowing for considerable future growth potential to be realised below the 750m level. The 750m depth has been the historic ‘floor’ or depth limit to pushing Blanket’s production downwards into what is currently understood to be higher-grade gold deposits.

Central Shaft development will now be completed to a depth of 1,330m below surface to provide additional scope for these extracting deeper and potentially higher-grade resources. The additional cost of this extension is already included in our financial model.

A further revision to the original Central Shaft development is the construction of a ‘mid-shaft loading’ system. This additional construction project was commenced during December 2017 at the 26 level, 870m below surface. It will serve to alleviate ore handling constraints on the 22 level haulage, and free up haulage capacity at the base of the Central Shaft development so as to be able to complete this development without compromising the projected ramp-up from c 57koz Au by end 2018 to 80koz Au by 2020.

Valuation: Peak capex drives base case up 5%

We have adjusted our model for Q417 and FY17 results. We have also revised our production schedule as per the company’s 10 November 2017 announcement (see page 3 for details) and a revised schedule of capital expenditures as per its March 2018 corporate presentation (Exhibit 5). Caledonia’s net cash position at end FY17 was US$11.3m. We note end-year payables grew to US$12.7m largely due to a c US$6m payment to ZESA not being paid during Q417. This was not due to a lack of funds on Caledonia’s part and will be settled during H118, bringing payables down to a more normal level. We see net cash increasing to US$14.9m in 2018 (net of dividend payments totalling US$2.9m), before we see a material shift in FCF generation in 2020 driven by lower IP development capex, when we forecast net cash increasing 45% to US$21.6m. With capex peaking in FY18, our DCF valuation reflects this strong FCF generation resulting from a successful IP build-out. This drives our DCF up 4.8% from 869p (FY17) to 911p on an FY18 basis. This valuation also reflects a 1.0% weakening in the US$/£ exchange rate from 1.41 to 1.395.

Exhibit 5: Revised Blanket IP capex schedule 2018-27, US$m

2018e

2019e

2020e

2021e

2022e

2023e

2024e

2025e

2026e

2027e

New capex schedule

(21)

(21)

(14)

(12)

(10)

(10)

(8)

(7)

(6)

(5)

Old Edison capex schedule

(27)

(11)

(6)

(6)

(6)

(6)

(6)

(6)

(7)

(7)

Source: Edison Investment Research and Caledonia Mining March 2018 corporate presentation

Forward-looking P/E shows CMCL undervalued at current share price

Our earnings projections are given in the following exhibit. The trend of rising earnings extends through to 2021 when Caledonia expects to produce 80koz pa gold at cash costs of US$501/oz. Our FY17 normalised EPS of 79c grows 115% to 170c in FY18e, and again by 31% to 223c in FY19e. Capital expenditures of US$21m in FY18 stay level through FY19 before decreasing markedly (by c 33%) to US$14m in 2020, demonstrating a considerable freeing up of cash resources.

Exhibit 6: Normalised EPS (LHS) and forward-looking P/E on RHS

Source: Edison Investment Research

On a P/E basis, the company’s successful execution of its IP at Blanket will drive the company’s forward-looking P/E multiples lower. Caledonia’s FY17 P/E of 12.1x matches the FTSE Mining Index average of 11.3x (as of 19 April 2018) very closely. However, looking forward, earnings generation shows Caledonia undervalued on a P/E multiple of 4.3x FY19e EPS.

Financials

Caledonia’s year-end net cash position decreased by 14.7% from US$13.0m to US$11.3m, reflecting the company’s increased capital expenditures (including the additional capex required to develop the Central Shaft to 1,330m). We note Caledonia’s payables increased to US$12.6m by end FY17, but also that management states this is largely down to a delay in a c US$6m payment to the Zimbabwean electricity company, ZESA, which should be made sometime in H118. This was not due to a lack of funds on Caledonia’s/Blanket’s side. Our projection of Caledonia’s working capital position, as well its end-year net cash position, is given in the following exhibit:

Exhibit 7: Working capital history and forecast 2013-20e

Year

2013

2014

2015

2016

2017

2018e

2019e

2020e

Payables

4,301

3,260

6,656

8,077

12,660

9,432

7,575

3,295

Creditor days

59

43

81

92

128

100

75

30

Receivables

3,636

1,850

4,236

3,425

4,962

6,137

6,639

8,534

Debtor days

21

13

32

20

26

30

30

30

Source: Caledonia Mining, Edison Investment Research

Our view is that Caledonia’s creditor days normalise to a more conventional 30-day turnaround by 2020. We will continue to monitor and adjust the number of creditor days as and when Caledonia’s financial results are released.

As long as the company’s working capital situation reverts to a more historical pattern, we estimate that it will generate the following net cash flow:

Exhibit 8: Caledonia end year net cash forecast 2014-20e

Year

2014

2015

2016

2017

2018e

2019e

2020e

Year-end net cash

23.1

10.9

12.9

11.3

14.9

21.6

49.9

Source: Caledonia Mining, Edison Investment Research

Exhibit 8 above includes all operational, central costs, FY18 dividend payment and capital expenditures, as per our 12 January 2018 note Record production and 14% increase in grade.

Caledonia states that its dividend of US$2.9m paid quarterly will be maintained in FY18. We have included this for FY18 and await further guidance to forecast this payment beyond the current year.

Zimbabwean changes to indigenisation

President Mnangagwa assumed leadership of Zanu-PF and became president of Zimbabwe in late 2017. He quickly stated his intention to relax the country’s indigenisation policy concerning gold miners. Caledonia’s statement on this change is given below. Until formal confirmation of this change and the rights issue are complete (see below), we maintain our model of the indigenisation structure with all indigenous party loan accounts modelled through cash flow.

‘’These pronouncements have now passed into law and accordingly, the boards of Caledonia and Blanket have agreed to implement a rights issue at Blanket to raise approximately $4 million which will be underwritten by Caledonia's Zimbabwean subsidiary. Blanket will use the proceeds of the rights issue to advance work on certain of its satellite properties. Assuming that Blanket's indigenous shareholders do not subscribe for shares in accordance with their rights, it is expected that, subject to the terms of the rights issue, Caledonia's shareholding in Blanket will increase from 49 per cent to slightly over 50 per cent.

"Caledonia will also evaluate the potential to buy the shareholdings in Blanket that are currently held by certain indigenous shareholders. However, it is our intention to retain the shareholders representing employees and the local community (both of which currently hold 10 per cent each) as long term shareholders of Blanket. Any transactions would reflect the value of the indigenous shareholders' holdings in Blanket after deducting the value of their outstanding facilitation loans and would be subject to a mutually agreed valuation of the holdings in Blanket.’’

Exhibit 9: Financial summary

US$'000s

2016

2017

2018e

2019e

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

61,992

69,762

74,672

80,774

103,836

120,007

Cost of Sales

(38,500)

(43,441)

(44,046)

(48,684)

(53,386)

(54,820)

Gross Profit

23,492

26,321

30,626

32,090

50,450

65,187

EBITDA

 

 

23,257

26,192

29,826

40,099

60,482

76,622

Operating Profit (before amort. and except.)

19,766

22,429

24,626

33,599

53,982

70,122

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

(788)

(1,811)

(1,000)

(2,966)

0

0

Operating Profit

18,978

20,618

23,626

30,633

53,982

70,122

Net Interest

(176)

(31)

261

335

468

1,034

Other financial items

0

Profit Before Tax (norm)

 

 

19,590

22,398

24,888

33,934

54,450

71,156

Profit Before Tax (FRS 3)

 

 

18,802

20,587

23,888

30,968

54,450

71,156

Tax

(7,717)

(8,691)

(4,444)

(7,250)

(12,225)

(15,984)

Profit After Tax (norm)

11,873

13,707

20,444

26,684

42,225

55,172

Profit After Tax (FRS 3)

11,085

11,896

19,444

23,718

42,225

55,172

Minority interests

(2,797)

(2,512)

(2,468)

(3,157)

(5,409)

(7,137)

Net income (norm)

 

 

11,276

8,329

17,975

23,527

36,816

48,035

Net income (FRS3)

 

 

8,288

9,384

16,975

20,562

36,816

48,035

Average Number of Shares Outstanding (m)

10.5

10.5

10.5

10.5

10.5

10.5

EPS - normalised (c)

 

 

106.9

79.0

170.4

223.1

349.0

455.4

EPS - normalised and fully diluted (c)

 

92.4

78.2

168.9

221.0

345.9

451.2

EPS - (IFRS) (c)

 

 

79.5

86.5

160.9

194.9

349.0

455.4

Dividend per share (c)

28.4

31.4

27.6

0.0

0.0

0.0

Gross Margin (%)

37.9

37.7

41.0

39.7

48.6

54.3

EBITDA Margin (%)

37.5

37.5

39.9

49.6

58.2

63.8

Operating Margin (before GW and except.) (%)

31.9

32.2

33.0

41.6

52.0

58.4

BALANCE SHEET

Fixed Assets

 

 

64,917

82,143

97,943

112,443

119,943

125,443

Intangible Assets

0

0

0

0

0

0

Tangible Assets

64,917

82,143

97,943

112,443

119,943

125,443

Investments

0

0

0

0

0

0

Indigenisation receivable

0

0

0

0

0

0

Current Assets

 

 

25,792

27,913

26,418

33,779

64,225

100,980

Stocks

7,222

9,175

2,830

3,030

3,295

3,325

Debtors

3,425

4,962

6,137

6,639

8,534

9,864

Cash

14,335

13,067

16,742

23,401

51,686

87,082

Other

810

709

709

709

709

709

Current Liabilities

 

 

(9,832)

(15,602)

(15,733)

(17,320)

(17,974)

(23,474)

Creditors

(8,422)

(13,805)

(13,936)

(15,523)

(16,177)

(21,677)

Short term borrowings

`

(1,410)

(1,797)

(1,797)

(1,797)

(1,797)

(1,797)

Long Term Liabilities

 

 

(19,365)

(23,417)

(23,417)

(23,417)

(23,417)

(23,417)

Long term borrowings

0

0

0

0

0

0

Other long term liabilities

(19,365)

(23,417)

(23,417)

(23,417)

(23,417)

(23,417)

Net Assets

 

 

61,512

71,037

85,211

105,485

142,777

179,533

Minority interests

 

 

(3,708)

(5,944)

(7,941)

(11,098)

(16,507)

(23,643)

Shareholder equity

 

 

57,804

65,093

77,270

94,387

126,271

155,889

CASH FLOW

Operating Cash Flow

 

 

25,631

28,885

31,768

34,574

54,042

62,347

Net Interest

(194)

(161)

261

335

468

1,034

Tax

(2,466)

(4,212)

(4,444)

(7,250)

(12,225)

(15,984)

Capex

(19,885)

(21,639)

(21,000)

(21,000)

(14,000)

(12,000)

Acquisitions/disposals

3

0

0

0

0

0

Term loan facility and equity issuance

3,360

(1,400)

0

0

0

0

Dividends

(2,994)

(3,310)

(2,911)

0

0

0

Net Cash Flow

3,455

(1,837)

3,675

6,659

28,285

35,396

Opening net debt/(cash)

 

 

(10,880)

(12,925)

(11,270)

(14,945)

(21,604)

(49,889)

HP finance leases initiated

0

0

0

0

0

0

Other

(1,410)

182

(0)

0

(0)

(0)

Closing net debt/(cash)

 

 

(12,925)

(11,270)

(14,945)

(21,604)

(49,889)

(85,285)

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Caledonia Mining and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

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United Kingdom

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295 Madison Avenue, 18th Floor

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US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Caledonia Mining and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

IBU-tech — One door closes, another door opens

Fallout from the Dieselgate scandal included a reduction in demand for the chemicals used in automotive catalytic converters. This adversely affected IBU-tec’s FY17 revenues (down 5%) and pre-tax profits (down 55%). Conversely, the environmental agenda is driving demand for electric vehicles, battery energy storage systems for use with renewables and catalytic devices for cleaning up factory exhaust gases. Management expects demand for specialist materials used in these applications to support a recovery in sales and EBITDA during FY18.

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