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Caledonia Mining still cheap and going higher says broker

Published: 11:04 27 Sep 2016 EDT

picture of gold bar
More coming out from Blanket now and in the future

Zimbabwe-based gold miner Caledonia Mining Corporation PLC (LON:CMCL TSX:CAL) has increased the dividend once this year, but broker WH Ireland expects more hikes as grades and cashflow improve.

A rising gold price and boost to its earnings in sterling from a lower pound/dollar exchange rate have strengthened the tailwind and WH Ireland has upped its target price by nigh on 40% to 146p.

Not that the improvement has gone unrecognised.

Caledonia shares sit at a five year high of 135p and have doubled this year already but the miner remains debt free and has options short-to-medium term to increase the dividend again if it so wishes believes the broker.

Caledonia bought the mine in 2006 and has rejuvenated it, according to Ireland.

It is in the process of completing a $65mln expansion and refit at the mine – possibly one of the largest infrastructure projects in Zimbabwe at the current time.

Gold production is up on the back of increased ore tonnage and grade as ore from No.6 Winze area and the decline into AR South is increasingly hoisted and processed. 

This is reducing cash costs and increasing profits and cash generation will continue rise.

Once the new Central Shaft is finished it will transform the economics of the mine as the AR Main and AR South and take production over 80,000oz of gold annually. 

WH Ireland also ascribes no value either to satellite deposits around Blanket that have demonstrated mineralisation and could add more gold ounces.

Caledonia owns 49% of the Blanket with local groups the remainder and has had no problem in taking cash out of Zimbabwe in the ten years it has run it.

Buy with a target price of 146p is the broker’s new view.

Caledonia Mining Corporation hits 2023 guidance despite challenging start

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on 01/15/2024