Transcript: Caledonia Mining Q2 2026 Earnings Conference Call

Caledonia Mining (AMEX: CMCL ) released second-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary Caledonia Mining Corporation Plc reported an 18% increase in production due to improved access to higher-grade mining areas, with revenue and EBITDA both rising 16% to $76 million and nearly $46 million, respectively.

The company made significant progress on the Bilboes project and expects to produce a maiden resource at Motapa soon, with ongoing exploration yielding promising results. 4 million, and the company maintained a cash and cash equivalents position of $171 million, providing a solid liquidity base for strategic initiatives. Management highlighted excellent safety performance with over 400 consecutive days without lost-time injuries, reflecting a strong focus on proactive risk prevention. Future guidance indicates increased production costs, with on-mine cash costs and all-in sustaining costs expected to rise due to higher royalties and administrative expenses.

Full Transcript Scott, Operator Welcome to the Caledonia Mining Q2 trading update. We're joined by Mark Learmonth and the management team. Mark, over to you. Mark Learmonth, Chief Executive Officer Thank you, Scott.

Could we get into the presentation, please? Okay. Well, morning. Good afternoon to you.

Should we just quickly go to the disclaimer page? Okay. And then on to the presenting team. So, I'm Mark Learmonth, Caledonia's Chief Executive, and we're joined today by Ross Jerrard, the CFO; Victor Gapare, another Executive Director who's running the Bilboes project; by Craig Harvey, VP Technical Services.

He runs exploration and MRM. And also in attendance we've got Maurice Mason, who's Vice President, Corporate Development and Investor Relations. Should we move on? Okay, just in terms of an overview.

Production was up 18% in the second quarter compared to the first quarter, which reflects improved access to higher-grade mining areas and benefits from various operating improvements. Revenue up 16% to $76 million and EBITDA up 16% to nearly 46 million, supported by stronger production and a robust gold price environment. Profit after tax up 27% compared to the comparable period in 2025, up to 30 million. 36 for the quarter.

4 million. And cash and cash equivalents at the end of the quarter was one. The growth pipeline is going well. We're making good progress at Bilboes, as Victor will explain.

We've got some very exciting exploration results coming out of Motapa, where we expect to produce a maiden resource in the next four weeks or so, and also some quite exciting exploration results coming out of the K Pits at Blanket. And just for the record, we've declared our usual quarterly dividend of 14 cents a share for the quarter. Should we move on to the next slide? Okay, I'm going to canter through these operating results quite quickly.

I mean, really, there's one thing that comes out and it's grade. So if we just move on. But before we get to that, let's talk about safety and excellent safety performance for the quarter we've had. Well now it must be over 400 consecutive days without any lost-time injury.

And that's five, nearly five and a half million man-hours worked without an LTI. So that's a very good, very good performance. Clearly that's backward. That's sort of a lagging indicator.

And the strong safety performance really reflects a couple of things. The first is the extent to which we're focusing on proactive and preemptive risk prevention. So things like, you know, we've undertaken risk propensity assessments on workers in high-risk areas. We're putting a strong focus on near-miss reporting and things like that.

So trying to preempt and predict where problems might be so that we can address them. And what underpins all of this is a renewed focus on training, culture and readiness. So a very pleasing, very pleasing safety performance. And congratulations to the mining team for achieving that.

Shall we move on? Right. Production has recovered in the quarter and that really comes down to improved access to higher-grade areas. And as we said previously, we've been hampered over the last few quarters by some fall-of-ground incidents in the course of 2025, which locked us out of high-grade areas.

So we've been effectively running the mine at a very low grade. In the first quarter it was 2 and a half grams a tonne. 1 the remainder of the year. And we're operating at that level.

So high access to higher-grade areas. We also in June moved the mine onto a seven-day working week, primarily to address worker fatigue. But it also means that we've increased our blasting days by 18% and that is flowing through into increased run-of-mine production. And from September onwards we'll be processing a portion of that incremental production through the Lima plant, which we'll repurpose.

And then into 2027, we'll be spending some money, as you'll hear shortly, to upgrade the main metallurgical plant to process all of that existing run-of-mine material through the main plant. The end of this month, the end of August, we will have completed an upgrade to the elution plant, which will allow us to process about 40 tons of material that we've accumulated over the last 18 months or so at a grade of 6 or 7 grams a tonne. So that will give us an extra 1,200 ounces across the months of September, October, November, December. And Q2 was well ahead of Q1 on the back of the higher-grade access.

So should we move on to the next page? Traditional graphs which we've seen before. I think the key things I draw out here are the top graph, the blue line, the stability that we've experienced now for many quarters. And that really is because of the stockpile that we developed and we've been running, fair to say, during this quarter.

Quarter two, the stockpile was run down to zero and has now been—now we've started to rebuild that since we introduced the new shift system in June. The bottom line in that top graph is the grade. And you can see how the grade came down from Q2 2025, reached a low point in the first quarter and has now recovered, as I say, in the second quarter. 88 grams a tonne.

16. And we're running at that level. And then the bottom graph just pulls it all together. In terms of looking at the recovery and the ounces produced, it's fair to say that as the grade falls, your recovery falls.

2 grams a tonne. 2, that means that your recovery goes down. So it is good to see that recovery bounce back again. Move on.

So that's just an overview of the operations. It all comes down to grades. So with that I will hand over to Ross who's got quite a lot to cover. Ross Jerrard, Chief Financial Officer Thank you, Mark, and good afternoon everyone.

Just running through the financial results summary up on the table, you can see the impact of both gold sold and gold ounces produced. So we were down for both the three months and the six months in terms of ounces, but we did benefit from a higher average realized gold price of $4,259 an ounce. So that was a 34% increase quarter on quarter. So we did produce some healthy revenues.

And as we go through our cost profile, that's one of the impacts in terms of higher royalties driven by those higher revenues. I will take a bit of time to go through our cost updates in terms of where we ended up. But the key message is really our on-mine costs were largely in line with where we had budgeted and were managing to. So in absolute terms, whilst those costs are shown to be up, there are some one-off or abnormal items that I'll talk you through in terms of why those transactions occurred.

But broadly we're very happy with our mine costs and the teams are managing their cost base very well. Those top-line ounces really impacted on our unit metrics in terms of an ounce sold basis. So you'll see our all-in sustaining and our on-mine cost per ounce sold were largely up. But, you know, there were some quite significant increases on an ounce profile metric.

But in absolute terms we’re broadly in line. 5% for the six-month period. And as you can see, some healthy numbers going through in terms of free cash flow and ultimate profit and earnings per share. Probably to highlight and remind everybody, our free cash flow number in the comparative period included our solar sale proceeds.

So that's probably not indicative of a normal operating cycle. 8 million worth of profit at the end of the three-month period and close to $40 million for the six months, or almost 35% up against the comparative period. We can move on to the next slide and talk a little bit about the profit and loss. You'll see our top-line revenue, as indicated, that was really driven by that higher average gold price, albeit that some of our sales ounces were a little bit down.

4% for the six months or 16% for the quarter. Royalties were up, but that was driven by that higher top-line performance. And also we did have some shipments during the six months—I think there were three shipments over the $5,000 per ounce level—which attracted the higher royalty. But in terms of our production costs, we are up some 15% year to date.

And I'll talk to some of those specific items that went through, and there were some timing differences. So as already highlighted by Mark, there was a drawdown on the stockpile, and obviously the costs that are released in terms of those ounces as they are put through does have a working capital impact. Below the line, in terms of significant movements, probably the one to highlight is the administration expenses, and there were some quite significant one-off costs that have related to our advisory fees, particularly on the senior loan note transaction, but our broader financing facility.

And as we go through Bilboes and our overall strategy, you'll see that we've made some significant progress in terms of our funding initiatives. So it's money well spent in terms of those work streams. I will also highlight the fair value gain on our derivative financial instruments. So that is financial accounting and some volatility that will go through the P&L, and it does result in some significant movements.

But I would ask you really to treat those as separate items when you're looking at the P&L because they're really driven by some quite complex accounting. And I've got a couple of slides that I'll talk to you a little bit later in the deck. But overall we're very pleased with our profit for the period—up some 27% for the three months at 30 million and up 40% for our six-month period, just shy of $50 million. The tax expense was down, but that was really around the capital gains tax that was paid on the solar in the comparative period.

So I guess our tax rate and effective tax rate is in line and we're very happy with that. If we turn to the next slide, please. In terms of cash flows, probably the items to note is really the rolling of our various loan notes. So you'll see some ins and outs, but actually there's no movement in terms of our net position there.

In terms of pointing out significant movements, you'll see the acquisition of our cap call options. 4 million in the six-month period was a one-off item that came through. And equally you'll see the impressive $145 million of proceeds in the convertible loan notes that came through and bulking up our cash at the year-end position, which closed at just shy of 167 or $168 million closing cash, which really puts us in good stead as we move forward in terms of our strategic objectives. So if we move to the next slide, you'll see our overall liquidity position, and we're very pleased with our cash on hand at $171 million.

There was bullion on hand of 13 million, 13 and a half million, which was really the ounces that are held on hand and ready for shipment. There was a slight delay on one shipment at the end of the six-month period which was driven by the demonstrations in Johannesburg. So there was a timing difference in terms of ounces that were held as we got them to the refiner, but those were delivered the day after, and it was really driven by timing. So nothing untoward to highlight there, but overall very pleasing to have a total liquidity of over $200 million as we stand at the end of the June period.

A very healthy position as we move forward with the company and the various initiatives. The next slide just talks to our capital structure and debt, and we included that in terms of just summarizing basically our debt structure—what's held at our Caledonia Holdings ZIM level in terms of our loan notes. And as I mentioned, you know, those movements that you see were really the successful rolling over of loans in terms of what was expiring. We're not intending to increase or decrease; it's really status quo in terms of those loan notes.

And what we're wanting to do is allocate those against strategic projects. And in terms of our borrowings, we're keeping the facility levels at the same level. We have paid down a large portion of that so that we're sitting in a very healthy position in terms of overall funding. And then, in terms of the new convertible bond, that sits on the balance sheet, increasing our total consolidated structure up to that 167 million that I'd mentioned previously.

So this gives you a picture in terms of overall debt. Taking a bit more of a deep dive into those on-mine costs, if we move to the next slide. We just wanted to highlight in terms of on-mine costs at Blanket, and I think it's very important to pull out a few key, I guess, transactions or cost centers. The first one is salaries and wages.

These have stayed broadly in line, and you can see a 4% movement year to date in terms of base increases in terms of salaries and wages. So well managed, and we're very happy in terms of that overall cost centre. What has moved, however, is the Blanket Employee Trust distribution. So previously we've had the facilitation loan, so any distributions that are made from Blanket dividends have gone to offset—or a portion of them have gone to offset—those facilitation loans, and those have now been paid off.

And under IFRS, any distributions that are now made under that arrangement need to be classified as employee costs and sit within production costs. 2 million charge going through in this last quarter which has significantly moved our production costs. It hasn't changed any distributions or anything and is actually a reflection of a great operation in terms of distributing funds, but unfortunately it sits within our mine costs and has had quite a material impact and will continue to have a material impact in terms of the optics as we go forward. So that is a standalone item.

We will be reporting it separately so everybody will be able to see that and deal with that specific cost or line item independently. And the other big movement for the period was the electricity cost, where you'll see that's gone up 25%. This is in fact driven by increased wheeling charges, but our actual consumption has decreased. So again, something that's largely outside of our control where we've done well in terms of our consumption of electricity, but we've been hit with some increased charges there.

So again, another one-off that has hit us in terms of those cost centers. So largely, when you back out those areas, you look at the performance in terms of where we've exited the six-month period—it's really driven by lower grade. So those reduced ounces that have come through in terms of production really hit us in terms of our unit metrics when you look at that on-mine cost metric, and at the bottom right of the chart going up some 46% for the period.

As that flows through onto the next slide in terms of our all-in sustaining costs, you'll see that the higher on-mine costs that I've just discussed, together with the higher royalty driven by that higher revenue that I mentioned at the start, has really flowed through in terms of our calculation of all-in sustaining costs.

Whilst our capital expenditure has been well managed and in line with expectation, those costs of the BETS distribution, higher royalties, and some higher administrative expenses largely driven by those advisor fees and transaction fees for our funding strategy have all fallen into that all-in sustaining bucket and driven that increase in terms of our overall costs. So what does that mean if we move to the next slide?

We have had a look and done a whole six-plus-six exercise and looked at our outlook for the end of the year, and it has meant, with those costs increasing, the classifications as we look towards the end of the year—we've increased our on-mine cash costs per ounce sold, increasing that by $100 from our previous guidance range. So the updated guidance range is $1,600 to $1,800, some 6% increase, and our all-in sustaining cost per ounce sold has increased by some $400 up from $2,100 per ounce to $2,500 an ounce at the lower end and increasing to $2,700 an ounce at the top end of the guidance range. Those are due to the factors I've just discussed.