Caledonia Mining Corporation Plc 2026 Q2 Earnings Call

Could we get into the presentation, please? Okay. Well, morning, good afternoon to you. Should we just quickly go to the disclaimer page? Okay. Then on to the presenting team. So I am Mark Learmonth, Caledonia's Chief Executive, and we are joined today by Ross Jerrard, the CFO, Victor Gapare, another Executive Director who is running the Bilboes project, by Craig Harvey, VP Technical Services. He runs Exploration and MRM. Also in attendance we have Maurice Mason, who is 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 comparable period in 2025, up to $30 million. EPS was up 29% to $1.36 for the quarter. Operating cash flow was strong, $28.4 million. Cash and cash equivalents at the end of the quarter was $167.8 million. The growth pipeline is going well. We are making good progress at Bilboes, as Victor will explain. We have some very exciting exploration results coming out of Motapa, where we expect to produce a maiden resource in the next four weeks or so. Also some quite exciting exploration results coming out of the K-Pits at Blanket. Just for the record, we have declared our usual quarterly dividend of $0.14 a share for the quarter. Should we move on to the next slide? Okay, I am going to canter through these operating results quite quickly. Really, there is one thing that comes out, and it is grade.

So if we just move on. But before we get to that, let us talk about safety, an excellent safety performance for the quarter. We have had, well, now it must be over 400 consecutive days without any lost time injury. That is nearly 5.5 million man hours worked without an LTI. So that is a very good performance. Clearly, that is sort of a lagging indicator, and the strong safety performance really reflects a couple of things. The first is the extent to which we are focusing on proactive and preemptive risk prevention. So things like we have undertaken risk propensity assessments on workers in high-risk areas. We are 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. What underpins all of this is a renewed focus on training culture and readiness.

A very pleasing safety performance, and congratulations to the mining team for achieving that. Should we move on? Production has recovered in the quarter, and that really comes down to improved access to higher grade areas. As we said previously, we have 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. We have been effectively running the mine at a very low grade. In the first quarter, it was 2.5 grams a ton. In the second quarter, it was about 2.88, and we are now targeting about 3.1 for the remainder of the year, and we are operating at that level. So higher access to higher grade areas. We also, in June, moved the mine onto a 7-day working week.

Primarily to address worker fatigue, but it also means that we have increased our blasting days by 18%, and that is flowing through into increased run-of-mine production. From September onwards, we will be processing a portion of that incremental production through the Lima plant, which we will repurpose. Then into 2027, we will be spending some money, as you will 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 Alluvion plant, which will allow us to process about 40 tons of material that we have accumulated over the last 18 months or so at a grade of 6 or 700 grams a ton. So that will give us an extra 1,200 ounces across the months of September, October, November, December.

Q2 was well ahead of Q1 on the back of the high-grade access. Should we move on to the next page? Traditional graphs, which we have seen before. I think the key things I would draw out here are the top graph, the blue line, the stability that we have experienced now for many quarters, and that really is because of the stockpile that we developed and we have been running. Fair to say, during this quarter, Q2, the stockpile was run down to zero and now we have 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, running at 2.88 grams a ton, target for the remainder of the year on average is about 3.16, and we are running at that level. Then the bottom graph just pulls it all together in terms of looking at the recovery and the ounces produced. It is fair to say that as the grade falls, your recovery falls. The tail grade, we cannot do much better than a tail grade of 0.2 grams a ton. So frankly, if the head grade goes down and the tail grade stays at 0.2, that means that your recovery goes down. So it is good to see that recovery bounce back again. Move on. That is just an overview of the operations. It all comes down to grade. With that, I will hand over to Ross, who has got quite a lot to cover.

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. We were down for both the 3 months and the 6 months in terms of ounces. But we did benefit from a higher average realized gold price of $4,259 an ounce. That was a 34% increase quarter-on-quarter. We did produce some healthy revenues. As we go through our cost profile, that is 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 we are managing to.

In absolute terms, whilst those costs are shown to be up, there are some one-off or abnormal items that I will talk you through in terms of why those transactions occurred. But broadly, we are 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. You will see our all-in sustaining and our on-mine cost per ounce sold were largely up. But there were some quite significant increases on our ounce profile metric. But in absolute terms, we are broadly in line. Going into our financials, we are very happy with our EBITDA. That was up some 28.5% for the 6-month period. 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, the comparative period included our solar sale proceeds. That is probably not indicative of a normal operating cycle. But we are very happy in terms of where we ultimately ended up with some $23.8 million worth of profit at the end of the 3-month period and close to $40 million for the 6 months or almost 35% up against the comparative period. If we can move on to the next slide and talk a little bit about the profit and loss. You will 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. But we are very happy in terms of our ultimate gross profit position, which was up some 17.4% for the 6 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 6 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 will talk to some of those specific items that went through. There were some timing differences. 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, it does have a working capital impact. Below the line in terms of significant movements, probably the one to highlight is the administration expenses.

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. As we go through Bilboes and our overall strategy, you will see that we have made some significant progress in terms of our funding initiatives. So it is money well spent in terms of those work streams. I will also highlight the fair value gain on our derivative financial instruments. That is financial accounting and some volatility that will go through the P&L, and it does result in some significant movements. I would ask you really to treat those as separate items when you are looking at the P&L, because they are really driven by some quite complex accounting. I have got a couple of slides that I will talk to you a little bit later in the deck.

Overall, we are 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. I guess our tax rate and effective tax rate is in line, and we are 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. You will see some ins and outs. But actually, there is no movement in terms of our net position there. In terms of pointing out significant movements, you will see the acquisition of our capped call options.