Caledonia Mining Corporation PLC's (LON:CMCL, TSE:CAL) Blanket gold mine has been in operation for many years and managed to ride out the complexities of the Zimbabwean political situation relatively unscathed.
To a large extent, that’s due to the indigenisation deal that Caledonia struck some years ago with local businessmen, with its own workers, and with other community groups.
Under the terms of that deal, Caledonia retains operational control of Blanket and ownership of 49%.
The terms of sale of the 51% stake stipulated that the company would be paid back out of cash flow from the mine itself, and on very commercial terms.
Accordingly, as with all the best deals, all parties felt that they came out of it well, and the company’s ability to operate in Zimbabwe has never been seriously in jeopardy.
In recent years, the concerns have been more about how to operate Blanket to maximum efficiency.
To that end, the company is in the middle of a heavy investment programme, the benefits of which are just beginning to show through.
Thus, a new tramming loop has been installed at the 750-metre level, allowing for the more efficient distribution of ore around the underground network of tunnels before it is brought to the surface for processing.
In addition, the company is also working on new shafts to increase the amount of ore it can haul to the surface at any one time.
All told, the plan is to boost output in the longer term to more than 80,000 ounces per year by 2021.
The AIM-listed gold miner produced 25,582 ounces of gold in the first half of 2018, marginally ahead of the 25,316 ounces produced a year earlier
For the second quarter, the company said around 12,657 ounces had been produced, a 1.1% increase on the second quarter of 2017 but 2% below production in the first quarter of 2018.
Gross profit amounted to US$5.14mln, up from US$5.03mln, and net profit attributable shareholder rose by 275% to US$2.6mln from US$694mln. Earnings per share improved substantially too, up 86% to 35.2 cents, from 18.9 cents.
Caledonia added that production remained in line with expectations and maintained its full-year production guidance at between 55,000-59,000 ounces and the miner is on track for its 2021 target.
Caledonia has been a consistent dividend payer in recent years and has already said it intends to maintain the payment of US$27.5c (21.5p) in its current financial year.
At the current share price of 690p, that's a yield of 3.1%.
--Adds details from second quarter results--