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01/10 16:06
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals. Record gold production and revenue are positive, yet increased production costs and vague management responses raise concerns. The Q&A reveals uncertainty about the Bilboes project and potential dividend suspension, which could negatively affect the stock. The strong financial performance is offset by these uncertainties, leading to a neutral sentiment.
Revenue Revenue increased by 30% year-over-year to $65 million, driven by excellent production and a stronger gold price.
Net Profit Attributable to Shareholders Net profit attributable to shareholders rose by 147% year-over-year to just over $20 million, supported by strong operating cash flows and higher gold prices.
Adjusted Earnings Per Share Adjusted earnings per share increased by 155% year-over-year, reaching $1.14 for the quarter, including $0.44 from the profit on the sale of the solar plant.
Operating Cash Flows Operating cash flows rose to $28 million, reflecting strong financial performance and efficient operations.
Net Cash The company closed the quarter with $8 million of net cash and an additional $18 million in fixed-term deposits, totaling $26 million in cash equivalents.
Gold Production Gold production reached a record 21,000 ounces for the quarter, a record for any second quarter, supported by higher grades and plant recoveries.
Realized Gold Price The realized gold price was just under $3,200 per ounce, contributing to the revenue increase.
Gross Profit Gross profit for the quarter was $33.8 million, up 48% year-over-year, excluding the $8.5 million profit on the sale of the solar plant.
Production Costs Production costs increased by 18% year-over-year, driven by higher labor costs, consumables, and power expenses, partially offset by power savings initiatives.
All-In Sustaining Costs All-in sustaining costs increased by 7.4% year-over-year, reflecting higher on-mine costs and sustaining capital expenditures.
Record Gold Production: Achieved a record production of over 21,000 ounces in Q2 2025, with full-year guidance increased to 77,500-79,500 ounces.
Solar Plant Sale: Completed the sale of a solar plant for $22.4 million, securing a long-term supply contract for Blanket Mine.
Exploration Programs: Ongoing $2.8 million exploration program at Motapa and continued exploration at Blanket Mine for resource replacement and new areas.
Gold Price Realization: Realized a strong gold price of $3,200 per ounce, contributing to revenue growth.
Zimbabwe Market Stability: Improved foreign exchange stability and increased liquidity in Zimbabwe, aiding operations.
Financial Performance: Revenue increased by 30% to $65 million, net profit rose by 147% to over $20 million, and operating cash flows reached $28 million.
Cost Management: Focused on cost-saving initiatives, including power savings and optimizing reagent dosages.
Safety Improvements: Improved safety performance with reduced injury rates and enhanced safety programs.
Bilboes Feasibility Study: Progressing with feasibility study, exploring phased project approach to minimize upfront capital costs and equity dilution.
Dividend Policy: Emphasized importance of dividends for shareholder returns, particularly in Zimbabwe.
Electricity Supply Challenges in Zimbabwe: Zimbabwe produces less electricity than it needs, creating a dependency on importing power from the Southern African power pool. While the government has fast-tracked permitting for independent power projects, the electricity supply remains a critical operational risk.
Foreign Exchange Volatility in Zimbabwe: The foreign exchange environment in Zimbabwe has historically been turbulent. Although there has been some stability recently, the local currency (ZiG) and its exchange rate remain areas of concern, impacting financial planning and operations.
Cost Pressures on Production: Production costs have increased by 18% for the quarter, driven by higher labor costs, consumables, and power expenses. This includes $2 million in production bonuses and $3 million in overruns for consumables, which could pressure profit margins.
Funding and Capital Allocation for Bilboes Project: The Bilboes feasibility study is ongoing, but the project requires significant upfront capital. The company is exploring phased approaches and non-equity funding options to minimize equity dilution, but funding delays or challenges could impact project timelines.
Assay Turnaround Delays in Zimbabwe: Delays in receiving assay results from local labs in Zimbabwe are slowing down exploration progress, particularly for the Motapa project. This could delay resource definition and subsequent project phases.
Operational Risks at Blanket Mine: While production at Blanket Mine has been strong, maintaining safety and operational efficiency remains a challenge. The company has reported improvements in safety metrics but acknowledges the need for continuous vigilance.
Full Year Gold Production Guidance: Increased to a range of 77,500 to 79,500 ounces for 2025, supported by strong Q2 production and operational improvements.
Bilboes Feasibility Study: Ongoing with a focus on cost-saving options and a phased approach to minimize upfront capital costs. The project has robust economics and high debt capacity.
Motapa Exploration Program: A $2.8 million exploration program is underway, targeting sulfide resources below historical oxide pits and potential oxide mineral resources at Mpudzi. Approximately 50% of the drilling budget has been completed.
Blanket Mine Exploration: Efforts are focused on resource replacement and identifying new areas within the Blanket lease for potential development.
Cost Management: Initiatives are in place to bring production costs within guidance range, with a focus on labor, consumables, and power savings.
Funding Strategy for Bilboes: Aiming to maximize net present value per share by minimizing equity dilution. Exploring non-recourse project finance, mezzanine funding, and asset-backed loans.
Cash Position and Treasury Goals: Targeting a cash balance of $50 million by year-end 2025, with a current pro forma net cash position of $30 million.
Importance of dividends: The CEO emphasized the importance of dividends in shareholder returns, particularly in markets like Zimbabwe. While there is no formal dividend policy, dividends are considered crucial and are integrated into the company's operational strategy.
Minimizing dilution: The company has a strong focus on minimizing equity dilution to maximize shareholder returns. This approach has been a key factor in the company's performance over the last decade.
The earnings report shows strong financial performance with significant revenue and EBITDA growth, supported by rising gold prices. Despite increased costs, the company's liquidity remains healthy. The dividend declaration and a positive outlook on production guidance further boost sentiment. While some uncertainties exist in exploration and resource estimation, overall guidance and strategic plans are optimistic. The Q&A highlighted management's commitment to maintaining dividends and addressing production constraints. These factors, combined with an increased production guidance, suggest a positive stock price movement.
The earnings call presents mixed signals. Record gold production and revenue are positive, yet increased production costs and vague management responses raise concerns. The Q&A reveals uncertainty about the Bilboes project and potential dividend suspension, which could negatively affect the stock. The strong financial performance is offset by these uncertainties, leading to a neutral sentiment.
The earnings call highlights strong financial performance with record gross profit and improved net cash position, but concerns arise from competitive pressures, regulatory challenges, and increased production costs. The lack of explicit shareholder return plans and vague management responses in the Q&A further contribute to a neutral sentiment. The positive aspects are balanced by the uncertainties and risks, leading to a neutral prediction for stock price movement in the next two weeks.
Despite improved financial performance and profitability, operational challenges, safety risks, and high costs pose concerns. The Q&A reveals uncertainties in project timelines and energy reliability, with management avoiding direct answers. While dividends reflect improved financials, the lack of clear guidance on critical issues tempers optimism. The stock price is likely to remain stable, reflecting mixed signals from financial gains and operational hurdles.
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