Caledonia delivers a turnaround quarter, but costs and accounting clouds the picture
Production recovers at Blanket, Bilboes financing nears closure, and exploration adds optionality — yet cost guidance climbs sharply.
CMCL · Earnings Call · 2026-08-10
A Quarter of Recovery
After a disappointing start to the year, Caledonia reported a marked improvement in Q2 2026. Production rose 18% sequentially, driven by better access to high grade areas and the transition to a seven-day mining week. As CEO Mark Learmonth put it: “Production has recovered in the quarter, and that really comes down to improved access to higher grade areas.” — Mark Learmonth, Chief Executive Officer · 2026-08-10 The mine is now running at the targeted 3.16 grams per tonne, and the company plans to process incremental output through the repurposed Lima plant from September, with a further $3.5M upgrade to the main metallurgical plant expected to lift throughput to 990,000 tonnes per year.
This operational rebound is a direct response to the fall of ground incidents that had hobbled output in 2025. Management's focus on proactive safety and a new shift system has also delivered a record safety performance—over 400 days without a lost-time injury. However, the quarter also revealed the cost side of the story. All-in sustaining costs guidance was lifted significantly to $2,500-$2,700 per ounce, and on-mine cash costs to $1,600-$1,800. CFO Ross Jerrard explained the drivers:
Those costs of the BETS distribution, higher royalties and some higher administrative expenses, largely driven by those advisor fees and transactions fees for our funding strategy, have all fallen into that all-in sustaining bucket and driven that increase in terms of our overall costs.
The BETS distribution—a new IFRS classification of employee trust dividends—added $3.2M to production costs, while electricity charges rose 25% despite lower consumption.
Bilboes Financing and Capex
The growth pipeline is now moving from planning to execution. The company has successfully issued a substantial convertible note and is on the verge of closing a $150M interim funding facility, with project finance expected by year-end. Ross Jerrard noted: “We have got credit approval from our two co-leader arrangers, and we are working with other syndicate banks... we hope that we will or we are planning for that to be closed in late August, early September.” — Ross Jerrard, Chief Financial Officer · 2026-08-10 The company's cash position stands at $167.8M, providing ample liquidity to support the next phase of Bilboes development. Capex guidance for 2026 has been reduced from $162M to $103M, primarily reflecting deferred payments on long-lead items; the project remains on schedule for first production in late 2028.
Exploration Upside
Exploration continues to add optionality. The K-Pits discovery, located within the Blanket lease, has returned oxide grades of 1.5-2.5 g/t and sulfide grades up to 6 g/t within 40 metres of surface. Exploration Manager Craig Harvey emphasized its significance: “This zone represents only a small portion of ground that we have rights to... in the coming years, this is going to be the model that we are going to follow, and it is going to be the first of many.” — Craig Harvey, Exploration Manager · 2026-08-10 The company is constructing a heap leach trial bed to test the oxide material, while drilling below the K-Pits and evaluating the deeper Blanket 7 zone. A maiden resource for Motapa is expected within weeks, potentially feeding into future processing plans.
Cost Pressures and Accounting Noise
Despite the operational recovery, the market will likely focus on the sharply higher cost guidance. The company has also faced volatility from fair-value accounting on its convertible notes and capped call options, which swung to a $4.4M net asset position. Management has repeatedly emphasised the importance of the dividend as a strategic tool. As Mark Learmonth stated in the March 2026 call: “The only way for a deep-level, relatively low-grade mine like Blanket to be sustainable... is by continuing to invest to improve resilience and lock in economies.” — Mark Learmonth, Chief Executive Officer (CEO) · 2026-03-23 This quarter, Caledonia moved closer to that goal, but investors will need to look through the accounting noise and rising cost per ounce to see the long-term value creation. With Bilboes financing near closure and exploration upside, the story is becoming more tangible—but execution remains key.