Welcome to the Caledonia Mining Q1 2026 results presentation. I would like to now hand over to Mark Learmonth, who's the CEO, to begin the results presentation. Mark, over to you.
Thank you. Welcome to this results presentation for the first quarter of 2026. Can we just move through to the presenting team? I actually can't see the slides there. Just move through to the presenting team. As you heard, I'm Mark Learmonth, Caledonia's CEO. I'm joined by Ross Jerrard, the CFO, Victor Gapare, Executive Director. We're not altogether certain if Craig Harvey will be able to join us. We're having some connectivity issues to Johannesburg, which is where he is. Craig may or may not join us. There's Maurice Mason, Vice President, Corporate Development and Investor Relations. That's the team. Shall we move on? Okay. Just by summary, as we previously announced, gold production in the 1st quarter was somewhat challenged.
It was about 14,700 ounces of production from Blanket Mine, and that was entirely due to, as you'll see in a moment, the lower grades mined during the quarter. Notwithstanding the lower production, financial performance was still robust, supported by the higher gold price environment. Revenue was up 18% to just over $66 million. Profit was also higher. Profit after tax was up nearly 70% to nearly $19 million, and also very strong cash generation. In particular, free cash flow, more or less tripled from $4 million to $12 million in the quarter. As you might expect with lower ounces produced, and particularly the effect of the lower grade, that affected the cost per ounce.
Cost per ounce, the all-in sustaining cost increased to $2,700. Having said that, it's worth noting that our cost per ton was very much in line with our expectations. If we can get the grade back, and as I'll show you, I think we can, these unit costs, cost per ounce should normalize. It's fair to say that, as again, as you'll see in a moment, it's fair to say that after the end of the quarter, April and so far into May, production at Blanket has very much improved and Blanket is now running as expected. That's Blanket. The Bilboes Gold Project is proceeding very well. As you know, we published a feasibility study in late November last year.
In January this year, we had a very successful convertible bond raise in New York, raised $150 million. We're now continuing to implement the rest of the funding strategy, and we're also making good progress with DRA in terms of finalizing the designs and actually moving this project forwards. Victor will talk to us about that later on. As you know, we've had some very encouraging deep-level exploration results at Blanket Mine. Hopefully, Craig will be able to join us and give a bit more detail on that. That sort of continues to support the long-term sustainability of Blanket Mine and recognizes the confidence that we have in the resource.
As usual, Blanket, Caledonia, sorry, declared the usual dividend of $0.14 for the quarter. That will be paid shortly. As a, as another sort of housekeeping point, July Ndlovu, who's a very experienced mining executive, joined the board in November 2025. At the AGM last week, he was appointed as Chairman. Okay, let's move on to just consider the operating results. Let's start with safety. Not much to say in terms of safety. It was a very, very good quarter with improving ratios. That really reflects our continued focus on proactive risk prevention in particular.
I'm very pleased to see there's been a substantial increase in the incidents of near-miss reporting, which is one of the key ways that we use to raise safety awareness and to act proactively to address safety issues before they become a problem. Safety is very good, but clearly, it continues to be an area of significant focus. It's never finished. Well, should we move on to the next slide? This is the usual two graphs. The top one shows grade and tonnes. The bottom one shows recovery and ounces. You'll see from the top graph, the tonnes has been stable at approximately 200,000 tonnes milled a quarter. You can see the grade.
The grade fell progressively from the second quarter of last year through into quarter three and quarter four and then further into quarter one. That reflects an issue that we've disclosed previously, which is the effect of, two falls of ground, which together meant that we were excluded from relatively high ton, high grade areas, which we relied upon to maintain the mix of our production. You can see the damage that the the grade did is reflected in the falling production profile in the in the second graph, where production fell quarter two last year into quarter three, quarter four, and again into quarter one.
Just the reduction in recovery, that also reflects the falling grade because the tail grade that we deposit onto the tailings facility is pretty much the lowest we're going to get is about 0.2 grams a ton. If the head grade, the feed grade is lower, that means that recovery tends to go down. If we move on to the next page, you can see in a bit more granularity the progression of grade in December and into the quarter. You can see that grade has recovered. December 2025, it was 2.55 grams a ton, increasing to 2.6 in January, 2.7 in February, and 3 in March.
Currently, it's running at about 2.9 grams a ton, which is actually pretty much what we expected it to be in the second quarter. As I've already outlined to you, Blanket has now returned to the production level that we had anticipated. We have already started with three remediation initiatives. The first is that we have appointed and a contractor started work to accelerate access to higher grade areas. They will continue to work for the remainder of the year, and that gets us back into a position where we should be ahead in terms of development, which gives us much more operating flexibility and resilience in future. A contractor started.
The second thing that's happening is that we are implementing a revised shift system, which will move the operations of the mine from six days a week to seven days a week. That new shift structure is primarily intended to reduce worker fatigue, which we understood was a significant problem. It will also result in increased run-of-mine production on an annualized basis, an extra 100,000 tons a year, which in due course will flow through into increased ounces produced. In the short term, the incremental production will be stockpiled. Once we've got a reasonable stockpile, thereafter, additional production will be processed. Also in June, July, we expect to commission an additional ball mill, BM3, which will increase our overall milling capacity by about 200 tons a day.
Those are the three initiatives that are taking place to increase and address the issues that we've faced at Blanket. As you can see, as you can't see, but you will see it in the second quarter, there has been a turnaround in the performance at Blanket Mine, which is an area of considerable focus for us. That's a few brief words on operations. Can I ask Ross please to take us through the financial results?
Thank you, Mark. Good afternoon, everyone. As always delighted to talk you through the results. As Mark has already discussed, it was really a concept of the higher gold price offsetting a lower production period. You'll see at the top of the table the outcome in terms of gold sold versus gold produced. There is a portion of a higher portion of ounces that sit within bullion on the hand, which does affect that in terms of timing. Largely, that average gold price that you see on the table, the $4,816 an ounce, was really offset by those lower ounces in terms of gold produced and sold. Pleasing for the period was the absolute cost.
You'll see the on-mine costs in terms of dollar quantum and our all-in sustaining dollars spent, the quantum of 23 or just under $24 million for on-mine costs and $38 million for all-in sustaining costs. Those were largely on track with our budget and expenditures, up 3% on-mine costs and 9% all-in sustaining costs. We were pleased with the spend rates there. Our unit costs were negatively impacted by the lower denominator in terms of ounces. Overall activity was really good, and we were pleased with the delivery by the teams. Obviously, the ounce profile hit our unit costs. As we exited the quarter, our EBITDA was up 50% at just shy of $34 million. With cashflow coming in really strongly after capital expenditure, which is again in line.
There are some timing differences in terms of capital expenditure profile. We're really pleased with our free cash flow of $12 million, which is up some 153% on the comparative quarter. A very pleasing result financially, albeit that ounces were down, and overall our earnings per share were 78% up on the comparative quarter. If we do a little bit more of a dive into our profit and loss. If I could turn to the next slide, please. You'll see the outcome of our revenue and, you know, that higher gold price that we achieved, resulting in revenue of $66 million for the period. Our royalties are obviously based on that top line, so they equally increased to $5.6 million for the period.
Production costs were on line with the expectation and largely on track together with depreciation. You see our gross profit is sitting at a shade over $32 million, which was a really pleasing result and almost 20% up. The key movements for the quarter are really driven around our financial instruments and I'm gonna do a little bit of a deep dive on the accounting treatments of that. That net fair value gain on the financial instruments is represented in a 1-line item, but there are a few different elements to that which I'll discuss in due course.
Further down on the chart, our net finance cost is up 200%, but that is due to the convertible senior loan notes and the treatment of those financial instruments. All other line items were largely in line, and we exited the period with a profit for the period of just shy of $19 million, which we're really pleased about. If we turn the slide, please, and we just talk a little bit more about the cash flows. Our net cash from operating activities were up 41% for the period. We did deploy against capital expenditure as planned. There are some timing differences there, but there's nothing to report or there are no outliers that need to be highlighted.
There's the combination of the various investing and financing, which really was around our capped call options, our convertible, and really the deployment of our financing program. We had some maturity of our fixed-term deposits, which we deployed against our put option instruments, and there were timing of various payments there. Our the raising of the $150 million convertible, some of those funds were used to acquire a capped call option. You'll see the deployment of $14 million going out of our cash flow. Further down, you'll see the proceeds from the convertible notes coming in at $145 million.
Overall, really at the bottom of the page, we exited the period in a fantastic position of $161 million worth of closing cash and cash equivalents, which shows that the whole financing strategy is really coming together. You'll see that if we turn to our next slide, which talks to our liquidity. Together with our cash on hand of $170 million and those drawn down bank facilities of $8.8 million, that gives us the $161 million that I've just discussed.
Together with bullion on hand, which represents about 3,600 ounces and some gold sales receivables, really pulls together a very robust financial liquidity position in treasury that enables us to move forward with our various capital allocation decisions, deployment of funds. Most exciting of all is obviously our continued development or moving forward with our development of the Bilboes project. If we move to the next slide, without doing a deep dive into the financial treatment of financial instruments, this is the first period that we will have disclosed the treatment of the convertible notes and the various accounting that goes with it.
The fact that we don't do a full set of financial statements that you would otherwise see, and that will come through in due course at the half year. We just thought it was important to articulate the various accounting around the convertible and also the capped call options. In terms of best illustrating that, we raised $150 million, which you can see on the left-hand side of the slide, which is the compound financial instrument of the senior loan notes. Under the accounting standards, we have to split that into two elements. There's the host debt, and there's a derivative liability. Those two are accounted for and treated separately.
One is under an amortized cost accounting treatment, the derivative liability, there's fair value through profit and loss. It has slightly different accounting connotations. Equally, the second arm, some of the deployment of that $150 million went towards a capped call option, that has a separate accounting treatment, also a fair value through profit and loss. There's two arms and elements in terms of the accounting and the valuation of that. You'll see below the chart in terms of the various line items that are represented in the primary statements that are attached to this quarterly announcement.
You'll see that there's a we hold a derivative asset, a non-current asset of $14 million. That asset really comprises both our capped call options and the treatment of that, but also our hedging program. It's a combination of a number of derivative financial instruments. Our liabilities, there's the, obviously, the host debt that sits there, but also there's a derivative financial statement liability. The $97 million and the $38 million compose that $135 million compound financial instrument for the bond.
Equally on the financial statements in terms of our income statement, you'll see a net $4 million or $3.9 million, and that's a combination of a number of these fair value adjustments that go through in terms of both our put options, the movements on the financial liabilities and the financial assets. I know that's complicated and hopefully this gives a little bit more color in terms of the accounting for it. The full financials and I guess a lot of the movement and the color will come through at the half year with the June results. I might pause there. It was a really good quarter financially, notwithstanding the lower ounces.
We're well-placed in terms of our strategy, both with, I guess, internal cash generation, and our overall funding position, which I'll talk to a bit more detail, as we go through Bilboes. With that, I'll hand it across, and we'll talk through the Bilboes project. So maybe Victor, if you can talk to Bilboes.
Thank you, Ross. Can we move to the next slide? Okay. This particular slide and the next one really is information we have already published on the project. I won't go over it today because it's already been published and it's already in our previous presentations. What I will do is actually to give an update on where we are today. We appointed, as Mark has said already, DRA as our EPCM contractor for this particular project. At the moment, we have DRA and ourselves, we've frozen the project scope and which allows DRA to complete the detailed designs for the project, commonly known as the front-end engineering design.
We expect to conclude these designs, maybe by the end of the third quarter into the fourth quarter of this year, which will allow us to place orders for the long lead items towards the end of the year, really in the fourth quarter of this year. The construction for this project will take place over 2027 and 2028, our expectation is that we should have the first gold pour towards the end of 2028. Basically, that's where we are. We are busy with DRA. We are working with the various contractors.
Okay. Thank you. Victor, I don't know if we've lost you. Could I ask, I think Craig has joined us. Craig, have you joined us? I hope so.
I actually have managed.
Good
to join us, but.
Okay, good.
on a mobile.
Okay, good. If you could, just take us through the. Hold on. Beg your pardon. Before we get on to Craig, I think, Ross, were you gonna just say a few words about the funding strategy for Bilboes?
Thanks, Mark. If we could turn to the next slide, it was really, and one more please.
Yeah. The next one. The next slide.
Billy, next slide.
Thank you.
That's it. Thank you.
Thanks, Mark Learmonth and Victor Gapare. Just to provide a quick update in terms of the funding strategy for Bilboes, as previously disclosed and discussed on previous calls, we have a four-funding pillar strategy. The first two pillars have been completed. We previously disclosed to you the hedging program that's in place, also the $150 million convertible note raise. Those are all completed and funds are received in treasury and ready for deployment. Importantly, steps three and four are in progress and well on track. Step three is the interim funding facility, and that is where we're working with a consortium of Zimbabwean and South African banks to pull together a $150 million facility.
We're working with our co-leader, arranger Stanbic, and CBZ in Zimbabwe. The data room is fully functional. We're working through all the various due diligence, and we're expecting to have that facility in place by mid 2026 or July 2026 latest. That facility is really going to be skewed around the Blanket Mine cash flows. The wider project finance facility is also well in progress. We're working with a number of financial institutions on that. We do acknowledge that the timeline to reach financial closure is a little bit longer term. That'll be completed over the next year or so.
Across those various work streams, we're well progressed and we're quite excited in terms of status and positioning for our Bilboes funding. If we turn to the next slide, we'll see an update in terms of the construct that I've previously spoken to. This is best read in terms of looking at the chart from right to left. You'll see in terms of the $590 million and the makeup of that $590 million in terms of our capital cost and including working capital and capitalized interest coming up to that quantum of spend that we expect to be able to the need to deploy for Bilboes.
Looking at the two columns on the left-hand side, at our $3,500 gold price per ounce and the compilation of how we expect to fill that funding requirement. We now have cash on hand, as I had previously articulated, of $161 million. At the top end, we have our forecast net cash flow that will come out of our operations of $125 million. Between the senior debt and other facilities in terms of what we're targeting, the gap is now $304 million.
If we move that pricing deck closer to $5,000 per ounce, which is represented in the middle column, you'll see that that senior debt and other facility requirement basically halves and goes down to $154 million. We're quite excited about where we sit in terms of our financing strategy, in terms of how that's all coming together. Actually, we think we're well-placed in terms of our ability to start deploying funds and moving this Bilboes project on time and to schedule. That hopefully gives you a good overview in terms of where we sit with our funding position. I might turn it across to Craig Harvey now to talk about exploration.
Thanks, Ross. I'll take you through our activities of what we've been doing at Blanket in the past couple of months. This opening slide is from our RNS that we published on the 7th of April. For those of you that haven't seen it basically represents from 34 level down, a depth of approximately 250 meters below 34 level. That kind of gives you an indication of the scale that we're looking at there. This is only really in what we call the BQR and the Blanket ore bodies area. Some of the key takeaways, as I said, is we are intersecting the continuation of the ore bodies about 250 meters below our workings currently.
What those colored blocks represent, if you can make it out, it's the various different ore bodies. It's quite difficult to read because they stack behind one another. That is the limit of the inferred mineral resources as we currently have, which was dated 31 December. Anybody looking at it can see at the bottom there, we've got some nice warm colors, which is greater than 2, 3, 5 grams per ton that is sitting below our inferred resource base that we have in the public domain at the moment. Encouraging takeaways. We drilling, the ore bodies continue at depth. If you can move on to the next slide.
This thing gives a tabulation of some of those results that you have seen. One of the key takeaways there. You'll see that the top four there is annotated as Blanket 7 under the ore body name. It was March, no, sorry, it was June 2025, when we published our previous drilling update for Blanket. We indicated that we had intersected a new ore body. This ore body is now being termed Blanket 7. As we drill more, define more, this area is going to grow. The key takeaway is there is, I mean, you know, Blanket 7, we're looking at in the drill holes 40 meters wide.
You know, I mean, any mining company that can find a 40-m wide ore body running at between 3 and 4 g/t is gonna be extremely happy about it. Inside that 40 m, we have the option of being selective in what we do. We can narrow it down, and just by looking at the drilling assays, we can mine those at anywhere between 5 and 6 m wide, at anywhere between kind of 12 to 50 g/t. It's not gonna be all over, but that's the kind of results that we actually get out of Blanket. It's, you know, very, very key. The drilling program's going along very well. We drilled just over 10,300 m between the June 2025 and the April 7 press releases that we've done.
Clearly we have a need to update our mineral resource estimate. That will be done during 2026 and reported and declared before the end of 2026. I think the upshot is that at depth there's no change. If anything, it's getting slightly better. I mean, you know, 40 meters wide, 4 grams a ton, I think it's happy days. If you can move on to the next slide, and we'll talk a little bit about Motapa, the surface exploration project that's located directly adjacent to Bilboes that we've just been speaking about. I'm pleased to say that finally, the labs in Zimbabwe have been very busy. Finally, we have gotten all of our repeat assets back and all of the assets from the lab that we need.
We have now closed out our 2025 drilling program, exploration program. By doing that, we are targeting early Q3 2026, a maiden mineral resource estimate for the Motapa North sulfide mineralization. That's going to represent the kind of $5 million of work that we've done during 2023 and 2024. That's what we've expended to date. Going forward into 2026, we will kind of be doing a rinse and repeat on the Motapa North. It's also got historic open pit oxides that have been mined. Clearly below those pits there's sulfides. We have done some reconnaissance drilling there. We will now formalize, and we are busy drilling there at the moment, to do very much what we've done at Motapa North. In addition, there's the Motapa oxides that we are still looking at.
Very interestingly, during 2025. Some surface trenching to the east of Motapa South has exposed mineralized horizons in the trenches. It's looking like we've got another near well, at-surface oxide potential target that we wanna have a look at. I think Motapa, yeah, it's business as usual. It's going on very well. We'll close out Q3 2026 with a maiden mineral resource estimate. With that, I'll hand it back to Mark to take us further.
Thank you. Thank you, Craig. Just to finish off. I mean, there's a lot of words on this slides, basically we've got two immediate focuses. The first is to return Blanket Mine to good health. Based on what we've seen in April and May to date, we appear to be making good progress on that. Just building on what Craig's been telling us, you know, we are convinced that Blanket has, you know, a good long life ahead of it. One of the things we're doing now is looking at ways to improve Blanket's resilience, so that it can actually live that longer life and continue to generate cash for us. Blanket is a pressing and immediate focus.
Clearly the other one is to get Bilboes into production as quickly as possible. For, in this gold price environment, for an asset of that quality, every month lost is money not made. We are very incentivized to get Bilboes done as quickly as possible with a view to continuing work on Motapa, which will then underpin our long-term growth potential. Those are the three main issues: Blanket, Bilboes and Motapa. With that, a little bit longer than we expected, I'll open for questions. I would just apologize again for some of the connectivity issues that we've had on this call. I'm sorry about that. Open for questions.
Mark and team, thank you very much for the presentation today. I would just like to ask people to raise their hands if they would like to ask a question. The raise hand button is in the bottom of your panel that's there. We'll just wait a moment before we go to questions just for people to have a time to raise their hands. Just give us one moment to Okay. We've got our first question from Nick at Denham Capital. Nick, please unmute yourself and ask the team your question.
Nick?
Nick, please go ahead. You're unmuted. I can see you've unmuted yourself, so please go ahead and ask.
No. Can't hear anything.
Unfortunately, Nick, we're not hearing you at the moment. I'd just like to ask people if you'd like to ask a question, please do raise your hand. Nick, we will wait to see whether maybe it's your microphone settings, which is in the bottom left-hand side of your speaker, of your screen. No, unfortunately we can't hear you at the moment, Nick.
Oh.
If we get any other further questions from people, please do raise their hands. Well, Mark, at the moment we don't have any further questions. Unfortunately, we're not able to hear Nick at the moment. That's there. Do you want to give it a few more minutes or a few more seconds, shall we say, to see if anyone else wants to ask a question?
Well, normally people are pretty quick off out of the blocks if they've got a question, so.
I would agree.
I'll assume that-
Maybe hand back to you for closing remarks, Mark.
Yeah. Okay. Okay. Look, thank you all for your participation. As I say, the first quarter was a disappointment in terms of production. The gold price saved us, but as you've heard, I'm personally very optimistic about the trajectory both for Blanket and for Bilboes. Let's put the first quarter behind us and move on. Thank you all for your attendance today. Thank you.