Caledonia Mining Corporation PLC 

Caledonia Mining Corporation PLC (LSE: CMCL) is an FTSE AIM All- share-listed gold producer with a profitable and cash-generative business with a growth profile. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

The Company expects to release FY24 results by 31 March 2025.

Key Recommendation Rationale – Sell at GBX 875.00

• Resistance near Current levels: CMCL’s stock price crossed the Resistance (R1) which was stated in the previous report on 23 December 2024 therefore, there can be a possibility of a decline from resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.
• Rising Production Costs and Decreased Profitability: The increase in on-mine costs per ounce and all-in sustaining costs (AISC) during the Quarter raises concerns about the company’s cost management. On-mine costs per ounce rose from USD 928 in Q3 FY23 to USD 1,056 in Q3 FY24, and AISC increased to USD 1,501 per ounce from USD 1,268. These higher costs are attributed to lower ounces sold, increased labor and electricity costs, and a rise in share-based payment expenses. This escalating cost structure could negatively impact profitability, especially if gold prices do not continue to rise or if production challenges persist.
• Lower Gold Production and Safety Concerns: Caledonia's production for the Q3 FY24 was 18,992 ounces, a decrease from the previous record of 21,772 ounces in Q3 FY23. This drop was primarily due to lower grade and reduced metallurgical recoveries. While production guidance for 2024 remains between 74,000 to 78,000 ounces, the lower production levels raise concerns about the company’s ability to consistently meet its targets. Additionally, the fatality at the Blanket mine in September 2024 underscores safety risks, which may negatively affect public perception and investor confidence in the company’s operational practices and safety standards.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

CMCL is expected to trade at a premium, considering the recent outlook and guidance, cost optimization strategies, and the reduction in interest rates. For conducting the valuation, the following peers have been considered Resolute Mining Ltd (LSE: RSG), Hochschild Mining PLC (LSE: HOC) and Adriatic Metals PLC (LSE: ADT1).

Given its current trading levels, the recent strategic investments and partnerships, recent rally in the share price, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing Market Price of GBX 875.00 as of 24 March 2025. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 24 March 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.