Caledonia Mining Q2 2026: gold price lifts profit as costs rise

Caledonia Mining's quarter at a glance

Caledonia Mining Corporation PLC reported a clear sequential recovery at its Blanket gold mine during the second quarter of 2026.

Production increased by 18% compared with the first quarter, while a stronger year-on-year realised gold price helped revenue and profit grow despite fewer ounces being sold than in Q2 2025.

The broad picture is encouraging, but not spotless. Costs per ounce remain high, full-year cost guidance has been raised and reported profit benefited from a sizeable fair value gain.

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Q2 key figure	2026	2025	Change
Blanket gold production	17,360 oz	21,070 oz	-18%
Gold sold	17,811 oz	20,487 oz	-13%
Realised gold price	US$4,259/oz	US$3,186/oz	+34%
Revenue	US$75.9 million	US$65.3 million	+16%
Gross profit	US$39.2 million	US$33.8 million	+16%
EBITDA	US$45.8 million	US$39.5 million	+16%
Profit after tax	US$30.0 million	US$23.6 million	+27%
Basic earnings per share	US$1.36	US$1.06	+28%
Operating cash flow	US$28.4 million	US$28.1 million	+1%

A higher gold price did much of the financial heavy lifting

Caledonia's Q2 revenue increased by 16% to US$75.9 million even though gold sales fell by 13% to 17,811 ounces.

That apparent contradiction is explained by pricing. The average realised gold price rose by 34% year on year to US$4,259 per ounce, more than compensating for the lower sales volume.

There was also 3,589 ounces of finished gold inventory on hand at the quarter end, which Caledonia said was sold immediately afterwards. This timing difference is worth noting when comparing quarterly production and sales.

Gross profit increased by 16% to US$39.2 million, while profit after tax rose by 27% to US$30.0 million. Basic earnings per share climbed 28% to US$1.36.

However, investors should look beneath the headline profit number. EBITDA included an US$11.5 million gain from the revaluation of derivative financial instruments. Excluding that gain and the US$8.5 million profit from the sale of the solar plant in the comparative period, profit after tax increased by 23% to US$18.5 million.

That adjusted comparison still shows meaningful progress, but it provides a more grounded view of operating performance than the statutory figure alone.

Blanket is recovering, but remains behind last year

Blanket produced 17,360 ounces of gold in Q2, up 18% from the first quarter as access to higher-grade mining areas improved.

The average feed grade rose from 2.5 grams per tonne in Q1 to 2.9 grams per tonne in Q2. It remained below the exceptional 3.4 grams per tonne achieved in Q2 2025, helping explain why year-on-year production fell by 18%.

Management said the grade continued to improve in July. Operational initiatives include a seven-day working schedule, better access to higher-grade areas, lower electricity consumption and measures to reduce overtime.

Caledonia expects the new schedule to support higher output from September 2026, when it intends to process an additional 200 tonnes per day. An elution plant upgrade is also due to be completed later in the year.

The company has reaffirmed Blanket's 2026 production guidance of 72,000 to 76,500 ounces. Delivering that range will require a stronger second half, particularly in the fourth quarter, as management itself expects.

Rising costs are the main concern

On-mine costs reached US$1,675 per ounce sold in Q2, 49% higher than a year earlier. All-in sustaining costs, or AISC, increased by 48% to US$2,678 per ounce.

AISC is a broader measure that includes direct mining expenses alongside items such as sustaining investment and certain corporate costs. It is useful for understanding the approximate cost of maintaining production.

Caledonia attributed the increase to lower grades and several additional expenses. Across the first half, these included US$3.2 million of payments to employees arising from their trust's 10% ownership of Blanket, US$4 million of fundraising and advisory fees, and US$3.2 million of higher royalty payments.

Cost discipline per tonne milled was described as stable after adjustments, but investors ultimately receive returns per ounce produced and sold. Lower grades therefore remain economically important even if underlying unit activity costs are controlled.

Full-year on-mine cost guidance has been raised to US$1,600-US$1,800 per ounce from US$1,500-US$1,700. AISC guidance has increased more sharply to US$2,500-US$2,700 per ounce from US$2,100-US$2,300.

The revised AISC range also includes higher royalties, US$4 million for potential oxide mining and processing work, and investment intended to improve infrastructure and support higher future production.

Cash provides flexibility, but free cash flow fell

Net cash generated from operating activities was US$28.4 million, compared with US$28.1 million in Q2 2025.

Quarterly free cash flow fell by 54% to US$17.4 million. For the first half, it declined by 29% to US$30.2 million.

Net cash and cash equivalents stood at US$167.8 million at 30 June 2026, up from US$8.2 million a year earlier. This reflects operating cash generation and proceeds from the convertible senior notes issued in January.

The cash position gives Caledonia financial flexibility, although a substantial portion of its growth plans depends on successfully assembling the remaining Bilboes funding package.

Bilboes is moving into the engineering and funding phase

Work on the Bilboes project is proceeding as planned. Front-end engineering design has started, Metso Finland has been appointed to provide BIOX processing technology and procurement for the first long-lead-time equipment is under way.

BIOX is a process used to treat sulphide gold ore so that the gold can be recovered more effectively.

Caledonia expects the first physical activity on site to begin in October 2026 with contractor accommodation and related infrastructure.

Funding remains a key execution point. The company is working towards a US$150 million interim facility from Zimbabwean commercial banks and a US$300 million limited-recourse project finance facility. Credit approvals have been obtained for more than half of the targeted interim facility, while prospective project lenders are progressing through due diligence and credit processes.

Neither facility was reported as completed, so financing risk has not disappeared.

Lower 2026 capex reflects timing rather than a smaller project

Group capital expenditure guidance for 2026 has been reduced from US$178.9 million to US$103.3 million.

The revised figure includes US$48 million of sustaining expenditure at Blanket, US$3.5 million of Blanket growth capital, US$48 million for Bilboes and US$3.8 million for Motapa exploration.

Caledonia said the reduction does not represent a change to Bilboes' timetable, scope or total cost. Instead, it reflects a better understanding of when deposits for long-lead equipment will be required.

That distinction matters. The lower 2026 spending forecast should help near-term liquidity, but it does not necessarily make Bilboes cheaper to build.

Exploration adds potential upside

At Motapa, drilling has confirmed mineralisation across approximately six kilometres of strike. Caledonia expects to publish a maiden mineral resource estimate in the third quarter of 2026.

At Blanket, exploration identified oxide and sulphide mineralisation at the K-pits zone, approximately 200 metres from existing mining infrastructure. A resource estimate is also expected in Q3, with planning under way for trial mining and heap-leach work in Q4.

Management now anticipates that Blanket's 2027 production could exceed the previous 72,000 to 76,500-ounce range. Firm guidance is not expected until the budgeting and technical planning process is completed at the end of 2026.

Dividend and investor takeaways

The board declared a quarterly dividend of US$0.14 per share, payable on 4 September 2026. UK-registered shareholders will receive the payment in sterling.

The positive case is that Blanket's operational performance improved from Q1, the gold price supported strong margins, safety reached a record level and the balance sheet has considerable liquidity. Bilboes and the exploration portfolio provide additional growth options.

The more cautious reading is that year-on-year production remains lower, cost guidance has risen materially, free cash flow declined and Bilboes still requires significant external funding. Reported earnings also received help from derivative valuation gains.

For investors, the second half will be about whether better grades and the seven-day schedule can turn management's confidence into sustained production growth and lower costs per ounce. The original company announcement contains the complete interim figures and disclosures.