Caledonia Mining's (CALVF) Stefan Hayden just announced his resignation from the board. Until very recently, he was the company's CEO. After he resigned toward the end of November, he retained a seat on the board, in spite of the fact that it was clear that the company was heading in a different direction. The resignation announced shortly thereafter reflects the fact that Caledonia is putting its past as a steady low-cost gold producer behind it.
For a long time, Caledonia Mining has been operating the 49%-owned Blanket mine in Zimbabwe. This mine has shown very stable production for years, and Caledonia has been sitting on a substantial amount of cash - now ~2/3rd of its market cap. But recently, the company decided to use this capital to become more aggressive and to grow the Blanket mine. This, along with recent share price weakness prompted me to write a bullish article, in which I demonstrate the company's enormous cash flow potential and its ability to grow organically in spite of the fact that the market was assigning virtually no value to this future cash flow given the mine's location in Zimbabwe - one of the riskiest mining jurisdictions in the world.
The changes taking place at Caledonia clearly pose a risk, since the company is entering unfamiliar territory with new leadership. However, given the company's large cash position, this makes sense, as otherwise this cash is effectively dead money.
In spite of the fact that the company operates in a high-risk mining jurisdiction, the market is acutely aware of this, which means that the company's market price has nowhere to go but up, unless something drastic happens to its cash hoard. With this in mind, and in spite of the risks, I think Caledonia is a compelling gold stock in the current market environment.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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