Caledonia mine to raise $309m for gold project

CALEDONIA Mining Corporation says the peak funding requirement for its Bilboes Gold Limited project in Matabeleland North province is estimated at US$309 million.

The bulk of the funding will be raised through debt.

Peak Funding Requirement refers to the point at which the highest amount of cash is required and the length of time it is required during the life of a given project.

The mining group, which is focused on becoming a multi-asset gold producer in Zimbabwe and elsewhere, 2022 acquired the Bilboes gold mining project for US$53,3 million from businessman, Mr Victor Gapare.

Mr Gapare acquired Bilboes from Anglo American Corporation Zimbabwe and before the mining giant exited Zimbabwe’s gold sector in 2003. In January last year, Caledonia acquired Bilboes for 5,2 million consideration shares (28,5 percent of Caledonia’s fully diluted equity, valued at approximately US$65,7 million at the time) and a one percent net smelter royalty.

The Victoria Falls Stock Exchange-listed mining group also owns Blanket Mine, its flagship whose annual output in 2023 was 75 416 ounces. Caledonia also owns the Maligreen goldfields and the Glen Hulme gold project in Gweru, Midlands province.

In an update this week, Caledonia chief executive officer Mr Mark Learmonth said the single–phase development option that his organisation has adopted for Bilboes, represented a key strategic milestone in the group’s journey to becoming a multi-asset, mid-tier gold producer.

“The peak funding requirement for the project is expected to be approximately US$309 million, with a sizeable proportion funded through debt.

“The company and, in the past, Bilboes’ previous owners, have had highly positive engagements with prospective debt providers and we now propose to re-engage with these providers in parallel with the process of preparing the new feasibility study,” he said.

It is hoped that the single-phase development option for the Bilboes project will provide improved cash generation allowing for a lower cost of capital due to enhanced debt financing capacity than phased development alternatives.

In addition, the project is expected to yield an estimated 1,5 million ounces of gold (based on measured and indicated mineral resources) over an initial 10-year life of mine at an all-in sustaining cost of $968 per ounce.

Caledonia, which is headquartered in Canada will shortly be filing a Preliminary Economic Assessment (PEA) in line with Canada’s National Instrument 43-101 – Standards of Disclosure for Mineral Projects for a single-phase development.

The PEA reflects the work that has been done by Caledonia and its consultants over the period since the project was acquired by Caledonia.The work focused on updating the feasibility study in respect of the project, which was prepared by DRA Projects (Pty) Ltd on behalf of the previous owners of the project and which had an effective date of December 15, 2021.

The work also considered alternative development options for the project, which included multi-phase development and changes to certain aspects of the project.

The main change to the Bilboes project development plan that has been made relates to the proposed construction of the tailings storage facility that will now be constructed on a modular basis to reduce the initial capital expenditure and therefore improve the economic returns.

“Notwithstanding the general inflationary increase in operating costs and capital costs over recent years, the PEA re-confirms that Bilboes is a high-quality mid-scale asset that can generate attractive economic returns.

“The PEA also confirms that Bilboes has an attractive production profile with the potential to almost triple Caledonia’s production capacity to over 200 000 ounces per annum in combination with production from Blanket Mine.

“To date, 2024 production at Blanket has been robust and the company remains well-positioned to deliver returns to shareholders while expanding our asset portfolio and growing our production profile.

“I am very excited by the opportunity we have to evolve our business, which we believe will generate significant long-term shareholder value,” said Mr Learmonth.herald