Caledonia to spend US$250 million on new Project

Business Reporter
HARARE – Caledonia Mining Corporation will spend US$250m on a project at its new acquisition Bilboes Mine, located nearly 75km north of Bulawayo.

Initially, it will spend about US$5m this year towards an oxidation project, meant to generate short-term cash flow for the mine.

Bilboes currently has a functional oxide mining and metallurgical plant at the project site which has historically produced up to 20,000 ounces of gold per annum but has stalled.

Addressing the media in the capital this week, Caledonia CEO, Mark Learmonth, said the project will oil Bilboes mining operations and contribute financially to the main project which he said requires US$250m over the next three years.

He said Caledonia will enter into a tribute relationship with Bilboes where Caledonia will provide about US$5m that is requires to restart the oxide project which was stalled.

“They should generate about 2 000 ounces of gold per month in the course of the next three years whilst we get busy with deeper sulphide levels,” Learmonth said.

“The other thing is to maintain the operating integrity of Bilboes so that it can continue to pay its workers and bills and once we are done with the initials it will start generating cash and contribute to the bigger sulphide project.”

He said the cost of the main project of building a 175 000 ounces a year mine will need about US$250m over three years or so.

“It will be a substantive investment.’’ Learmonth said.

According to Caledonia this tribute agreement will commence this year as soon as it has been registered with the relevant authorities and will continue until completion of the transaction.

According to the provisions of the tribute agreement, Caledonia will pay the necessary capital and operating expenses and will earn 100% of the mining operation’s profits in exchange for paying a 5% royalty to Bilboes Holdings, which it will apply to its debt obligations for working capital.

The tribute agreement will end when the transaction is finished, or if it doesn’t finish and Caledonia has recovered its investment with a sufficient internal rate of return.

After the transaction is complete, Caledonia anticipates continuing to mine and process the oxides and transitional ore and using the money earned to help pay for the larger-scale sulphide project’s capital expenses.

The conditions which are holding the completion of the transaction is that Caledonia wants Bilboes to be allowed to export all its gold directly and also retain all their earnings and also another discussion to deal with guaranteed power supply to the mine.

However, Learmonth said he was optimistic as talks were progressing well with authorities.

He said the transaction will be finished before year end.

The transaction is subject to the condition that Bilboes will be able to export all its gold directly.

Learmonth said they had a “very constructive conversation” with the government and Reserve Bank of Zimbabwe.

“It’s looking very encouraging and also we need to confirm the access to electricity so we are looking for a power purchase agreement from a supplier in Zimbabwe and a supplier outside Zimbabwe. We need confidence that power can be wheeled to the Zimbabwe grid to the project,” he said, adding they had a constructive conversation with the Ministry of Energy.

“So, I’m highly optimistic of getting those conditions precedent and get this transaction finished before the end of the year,” Learmonth said.

Bilboes is a large, high grade gold deposit.

Historically, it has been subject to a limited amount of open pit mining with mineral reserves of 1.96m ounce of gold.

This became Caledonia’s third acquisition in Zimbabwe following that of Blanket Mine and Maligreen.


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