Zimpapers Logo

Caledonia Mining plans to invest approximately $70 million at its Zimbabwe gold mining subsidiary Blanket mine in the next five years

Business Reporter
Toronto Stock exchange listed Caledonia Mining plans to invest approximately $70 million at its Zimbabwe gold mining subsidiary Blanket mine in the next five years.

All the capex is to be funded from Blanket’s internal cash flows and existing facilities.

Under the plan $50 million would be invested for the period 2015-2017 while the remaining $20 million will be invested for the period 2018-2020.

The investment will go towards expansion and infrastructural improvements that will allow an efficient and sustainable production build up for the mine.

Caledonia is targeting production of approximately 75 000 ounces of gold per annum by 2021 from inferred resources and additional production of 6 000 ounces of gold in 2021 from proven and probable mineral reserves.

“Caledonia had net cash resources of $25.8 million as at June 30, to be used to provide financial support to Blanket subject to agreement of acceptable terms between Caledonia and Blanket and securing the necessary regulatory approvals,” said the company in a statement.

The group’s Board and management have completed a review of alternative expansion and diversification plans for Caledonia.

The company said the Board and management have addressed the revised production projections for Blanket Mine and the possible benefits of diversifying Caledonia’s production base.

“Caledonia has concluded the best returns on investment at the Blanket Mine in Zimbabwe, which continues to be cash generative in the current market conditions and also offers investment returns that exceed alternative investment opportunities.

“The objectives of the revised plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build up,” said Caledonia.

Infrastructure improvements will include the development of a “Tramming Loop” and the sinking of a new 6 meter diameter central shaft from surface to 1,080 meters.

The increased investment pursuant to the Revised Plan is expected to give rise to production from inferred resources.

Caledonia said the revised plan is expected to improve Blanket’s long term operational efficiency, flexibility and sustainability.

A preliminary economic assessment (“PEA”) has been prepared in respect of the inferred resources which is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be classified as mineral reserves.

Caledonia said there is no certainty that the PEA will be realised.

“The plan, which will be the largest investment undertaken by either the Blanket Mine or Caledonia, will be implemented under the direction of Mr Dana Roets, Caledonia’s chief operating officer, who developed the plan and scope of work.

“Mr Roets will work closely with Mr Caxton Mangezi, Blanket’s General Manager,” said the company.

While at Gold Fields Limited, from 1994 to 2004, Mr Roets successfully implemented the approximately $850 million Oryx Project which comprised sinking production and ventilation shafts from surface to 2,400m below surface and building up production to approximately 500,000 ounces of gold.

Caledonia’s Board has established a committee of directors that will closely monitor progress on implementing the Revised Plan and regular updates will be published in Caledonia’s usual quarterly reporting.

Commenting on the Revised Plan, Caledonia’s president and chief executive Mr Stefan Hayden it is anticipated that the construction of the Central Shaft will substantially improve the Blanket Mine’s operational efficiency and reinforce the beneficial effect of fixed costs being spread across more production ounces.

He said the central shaft will also enhance the Mine’s operational flexibility by reducing its current dependence on a single production shaft and give it the flexibility to continue to explore and develop at depth.

“The revised strategic plan represents a vote of confidence in Zimbabwe as an investment destination. I am pleased to say that Blanket’s indigenous shareholders and the Government of Zimbabwe are both highly supportive of the revised plan. “Implementation of the plan will result in considerable long term benefits to all stakeholders, including Caledonia and Blanket shareholders, Blanket’s current and future employees, the surrounding community and the government of Zimbabwe,” said Mr Hayden.

He said implementation of the plan is expected to create approximately 400 permanent, high-quality jobs in Zimbabwe over the next five years.