NEW York Stock Exchange-listed Caledonia Mining, a profitable cash generative gold producer with a strong growth profile, says that Zimbabwe has not been properly explored using modern exploration techniques and there are huge gold deposits lying untouched across the country.
Caledonia’s primary asset is the Blanket Mine in Zimbabwe which is on track to hit its increased 2020 gold production guidance of between 55,000 – 58,000 ounces. This will increase to 80,000 ounces in 2022.
Blanket Gold Mine is a well-established Zimbabwean gold mine, which operates at a depth of approximately 750 meters below surface and produced approximately 55,000 ounces of gold in 2019.
The Caledonia group’s management team is based in Johannesburg, South Africa, London, United Kingdom and Jersey, Channel Islands.
Caledonia acquired the Blanket Mine from Kinross Gold Corporation with effect from April 2006. Caledonia owns 64% of Blanket with the remaining 36% owned by local Zimbabwean Shareholders.
The Blanket Mine is located in the south-west of Zimbabwe approximately 15 km west of Gwanda, the provincial capital of Matabeleland South. Gwanda is 150 km south east of Bulawayo the country’s second largest city and 196 km northwest of the Beit Bridge Border post with South Africa, and 560 km from Harare, Zimbabwe’s capital city.
Access to the mine is by an all-weather tarred road from Gwanda, which is linked from Beit Bridge to Bulawayo and Harare by a national highway.
Caledonia answered the following three questions regarding its recent acquisition at Gweru-based Glen Hume mine as well as the Zimbabwe investment climate in general.
Q1: Caledonia has announced it has signed an option agreement to explore and acquire Glen Hume. What are your thoughts on this?
A1: Caledonia has long told its shareholders that it is looking at potential acquisitions in Zimbabwe and today we have first evidence of that. The Glen Hume area contains active artisanal workings and has produced from formal mines in the past.
We have long held the opinion that Zimbabwe has not been properly explored using modern exploration techniques and that given the type of mineral deposit, and depth and strike extensions of gold deposits in similar Greenstone belts in the world, that the potential in Zimbabwe is huge.
With Caledonia having already carried out airborne geophysics and with it lining a drilling contractor to get drilling quickly, we expect results soon.
Q2: What can you tell us about the option – do you think it’s good value?
A2: The option cost Caledonia $2.5m (in cash) and will cost another $2.5m (cash or shares) to complete (plus a net smelter return that can be bought back).
If the project is as good as Caledonia thinks it is – and remember the company has been looking all over Zimbabwe for several years – then the purchase price will be small compared to the benefits a second, low-cost producing mine in Zimbabwe will bring to the company – by increasing the production profile and also reducing its risk.
Q3: Does this change how you see the fair value of the company?
A3: Our fair value for the company is based principally on its high profit margin Blanket Gold mine which is expanding to produce over 80koz gold per year. The cash being thrown off from this profitable mine will be used to both increase the dividend to shareholders and also used to grow the company.
With the tremendous projects available in Zimbabwe and the goodwill that Caledonia Mining Corporation has built up in country we see this first step out of the Gwanda Greenstone Belt, where Blanket is located, as an exciting move – and one that we hope will result in Caledonia increasing its scale and the size of its production footprint in country. – Agencies
