Gold miner Caledonia Mining has entered into an option agreement to secure the exclusive right to explore and, if exploration is successful, at its sole discretion, to acquire the mining claims over the area known as Glen Hume, a property situated in the Gweru mining district, in the Zimbabwe Midlands that has historically produced significant quantities of gold.
Caledonia believes Glen Hume offers significant exploration potential.
The agreement covers an area of about 350 ha with substantial evidence of gold mineralisation including historical mining activity.
In a statement on December 10, Caledonia said it has conducted airborne geophysics, which indicates attractive exploration targets. It has also conducted preliminary metallurgical work indicating favourable grades and recovery.
A preliminary contract has been signed with the existing drilling contractor and a drill programme has been put in place.
Caledonia has acquired the right to explore the area for a period of up to 15 months.
The total consideration is an initial payment of $2.5-million in cash, followed by a further payment of $2.5-million (payable in cash or shares at the discretion of the vendor) which would be payable should Caledonia decide to exercise its right to acquire the mining claims.
Caledonia has agreed to the payment of a 1% net smelter royalty (NSR) to the vendor on gold it produces from the area.
The NSR can subsequently be bought out at Caledonia’s discretion for a lump sum payment of $15-million within the first five years following the acquisition by Caledonia of the claims, or $10-million up to the tenth anniversary of starting operations or $5-million thereafter.
Caledonia CEO Steve Curtis said that, as the company approaches the completion of the Central shaft at its Blanket mine, production is expected to increase by 45% to 80 000 oz by 2022.
“We also expect to realise a substantial increase in cash flow as a result of increased production, reduced costs per ounce and lower capital expenditure. This gives us the financial and management capacity to take on new opportunities in Zimbabwe,” he added. – Mining Weekly