Caledonia Mining to triple its gold output
Caledonia Mining Corporation expects to triple its gold output following the development of Bilboes, a gold asset it acquired last year.
The company has chosen a single-phase development strategy for this new project, a decision that represents a significant shift from its initial plan to develop the project in stages.
Caledonia purchased Bilboes for US$65.7 million in an all-share deal in January 2023. After evaluating various development options, the company has now committed to a single-phase approach, necessitating a new feasibility study expected to be completed early next year.
“The preliminary economic assessment 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,” said CEO Mark Learmonth. Caledonia’s current mine, Blanket in Gwanda, produced 75,416 ounces of gold in 2023 and is projected to produce 78,000 ounces this year.
Learmonth added, “The Board’s decision to proceed with the single-phase development option for Bilboes represents a key strategic milestone in our journey to becoming a multi-asset, mid-tier gold producer.”
To bring Bilboes into production, Caledonia will need to raise up to US$309 million, with a substantial portion expected to come from debt financing. The company has been in discussions with development banks in Africa to secure the necessary funding. Analysts predict that Caledonia will also leverage equity to raise additional capital.
“We estimate Bilboes will be able to support approximately US$200 million in debt, and Caledonia will need to finance an additional US$100 million through equity, either at the project level or the Caledonia level, once the risk factor on Bilboes is reduced,” stated London-based investment advisory firm Cavendish.
Caledonia projects that the new mine will produce 1.5 million ounces of gold over an initial 10-year mine life, with a production cost of US$968 per ounce. The payback period is anticipated to be just 1.9 years at a gold price of US$1,884 per ounce. Currently, gold is trading at US$2,331 per ounce, up 12.5% since the start of the year.
This development marks a significant step for Caledonia Mining as it aims to enhance its production capacity and solidify its position as a leading mid-tier gold producer.
