New York Stock Exchange-listed resources firm, Caledonia Mining Corporation, is planning to expand its gold mining operations in Zimbabwe, undeterred by teething problems currently bedevilling the yellow metal sub-sector in the southern African country, Business Times can report.
Government has forced miners to sell their bullion to Fidelity Printers and Refiners (FPR), the country’s sole buyer of the yellow metal. FPR pays 70% in foreign currency and the remainder in Zimbabwe dollars. FPR has been struggling to pay gold producers partly blaming it on the disruptions caused by the Covid-19 pandemic which saw a ban on flights that would have been used to transport cash.
However, Caledonia, which operates Blanket Mine in Gwanda, Matabeleland South Province, is undeterred and is targeting to acquire more claims in Zimbabwe, including the Glen Hume area in Gweru, in the Midlands Province.
The claim in Gweru covers approximately 350 hectares and is believed to have massive gold deposits.
Currently, Caledonia is undertaking exploration at the Gweru claims.
“Caledonia has acquired the right to explore the area (Glen Hume) for a period of up to 15 months and subsequently, if exploration is successful and at its sole discretion, acquire the mining claims over the area.
The total consideration is an initial payment of US$2.5m in cash, followed by a further payment of US$2.5m (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 chief executive officer Steve Curtis said.
He added: “As we approach the completion of the Central Shaft at Blanket Mine, our production is expected to increase by 45 % to 80,000 ounces 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 and we are pleased to enter into this option agreement which give us the right to explore and subsequently to acquire mining claims over this property.
“This agreement represents the first step towards our goal of increasing our portfolio and becoming a multi-asset gold producer in Zimbabwe, one of the last gold frontiers in Africa.”
Caledonia has so far conducted airborne geophysics which indicates attractive exploration targets and has also conducted preliminary metallurgical work indicating favourable grade and recovery.
A preliminary contract has been signed with the existing drilling contractor and a drill programme has been put in place.
Caledonia has also agreed to the payment of a 1% 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 US$15m within the first five years following the acquisition by Caledonia of the claims, or US$10m until the tenth anniversary of operation or US$5m thereafter.
In October, Caledonia reached an agreement with the Zimbabwe government under which the miner will evaluate mining rights, properties and/or projects in the gold sector that are controlled by government with a view to assessing the potential to advance development on these properties or projects.
Caledonia believes Zimbabwe is a highly prospective region for gold discoveries and it has assessed and continues to assess investment opportunities in the Zimbabwe gold sector that are privately owned.
Since Caledonia purchased Blanket Mine in 2006, it has increased production at the mine from less than 20,000 ounces of gold per annum to about 80,000 ounces per annum.
Blanket Mine has more than doubled its employment from less than 800 in 2006 to a current level of approximately 1,650.