Caledonia adds one of Zimbabwe’s largest gold projects to portfolio

Caledonia Mining (LON: CMCL) has added to its portfolio one of Zimbabwe’s biggest gold mining projects after completing the acquisition of Bilboes Gold, owner of the namesake asset.

The shares plus royalty transaction, announced last year, will help the company achieve its goal of more than doubling annual output, potentially making it Zimbabwe’s top gold miner. 

The Bilboes gold project, a large, high-grade gold deposit located about 75 km (47 miles) north of Bulawayo, also makes of Caledonia Mining a multi-asset, mid-tier producer.

According to the latest feasibility study, the asset has the potential for an open-pit gold mine producing an average of 168,000 ounces per year over a 10-year life of mine.

Caledonia said it plans to conduct its own feasibility study to determine the “most judicious way” to commercialize the deposit. One approach that will be considered is a phased development, which would minimize the initial capital investment and reduce the need for third party funding, the company said.

Ore production from the Bilboes oxides will start in early February, chief executive officer, Mark Learmonth, said in the statement.

Caledonia anticipates beginning to recover gold from the heap leach in March. Once full production rate is achieved, the net smelter royalty would generate around $2.6 million a year for the company at current gold prices, the miner said.

The total consideration payable for the Bilboes acquisition is, subject to adjustment, 5,123,044 shares representing approximately 28.5% of Caledonia’s fully diluted share capital and a 1% net smelter royalty (NSR) on the project’s revenues.

Based on the last trading day’s closing price for Caledonia shares on the NYSE of $12.82 per share, the value of the maximum number of new shares that could be issued as consideration if there is no adjustment is currently $65.7 million.