Caledonia sinks US$60m into Gwanda project

CALEDONIA Mining Corporation Plc (Caledonia) has spent about US$60 million developing the Central Shaft project, which is due to be commissioned during the first quarter of next year.

In a statement released this week, the resources outfit, which operates Blanket Gold Mine in Gwanda, said it had fully equipped the landmark shaft from base to the surface collar, and is on track to bring it online as planned.

The firm said work so far completed was considerably below budget.

Central Shaft's completion is key to the firm's ambition to ramp up output to 80 000 ounces of gold a year by 2022.

Chief executive officer Steve Curtis said by completing the equipping phase of the project, Caledonia had achieved key milestones that "no-one should underestimate".

"The last five years have been a tremendous team effort and we commend our employees for their hard work and their commitment to safety," Curtis said in a market update.

"Shaft sinking is widely regarded as one of the most dangerous activities in mining and I am proud to report that over more than five years the crew achieved 1 850 fatality free shifts to date with only two LTI (lost time injury) and achieving more than one million LTI free man hours worked since the last LTI," he said.

"We have invested approximately US$60 million in this project since we first announced it in 2015 and it has been ownerbuilt and fully funded through internal cash flow and has been completed at a cost that is well below initial quotes received."

Central Shaft represents one of the most recent largest gold mining investment projects in Zimbabwe, and is seen as a game changer to Caledonia's Zimbabwean interests.

He said the firm's target production was to increase output by 45% to 80 000 ounces by 2022, while long-term all-in sustaining costs will significantly drop.

"Central Shaft will also position us to step-up our deep level exploration which, if successful, may extend Blanket's life of mine, which is currently to 2034," he said.

The Caledonia boss said over the last five years the firm had built a solid foundation for the future, with a healthy balance sheet and a highly cash generative asset with free cash flow expected to increase in tandem with rising output.

"This is a very exciting time for Caledonia," he said.

Bloomberg reports that Caledonia is interested in buying Bilboes, one of Zimbabwe's largest gold operations as it embarks on an aggressive plan to acquire more assets in the country.

Bilboes CEO Victor Gapare told the Zimbabwe Independent last month that his company was looking for investors but was not holding talks with Caledonia.

"Every gold mine in Zimbabwe, without exception, is looking for money and it's not a secret.

"Yes, we were on the market, but there is absolutely nothing in us talking to Caledonia," he was quoted saying.

Bloomberg said Bilboes' mines can potentially produce more than 200 000 ounces of gold, making it the largest project by output in the country.

Caledonia, which has Cape Town-based fund manager Allan Gray as its biggest shareholder, would be able to return the mines to full production within a short period, Bloomberg reported.