Caledonia starts direct sale of gold outside Zimbabwe

MULTI-ASSET gold producer Caledonia Mining Corporation has commenced the direct sale of gold produced from Blanket Mine — its flagship operation — to a refiner outside Zimbabwe, NewsDay Business can report.

Since listing on the Victoria Falls Stock Exchange and following completion of the Bilboes acquisition, Caledonia has been looking into various avenues to achieve direct export of its gold.

In a shareholder update yesterday, the gold miner, however, said unrefined gold continued to be processed at Fidelity Gold Refinery (FGR), a subsidiary of the Reserve Bank of Zimbabwe (RBZ), on a toll-treatment basis, in accordance with requirements of the government of Zimbabwe for in-country refining.

This allows the Zimbabwean authorities' full visibility over the gold produced and exported by Caledonia.

"This arrangement is a big milestone for Caledonia and further demonstrates the pragmatic approach of the Zimbabwean authorities to resolve commercial issues facing gold producers," Caledonia chief executive officer Mark Learmonth said.

"In the 10 years or so during which Blanket Mine has sold its gold in-country (initially to RBZ, and more recently to FGR), we have experienced very few difficulties in receiving payment within the prescribed period; when difficulties have arisen, they have been resolved rapidly.

"This new arrangement should be seen in the context of Caledonia's planned expansion in Zimbabwe, initially at Bilboes and thereafter at Motapa and Maligreen: this new marketing arrangement should make it easier for Caledonia to arrange debt facilities with funders outside Zimbabwe which may be used to support the construction of the new mines."

The exportation of the gold, the company said, was facilitated by FGR as the holder of a gold dealing licence.

The refined gold held by FGR is exported to a refinery outside Zimbabwe; the receiving foreign refinery undertakes the final refining process and the gold is sold on behalf of Caledonia.

Caledonia receives the proceeds of the gold sales directly into its bank account in Zimbabwe within a few days of delivery to the final refinery.

The company said this arrangement, in respect of production from Blanket Mine, complied with the current requirements to pay a 5% royalty and that Blanket continues to receive 75% of its revenue in US dollars and the balance in local currency.

Gold production at Caledonia fell by 13% to 16 036 ounces during the first quarter of this year due to "several individually insignificant" mechanical breakdowns and logistical issues.

Bilboes, one of its assets, commenced production of gold from oxides derived from pre-stripping works in the last few days of the quarter, producing 105 ounces of gold.

Commencement of oxide production at Bilboes, according to Caledonia, has been slower than anticipated, having been adversely affected by inconsistent grades, mechanical breakdowns and the poor availability of spare parts and alternative equipment.

Caledonia is also listed in New York and London.