Caledonia Mining has agreed to buy Bilboes gold mine for US$53 million worth of stock, a deal that could increase Caledonia’s gold output by four times.
Caledonia currently owns Blanket Mine and has stated its ambitions to buy more mines to increase the number of its assets.
The new deal involves Bilboes getting 5,123,044 Caledonia shares, or 28.5% of Caledonia’s fully diluted equity, plus a 1% net smelter royalty on the project’s revenues. Based on Caledonia’s closing share price of US$10.40 per share on the New York Stock Exchange on Wednesday, the value of the stock is US$53,279,658.
“This is a transformational asset for Caledonia, as we embark on the next step in our journey to become a multi-asset, mid-tier gold producer. Once in full production – which will be subject to financing of the capex – Caledonia’s management believes that Bilboes could produce three times our current 64% attributable share of gold production from Blanket, resulting in production from the enlarged Caledonia group being potentially four times its current size,” Caledonia CEO Mark Learmonth says.
Bilboes has proven and probable mineral reserves of 1.96 million ounces of gold at a grade of 2.29 g/t and measured and indicated mineral resources of 2.56 million ounces of gold at a grade of 2.26 g/t. It has inferred mineral resources of 577,000 ounces of gold at a grade of 1.89 g/t. The Project has produced approximately 288,000 ounces of gold since 1989.
Caledonia has an annual production target of between 73,000-80,000 ounces of gold this year.
Caledonia: On condition…
However, regulatory issues may still stand in the way. Caledonia says it will only complete the transaction if Bilboes can get reassurance from the Zimbabwe government that it can export gold directly and to retain 100% of the sale proceeds in US dollars.
Currently, mines must sell 40% of their export earnings to the RBZ at the official rate, which companies say dilutes their value significantly. Companies listed on the Victoria Falls Stock Exchange can keep 100% of their incremental exports, but must still retain only 60% of earnings in US dollars.
Caledonia also wants assurance of constant power supply from ZESA or an independent power producer.
To add to Blanket Mine, Caledonia has been hunting for new assets.
In 2020, Caledonia bought Pan African Mining’s Maligreen gold claims near Gweru. Maligreen is estimated to host an inferred mineral resource of approximately 940,000 ounces of gold. As a plus for Caledonia’s preference for low-cost mining, 76% of the inferred mineral resource there – or about 712,000 ounces – is shallower than 220 metres. This means that there is potential for an open pit mining operation.
Bilboes was once owned and explored by Anglo American before Anglo’s exit from the Zimbabwean gold sector in 2003. The mine, 75km from Bulawayo, is 50% owned by Victor Gapare, a former Anglo executive and former president of the Chamber of Mines. After the transaction, he would become a Caledonia executive director.
The rest of the company is owned by Baker Steel, a London-listed investment trust, and Infinite Treasure, a British Virgin Islands-registered unit of investment fund Shining Capital Holdings.