Caledonia expects to triple gold output with US$309m Bilboes development plan

Expansion: Construction of Blanket Mine's new tailings dam

Caledonia Mining expects to triple its gold output once it develops Bilboes, the gold asset it acquired last year, after the company decided on a single-phase development strategy for the new project.

The company has been assessing options on how to develop Bilboes, which it bought for US$65.7 in an all-share deal in January 2023. Initially, Caledonia considered developing the project in stages. The company has now decided on a single-phase approach. This means it needs a new feasibility study, which will be completed early next year.

“The (preliminary economic assessment) also confirms that Bilboes has an attractive production profile with the potential to almost triple Caledonia’s production capacity to over 200,000 ounces per annum in combination with production from Blanket Mine,” says CEO Mark Learmonth. Caledonia’s current mine, Blanket in Gwanda, produced 75,416 ounces of gold in 2023 and is expected to produce 78,000 ounces this year.

Says Learmonth: “The Board’s decision to proceed with the single-phase development option for Bilboes represents a key strategic milestone in our journey to becoming a multi-asset, mid-tier gold producer.”

To develop Bilboes, Caledonia will need to raise up to US$309 million. A “sizeable” portion of this will come from debt, according to Learmonth. Previously, the company has said it was speaking with development banks in Africa to help raise the money. Analysts expect Caledonia to also use equity to raise additional capital.

“We estimate Bilboes will be able to support approximately $200m in debt and Caledonia will need to finance an additional $100m through equity, either at the project level or Caledonia level, when the risk factor on Bilboes is reduced,” according to London-based investment advisory, Cavendish.

Caledonia estimates that the new mine will deliver 1.5 million ounces of gold over an initial 10-year life of mine, at a cost of US$968 per ounce. The payback period would be just 1.9 years at a gold price of $1,884 per ounce. Gold is currently trading at $2,331/oz, up 12.5% since the start of the year.

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