Caledonia increases Zim investment, says mine not affected by forex shortage

Caledonia Mine Zimbabwe
“If you believe things will be better in five years’ time, you have to get in now": Caledonia takes long term view on Zimbabwe

Caledonia Mining Corporation is to move ahead with the acquisition of a further 15% of the Blanket gold mine in Zimbabwe from local investment group Femiro.

The terms of the deal were first set out in a memorandum of understanding in August. Caledonia’s purchase of additional shares from its local partner was made possible by the repeal of the indigenisation act, which restricted foreign investors to below 50% of Zimbabwean assets.

In total, the transaction is worth US$16.667mln, and includes the cancellation of an US$11.67mln loan and the issue of just over 725,000 shares at a price of US$7.15, the prevailing price at the time the MoU was agreed.

The company is listed on the Toronto Stock Exchange in Canada and trades on the New York Stock Exchange and in London.

On completion of the transaction, Caledonia will have a 64% shareholding in Blanket and Fremiro will hold 6.42% of Caledonia’s diluted equity. Caledonia plans to invest more into expanding Blanket mine.

Separately, Caledonia on Tuesday moved to reassure investors that the ongoing shortage of foreign exchange in Zimbabwe has not impacted operations at Blanket.

“Caledonia notes recent media reports which refer to certain Zimbabwean gold miners having suspended production due to the lack of foreign exchange to purchase key inputs. Caledonia confirms that, although the availability of foreign exchange in Zimbabwe appears to have reduced in recent weeks, production at the Blanket Mine has continued without interruption. The monetary situation in Zimbabwe is receiving the highest levels of attention from Zimbabwean monetary and government authorities with whom Caledonia are actively and constructively engaged on a regular and ongoing basis.”

RioZim, the country’s number two gold producer, announced last month that it had suspended production at its three gold mines after failing to secure enough foreign currency to pay for inputs. In a memo to Reserve Bank, RioZim sought approval to retain 100% of its export earnings in the interim in order to cover import shortfalls.

Gold producers have warned of widespread mine closures due to worsening foreign currency shortages.