Zimbabwe once sat at the top table of African gold miners, but years of underinvestment in exploration stole its shine. For some investors, this makes it just the right place to be.
Caledonia Mining Corporation, which runs Blanket Mine, sees Zimbabwe as “the last frontier” where low exploration means there are still more opportunities to strike gold than in more explored markets.
The company says it is currently assessing “relatively large” mines, after narrowing down its search from dozens of potential buys.
“Caledonia has evaluated a large number of assets in Zimbabwe over the past few years, I think we must have looked at 30-40 potential assets; some we like, and some we don’t. We have narrowed this down to approximately four or five assets that we think meet our investment criteria in terms of geological potential and scale,” says FD Mark Learmonth, who takes over as CEO when Steve Curtis retires this June.
Output at Blanket is projected at between 73,000 ounces and 80,000 ounces this year, as the company starts reaping the rewards of the shaft sinking project completed by the mine last year. Blanket produced a record 67,476 ounces in 2021.
But the company is looking to add more mines. Last September, Caledonia bought Pan African Mining’s Maligreen gold claims near Gweru for US$4 million. Maligreen is estimated to host an inferred mineral resource of approximately 940,000 ounces of gold. Caledonia abandoned an option to take over Connemara claims after assessing the resource, but has also looked at some mines held by the Zimbabwe Mining Development Corporation.
Zimbabwe has not invested enough in exploration. The Mining Promotion Corporation, the state agency supposed to lead exploration, has been underfunded. It was allocated ZWL$203.6 million in the 2022 budget. Many miners say it is not enough, given the scale of geological work needed.
According to data from the Ministry of Mines, in 1999, Zimbabwe had over 300 Exclusive Prospecting Orders (EPOs), which allow a company to explore minerals. Last year, Government issued 25 EPOs, the first such issue in years.
This has seen Zimbabwe losing its spot among the continent’s biggest gold producer, but it also means Zimbabwe has more opportunity left.
“Zimbabwe was once the third largest gold producer in Africa, after South Africa and Ghana. Now its position has been taken over by many other markets, such as Tanzania, Mali and others. It’s not because there’s no more gold here, but there just hasn’t been enough exploration,” according to Learmonth. “Zimbabwe is the last frontier, it’s like the El Dorado, and we are right in the middle of it.”
The company plans to remain focused on Zimbabwe and is not looking elsewhere. Says Learmonth: “If we think Zimbabwe has great assets, why would we look elsewhere?”
Under the country’s forex laws, mines keep 60% of their export earnings and must sell the remainder to central bank at the official exchange rate. According to the Chamber of Mines, companies are losing up to 20% of their revenues this way.
What is Caledonia’s view on this retention law?
"We would like 100%, but we can live with it (retention)," Caledonia CEO Curtis says. "It would certainly make Zimbabwe more attractive if payment mechanisms matched the rest of the world."
Listing on the Victoria Falls Exchange has helped soften the impact of these losses for Caledonia. Now, Caledonia gets to keep 100% of incremental export earnings.
“Zimbabwe has its unique needs, and so we understand why certain regulations are in place,” Curtis says. “But all these are always being modified; for example, the move on incremental earnings. If we open a new mine, it will be incremental not only to Blanket Mine, but Caledonia as a whole.”