Caledonia closes deal for one of Zimbabwe’s largest gold projects

Caledonia Mining (LSE: CMCL) has added to its portfolio one of Zimbabwe’s biggest gold mining projects after completing the acquisition of Bilboes Gold, owner of the namesake asset, the U.K.-based miner said in a news release Friday.

The shares plus royalty transaction, announced last year, will help the company more than double its annual output, potentially making it Zimbabwe’s top gold miner. 

The Bilboes gold project, a large, high grade gold deposit located about 75 km north of Bulawayo, also makes  Caledonia a multi-asset, mid-tier producer.

According to the latest feasibility study, the asset has the potential for an open-pit gold mine producing an average of 168,000 ounces per year over a 10-year mine life.

Caledonia said it plans to conduct its own feasibility study to determine the “most judicious way” to commercialize the deposit. One approach that will be considered is a phased development, which would minimize the initial capital investment and reduce the need for third party funding, the company said.

Ore production from the Bilboes oxides will start in early February, chief executive officer Mark Learmonth said in the release. Caledonia anticipates beginning to recover gold from the heap leach in March. 

Once the full production rate is achieved, the net smelter royalty would generate around US$2.6 million a year for the company at current gold prices, the miner said.

The total consideration payable for the Bilboes acquisition is 5,123,044 shares representing approximately 28.5% of Caledonia’s fully diluted share capital and a 1% net smelter royalty (NSR) on the project’s revenues, subject to adjustment.

Based on the last trading day’s closing price for Caledonia shares on the NYSE of US$12.82 per share, the value of the maximum number of new shares that could be issued as consideration if there is no adjustment is currently US$65.7 million.