Caledonia Mining is moving towards securing the remaining financing required to develop its US$600 million Bilboes gold project in Zimbabwe, with a US$150 million interim bank facility expected to be concluded as early as October, Mining Zimbabwe can report.
By Ryan Chigoche
The VFEX- and Toronto-listed gold producer said funding arrangements for the project were progressing, with a combination of existing cash, debt and cash flows from its Blanket Mine expected to cover the development programme.
Speaking at the company’s capital markets day in New York, Caledonia chief financial officer Ross Jerrard said the company was in the final stages of due diligence and documentation for the interim facility.
The facility could involve up to eight banks from Zimbabwe and South Africa and would be secured against cash flows from Blanket, providing bridge financing while Caledonia finalises longer-term project finance for Bilboes.
“We are in the final stages … with the facility imminent, and hopefully we will get that closed in October 2026,” Jerrard said.
Caledonia estimates total project expenditure at just under US$600 million once interest and working capital requirements are included.
The company raised US$150 million through a seven-year convertible bond in January, leaving between US$263 million and US$303 million to be sourced through senior debt and other financing arrangements.
The amount still required will depend partly on the gold price and the cash generated by Blanket.
At a gold price of US$3,500 an ounce, Blanket is expected to contribute about US$115 million towards the Bilboes funding requirement. That contribution rises to approximately US$155 million if gold averages US$4,000 an ounce.
Caledonia also has US$172 million in cash.
Jerrard said discussions with regional and international financial institutions on longer-term project financing were already well advanced, with the company targeting completion within six to nine months.
Unlike the interim facility, the longer-term debt will be secured against Bilboes and is expected to replace the bridge financing.
Construction funding
Caledonia has also put in place a hedge covering its share of Blanket’s gold production from January 2026 to December 2028, with a floor price of US$3,500 an ounce.
Jerrard described the arrangement as providing protection for Blanket’s cash generation during the Bilboes construction period while retaining exposure to gold prices above the hedge floor.
The hedge also strengthens the company’s ability to raise debt from banks, he said.
For Caledonia, securing funding early is important because delays could affect the economics of Bilboes, particularly by disrupting procurement of long-lead equipment and the construction schedule.
Executive director Victor Gapare said project execution remained a key risk, although the company had incorporated contingencies into its capital cost estimates and was engaging contractors ahead of construction.
Chief executive Mark Learmonth said procurement was already underway, with more definitive project costs expected by November.
Gapare said the company had subjected the project to extensive analysis before proceeding with its development plans.
Meanwhile, Caledonia is working to improve production and reduce costs at Blanket as the mine continues to provide cash to support the wider growth strategy.
The company said costs had increased as Blanket had become deeper and expanded underground operations. Lower grades and the increasing depth of the mine have also weighed on gold production and pushed unit costs higher.
Caledonia introduced a seven-day shift system in June, which Learmonth said had increased run-of-mine capacity by about 100,000 tonnes a year without requiring additional capital expenditure.
The company has also reduced overtime costs by about 50% between May and June and rebuilt broken-ore stockpiles.
Processing plant upgrades are expected to allow Blanket to handle additional ore and could increase annual gold production by about 8,000 ounces.
Learmonth said management was concentrating on areas within its control, including labour productivity, electricity consumption and the use of consumables.
The measures at Blanket are expected to support cash generation as Caledonia advances the financing and construction programme for Bilboes, one of the company’s key growth projects in Zimbabwe.
