Toronto Stock Exchange (TSX) listed Caledonia Mining Corporation, whose main and only producing asset is Zimbabwe based Blanket Mine, says successful exploration at the gold mine has extended the life of mine (LOM) from six to 14 years.
Gold mining is Zimbabwe’s second biggest export earner after tobacco and national production totalled 33,2 tonnes last year against a stretched target of 32 tonnes from 24,8 tonnes achieved in 2017. Blanket is one of Zimbabwe’s major gold producers.
Caledonia, which achieved its 2018 gold production target at Blanket Mine, said it has announced seven successive increases in the resource base, which has more than doubled the gold mine’s LOM.
The mining group, which saw gold production hit the target of 54 000 ounces in 2018, is targeting between 53 000 ounces and 56 000 ounces this year and expects to reach 80 000 ounces by 2021 when it completes its central shaft drilling project designed to ramp up output.
“Following an increase in exploration activity at Blanket, since early 2015 Caledonia has announced seven successive increases in the resource base as a result of which Blanket’s life of mine has been extended from six years as at the end of 2014, to 14 years as at the end of 2018. Exploration continues at Blanket with the objective of further extending Blanket’s life of mine,” Caledonia said this week.
Until the central shaft has been commissioned in 2021, production at Blanket is expected to remain at broadly the same level as achieved in 2017 and 2018. Caledonia therefore expects to produce between 53 000 and 56 000 ounces in 2019.
Approximately 14 952 ounces of gold were produced during the quarter ended December 31, 2018, 7 per cent higher than the previous quarter. Total gold production for the year to December 31, 2018 was approximately 54 512 ounces, which is in line with 2018 production guidance which was a range of 54 000 to 56 000 ounces
“Blanket finished 2018 with adequate mining and development infrastructure in place to deliver on this target (53 000-56 000oz in 2019) and we have made a good start to 2019,” Caledonia chief executive Steve Curtis said this week.
“Completion of the central shaft is the key to Blanket achieving its planned production of approximately 80 000 ounces of gold per annum from 2021 onwards. I expect that sinking work at central shaft will be completed by mid-year after which we will start to equip the shaft,” Curtis added.
This part of the central shaft project is relatively capital intensive. As such, Caledonia said that it had secured price hedging contracts, which will see the mining group getting a minimum price of US$1 250 per ounce for the next 5 months.
“In light of our significant capital expenditure commitments, we believe it is prudent to take advantage of the recent strengthening of the gold price and we have therefore secured a minimum received gold price of $1 250 per ounce for the 5 months to June 2019 whilst maintaining full upside exposure to the gold price through a cost effective option structure,” Curtis said.
The central shaft project is in the final 18 months of construction and capital investment on this project is projected to be lower in the second half of 2019 and to reduce further in 2020 as it nears completion.