Caledonia results for the quarter ended March 31, 2023

Caledonia Mining

Caledonia Mining Corporation Plc (NYSE AMERICAN: CMCL; AIM: CMCL; VFEX: CMCL) has announced its latest quarterly report, which includes the newly acquired Bilboes mine.

The report indicates that production at the Blanket mine was below target due to equipment failures and logistical issues but these issues have since been resolved, and production has picked up, exceeding expectations.

The company has confirmed its production guidance of 75,000 to 80,000 ounces of gold per annum for the year to December 31, 2023.

The cost per ounce rose due to the high cost of operations at Bilboes, where production only began in the last week of the quarter, as well as higher on-mine costs at Blanket. However, Caledonia has reduced its grid power costs following the implementation of alternative supply arrangements in April. The company’s 12.2MWac solar plant, commissioned in February, has also contributed to a reduction in diesel consumption at Blanket.

In January, Caledonia announced its purchase of Bilboes, with plans to construct a large, open-pit operation to extract sulphide resources. A revised feasibility study is currently underway to maximize the uplift in value for Caledonia shareholders.

The start-up of the additional, small oxide mining and processing activity at Bilboes was affected by underperforming contractor drill rigs and variations between the realized and anticipated grades. Caledonia is evaluating other target areas for oxide mining, both at Bilboes and next door at Motapa, with a focus on areas where there is a high confidence level in the target mining areas. Caledonia has withdrawn guidance for the oxide mining activity and will report production and costs retrospectively.

Operating Highlights

·    16,141 ounces of gold produced in the Quarter (Q1 2022: 18,515 ounces) of which 16,036 ounces were produced at Blanket and 105 ounces were produced at the Bilboes oxide mine.  Gold produced in the Quarter was lower due to lower mine production at Blanket than anticipated and the slower-than-expected restart of the Bilboes oxide mine.

·    Production at Blanket was lower than expected due to minor mechanical breakdowns and logistical issues which have now been resolved.  The rate of production improved in April with 5,202 ounces of gold being produced in the month (which has 23 scheduled production days due to public holidays and production cut-off), which equates to an annualised production rate of approximately 80,000 ounces per annum.

·    The Company is reviewing the commercial viability of the low margin oxides mining activities, which includes assessing the scope to mine and process oxide material from the recently acquired Motapa property, which is immediately adjacent to Bilboes.   Approximately 217 ounces of gold were produced from the Bilboes oxide mine in April; a further approximately 338 ounces of gold was contained in material that was deposited onto the leach pad in April and is expected to report to production in May.   

·    The 12.2MWac solar plant was fully commissioned on February 2, 2023, and is generating slightly more power than anticipated.

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Mark Learmonth, Chief Executive Officer, commented:

“The first quarter of 2023 presented several operational challenges at Blanket which resulted in lower production and higher costs.  We are confident these issues have been identified and addressed, and we reiterate our production guidance for Blanket of between 75,000 and 80,000 ounces of gold.

“We were pleased to complete the acquisition of Bilboes at the start of the Quarter.  Although the start-up of the Bilboes oxide mining activity was disappointing, this does not detract from the attraction of the main sulphide project.

“The sulphide resource is based on direct drilling results and has been subjected to independent third-party reviews.  Caledonia has commenced work on a revised feasibility study for the sulphide project which will consider updated commercial assumptions and will focus on the most judicious way to commercialise this project with the objective of maximising value for Caledonia shareholders.      

“Following Caledonia’s oversubscribed fundraise in March and April, which raised approximately $16.5m, our balance sheet and operational flexibility have been improved and we are delighted to have new shareholders on our register who believe in our vision, and we hope will support us in the next stage of our growth.”

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