daniel chigunwe
Business Writer
VICTORIA Falls Stock Exchange Listed (VFEX) Caledonia Mining Corporation says it will soon be filling a Preliminary Economic Assessment (PEA) in line with Canada’s National Instrument 43 -101 – standards of disclosure for mineral projects for a single-phased development of Bilboes’ Gold Limited Project in Matabeleland North.
PEA is the first comprehensive economic evaluation of a mining exploration project. It provides crucial insights into a project’s potential economic viability and associated risks, thereby informing investment decisions.
As such, Caledonia’s PEA reflects the work that has been done by its consultants over the period since Bilboes was acquired by Caledonia.
Caledonia acquired Bilboes’ Gold Limited Project assets in January 2023 for US$53,3 million from businessman Victor Gapare.
According to Caledonia, the main change to the project development plan relates to the proposed construction of the Tailings Storage Facility (“TSF”), which will now be constructed on a modular basis to reduce the initial capital expenditure and therefore improve the economic returns.
The revised approach to the TSF constitutes a “significant change” to the project and requires the preparation of an entirely new technical and economic study.
Bilboes project is expected to yield an estimated 1,5 million ounces of gold based on measured and indicated mineral resources over an initial 10-year life of mine at a sustaining cost of US$968 per ounce.
In an interview with Proactive London, Caledonia Mining Corporation chief executive Mark Learmonth said the results of the evaluation confirmed that the single-phase development option, which incorporates rephased capital spending, revised costs aligned to updated gold prices is expected to offer more appealing returns than multi-phased development options.
“We have been working quite hard to look at various ways to commercialise the property, with quite a simple view, to maximise the uplift in NPV per Caledonia share, taking into account the funding of the project.
“Over the next nine months, the company intends to upgrade the confidence level of the study in respect of the TSF.
“We looked at multiple permutations, single phase, two-step approach, three-step approach and we have now decided to take the single-step approach that gives by far the best uplift for Caledonia shareholders than a multi-phase approach.
“What we are doing over the next six months or so, maybe early next year will be to take the existing body of work that we have done, which is to a PEA level, upgrade that to a feasibility study.
“The key area of work will be to upgrade the work in respect of the tailings facility, which is probably the biggest single capex component. It’s about US$75 million,” said Learmonth.
Learmonth highlighted that the peak funding for the project, which is the same as the NPV is about US$309 million, taking into account the initial capital spending, which is significantly more than Caledonia’s current market capitalisation.
Net present value (NPV) is a financial metric that seeks to capture the total value of an investment opportunity.
The idea behind NPV is to project all of the future cash inflows and outflows associated with an investment, discount all those future cash flows to the present day, and then add them together.
Learmonth said Caledonia had appointed an advisor to help come up with internal ideas regarding debt, and subsequently begin to reach out to debt providers.
“So, we are running the process in parallel, both upgrading the work we have done to a feasibility study and now beginning to engage with debt providers.
“While those two work streams go in parallel, that does not necessarily mean that they come to an end at the same time. Whilst we have got some control over the timing of the feasibility study, we have a lot less control over the speed at which the financiers may progress, but the two are happening broadly in parallel,” he said.
Learmonth said the build phase will likely take two years to complete.
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