Listed gold miner Caledonia Mining has signed an agreement to buy Bilboes Gold, the parent company which owns, through its Zimbabwe subsidiary Bilboes Holdings, the Bilboes gold project.
This will be for a total consideration of about 5.1-million Caledonia shares, representing about 28.5% of Caledonia’s fully diluted equity, and a 1% net smelter royalty (NSR) on the project’s revenues.
Based on the July 20 closing share price on NYSE American of $10.40 apiece, the value of the new shares that will be issued as consideration is currently about $53.3-million. Completion of the transaction is subject to several conditions.
Bilboes is a large, high-grade gold deposit located about 75 km north of Bulawayo.
Historically, it has been subject to a limited amount of openpit mining.
The project has National Instrument (NI) 43-101-compliant proven and probable mineral reserves of 1.96-million ounces of gold at a grade of 2.29 g/t and measured and indicated mineral resources of 2.56-million ounces of gold at a grade of 2.26 g/t and inferred mineral resources of 577 000 oz of gold at a grade of 1.89 g/t.
The project has produced about 288 000 oz of gold since 1989.
A feasibility study prepared by the vendors indicates the potential for an openpit gold mine producing an average of 168 000 oz/y of gold over a ten-year life-of-mine.
Caledonia says it will conduct its own feasibility study to identify the most judicious way to commercialise the project to optimise shareholder returns.
One approach that will be considered is a phased development which the company posits would minimise the initial capital investment and reduce the need for third-party funding.
Prior to completion of the transaction, Caledonia will enter a tribute arrangement with Bilboes Holdings so that oxide operations can be restarted with the expectation that Bilboes Holdings will return to profitable operations within six months.
This also has the benefit of an element of pre-stripping for the main development of the project, Caledonia points out.
“We are delighted to have signed an agreement for the purchase of Bilboes, the premier gold development project in Zimbabwe, and indeed one of the best gold development projects in Africa.
“This is a transformational asset for Caledonia, as we embark on the next step in our journey to become a multi-asset, midtier gold producer,” says CEO Mark Learmonth.
He notes that, once in full production, which will be subject to financing of the capital expenditure, Caledonia’s management believes Bilboes can produce three times the company’s current 64% attributable share of gold production from the Blanket mine in Zimbabwe, resulting in production from the enlarged Caledonia group being potentially four times its current size.
“The acquisition of Bilboes will build on the recent acquisition of the Maligreen claims, which host NI 43-101-compliant inferred mineral resources of 940 000 oz of gold in 15.6-million tonnes at a grade of 1.88 g/t. We continue our work at Maligreen, which is focused on increasing the confidence level of the resource base.
“We have followed the progress of Bilboes for several years and today’s announcement marks the culmination of many years of hard work on the part of both the Caledonia and Bilboes management teams,” Learmonth says.