Caledonia Mining Corporation Q&A: Enormous potential in the gold space in Zimbabwe


Caledonia Mining Corporation plc (LON:CMCL) Chief Financial Officer Mark Learmonth caught up with DirectorsTalk for an exclusive interview to discuss the acquisition of an option over an exploration prospect in Zimbabwe, the next steps, other opportunities, focussing on Zimbabwe and how it all fits in with the company’s long-term strategy.

Q1: Caledonia Mining has announced that you’ve acquired an option over an exploration prospect in Zimbabwe, can you tell us a little about Glen Hume and what stage the property is at?

A1: We’re treating it as an exploration project, it is actually a very small scale gold operation moment, the existing owner is extracting a very modest amount of gold but that’s not an operation that we would seek to take over. So, we don’t really want to refer to that but it gives us comfort that there is actually gold there because he’s digging it out of the ground.

So, what we’ve done is we’ve entered into an arrangement whereby we’d paid him a $2 million fee, we will then go off and spend about a $1 million over the course of the next 15 months drilling and ,if in the course of that drilling exercise, we find something we like, we have the option to buy the property for a further $2.5 million.

We think it’s very prospective, as I say, there is gold being produced at the moment, we’ve been to the site, we’ve had a look at it, we’ve had some geologists giving it the once over but there’s no substitute for drilling. So, that’s what we’ve started doing now, drilling.

Q2: What will be the next steps then?

A2: Well, the drillers are on site already even though we announced it this morning, there was a contract driller already on the property and we’re repurposing that driller to do what we want them to do. There will, over the course of the ensuing 15 months, hopefully be some updates as the results of the drilling and that should culminate sometime within the next 15 months hopefully announcing exercising the option.

In addition, though, you should look out for further similar transactions on a similar basis so  we’ve said for a long time that we’re in the market in Zimbabwe looking for things just like this.

Having looked at probably two dozen properties over the course of the last few years, we’ve narrowed that down to three or four that we really like, this is the first deal that we’ve announced. I wouldn’t be at all surprised if, in fairly short order, we don’t announce at least one another very similar transaction which gives us the opportunity to start building a pipeline of new projects to help us in our objective of becoming a multi-asset producer focused on Zimbabwe.

So, this is hopefully the first step in a much longer journey.

Q3: Are you still then looking at other opportunities there?

A3: Absolutely. As I say, we’ve looked at two dozen things, we’ve got four we really like, things are progressing, sometimes quickly, sometimes slowly in Zimbabwe, and that’s quite apart from any other assets that may arise as a result of the Memorandum of Understanding that we signed with the Zimbabwe government about two months ago.

So, at the moment we’re focused purely on the private sector opportunities in Zimbabwe but as a result of the MOU was signed with the government, we  do expect to in due course to be able to look at some properties that are owned by the government.

Q4: Are you just focused in Zimbabwe?

A4: At this stage, we are, that’s where we’ve got the infrastructure, that’s where we can do things, that’s where we have the logistics and all that sort of stuff, and happily, it’s where we believe that there’s enormous potential in the gold space.

We think there’s some very, very attractive opportunities there which reflect the fact that for the last several decades, there’s been really very little exploration activity in Zimbabwe which means that the projects that had they been elsewhere would have been snapped up and exploited long, long, long ago in Zimbabwe, they’re still there.  

So, for the time being, we are absolutely focused on Zimbabwe for those two reasons, it’s where we are and is where we think the opportunities are.

Q5: How does this acquisition fit into Caledonia Mining’s long-term strategy?

A5: It’s a core part of the long term strategy.

So, the strategy for the last five years has been to do the central shaft, finish the central shaft which is going to be finished in the next few days and then will be commissioned next year, that’s at Blanket Mine which is in the South of Zimbabwe. Once that’s finished, that will allow us to increase production from the current level of about 55,000-58,000 ounces up to somewhere in the mid-sixties, 60,000 ounces next year and then thereafter from 2022, 80,000 ounces. So that’s been our strategy to date, to get Blanket Mine up to that level of 80,000 ounces and significant improvement in cash generation.

As we get to the end of that project, now our strategy is to look forwards and find new ways of growing the business in Zimbabwe. This is very much part of the strategy, focussed on brownfields exploration projects rather than buying large existing operations which probably bring with them very substantial, immediate requirements for recapitalisations.

So, this is very much core strategy for us, absolutely.

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