REG - Caledonia Mining Crp - Bilboes Preliminary Economic Assessment

Caledonia MiningAnnouncement

03/06/2024 07:00

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RNS Number : 7494Q  Caledonia Mining Corporation PLC  03 June 2024

Caledonia Mining Corporation Plc

Caledonia to file preliminary economic assessment on chosen approach to
develop the Bilboes sulphide gold project

 

(NYSE AMERICAN: CMCL; AIM: CMCL; VFEX: CMCL)

 

St Helier, June 3, 2024 - Caledonia Mining Corporation Plc ("Caledonia" or the
"Company") is pleased to announce that the Company will shortly be filing a
preliminary economic assessment in accordance with Canada's National
Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101")
on SEDAR+ (the "PEA") for a single-phase development of the Bilboes sulphide
gold project (the "Project"). A copy of the PEA, which is entitled "Bilboes
Gold Project Preliminary Economic Assessment" with effective date May 30, 2024
prepared by DRA Projects (Pty) Ltd ("DRA"), and reflecting the summary
information contained in this announcement, will also be available on the
Company's website at www.caledoniamining.com/investors/technical-reports/
(https://www.caledoniamining.com/investors/technical-reports/) . All dollar
figures are in U.S. dollars unless otherwise noted.

 

The PEA reflects the work that has been done by Caledonia and its consultants
over the period since the Project was acquired by Caledonia in January 2023.
This work focussed on updating the feasibility study in respect of the Project
that was prepared by DRA on behalf of the previous owners of the project and
which had an effective date of December 15, 2021 (the "Former Feasibility
Study"); the work also considered alternative development options for the
Project, which included multi-phase development and changes to certain aspects
of the Project.  The main change to the Project development plan that has
been made 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.  The work that has been carried out to date in respect of the revised
approach to the TSF is to the level of a preliminary economic assessment and
not to the level of a feasibility study.  Due to the significance of the TSF
to the overall Project, the entire body of work that has been completed to
date is therefore at the level of confidence of a preliminary economic
assessment.  Over the course of the next 9 months, the Company intends to
upgrade the confidence level of the study in respect of the TSF so that the
entire body of work on the Project may be classified as a feasibility study
which will be published in due course.

 

The PEA therefore supersedes the Former Feasibility Study.

 

Highlights of the PEA

 

The publication of the PEA will follow the Company's decision to advance the
Project to the execution stage in a single-phase development instead of
multiple phases. This decision followed an evaluation of different development
options, revealing that the single-phase approach is expected to yield
superior returns.

 

 ·   Publication of PEA for a single-phase development of the Project.
 ·   Single-phase development is expected to provide improved cash generation
     allowing for a lower cost of capital due to enhanced debt financing capacity
     than phased development alternatives.
 ·   Project to yield approximately 1.5 million ounces of gold (based on measured
     and indicated mineral resources) over an initial 10-year life of mine at an
     all-in sustaining cost of $968 per ounce.  See below for mineral resource
     table. (Note that mineral resources are not mineral reserves and have no
     demonstrated economic viability.)
 ·   Payback period of 1.9 years at a gold price of $1,884 per ounce.
 ·   New single-phase feasibility study commissioned (the "New Feasibility Study")
     that is expected to be delivered during the first half of 2025.
 ·   Funding solutions being progressed in tandem with work on the New Feasibility
     Study.

 

Summary of the revisions made to the single-phase development plan

 

The Company incorporated several material revisions to the original
single-phase development plan (as set out in the Former Feasibility Study)
which include:

 

 ·   Revised designs for the TSF to incorporate a modular construction approach and
     reduce upfront capital.
 ·   Revised pit designs to reduce upfront capital.
 ·   A review of the cost of the process plant and infrastructure, in particular
     sourcing major equipment and steelwork from alternative suppliers to reduce
     costs.
 ·   Reassessing the phasing of the mine village establishment.
 ·   A review of the operating expenses and general and administrative expenses
     with the availability of shared resources now that the Project is part of the
     Caledonia group.

 

The results of the evaluation confirmed that the single-phase development
option, that incorporates rephased capital spending, revised costs and applies
updated gold prices is expected to offer more appealing returns than
multi-phased development options. This approach is also anticipated to
generate cash returns capable of accommodating a lower cost of capital due to
an increased debt capacity compared to the multi-phase development options.
The Company expects that the single-phase development option will optimise
capital allocation and maximise the NPV of the Project compared to the
multi-phase development options.

 

Further work is required on the selected single-phase development option to
elevate the confidence level of the PEA towards the New Feasibility Study. DRA
has indicated that this work is expected to be completed in the first half of
2025. The main focus of this work relates to the TSF, which is effectively a
new undertaking due to the modular construction approach.

 

The Company believes that a significant proportion of the funding requirement
for the single-phase development option may be provided by one or more
lenders. The Company will work with its appointed debt adviser to secure an
acceptable debt funding package in parallel with the process of preparing the
New Feasibility Study.

 

Summary of economic outcomes in the PEA*:

 

 Total production (m.oz)         1.518
 Life of mine (years)            10
 Total capital cost ($'m)        403
 Peak funding ($'m)              309
 NPV (10%) ($'m)                 309
 IRR (%)                         34
 AISC ($/oz)                     968
 Payback (undiscounted) (years)  1.9

 

 *Outcomes calculated at a gold price of $1,884/oz

 

 

Summary of mineral resource estimate in the PEA*:

 

 Base Case Mineral Resources (0.9 g/t Au) Reference Point: in Situ (31 December
 2023)
         Classification                Tonnage (Mt)  Au (g/t)  Metal (kg)  Ounces (koz)
 Totals  Total Measured                6.128         2.51      15,382      495
         Total Indicated               27.522        2.26      61,446      1,976
         Total Measured and Indicated  33.650        2.30      76,828      2,470
         Total Inferred                9.118         1.99      17,406      560

*based on a 0.9g/t Au Cut-Off Grade

·    CIM definitions (May 10, 2014) observed for classification of mineral
resources.

·    Mineral resources are in situ.

·    Block bulk density interpolated from specific gravity measurements
taken from core samples.

·    Resources are constrained by a Lerchs-Grossman (LG) optimized pit
shell using Whittle software.

·    Mineral resources are not mineral reserves and have no demonstrated
economic viability. The estimate of mineral resources may be materially
affected by mining, processing, metallurgical, infrastructure, economic,
marketing, legal, environmental, social, and governmental factors (Modifying
Factors).

·      The results of the PEA are preliminary in nature and include
inferred mineral resources that are considered too speculative geologically to
have the economic considerations applied to them that would enable them to be
categorized as mineral reserves, and there is no certainty that the PEA will
be realized.  For the risks in realizing the PEA, please refer to those set
out below at "Cautionary Note Concerning Forward-Looking Information".

·    Numbers may not add due to rounding.

·    The mineral resource estimate has been depleted to reflect mining up
to 31 December 2023.

·    Effective Date of mineral resource estimate is 31 December 2023.

 

Inferred mineral resources have not been included in any economic outcomes in
the PEA.

 

No mineral reserves were declared in the PEA.

 

Sensitivity analysis in the PEA (NPV (post tax; $'m)):

 

                     Discount Rate

 306
             15%     12.50%                       10%                          7.50%                     5%
 Gold Price  $1,500               31                           59                         94                        137                       191
             $1,700             116                          157                          206                       267                       342
             $1,884             194                          246                          309                       385                       480
             $2,000             243                          302                          373                       460                       567
             $2,200             327                          398                          484                       588                       717
             $2,400             411                          494                          594                       717                       867
             $2,600             495                          590                          705                       845                    1,016

 

Mark Learmonth, Caledonia's Chief Executive Officer, commented:

 

"The Board's decision to proceed with the single-phase development option for
Bilboes represents a key strategic milestone in our journey to becoming a
multi-asset, mid-tier gold producer. Notwithstanding the general inflationary
increase in operating costs and capital costs over recent years, the PEA
re-confirms that Bilboes is a high-quality mid-scale asset that can generate
attractive economic returns. The PEA also confirms that Bilboes has an
attractive production profile with the potential to almost triple
Caledonia's production capacity to over 200,000 ounces per annum in
combination with production from Blanket Mine.

 

"The peak funding requirement for the Project is expected to be approximately
$309 million, with a sizable proportion funded through debt. The Company and,
in the past, Bilboes' previous owners, have had highly positive engagements
with prospective debt providers and we now propose to re-engage with these
providers in parallel with the process of preparing the New Feasibility
Study.

 

"To date, 2024 production at Blanket has been robust and the Company remains
well positioned to deliver returns to shareholders while expanding our asset
portfolio and growing our production profile. I am very excited by the
opportunity we have to evolve our business, which we believe will generate
significant long term shareholder value.

 

Background

 

Caledonia acquired the Project in January 2023 for 5.12 million consideration
shares (28.5% of Caledonia's fully diluted equity, valued at approximately
$65.7 million at the time) and a 1% net smelter royalty.

 

The main objective was to construct a large, open-pit operation to extract
sulphide mineralisation. The Former Feasibility Study in respect of the
Project was prepared by the previous owners which targeted mine and processing
operations to produce an average of 168,000 ounces of gold per annum over a
10-year life of mine.

 

Caledonia commissioned an update of the Former Feasibility Study for the
sulphide project reflecting the prevailing economic environment for capital
and operating costs and a revised gold price outlook. It aimed to identify the
most judicious way to commercialise the Project to maximise future shareholder
value; this explored the Project potentially being implemented in a single
step or on a phased basis over an extended life of mine and is resulting in
the publication of the PEA which is expected to be converted into the New
Feasibility Study in due course.

 

Investor webinar

 

Investors are invited to a Zoom webinar for management to discuss the PEA and
the proposed development of Bilboes. The details are as follows:

 

When: June 6, 2024 02:00 PM London

 

Topic: Bilboes PEA Investor Call

 

Register in advance for this webinar:

 

https://caledoniamining.zoom.us/webinar/register/WN_VkTijABuRNurc_CYsNQWDg
(https://caledoniamining.zoom.us/webinar/register/WN_VkTijABuRNurc_CYsNQWDg)

 

After registering, you will receive a confirmation email containing
information about joining the webinar.

 

 

Enquiries:

 Caledonia Mining Corporation Plc

 Mark Learmonth                                              Tel: +44 1534 679 800

 Camilla Horsfall                                            Tel: +44 7817 841 793
 Cavendish Capital Markets Limited (Nomad and Joint Broker)

 Adrian Hadden                                               Tel: +44 207 397 1965

 Pearl Kellie                                                Tel: +44 131 220 9775
 Liberum Capital Limited (Joint Broker)

 Scott Mathieson / Matt Hogg                                 Tel: +44 20 3100 2000
 Camarco, Financial PR/ IR (UK)

 Gordon Poole                                                Tel: +44 20 3757 4980

 Julia Tilley

 Elfie Kent
 3PPB (Financial PR, North America)

 Patrick Chidley                                             Tel: +1 917 991 7701

 Paul Durham                                                 Tel: +1 203 940 2538
 Curate Public Relations (Zimbabwe)

 Debra Tatenda                                               Tel: +263 77802131
 IH Securities (Private) Limited (VFEX Sponsor - Zimbabwe)

 Lloyd Mlotshwa                                              Tel: +263 (242) 745 119/33/39

This announcement contains inside information which is disclosed in accordance
with the Market Abuse Regulation (EU) No. 596/2014 ("MAR") as it forms part of
UK domestic law by virtue of the European Union (Withdrawal) Act 2018 and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

 

Cautionary Note Concerning Forward-Looking Information

 

Information and statements contained in this news release that are not
historical facts are forward-looking information or forward-looking statements
(collectively, "forward-looking information") within the meaning of applicable
securities legislation that involve risks and uncertainties relating, but not
limited, to Caledonia's current expectations, intentions, plans, and
beliefs.  Forward-looking information can often be identified by
forward-looking words such as "anticipate", "believe", "expect", "goal",
"plan", "target", "intend", "estimate", "could", "should", "may" and "will" or
the negative of these terms or similar words suggesting future outcomes, or
other expectations, beliefs, plans, objectives, assumptions, intentions or
statements about future events or performance. Examples of forward-looking
information in this news release include: the willingness of lenders and
availability of funding to construct the Bilboes project and the generation of
a new feasibility study for the project, the planned development of the
Bilboes project, including with respect to the cost of development and
production, project economics, gold price assumptions, potential
mineralization, projected ore grades, expectations regarding the mine plan,
sustaining capital and value of operations and other statements, shareholder
returns, expanding our asset portfolio and information that is based on
forecasts and projections of future operational, geological or financial or
market results, estimates of amounts not yet determinable and assumptions of
management.  This forward-looking information is based, in part, on
assumptions and factors that may change or prove to be incorrect, thus causing
actual results, performance or achievements to be materially different from
those expressed or implied by forward-looking information.  Such factors and
assumptions include, but are not limited to: failure to establish estimated
resources and reserves, the grade and recovery of ore which is mined varying
from estimates, success of future exploration and drilling programs,
reliability of drilling, sampling and assay data, assumptions regarding the
representativeness of mineralization being inaccurate, success of planned
metallurgical test-work, capital and operating costs varying significantly
from estimates, delays in obtaining or failures to obtain required
governmental, environmental or other project approvals, inflation, changes in
exchange rates, fluctuations in commodity prices, delays in the development of
projects and other factors.

 

Security holders, potential security holders and other prospective investors
should be aware that these statements are subject to known and unknown risks,
uncertainties and other factors that could cause actual results to differ
materially from those suggested by the forward-looking statements.  Such
factors include, but are not limited to: risks relating to estimates of
mineral reserves and mineral resources proving to be inaccurate, fluctuations
in gold price, risks and hazards associated with the business of mineral
exploration, development and mining, risks relating to the credit worthiness
or financial condition of suppliers, refiners and other parties with whom the
Company does business; inadequate insurance, or inability to obtain insurance,
to cover these risks and hazards, employee relations; relationships with and
claims by local communities and indigenous populations; political risk; risks
related to natural disasters, terrorism, civil unrest, public health concerns
(including health epidemics or outbreaks of communicable diseases such as the
coronavirus (COVID-19)); availability and increasing costs associated with
mining inputs and labour; the speculative nature of mineral exploration and
development, including the risks of obtaining or maintaining necessary
licenses and permits, diminishing quantities or grades of mineral reserves as
mining occurs; global financial condition, the actual results of current
exploration activities, changes to conclusions of economic evaluations, and
changes in project parameters to deal with unanticipated economic or other
factors, risks of increased capital and operating costs, environmental, safety
or regulatory risks, expropriation, the Company's title to properties
including ownership thereof, increased competition in the mining industry for
properties, equipment, qualified personnel and their costs, risks relating to
the uncertainty of timing of events including targeted production rate
increase and currency fluctuations.  For a more detailed discussion of such
risks and other factors that may affect the Company's ability to achieve the
expectations set forth in the forward-looking statements contained in this
news release, see the Company's latest Form 20-F Annual Report and
Management's Discussion and Analysis, each under the heading "Risk Factors",
available on the SEDAR website at www.sedar.com (http://www.sedar.com) or on
EDGAR at www..sec.gov (http://www.sec.gov) . The foregoing should be reviewed
in conjunction with the information and risk factors and assumptions found in
this news release.

 

Security holders, potential security holders and other prospective investors
are cautioned not to place undue reliance on forward-looking information.  By
its nature, forward-looking information involves numerous assumptions,
inherent risks and uncertainties, both general and specific, that contribute
to the possibility that the predictions, forecasts, projections and various
future events will not occur.  Caledonia undertakes no obligation to update
publicly or otherwise revise any forward-looking information whether as a
result of new information, future events or other such factors which affect
this information, except as required by law.

 

National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI
43-101") is a rule of the Canadian Securities Administrators which establishes
standards for all public disclosure an issuer makes of scientific and
technical information concerning mineral projects.  Unless otherwise
indicated, all resource estimates referred to in the PEA have been prepared in
accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and
Petroleum Classification System.  These standards differ from the
requirements of the U.S. Securities and Exchange Commission (the "SEC"), and
resource information and economic analysis contained in the PEA may not be
comparable to similar information disclosed by U.S. companies under SEC
standards.

 

This news release has been approved by Mr Craig James Harvey, MGSSA, MAIG,
Caledonia Vice President, Technical Services, the Company's qualified person
as defined in NI 43-101. Mr Sivanesan Subramani (BSc. Hons (Geology),
Pri.Sci.Nat) of Caracle Creek International Consulting MINRES (Pty) Ltd, and
Mr David Alan Thompson (B-Tech, Pr Cert EngSACMA) and Mr Aveshan Naidoo (BSc
Chemical, MBA, PrEng) each of DRA Projects (Pty) Ltd, the qualified persons
responsible for the PEA, have also reviewed and approved this news release and
the scientific and technical data presented herein. Each of the qualified
persons stated above has verified the data disclosed herein, including
sampling, analytical and test data by reviewing the methodologies, results and
all procedures undertaken in a manner consistent with industry practice, and
all matters were consistent and accurate according to their professional
judgement. There were no limitations on the verification process.

GLOSSARY

 

 $'m                                                          Millions of U.S. dollars
 $/oz                                                         U.S. dollars per ounce
 AISC                                                         All in sustaining cost
 Au                                                           Gold
 Caledonia or the Company                                     Caledonia Mining Corporation Plc
 CIM                                                          Canadian Institute of Mining
 DRA                                                          DRA Projects (Pty) Ltd
 Former Feasibility Study                                     Bilboes Gold Project Feasibility Study prepared by DRA with effective date of
                                                              December 15, 2021 and filed by the Company on SEDAR on July 21, 2022
 g/t                                                          Grams per tonne
 IRR                                                          Internal rate of return
 Kg                                                           Kilogram
 koz                                                          Thousand ounces
 m.oz                                                         Million gold ounces
 MAR                                                          Market Abuse Regulation (EU) No. 596/2014
 Mt                                                           Million tonnes
 New Feasibility Study                                        Feasibility study for the Project expected to be delivered during the first
                                                              half of 2025
 NI 43-101                                                    Canada's National Instrument 43-101 - Standards of Disclosure for Mineral
                                                              Projects
 NPV                                                          Net present value
 PEA                                                          Bilboes Gold Project Preliminary Economic Assessment with effective date May
                                                              30, 2024 prepared by DRA
 Project or Bilboes                                           Bilboes sulphide gold project
 SEDAR+                                                       Canada's System for Electronic Document Analysis and Retrieval
 TSF                                                          Tailings storage facility
 U.S. dollars or $                                            United States dollars, the currency of the United States of America

 

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