The Sunday News
Business Reporter
CANADIAN junior miner Caledonia Mining which owns a 49 percent stake in Gwanda-based Blanket Mine said it will avail $5 million for the expansion of the mine aimed at boosting production, reduce the average cost of production and extend the life of the mine.
In a statement accompanying Caledonia Mining’s third quarter results to September, the company said the provision of the $5 million was necessitated by the continued fall of gold price on the international market.
The company announced a Revised Investment Plan for Blanket Mine last November which entails spending $50 million in the period 2015-2017 and a further $20 million between 2018 and 2020 with an aim to increase annual output from 40 000 ounces to around 80 000oz by 2021.
The funding for the expansion project was budgeted to come from operations at the mine.
However, the company said when the plan was tabled it was expecting gold to fetch a base price of $1 200 per ounce but has now gone down to $1 000.
“The price of gold is lower than the level of $1 200 per ounce which was used as the basis for planning the funding of the Revised Investment Plan at Blanket. Accordingly, to ensure that Blanket retains the financial capacity to implement the Revised Investment Plan, Caledonia intends to provide additional funding of approximately US$5m to Blanket,” the company announced.
It added that the funding will come from Caledonia’s treasury which has deliberately been maintained at a high level to cater for this eventuality.
The company announced that it has, however, started seeing the benefits of the expansion programme which saw a 10 percent increase in the third quarter to September.
Gold production rose to 10 927 ounces in the three months to 30 September compared to 9 890 ounces during the same period last year pushing net profit for the period to $1,7 million.
“The first element of the Revised Investment Plan, the Tramming Loop at the 750 metre level, was completed in June 2015 following which Blanket increased its mining activity to a record level.
The record level of mining activity contributed to the 10 percent increase in gold production compared to Q3 of 2014.
“The next element of the Revised Investment Plan is the No. 6 Winze which will start production in the first quarter of 2016, and will provide access to resources below 750 metres. This will allow Blanket to increase production progressively in 2016 with a full year target for 2016 of 50 000 ounces,” said the company.
On power, the company said, it has been spared load shedding that is experienced across the country after it entered an un-interruptible power supply agreement with Zesa.
Zesa is struggling to provide enough power in the country due to reduced generating capacity at Kariba hydro power station resulting in massive load shedding which has affected many companies.
Besides, the company said even if Zesa cuts power supply to the mine, it has secured 12MW of stand-by diesel generating capacity which is sufficient to allow all mining and processing activities and work at the central shaft to continue if there are any interruptions to the Zesa supply.
“It is expected that the cost of using the generators would be mitigated by a reduction in electricity consumption from Zesa and a reduction in the tariff payable to Zesa.
Accordingly, the effect of running the generators is not expected to have a significant adverse effect on the financial performance of Blanket and Caledonia for 2015.”
