Caledonia Mining planning extension of Blanket central shaft

Following its announcement of an updated resource statement on 2 November, Caledonia Mining Corporation announced on Friday that it plans to extend the depth of the central shaft at its 49% subsidiary, the Blanket Mine in Zimbabwe.

The AIM-traded company said the central shaft - which was currently under construction - would be extended by a further 250 metres to a shaft bottom depth of 1,330 metres, and fully commissioned by the end of the first quarter of 2020.

It said the extension of the central shaft would add two further production levels on the 34 and 38 levels, in addition to the two levels that were already planned at the 26 and 30 levels.

The extension and associated capital development of additional production levels would cost approximately $18m, which would be funded by Blanket's internal cash generation.

Caledonia said the additional capital investment was not expected to have “any effect” on the continuation of Caledonia's existing dividend.

A preliminary economic assessment (PEA) indicated a project net present value over the life of mine of $193m based on a gold price of $1,260 per ounce, and a 10% discount rate.

The addition of two further production levels would provide access to the indicated and inferred resources below 30 level, the board explained, and potentially increase Blanket's projected life of mine by a further four years to 2031.

Caledonia’s board said the indicated resource below 30 level of 37,000 ounces, as a standalone project, justified the investment of $18m for the shaft deepening and the additional two production levels.

Total production from measured and indicated resources over the life of the mine were expected to be approximately 420,000 ounces, and production from inferred resources was expected to be approximately 550,000 to 600,000 ounces between 2018 and 2031.

The company said it expected that its long term all-in sustaining cost guidance was expected to remain in the range of $700 to $800 per ounce.

It said the extension of the central shaft before it has been completed, equipped and commissioned was understood to be “significantly” cheaper, quicker and less disruptive than a subsequent extension after commissioning.

Caledonia also initiated a mid-shaft loading system at Blanket using the existing central shaft infrastructure to handle development waste.

That was expected to improve Blanket's waste handling capacity and alleviate pressure on the Number 4 shaft, which it added should have a positive effect on both production flexibility and horizontal development.

“We are very pleased that the long track record of sustained resource growth at Blanket, particularly the continued discovery of resources at depth with good grade continuity, supports an extension of the central shaft project at Blanket,” said Caledonia CEO Steve Curtis.

“The central shaft is already a transformational project for our business, and to extend the project an additional 250 metres in depth including development on 34 and 38 levels will potentially secure Blanket's operating future for the next 20 years taking exploration potential into account.”