Blanket Mine boosts Caledonia expansion plans

Published: 21 June 2015

London-listed Caledonia Mining Corporation Limited (Caledonia)'s expansion plans have been given a boost by an increase and upgrade in the gold resource at its Zimbabwean Blanket Mine (Blanket).

This comes after an extensive drilling programme has been able to move 491 000 ounces of gold into the higher confidence indicated resource category from inferred.

Caledonia chief executive Steve Curtis said the upgrade reflected an increased focus on resource development at Blanket.

"The rate of exploration drilling has increased and will increase further when the new drill machines, which have already been ordered, are delivered and commissioned," he said.

An additional 47 000 of 'indicated inventory' has also been identified. In all, it now has just under 3,5 million tonnes of reserves and indicated resource.

This represents a 20,5 percent increase in contained gold compared with the last figure released late last year, which formed the basis for the company's plans to double production over the next three years.

At that point only 55 percent was measured and indicated. After the upgrade, the resources split has improved to 62 percent in the higher confidence categories.

In November last year Caledonia said it intended to double production at its Blanket Mine after a strategic review indicated expansion of the mine was the best use of its funds.

The gold producer was considering growing outside of Zimbabwe, but the review concluded the best potential returns lay with exploiting the additional resources at the mine, which is 49 percent owned and operated by Caledonia.

The Canada-based miner early this month saw production at Blanket dipping to 9 960 ounces in the three months to March compared to 10 241 ounces in the comparable period.

Sales were also down to 10 773 ounces in the quarter to March against 12 210 in the prior period at a price of $1 200, which alongside a rise in cash costs meant net profits fell to $1,6 million from $2,4 million.

Cash generated dropped to $3,4 million from $6,2 million, but this was still a strong result according to the company.

Curtis noted that work was currently underway on four shafts at Blanket including a new central shaft.

A new Tramming Loop is scheduled for completion three weeks early and the 6 Winze project remains on target to start production build-up in January 2016.

"On-mine cost control remains good and we have initiated measures to reduce the level of general and administrative costs. As production begins to increase from the first quarter of 2016, I expect that average costs per ounce will start to fall," added Curtis

Caledonia expects production at Blanket to increase to around 80 000 ounces annually once the expansion work in completed.
- dailynews