Caledonia may tap equity markets for $403m Bilboes project

Mark Learmonth, CEO, Caledonia Mining

CALEDONIA Mining, the Zimbabwean gold miner, could equity finance up to $100m of its $403m Bilboes project which is forecast to produce 1.5 million ounces over 10 years.

On June 3 the Toronto-listed firm unveiled a preliminary study setting out plans for Bilboes which it first acquired in January 2023. Peak funding is set at $309m with a “sizeable” portion to be finalised with debt, said Caledonia CEO Mark Learmonth.

Liberum Capital analyst Yuen Low said in a report that Caledonia could be expected to raise $330m comprising $231m in project debt and $99m from ‘other sources’ which, for “convenience and conservativeness” it said would be in shares.

“We estimate Bilboes will be able to support approximately $200m in debt and Caledonia will need to finance an additional $100m through equity, either at the project level or Caledonia level, when the risk factor on Bilboes is reduced,” said UK-based investment advisory, Cavendish.

Learmonth said the company was contacting banks to resume funding discussions. There had been some debate as to whether Bilboes would be funded in stages but the preference now is a single project using modular build out of tailings facilities. These critical changes require a new feasibility study to be completed, most likely towards the first half of next year, the company said.

Learmonth said Bilboes had potential to “almost triple Caledonia’s production capacity to over 200,000 ounces a year” in combination with production from its operating mine, Blanket – also in Zimbabwe. Blanket is guided to produce 74,000 to 78,000 oz this year.

“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,” Learmonth said.

Payback on the project is estimated to be 1.9 years at a gold price of $1,884 per ounce. Gold is currently trading at $2,331/oz, a 12.5% increase year-to-date.

The announcement failed to provide any lift to Caledonia’s share price which has been under pressure lately, down 18% year-to-date and some 21% lower over the past 12 months. The company last year undershot production guidance and reported lower profit numbers despite the strong gold price.