Caledonia Mining Corporation Plc (LON:CMCL) has announced that it has entered into an option agreement which gives the Company the exclusive right to explore and subsequently, if exploration is successful and at its sole discretion, acquire the mining claims over the area known as Glen Hume, a property situated in the Gweru mining district in the Zimbabwe Midlands that has historically produced significant quantities of gold.
Caledonia believes that Glen Hume offers significant exploration potential. The agreement covers an area of approximately 350 hectares with substantial evidence of gold mineralisation including historical mining activity. It has conducted airborne geophysics which indicates attractive exploration targets and has also conducted preliminary metallurgical work indicating favourable grade and recovery. A preliminary contract has been signed with the existing drilling contractor and a drill programme has been put in place.
The company has acquired the right to explore the area for a period of up to 15 months and subsequently, if exploration is successful and at its sole discretion, acquire the mining claims over the area. The total consideration is an initial payment of $2.5 million in cash, followed by a further payment of $2.5 million (payable in cash or shares at the discretion of the vendor) which would be payable should Caledonia decide to exercise its right to acquire the mining claims.
Caledonia Mining Corp has agreed to the payment of a one per cent net smelter royalty to the vendor on gold it produces from the area. The NSR can subsequently be bought out at Caledonia’s discretion for a lump sum payment of $15 million within the first five years following the acquisition by Caledonia of the claims, or $10 million until the tenth anniversary of operation or $5 million thereafter.
Commenting on the announcement, Steve Curtis, Chief Executive Officer, said:
“As we approach the completion of the Central Shaft, our production is expected to increase by 45 per cent to 80,000 ounces by 2022, we also expect to realise a substantial increase in cashflow as a result of increased production, reduced costs per ounce and lower capital expenditure. This gives us the financial and management capacity to take on new opportunities in Zimbabwe and we are pleased to enter into this option agreement which give us the right to explore and subsequently to acquire mining claims over this property.
“This agreement represents the first step towards our goal of increasing our portfolio and becoming a multi-asset gold producer in Zimbabwe, one of the last gold frontiers in Africa.”