Caledonia Mining Corporation plc (LON:CMCL) Chief Financial Officer Mark Learmonth caught up with DirectorsTalk for an exclusive interview to discuss purchasing the mining claims at the Maligreen project, why it’s such an exciting opportunity, the next steps in the project and looking at other opportunities.
Caledonia Mining is a profitable cash generative gold producer with a strong growth profile, Caledonia’s primary asset is the Blanket Mine in Zimbabwe. Today, the company has announced that it has entered into an agreement to purchase the mining claims over the Maligreen project, a property which is situated in the Zimbabwe Midland. Joining me to discuss the agreement is CFO Mark Learmonth.
Q1: Mark, It all sounds very exciting for the company. Can you just talk to the announcement that you made this morning?
A1: It is actually quite exciting, it’s an asset that we’ve been pursuing for several years now. As you’ve outlined, we’re paying $4 million to buy claims so we’re not buying a dirty companies or people’s liabilities or assets, we’re just buying the claims.
We’ve put ourselves in a position where we’ve been able to re-evaluate some of the quite considerable work that’s been done by previous owners so that we can say we’re spending $4 million of shareholders money to buy 940,000 ounces of inferred resource at a grade of nearly 1.9 grams a tonne. So that’s a meaningful size ore body, even now, and the grade is also quite attractive, 1.9 compares very favourably to the average open pit grid in the world, which I think is less than 1 gram a tonne.
What’s nice is that the bulk of the ore that we’ve identified is shallow enough to make it suitable for open pit mining so it’s a very exciting deal for us, and we’re very pleased that we’ve been able to land it.
Q2: What is it that makes Maligreen such an exciting opportunity?
A2: It’s the grade which is relatively high, it’s the ore body which is relatively shallow and the grade curve means that there’s quite a good deal of flexibility for future mine planning to accommodate a substantially lower gold price that might prevail at the moment.
So, effectively there is a high grade core and a fairly large lower grade area around that, which means that should the gold price fall substantially, we can focus the mining activities on a high-grade area and still make money out of it.
There’s that highly defensive characteristic, it’s got scale, as I say, it’s got grade and also, it’s got upside potential, both the depth and along strike, and in a completely separate area of the claim area that we’re buying up in the north.
So, it ticks all the boxes in terms of, it looks like it’s attractive for a relatively quick production, but also some legs to it both go to deeper extensions and new areas so it ticks all those boxes.
Q3: So, what will be the next steps for the project?
A3: The claims will get transferred so how long that takes, we don’t know, that might take a few weeks, it might take a month or so and we will then start drilling.
The initial objective would be to spend 18 months to two years, and about $1.6 million so that’s not a large amount of money to do what we’d term ‘confirmatory drilling’ to increase our confidence level of the existing resource base with a view to moving towards identifying what sort of mine we could build and then building it as quickly as we can.
So, that would be say 18 months to two years to do the drilling, 18 months to two years to get a mine together and then after that, do further drilling along the extensions and in the new areas with a view to either extending the mine life or even increasing the capacity, the size of any mine that we build.
That’s the plan going forward.
Q4: Are there any other opportunities that Caledonia Mining are looking at, at the moment?
A4: We continue to look for opportunities in Zimbabwe. This asset is one that we’ve really coveted for quite some time, there is one other asset that’s also in that category and hopefully we’ll get our hands on that, which we think is actually even more exciting.
We continue to look at things in Zimbabwe, actually at this stage probably to a lesser extent than stuff outside Zimbabwe so we do continue to look at things very much the same sort of size as what we’re looking at, absolutely.