Caledonia Mining Corporation PLC's (AIM:CMCL, NYSE-A:CMCL, VFEX:CMCL) decision to proceed with the Bilboes sulphide project marks a major step, so says stockbroker Cavendish, as analyst Yuen Low reacted to Tuesday's news.
The greenlight at Bilboes is supported by a feasibility study that shows a post-tax NPV of US$582 million and an internal rate of return of 32.5%.
The broker highlighted the short 1.70-year payback at a consensus gold price of US$2,548 per ounce, with payback falling to under one year at spot levels.
The feasibility study outlined planned production of 1.55 million ounces over an initial 10.8-year life and an all-in sustaining cost of US$1,061 per ounce from late 2028.
Cavendish said Bilboes would increase Caledonia’s attributable output to about 200,000 ounces per year and reduce medium-term group costs. Capital expenditure is estimated at US$584 million, with peak funding of US$484 million, it noted.
Cavendish added that Caledonia aims to minimise dilution by using mostly non-recourse debt, supplemented by internal cash flow and flexible instruments such as royalties and streams, while maintaining the US$0.14 per share quarterly dividend.
The broker also pointed to potential upside from resource growth and future synergies with the nearby Motapa property, which could improve operating costs and production profiles as work progresses.