Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL, VFEX:CMCL) this week confirmed it will move forward with development of the Bilboes gold project following the release of a comprehensive feasibility study.
The company said the project contains approximately 2.3 million ounces of gold at a grade of over 2g/t, supporting a 10-year mine life with total production of 1.5 million ounces. Initial annual output is expected to reach 200,000 ounces.
Caledonia Mining said it plans to develop the project as a single-phase operation. The company noted this approach would generate stronger financial returns compared to a phased build. Peak capital expenditure is estimated at $484 million, with an additional $100 million allocated for financing-related items.
Using a gold price of $2,500 per ounce, the company reported a net present value of $580 million.
CEO Mark Learmonth joined the Proactive studio to talk us through the plans, and here, we take a closer look at what was said.
Proactive: Mark, good to have you along. Exciting news out from the company that you've made a decision to proceed on the Bilboes gold project. So, obviously, the results of the feasibility study have a lot to do with this. Take us through some of the key highlights that people should understand about the reasoning behind the decision.
Mark Learmonth: Yeah. We published an RNS this morning, and we've also published the full feasibility study — I think it is about 800 pages. Hopefully, the RNS gives a bit of an abbreviation, but it confirms that the project is a large high-grade project with just about 2.3 million ounces at over two grams a tonne, which is excellent for an open-pittable operation.
There's no change to the total production, which remains about 1.5 million ounces over ten years, although we've adjusted the phasing to bring more production forward, improving overall cash flow. In the first full year of production, we’re expecting about 200,000 ounces, which helps enormously.
CapEx has gone up — peak CapEx is now $484 million, plus another $100 million for things like interest. The increase isn't from scope changes but reflects inflation in input prices. However, that’s more than offset by the improved gold price.
Using a gold price of approximately $2,500, the NPV at 8% is just over $580 million. The ungeared IRR is over 32%. The all-in sustaining cost is $1,068 an ounce. So it's clearly a high-margin operation with a very quick payback — 1.7 years. At a higher gold price of $3,600, the NPV increases to $1.2 billion, and the IRR is 70% with a payback of just over a year.
Proactive: I want to pick up on something you talked about — the single-phased development approach you mentioned. Is it purely the economics that drove that decision?
Mark Learmonth: It is. We looked very closely at phased approaches to chop the CapEx into more manageable chunks. But the capital intensity of a smaller project increases — more dollars per ounce. That erodes the returns. So after reviewing and testing options, we decided to go with the big bang, single-phase approach.
Proactive: A lot of people ask about funding. Tell me a bit about the structure and how this is going to work.
Mark Learmonth: Given it’s a high-margin mine with a short payback, we believe senior non-recourse debt will provide most of the funding. The project has high debt capacity, but realistically, lenders may limit themselves to around 65–70% of the project value, which is still significant.
In addition, we’ve got the Blanket Mine, which will make a substantial contribution. As stated in the press release, we’ve entered into a three-year hedging arrangement locking in a minimum gold price of $3,500, which guarantees $200 million in cash flow from Blanket up to Caledonia.
That contributes substantially to the CapEx. And let me be clear: this is done with out-of-the-money put options — so no margin call risks, and we retain full upside participation if gold prices rise.
We’ll also consider hybrid instruments like streams or convertibles, but the goal is to minimise equity dilution. One of the reasons we've delivered strong returns over the past ten years is tight control over dilution. We aim to maintain that. I’m not saying there’ll be no equity dilution — but we’ll keep it tight.
Proactive: Okay. Timeline — what are you looking at?
Mark Learmonth: We’re starting the FEED phase — front-end engineering design — immediately. That takes about six months. Then we want to begin placing orders. There’s a big value uplift in starting this project sooner.
So we’re aiming to place orders for long-lead items in the second half of 2026. To do that, we’ll put short-term liquidity measures in place. Senior debt probably won’t flow until late 2026 or early 2027. Lenders move slowly, so we’re fast-tracking where we can.
We aim to begin construction in H2 2026, with initial production three years later — around late 2028. That’s an aggressive timetable and dependent on senior debt timing, but it’s our goal.
Proactive: Just a couple last questions from me. I imagine there's a lot of talk about this project in Zimbabwe. It's a boon for the economy, provides employment. A lot of eyes on it?
Mark Learmonth: You're right. It’ll be a marquee project in Zimbabwe. Gold production there has increased significantly due to high prices — this year’s output will be about 40 tonnes.
In its first year, Bilboes will add 6.5 tonnes — a significant contribution. It’ll also deliver substantial royalties, taxes, etc. We’re likely to make a fuller presentation early next year to wrap it all up.
But beyond the money, I think a project of this size helps Zimbabwe reclaim its position as a significant investment destination for gold. That’s long overdue.
Proactive: Last question — you mentioned a lot happening over the next three months to three years. What should people watch for?
Mark Learmonth: We’re close to year-end, so don’t expect much more in 2025. Key things to watch for in 2026 are progress on short-term liquidity measures, which will help us move faster.
Also, look for exploration updates — probably in February — at Blanket (both deep and shallow) and at Motapa, where we’re targeting sulphide material that would complement the Bilboes project. Expect that in early 2026.
Proactive: We'll keep an eye on all of that. Mark, thanks so much