Two out of the three core elements of Caledonia Mining’s (LON:CMCL, TSE:CAL) plans to improve output at its flagship Blanket gold mine in Zimbabwe are now in place.
First, a so-called “tramming loop”, which will allow for the efficient distribution and transportation of ore underground before it is brought to surface, is now complete.
The impact of this development should be felt almost immediately, and has been reflected in Caledonia’s revised upward projection for production this year to 42,000 ounces of gold.
Second, the shaft known as the “No.6 Winze” has now been sunk. The plan now is to develop the mine laterally towards the two main resource ore bodies.
First production from this source is expected early next year, with the targeted rate of production of 500 tonnes per day expected to be reached in May 2017.
With that work all in hand, the company is now gearing up to sink the big, new Central Shaft.
Much of the necessary equipment is already on site, with the rest on order. The full sink phase is expected to commence in January.
Broker Panmure repeated a 'buy' and its target price is 55p.
It said the market update would serve to "reassure" investors that the investment case behind the broker's positive view on Caledonia remained intact.
"Early completion of the tramming loop in June points to the potential for higher tonnages towards the end of the year, supporting management’s FY production guidance of 42koz."
It reckons the investment plan remained internally funded at a gold price above $960 per ounce.
"With positive cash generation a consistent feature at Caledonia. We believe that Caledonia, through its internally funded $70m investment plan for Blanket, will significantly enhance returns for shareholders through both the doubling of production and a reduction to an already impressive cost base."
Shares were unchanged at 40p.