Caledonia Mining Corp PLC agreed to buy the Bilboes gold project in Zimbabwe in a 'transformational deal' that it said could lead to a four-fold increase in overall production.
Caledonia will pay Bilboes Gold Ltd, owner of the project, about US$53.3mln (£44.4mln) in shares and a 1% net smelter royalty (NSR) on the project's revenues.
Bilboes is a large, high-grade gold deposit formerly owned and explored by Anglo American PLC (LSE:AAL)’s Zimbabwe subsidiary before its exit from the Zimbabwean gold sector in 2003.
The project has NI43-101 compliant proven and probable mineral reserves of 1.96mln ounces of gold at 2.29 grammes a tonne (g/t), measured and indicated resources of 2.56mln ounces at gold grades of 2.26 g/t, and inferred resources of 577,000 ounces at 1.89 g/t gold.
"We are delighted to have signed an agreement for the purchase of Bilboes, the premier gold development project in Zimbabwe, and indeed one of the best gold development projects in Africa,” said Caledonia chief executive Mark Learmonth.
"This is a transformational asset for Caledonia, as we embark on the next step in our journey to become a multi-asset, mid-tier gold producer.
“Once in full production (which will be subject to financing of the capex) Caledonia's management believes that Bilboes could produce three times our current 64 per cent attributable share of gold production from Blanket, resulting in production from the enlarged Caledonia group being potentially four times its current size.”
The Blanket mine, also in Zimbabwe, is Caledonia's primary asset. It produced a record 20,091 ounces in the quarter to end-June 2022 and is on target to produce between 73,000 and 80,000 ounces in 2022.
The Bilboes project, located about 75 km north of Bulawayo, has produced about 288,000 ounces of gold since 1989.
A feasibility study prepared by the vendors indicates the potential for an open-pit gold mine producing an average of 168,000 ounces per year over a 10-year mine life, Caledonia said, adding that it will conduct its own feasibility study.
Bilboes Gold had a pretax loss of US$1.5mln in the year to end-December 2021 and net assets at end-May 2022 of US$23mln.