TORONTO, ONTARIO — (Marketwire) — 01/09/13 — Caledonia Mining Corporation („Caledonia“ or the „Company“) (TSX: CAL)(OTCQX: CALVF)(AIM: CMCL) provides an update on its strategic objective to increase gold production from current NI 43-101 compliant resources at the Blanket Mine in Zimbabwe („Blanket“) to approximately 76,000 ounces of gold per annum (oz pa) by 2016, a 90% increase on Blanket-s targeted gold production for 2013 of approximately 40,000oz.
As a fully indigenised entity, Blanket can now develop and implement its long term growth strategy. Blanket-s newly re-constituted Board of Directors, which includes representatives of the Indigenous Zimbabwean shareholders, has approved a budget for 2013 and strategic plan which covers the period 2013 to 2017.
Highlights
Surplus Plant Capacity
Since Caledonia purchased Blanket in early 2006, it has ensured, with an eye to the future, that all the numerous plant upgrades it has designed and installed at Blanket, have resulted, not only in a highly efficient operation, but also in substantial surplus capacity in its hoisting and carbon-in-leach („CIL“) circuit. Blanket-s current gold production of approximately 40,000oz pa equates to throughput of 1,000 tonnes per day („tpd“). Blanket currently has hoisting capacity of 3,000tpd and CIL circuit capacity of 3,500tpd. Blanket-s crushing capacity will be increased to 3,000tpd after minor amendments to the crushing circuits; the existing milling capacity of 1,460tpd will be increased to 2,900tpd following the budgeted investment of $850,000 on new rod mills. Accordingly, Blanket will be able to process a substantial amount of additional compatible ore following the planned increases in the capacity of the crushing and milling circuits.
Caledonia has two approaches to accessing additional ore:
(i) exploration and subsequent development at Blanket-s satellite properties, and
(ii) down-dip exploration and development at the Blanket Mine.
Work has already commenced on development projects at Blanket which are expected to progressively give rise to increased annual gold production of 36,000oz pa. The first increase in gold production is expected in early 2014, and the targeted 36,000oz increase is expected to be achieved in 2016.
Additional gold production will also spread Blanket-s fixed costs over more ounces of gold and could mitigate some of the anticipated increased production costs. The most recent quarter ended September 30th 2012 reported cash costs of $508/oz, the lowest level yet recorded at Blanket.
Increase in Production Funded by Internal Cash Flows
The proposed increase in production at Blanket and the exploration and pre-production development of the first three satellite projects will require a capital investment of approximately $4.7 million in addition to the normal planned capital expenditures required to sustain operations at Blanket. The total budgeted and projected sustaining and development capital investment at Blanket from 2013 to 2017 will be approximately $37 million, all of which is expected to be funded from Blanket-s internal cash flows. Subject to the strategic plan projections, including future ore production, the price of gold and operating costs, and the company-s ability to adhere to the implementation timeline, both Blanket and Caledonia expect to continue to pay dividends throughout this period.
Two Part Growth Strategy Comprising:
1. Exploration and Development at Satellite Properties
Blanket holds 18 licenced satellite exploration properties, the furthest of which is 42 km from Blanket-s plant, on which there has been some small-scale historic gold mining activity. Any ore mined from the satellite properties will be crushed and transported to Blanket for processing in Blanket-s metallurgical plant.
Three satellite properties, GG, Mascot and Eagle Vulture, are currently undergoing exploration and underground development work.
GG and Mascot are expected to commence production in Q4 2013 whilst production at Eagle Venture is anticipated to commence in early 2015. The eventual production rate from GG, Mascot and Eagle Vulture and their life-of-mine will be determined once exploration and development work and metallurgical test-work on the mined mineralization has been completed and a resource base has been identified.
Two further satellite properties have been identified for near-term development: Abercorn, which is approximately 20km from Blanket, and Sabiwa, which is adjacent to Blanket but is not connected to Blanket-s underground infrastructure. The combined budgeted investment at Sabiwa and Abercorn in 2013 is $1,269,000; further investment of $4.5 million is projected for the four years 2014 to 2017. No guidance as to future production levels from Sabiwa and Abercorn can be provided until exploration work has been completed.
2. Exploration and Development at Blanket
Exploration and development at Blanket is focused on the following projects:
Further information regarding Caledonia-s exploration activities and operations along with its latest financials and Management Discussion and Analysis may be found at .
Contacts: Caledonia Mining Corporation Mark Learmonth + 27 11 447 2499
Canaccord Genuity Limited Andrew Chubb/Sebastian Jones + 44 20 7523 8000
Newgate Threadneedle Beth Harris/Adam Lloyd +44 20 7653 9850
CHF Investor Relations Jeremy Hill +1 416 868 1079 x 222
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