HomeBusinessCaledonia moves to protect Blanket Mine

Caledonia moves to protect Blanket Mine

IN October, resources firm Caledonia Mining Plc, the major shareholder in the southwestern Zimbabwe-based Blanket Mine, signed a memorandum of understanding (MoU) with the government where it undertook to play a big role in helping the country increase mineral output and achieve the targeted US$12 billion mining industry by 2023.

It was a bold undertaking from a firm that operates in an industry that faces a string of headwinds including power and foreign currency shortages.

But as Caledonia CEO Steve Curtis (SC) told our chief business reporter Taurai Mangudhla (TM) in the discussion below, several investments are underway to ramp up output at the operation.

Curtis was loaded with surprises.

More is still on the way, he said, as Caledonia embarks on an aggressive shopping spree, pouncing on more Zimbabwean assets.

Below are excerpts from the interview.

TM: Caledonia has indicated that it is in the market for brownfield gold mines to increase reserves.

What progress have you made so far?

SC: We continue to evaluate opportunities both in the private sector and now we are going to evaluate in the government sector.

But the evaluation is a long process.

(When you see us taking a little bit longer) it’s not that we have stopped or we are not interested.

It’s just that a lot has got to happen in the background when you are not making a lot of noise about it.

So the MoU signing is probably the most significant event that we have done to indicate that we have got a real opportunity to do a partnership. We are in the market and we will continue to do the evaluations.

TM: It is almost year end and I doubt you will meet your target to complete your US$70 million mine shaft expansion project by the end of 2020?

You have sunk US$70 million into a project over five years and it’s not yet bringing return.

SC: We started in 2015 and by the time it is finished we would have spent
US$70 million.

It will kick in next year.

We are only three months late on the initial five-year programme, which under the circumstances is an amazing effort.

So it’s money you were investing for the future because Blanket Mine has got another 15 years of life in the mine as it stands today.

So it’s a very worthwhile investment to be able to go deeper and build a new mine underneath the old mine.

TM: What is the impact of this investment on your mine life, reserves and resources?

SC: Reserves and resources are above 1,8 million ounces.

So it is a very good project that we are talking about here. Now we are ready for the next project.

TM: An infrastructure deficit in respect of power supply has caused headaches for miners to a point you are investing in a 12-megawatt (MW) solar plant.

Unfortunately, the 12MW is merely a third of your demand.

What do you intend to do to solve the erratic power supplies in the long-term?

SC: Yes, it is really a third of the power demand because we are not putting in a battery system with it, that’s very expensive.

Our solar power is really there for daylight hours.

If we get to a stage where we have got additional investment capacity, then we could put in battery backup and that will obviously then basically enable us to mainly run the whole mine 24 hours a day on solar.

This is phase one so 12MW is phase one.

Phase two will take us up to 18MW and then phase three will be (investing in) batteries.

At the moment we have got diesel generators for backup as well.

So we have got that, but it’s expensive and it’s not environmentally friendly.

TM: What is the total cost of the solar project?

SC: (It will cost us) US$12 million to complete the solar project.

TM: You are still using diesel power. Yet your chief finance officer says it costs you like $3 600 per hour. Is this sustainable?

SC: One litre of diesel per second is very huge and it’s very expensive.

It is very expensive; three times the cost of grid and it is not something we want to use on a long-term basis.

It’s not economically viable. Solar is much more economical.

That is why we will have a combination of diesel, grid and solar.

We will try and get the most economical use out of each one of them depending on what’s going on at that time.

This investment is really a strategic defence mechanism to protect Blanket Mine.

We are not there to make money out of it, but to ensure the ability to produce.

TM: Before Covid-19 tore through the world, Caledonia had geared itself to buy out minorities and possibly increase its stake to about 90%.

What is the thinking right now?

SC: We own 64%. We will always keep the staff in (the company) and we will always keep the community in (the company), so at our top end we will go to 80%.

At this stage we are at 64% and that works for us and if the government is interested, we can always have talks and negotiations going forward.

TM: What is the projected cost of increasing your stake to 80%?

SC: We have not done any value calculations. That would be part of the discussions we would have to have for the 16%.

TM: What is the status of these negotiations?

SC: Not actively at the moment.

Covid-19 has really put a stop on a lot of things and I think when we get back to normal we can rekindle those discussions.

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