Oliver Kazunga, Senior Business Reporter
CALEDONIA Mining Corporation will invest $18 million into Blanket Mine in Gwanda this year as part of a drive to boost gold production.
Between 2015 and 2016, the mining corporation invested $36 million into Blanket Mine.
Towards the end of 2014, Caledonia announced an intent to increase its investment to $70 million at its Gwanda-based gold mine in the next five years.
This would boost output by up to 75 000 ounces per annum and create 400 additional jobs by 2021.
In its operating and financial results for the fourth quarter ended December 31, 2016, Caledonia chief executive officer Mr Steve Curtis said the firm continued to progress towards its long-term production target of 80 000 ounces by 2021.
“Caledonia finished 2016 with a strong quarter with Blanket producing 13 591 ounces at an all-in sustaining cost of $843 per ounce, a new quarterly production record for the mine. Full year 2016 production of 50 351 ounces at an all-in sustaining cost of $912 per ounce also represents a new annual production record for Blanket and is an achievement for which all of our staff can be justifiably proud,” he said.
“The total investment in Blanket for 2015 and 2016 exceeds $36 million and a further $18 million is budgeted for 2017. The investment project at Blanket has been a significant logistical, technical and financial undertaking for which we are grateful to have the support of our local partners in the mine and the Zimbabwean authorities.”
Mr Curtis said the mine delivered a production increase of 18 per cent when compared to 2015 production, and achieved a 12 per cent reduction in all-in sustaining cost over the period.
He said their business was further supported by a higher average received gold price of $1 232 per ounce for 2016, an increase of eight percent on the previous year.
“We are pleased to finish the year with a strong balance sheet and a cash position of $14,3 million at year end.
“Our cash position was boosted by the drawdown of a new $3 million term facility in Zimbabwe, which will serve to improve capital efficiency.
“To finish the year with an increased cash balance despite having invested almost $20 million at Blanket and while also returning $3 million to our shareholders in dividends in 2016 is testament to the very strong cash generation potential of the mine,” he said.
The company looks forward to the completion of its central shaft capital investment programme in 2018 after which capital investment is expected to decline significantly.
Mr Curtis acknowledged the constructive engagement they have experienced with various Zimbabwean authorities throughout 2016 in supporting Blanket during a period of significant capital investment.
He said the Government also showed its commitment to the gold sector by introducing several financial incentives to encourage Blanket and other gold producers to increase production.
This, Mr Curtis said, included the royalty rate on incremental production being reduced from five percent to three percent from May 2016, and Blanket receiving an export incentive to the value of 2,5 percent of the value of gold sales.
He said in the long-term, exploration efforts at Blanket produced good results in 2016 with the addition of over 200 000 ounces of new inferred resources at a grade of five grammes per tonne during the year.
In 2017, Caledonia targets production guidance amounting to 60 000 ounces at an AISC of $810-$850 per ounce, reflecting a 19 percent increase in production and between a seven percent and 11 percent decrease in AISC when compared to 2016 as the ramp-up of production at Blanket towards 80 000 ounces by 2021 continues.