- The halt is effective October 1 2023
- During the first quarter of 2023, the mine produced 105 ounces and increased production to 1076 during the second quarter.
- The Bilboes Oxides was intended as a small-scale, low-margin, short-term project which was primarily justified by the benefits of pre-stripping in anticipation of the development of the larger sulphide project
Harare- Mining firm, Caledonia Mining Corporation has halted the Bilboes Mine operations as the project is not generating sufficient revenues or cash flows to justify its continuation. The halt is effective October 1 2023.
The corporation completed the acquisition of Bilboes for US$65.7 million, a deal which is capable of positioning it as Zimbabwe’s biggest gold producer and announced last year that it planned to invest US$250 million into developing Bilboes into a new mine, while minimising the initial capital investment and reducing the need for third-party funding.
Gold production at a large scale was initially set for 2025. Ore production from the Bilboes oxides project started in mid-February this year with expectations to recover gold from the heap leach in March. During the first quarter of 2023, the mine produced 105 ounces and increased production to 1076 during the second quarter.
The Bilboes gold deposit in Zimbabwe is a large and high-grade deposit that has been subject to limited open pit mining. It has NI43-101 compliant proven and probable mineral reserves of 1.96 million ounces of gold and additional measured, indicated, and inferred mineral resources. The project has produced approximately 288,000 ounces of gold since 1989 and a feasibility study indicated the potential for an open-pit gold mine producing an average of 168,000 ounces per year over a 10-year life of mine.
NI 43-101 is a Canadian mineral resource classification standard that sets out the requirements and guidelines for public disclosure of technical information related to mineral properties. N143-101 means that the project has been evaluated and assessed in accordance with the NI 43-101 standard, and that it has been determined to have compliant proven and probable mineral reserves of 1.96 million ounces of gold. This indicates that the project has a substantial amount of gold that has been identified and confirmed through various exploration and evaluation methods, and that the company has a reasonable expectation of being able to extract this gold economically.
Bilboes Mine gold projections in 10 years
“The Bilboes Oxides was intended as a small-scale, low-margin, short-term project which was primarily justified by the benefits of pre-stripping in anticipation of the development of the larger sulphide project,” the company’s Chief Executive Officer, Mark Learmonth said in a statement accompanying the Q2 financials.
In the context of mining, small-scale refers to operations that are relatively small in size and output, often with lower production volumes and lower capital requirements than larger mining projects. Low-margin projects are those that generate relatively small profits or returns on investment, often due to factors such as lower commodity prices or higher production costs. Pre-stripping refers to the process of removing overburden and waste materials from a potential mining site in advance of actual mining operations, in order to access the desired minerals or metals more efficiently.
In the case of the Bilboes Oxides project, it was intended as a small-scale operation with relatively low profit margins, and its primary justification was the potential benefits of pre-stripping in anticipation of the development of a larger sulphide project. The project was seen as a means to access gold more efficiently at a lower cost, with the expectation that the larger sulphide project would yield higher profits and returns on investment.
However, the decision to return the Bilboes Oxides project to care and maintenance suggests that the project had not met these expectations, and that the benefits of pre-stripping have not been sufficient to justify its continuation. First of all, the decision signifies proper and up-to-date management. This highlights the importance of careful planning, risk management, and ongoing evaluation in the mining industry, and the need for mining companies to carefully consider the risks and benefits of each project before investing significant resources.
During the period to October 2023, mining and metallurgical processing at the project will continue until the end of September. Thereafter leaching of material that has already been deposited on the leach pad will continue. Oxide mining and processing will resume when the stripping of the waste for the sulphide project commences.
This decision to continue mining and metallurgical processing at the Bilboes Oxides project until the end of September, and to continue leaching of material that has already been deposited on the leach pad, suggests that the company is taking a responsible and sustainable approach to the project's suspension. By continuing to extract value from the project, the company is demonstrating its commitment to sustainability and increasing shareholder value.
The resumption of oxide mining and processing when the stripping of the waste for the sulphide project commences reflect the company's longer-term strategy for the project and its focus on maximising shareholder value. While the Bilboes Oxides project may not be generating sufficient revenues or cash flows to justify its continuation at this time, the company may see potential for future growth and profitability once the larger sulphide project is developed and operational.
What’s next for Bilboes
Production for FY 2023 has already been suspended. However, this will not have a big impact on the company’s going concern as it is not the bigger project it relies on. However, the future of the project remains liquid. The graph above shows that the combined group will have an overall cost profile of well below US$1,000/oz giving investors a substantial margin of safety in the event of lower gold prices. However, increasing costs in later years are as a result of increases in the strip ratio and as a result of ore from the Bubi ore body being processed which is harder and results in higher milling costs.
The larger sulphide project that Caledonia Mining Corporation is planning to develop may help the company to generate higher revenues and profits by accessing higher grade and higher quality ore deposits. Sulphide ore deposits typically contain higher concentrations of valuable metals such as gold, silver, copper, and zinc than oxide ore deposits, which can be more challenging and costly to extract.
By developing the larger sulphide project, Caledonia Mining Corporation may be able to access larger and more profitable ore deposits, which could help to contribute to its overall growth strategy and improve its financial performance. The development of the larger sulphide project may also create additional employment opportunities and economic benefits for local communities in the area.
However, the development of the larger sulphide project will also come with its own set of challenges and risks, such as technical complexity, environmental impact, and social considerations. The company will need to carefully evaluate these risks and take steps to mitigate them, while also engaging with local communities and stakeholders to ensure that the project is developed in a responsible and sustainable manner.
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