‘We are not scared of Zim’
Zimbabwe-focused gold junior Caledonia Mining Corporation is looking at opportunities to expand its investment in the country, where it currently runs a 50 000-ounce per year mine, despite the country’s treacherous political and economic terrain.
Canada-listed Caledonia owns 49 percent of Blanket mine in Gwanda, making it one of two foreign-listed companies to fully comply with Zimbabwe’s indigenisation requirement of 51 percent local ownership. The local ownership policy has created uncertainty among foreign investors in Zimbabwe.
The government’s National Indigenisation and Economic Empowerment Fund owns 16 percent of the mine, while a consortium led by former Reserve Bank of Zimbabwe deputy-governor, Nicholas Ncube, who chairs the Blanket board, owns 15 percent.
Staff and a community share ownership scheme owns 10 percent each.
Caledonia produced 12 794 ounces of gold in the first quarter to March 2017, an 18 percent increase on the same period of last year, driving quarterly net profit 331 percent up to US$2,34 million over the corresponding period of 2016. The firm expects Blanket output to be between 52 000 and 57 000 ounces in 2017.
Speaking at an interactive event with investors hosted by the United Kingdom’s digital investment magazine Shares, Caledonia vice president Maurice Mason said his single-asset company was scouting for more opportunities in Zimbabwe.
“We are not scared of Zimbabwe. So yes, we are looking actively in the country,” Mason said when asked if Caledonia was looking for other investment opportunities in the country.
He revealed that Caledonia had, in 2016, spent a considerable amount of money evaluating a privately-owned asset in Zimbabwe, before eventually walking away for reasons he did not specify.
“We have our own exploration ground surrounding the mine, which we could explore, and we have a mill at Blanket. Assets are cheap in Zimbabwe, the place is under-capitalised. It has not been adequately invested in,” Mason added.
“So, as a place to invest our cash, we actually do like the place geologically. We think it it’s under-invested and under-explored.”
Mason said while Caledonia could possibly explore the option of investing in some capital-starved mines in Zimbabwe, the company also had scope to go into greenfield projects. Caledonia’s cash position, US$12 million at the end of the first quarter, puts it in a healthy position to acquire existing assets or develop new ones.
“Finding new capital for Zimbabwe is difficult right now. People do not want to take a dollar outside the country and invest it in the country,” Mason said.
“We have got this goose that is laying the golden eggs in the country. We can look to deploy some of those funds more effectively than, potentially, an external investor would be able to put money in.”
Caledonia is 60 percent through its US$26 million investment to ramp up production at Blanket to 80 000 ounces per year by 2021.
Toronto-listed Caledonia is seeking a listing on the New York Stock Exchange in a bid to increase trading liquidity as well as to access a larger pool of US investors. Shareholders will deliberate on the proposal, which includes a share consolidation, on June 19.
Caledonia purchased Blanket mine from Kinross Gold in 2007 and employs 1 200 workers.
South African fund manager, Allan Gray, owns 16 percent of Caledonia. Financial Gazette
