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Caledonia Mining: A bargain hunter’s dream in Zimbabwe’s mineral rush?

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Caledonia Mining Corporation [LON:CMCL] the Zimbabwe-focussed mining company published its 1Q24 results today (13th May). The AIM-listed miner is also listed in New York and acquired its flagship project, the Blanket Mine, from Canada’s Kinross Gold Corporation [NYSE:KGC] in April 2006. Blanket had been an operating gold mine since 1904 and Kinross had been operating the site since 1993, and since mining operation started Blanket has produced more than one-million ounces of gold.

Zimbabwe has historically been a prolific mining jurisdiction for over a century, boasting commercial deposits of almost 50 industrial minerals, with significant deposits of gold, nickel, copper, coal, diamonds, platinum group minerals and chromite. The country also has Africa’s largest lithium deposits, with predictions that once Zimbabwe starts tapping its lithium reserves, the southern African country could supply up to 20% of the world’s demand should it reach its potential.

However, Zimbabwe has also been a byword for political instability in Africa for the last 40-years, and the country’s internal issues and international marginalisation led to a systematic degradation of what was one of the continent’s best infrastructural systems. Despite acquiring Blanket Mine in 2006, Caledonia was not able to start operations on the site for three years, whilst Zimbabwe’s governmental insecurity played on in the background.

However, come 2010, Caledonia started developing the site in earnest, investing over USD50m to expand the mine and push up production from around 20,000 ounces of gold a year (oz/pa) to 40,000oz/pa with a target of up to 80,000oz/pa from the site.

Indigenous shareholdings

Located in the south-west of Zimbabwe, Caledonia owns 64% of the project, whilst the remaining 36% is owned by indigenous Zimbabwe shareholders. Since 2015 the mine has been operating below 1,200 metres after Caledonia sunk a new shaft, which allowed it to mine in two directions at two sub-750m levels. The new shaft allowed Caledonia to hit to its 80,000oz/pa target from 2022 and extended Blanket’s LOM (life-of-mine).

Caledonia also has a number of other Zimbabwean assets, including the Bilboes gold mine, which Caledonia acquired at the start of last year. Bilboes has probable mineral reserves of 1.96 million ounces of gold (moz) at a grade of 2.29 grammes per tonne (g/t), indicated reserves of 2.55moz at 2.26g/t and inferred reserves of 577,000oz at 1.89g/t. Bilboes has produced 288,000oz since 1989.

Bilboes also has an adjoining exploration play at Motapa, which Caledonia acquired.

The Jersey-based miner also acquired the Maligreen project in the Zimbabwean midlands as an exploration project. Maligreen is another brownfield project that had two previous gold mines on the tenement, and as of 2021 inferred resources of 940,000oz in 15.6mT at a grade of 1.88g/t, with more than three-quarters of the reserve occurring at less than 220 metres from the surface, which would favour open-pit retrieval. Maligreen also has underground potential.

Sadly, due to the Zimbabwe’s post-colonial history, the nation’s infrastructure has degraded, and one of the critical issues in the country is electric power – much of which is imported. To counteract this, Caledonia, built a 12MW solar plant in 2022, at the cost of around USD14m, to support Blanket Mine’s operations. The 12MW plant provides a quarter of Blanket’s total electricity demand. The company is planning on increasing its self-generated capacity.


In the latest results, Caledonia Mining reported gross profit of USD13.8m, up 138% from USD5.8m in 1Q23, on the back of higher gold revenue of USD38.5m and lower production costs. Earnings were USD9.9m, up 330% year-on-year with Blanket Mine contributing USD17.5m.

Caledonia’s cost of production per ounce was USD993/oz, which was more-or-less on par from this time last year, with an all-in sustaining cost of USD1,296/oz, down 8.2% y-o-y, mainly driven by Bilboes, which was a result of the non-recurrent nature of acquisition costs for Bilboes, and the financial savings created by the solar farm.

Zimbabwean dollar devalution

However, Caledonia was affected by the ongoing devaluation of the Zimbabwean dollar, leading to a USD4.1m forex loss. In 1Q23 Caledonia had a USD1.5m forex profit. Net cash was USD4.9m comparing favourably to a USD900,000 outflow y-o-y. The higher operating profit increased the net cash from operating activities, partly offset by USD4.1m of short-term working capital movements at the end of the quarter.

Caledonia Mining paid quarterly dividends of 14c/share paid in January and April.

The company produced 17,476oz in 1Q24, up 8.3% y-o-y, with the bulk produced at Blanket, but Bilboes contributing 426oz in the quarter. Gold produced at Blanket was a 6% increase from 1Q23 due to higher tonnage and grade and improved gold recovery.

The company is looking to produce between 74,000oz and 78,000oz this year, maintaining costs at USD870/oz to USD970/oz with AISC maintained at between USD1,370/oz to USD1,470/oz.

Mark Learmonth, Caledonia’s CEO said in a statement this morning: “We were highly encouraged by the results from the underground exploration programme which has yielded excellent results indicating that the Blanket, Eroica and AR South ore bodies have better than expected grades and widths at depth. The results of this drilling programme are being incorporated into a new technical report summary for Blanket Mine which we will announce shortly; it will show a meaningful increase in the life of the mine at Blanket.”

Caledonia Mining pushing Bilboes to feasibility

Learmonth also said work was continuing on Bilboes to push the mine development through to definitive feasibility, saying: “…this activity will take place in parallel with a process to secure debt finance for the project,” having previously indicated that debt would form the bulk of Bilboes’ project financing with African development finance institutions being the keystone lenders. Management is looking at wrapping-up the debt financing discussion by end of 2Q25 with a two-year construction schedule for the Bilboes mine.

Caledonia’s shares opened the week at 833p and has seen its shares fall 22.3% over one-year. Over the year-to-date shares fell 14.6% with shares ranging between 600p and 1,170p over a 52-week period with a market cap of GBP156.4m.

Zimbabwe is a tough market to operate in, however, Caledonia Mining has so far managed to chart the economic and political obstacles to working in the country, and has a profitable operation that it is on the cusp of extending, and some exciting prospects down the line. This firm might be a bit of a steal at this price compared to where it might be in two-or-three-year’s time, noting a high-point of 1,700p in 2020, more than twice where it is today.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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