"For the last 18 years, Zimbabwe has not received much investment, but there is an entire greenstone trend here and there are projects that simply have not captured the investment they need to survive. We would look at greenfield exploration as an option in the long term, but there are plenty of existing mines with plentiful resource that do not have the required capital, and we are interested to look at acquiring and developing an existing mine."
Could you please provide a brief background of Caledonia and highlight what your key focus is heading into 2019?
Caledonia has been around for quite some time. We were a diversified junior that used to have a cobalt project in Zambia, a gold project in Scotland and one or two legacy assets in South Africa that are currently being disposed of. Caledonia bought the Blanket mine in 2006, and it has been a fantastic investment. Because it is such a strong asset, we are now focused 100% on the Blanket mine and Zimbabwe more generally as an investment destination.
Do you have any intentions to expand your portfolio within the Southern Africa region?
We are not looking outside of Zimbabwe at the moment, and our primary objective is to expand our current asset. Caledonia is exploring deeper underneath the Blanket mine to extend the resource, an endeavor that has been quite successful in the past few years. We have expanded from 25,000 ounces to 55,000 ounces, and we are investing fairly heavily in the mine so that it should grow to 80,000 ounces by 2021. This supports our decision to invest in a new shaft to explore even deeper into the mine, and we should be able to extend its life to 2031.
We are also exploring a range of satellite projects around the current mine, which will not be huge in terms of scale but could bring us another 10,000 to 20,000 ounces per year. This is an opportunity to grow production further and we have excess cyanide capacity at the mill of which we would like to take advantage because it is mainly used to process old tailings. If we upgrade the plant to be fed by the satellite deposits within a ten kilometer radius of the mine we can up overall production.
Do you see any opportunities for exploration potential in the country outside of the scope of your current projects?
Looking at Zimbabwe more generally, it is a hugely under-explored region. People forget that before the year 2000, Zimbabwe was the third largest gold producer on the continent, even larger than Tanzania. For the last 18 years, Zimbabwe has not received much investment, but there is an entire greenstone trend here and there are projects that simply have not captured the investment they need to survive. We would look at greenfield exploration as an option in the long term, but there are plenty of existing mines with plentiful resource that do not have the required capital, and we are interested to look at acquiring and developing an existing mine.
Following Robert Mugabe’s departure from the presidency, where is the new investment interest in Zimbabwe coming from geographically speaking and how do you expect interest to evolve as new political changes are introduced in coming months?
It would be difficult to define any specific geography in terms of investment, but interest in our project from the United States has picked up and also from Europe — mainly the places where we are listed to trade. We are certainly getting meetings that we would not have been able to get last year. It has only been three months since the President said he would change indigenization laws or that he would make Zimbabwe a more attractive destination. This statement is now in the process of being followed up by legislative changes. We would expect over the course of 2018 and 2019 for the policy changes to begin to reflect the legislative changes, and we are looking forward to that.
You mentioned that monetary policy will be critical to helping Zimbabwe recognize its potential. Can you elaborate on this?
To us gold miners, the liquidity problem is quite serious, and exchange controls are quite challenging. Caledonia, as a gold producer, is fortunate in that we bring dollars into the country because we export and sell our gold. We are a very valuable generative for the foreign exchange, so the government knows that they need to allow the mining industry to work with foreign currency to buy all of the materials we need to run the mine and generate the gold. Other industries find it much more difficult. If you cannot get money out, you will be reluctant to put money in, which is the issue with tricky exchange controls which is keeping people from putting their money into Zimbabwe.
Are there any other commodities into which Caledonia would consider diversifying though its exploration?
Caledonia is looking to stay within the precious metals realm. Gold is a bit easier, as platinum tends to take a lot more capital and we just are not big enough yet. We take the view that it is much easier for a shareholder to diversify then it is for us to diversify. We will manage a successful gold mining business and let the shareholder do the diversifying. I have worked for a diversified mine previously and was not swayed by the thinking that the strategy will help dilute the ultimate investment risks.
What is your longterm vision for Caledonia going forward?
The vision is to deliver the project, which will make us one of the most profitable and cash flow running junior miners in the sector. Beyond that, we want to grow and find attractive investment opportunities. However, our industry has a terrible reputation for spending the profits of a good mine on a bad mine, so it will take discipline and patience. If we deliver this project, we will have 10 to 12 years or longer of a very solid cash flow and we can grow the dividend which is a good position to be in.