Caledonia Mining

[audience applauding] Okay. Good. Thank you all very much. So moving from Latin America to Zimbabwe. Actually, having listened to that presentation, a very similar business model, a combination of growth and yield, but with very strong social license to operate. There’s our disclaimer and our forward-looking statement.

So our formula is very simple. It is a combination of yield and growth to deliver shareholder value. We are listed on the NYSE American, where we get about 95% of our trading. Also on AIM in London and on the Victoria Falls Stock Exchange in Zimbabwe, which has actually been surprisingly fertile for us. And we are a completely Zimbabwe-focused gold mining and development company. We’re focused on growth. We have a target to increase production from the current level of about 75,000 ounces to over 200,000 ounces from 2029 onwards. As you’ll see in a moment, we have a very attractive portfolio of development projects, and we’ve delivered very strong financial returns to shareholders, as you’ll see.

We’ve got four assets at the moment. The first one is a producing mine called Blanket, of which we own 64%. And we’ve owned that since 2006 when we bought it off Kinross for $4 million, only $4 million. Since then, we’ve increased our resource base from 60,000 ounces to nearly 3 million ounces, 2.2 measured and inferred, and 750,000 of measured and indicated, and 750,000 of inferred. And we’ve shown very clearly our ability to grow assets and invest heavily in a jurisdiction like Zimbabwe.

The real interest for investors is the Bilboes asset, which is our immediate development asset. It’s 100% owned. We acquired it in 2023 for about $65 million plus a 1% NSR. It’s got about two and a half million ounces of M&I at a grade of 2.3 grams a ton. And we’ve published a feasibility study on that project in November last year, and I’ll unpack those economics for you shortly. But we’re now embarked on building that project and turning it to account. So that’s the immediate focus of value uplift. We also have an early-stage exploration project called Motapa, which is immediately adjacent to Bilboes. Then the fourth asset, which has been somewhat overtaken by events, is an asset called Marley Green.

So we’ve been in Zimbabwe for a long time now. We’ve been there since 2006, and it’s been a long road for us. But over that time, we transformed the business from being a single asset miner focused on Blanket Mine into a portfolio of development and growth assets. And from 2025 onwards, we’re now gonna transition into being a multi-asset mid-tier producer targeting production of over 200,000 ounces a year. At the heart of all of this is value creation, both for shareholders and for stakeholders in Zimbabwe.

So let’s start with stakeholders in Zimbabwe. Over the last ten years, we’ve distributed over a quarter of a billion dollars in Zimbabwe to Zimbabwean stakeholders. That is the government through royalties and taxes, and also to our local shareholders. So we’ve got 10% of the Blanket Mine is owned by workers, 10% is owned by the community, and 16% is owned by the government. And we’re very proud of that contribution because it gives us a very, very firm social license to operate in Zimbabwe and creates a very good foundation for our further growth there.

But we’re investors, and we had to make money for investors. And so what you see here is a chart going back for the last ten years, which shows Caledonia share price plus reinvested dividends. We’re a quarterly dividend payer. We’ve been paying a quarterly dividend since 2012, and that shows a return of about 1,200% over ten years. That substantially exceeds the return on the GDX and the GDXJ, and also the return on underlying gold. So we’ve got a strong track record of delivering value for shareholders as well as creating value for domestic stakeholders.

Let’s have a few minutes on the cornerstone asset, which is the Blanket Mine, which we acquired in 2006 from Kinross. Currently, it’s producing at a rate of about 75, 70,000 to 75,000 ounces a year. It’s got 2.2 million of M&I, and that’s a recent resource upgrade. And so at the moment, we’re now busy converting that increased resource base into a new life of mine, which I expect we’ll publish towards the end of this month and should give rise to a significant increase in our annual run rate to production.

It’s located in the south of Zimbabwe, about an hour and a half’s drive south of Bulawayo, which is Zimbabwe’s second city. One-hour flight from Johannesburg, and from Johannesburg, you’ve got international flights to pretty much anywhere in the world. And it’s got a strong mining background, so there’s a very good supply of mining-experienced people at every level you could look for, and also a strong supply industry. If you need technical skills, they can be brought in very, very easily from South Africa. We own, as I said, 64%, and the balance is spread between employees, the local community and government.

We’ve had good drilling results from Blanket. But I think what this slide doesn’t really show is a couple of initiatives that we’ve taken very recently to increase production. The first of those is in June, we introduced a seven-day working week at Blanket instead of six days. That’s primarily to address worker fatigue, but that is going to, and has already increased our run-of-mine production by about, it’ll be about 100,000 tons a year. And at a grade of just over 3 grams a ton, that will in due course convert into about 8,000 or 9,000 additional ounces of gold production. And the second thing that we’ve recently announced is the discovery of an open pitable oxide resource on the mine property. We’ll start commercializing that before the end of the year, and that should again add an extra 4,000 or 5,000 ounces of production a year.

So we can see a very clear trajectory to increase production from the current level of approximately 75,000 ounces up to something close to 90,000 ounces, which should go a long way towards addressing the continued cost creep as we continue to face inflationary pressure. So that’s Blanket, which is a cornerstone asset. It generates cash, it pays the head office overheads, it pays the dividend, and it makes a modest contribution towards the next asset, which is the Bilboes Gold Project.

So Bilboes is located a little bit north of Bulawayo, so it’s in the same area as Blanket, but not close enough to have any direct synergies. It’s a fully owned large-scale open pitable gold project. As I said, it’s got two and a half million ounces at a grade of 2.3 grams a ton. We’ve already started this month. We’ve got boots on the ground now to start the development of the project. And we’re looking at first gold production in two years’ time, in the fourth quarter of 2028, and then the first full year of production being in 2029 at about 200,000 ounces a year.

It’s got very strong project economics. And at a prevailing gold price of about $4,000 an ounce, it’s got an NPV of just over $1.5 billion, which is more than three times Caledonia’s current market capitalization. An ungeared post-tax internal rate of return of nearly 60% and a life of mine of nearly eleven years. So it’s a standout asset.

Here you see the production profile. As I say, first production starting towards the back end of 2028 and 2029 being the first full year of production. Production then oscillates. We deliberately front-ended or front-loaded production to enhance the project economics. But as you’ll see towards the end of this presentation, we do have an asset immediately adjacent to Bilboes, and in the fullness of time, we do expect material from that adjacent asset, called Matapa, to smooth out this production profile. But that’s something that we’ll work on over the course of the next few years. As it stands at the moment, this project, as presented, has exceptional economics.

This is simply an extract from the feasibility study that we published at about this time next year. The only thing that we’ve done is we’ve added on the right-hand side a running of the feasibility study at approximately the current gold price of about 4,100. And you can see at the very bottom row, the all-in sustaining cost is very, very competitive. At this current gold price, including the government royalty, the all-in sustaining cost is about $1,145 an ounce. And so at a gold price of, say, $4,000 an ounce, you can see we’re clearing about $3,000 an ounce of profit. And in that first full year of production, given the tax regime in Zimbabwe, that will be tax-free. So that’s about $600 million in the first year of disposable cash. The peak funding requirement is about $484 million, and I’ll explain to you in a moment how we propose to fund that. But it’s got a payback of less than one year.

So let’s just focus on the funding strategy. And there are really four components to that strategy. The first that we implemented late last year, at the turn of this year, was to put in a gold price hedging against our cash flows coming out of Blanket. So we hedged a floor price of $3,500 an ounce, and we did that by purchasing out-of-the-money put options. So it was an initial upfront cost of about $13 million, but it gives us full price participation to the upside. Now, the importance of this gold price hedging actually becomes more relevant as we talk through this, but that’s the first thing we did.

The second thing we did in January this year is we had a very successful offering of convertible notes in the US. We initially went out to raise $100 million, but it’s very strong demand, and we increased that to $150 million. But that offering was over four times subscribed. And that really shows a very substantial change in market perceptions towards Caledonia, this asset and also Zimbabwe as well. So we’re very pleased to get that away. And embedded in that transaction was a $20 million capped call product, which increased the conversion premium from the standard 25% to just on to about 57, to a 50% premium to the prevailing share price when we did it. So it was quite a clever corporate finance move.

The third aspect of funding is an interim funding facility. So we’re raising about $150 million from Zimbabwe banks, and this is where the hedging comes into place because left to their own devices, the Zimbabwean banks would probably be using a reference gold price of $2,000. But because of the hedge, we now don’t need to debate the gold price, and the gold price that they’re using to put together their funding package is $3,500 an ounce. We’re very close to finalizing that. We had hoped to close this by the end of September. And the final stages of documentation, really what we’re coming down to now is how to capture, in legal terms, the value of the hedge that arises at the head office level in Jersey, how to make that value, if it’s needed, flow down into Zimbabwe. But I’d expect that facility to close certainly by the end of October, maybe within a couple of weeks. So that’s the interim facility, $150 million.

But Zimbabwean banks don’t really have the capacity to offer a long-term funding solution. And so in the background, we’re also working on a traditional project financing, which we expect to complete sometime in the next six to nine months. That will be about $300 million, $350 million, and part of that will be used to repay the interim facility. So as far as we stand today, we’re highly confident that this package will be funded, and the project will go forwards.

And here, this gives a bit of background as to the sources of how we’re gonna spend the money and where it’s gonna come from. So on the right-hand side of this slide, you can see the total capital cost of the project, $485 million, capitalized interest during the build period of about $80 million, and working capital of 25. So we need about $600 million to bring this project into fruition. Then on the left-hand side, you’ve got indicatively how that funding might be made up at a gold price of, say, 3,500, which don’t forget is the hedge price, and also indicatively at a gold price of 4,000. Already at the end of Q2, we had $172 million of cash in hand. That’s internal cash generation plus the proceeds of the convertible. Depending on the gold price, we expect to generate anything between $115 million and $155 million of internal cash flow. So that means the net funding requirement, the additional, is anything between $300 million or $260 million, which will be made up by the funding structures that I’ve just outlined to you.

Capital structure at the moment, we had cash on hand of $172 million. We’ve got bullion of $13 million. So we had total available liquidity at the end of June of about $200 million, so we’re pretty well cashed up. And that puts us in a position where we can now embark on placing the long lead time orders for critical bits of equipment, such as the mills, so we can actually get this project off to a proper start. Just for reference, we’ve got our capital structure here with all of the relatively small local facilities, but also recognizing the convertible bond as a $150 million liability.

An important adjunct to this portfolio is the Matapa asset, which is immediately adjacent to Bilboes. We acquired that in 2022 for about $8 million, and since then, we’ve been working on exploration. And recently, we announced a maiden resource of about, well, just over half a million ounces of measured, indicated, and inferred at a discovery cost of about $15 an ounce. But the critically important thing about Matapa is that it’s immediately adjacent to Bilboes. That means over the course of the coming years, we can continue to do exploration at Matapa with a view to smoothing out that production profile which I outlined to you earlier on. You’ll get this on our website. This is just some more detailed drilling information of the Matapa property.

So just to finish, we’re a Zimbabwe-focused business. We’re in the ascendant. We’ve got a cash generative foundation at Blanket, which is very unusual for a company of our status. We’ve got transformational growth through the Bilboes asset with significant upside exploration potential at Blanket and Matapa to support further growth. And as you’ve seen, we’ve got a strong track record of delivering returns for stakeholders in Zimbabwe and also for Caledonia shareholders. So with that, I think we’ll finish, and I can take any questions if you have any.

Mark, thank you very much. Any questions from the room?

Zimbabwe as a jurisdiction to invest in, would you like to comment the prospects for next five years?

Sorry. There’s a lot of noise from next door. I can’t hear that. Could you?

Could you comment on Zimbabwe as a jurisdiction to invest in?

It’s improved substantially. But we’ve been there since 2006, and there have been some difficult years. 2008, 2009 were particularly difficult. There was a change in president in 2017, and the incoming president since then, Emmerson Mnangagwa, has done a lot to make the Zimbabwe government more commercial and improve Zimbabwe as an investment destination. So a couple of key points is Zimbabwe is well known for having hyperinflation. Zimbabwe’s current inflation rate I think is lower than United States. It’s got currency stability, and just a series of relatively small measures have just made it an easier place to do business. And I think the fundamental point I’d say is that the ability we had to raise $150 million in January in New York, four times oversubscribed, is beginning to show that serious international investors are beginning to recognize that Zimbabwe is coming into the fold as an investment destination.

Thank you. Any other questions? And I can validate that statement. I’ve been to Zimbabwe. I’ve experienced the mining industry. There is huge prospectivity. Great workforce, very well-educated people.

Yeah, the quality of the human capital in Zimbabwe is absolutely outstanding. So we’ve currently got what, two and a half thousand people working at Blanket Mine. Every single one of them is a Zimbabwean, and the team that we’re building to implement the Bilboes project, again, they’re all high-quality Zimbabweans, either domestic or brought back from projects overseas.

Great. Okay. Mark, thank you very much.

Thank you. Cheers.