Aim-listed Caledonia Mining has announced that it will proceed with the development of the Bilboes gold project, in Zimbabwe, following completion and publication of a feasibility study.

The project covers 2 731.6 ha in Matabeleland North province, about 80 km north of Bulawayo – Zimbabwe’s second-largest city.

The company notes that the mineral reserve and mineral resource bases at Bilboes are substantial, with proven and probable mineral reserves totalling 1.75-million ounces of gold contained in 24.1-million tonnes of ore at a grade of 2.26 g/t.

Measured and indicated mineral resources – exclusive of mineral reserves – total 532 000 oz of gold contained in 12.1-million tonnes of ore at a grade of 1.37 g/t, while inferred mineral resources total 984 000 oz contained in 18.9-million tonnes at a grade of 1.62 g/t.

The company says there is also significant exploration potential both within Bilboes and on the adjacent Motapa property, a brownfield site comprising 2 161.34 ha, which is also owned by Caledonia.

The ore is refractory and after extensive evaluation of several processing methods, technology and services provider Metso’s BIOX technology was chosen.

This technology, which is already used successfully in similar gold projects globally involves the pretreatment of refractory concentrates using bacteria to destroy sulphides ahead of conventional cyanide leaching for gold recovery.

Using a gold price of $2 548/oz, the company says the project has a projected capital cost of $584-million and a peak funding requirement of $484-million.

The post-tax ungeared internal rate of return (IRR) is 32.5%, with an all-in sustaining cost (AISC) of $1 061/oz and a payback period of just 1.7 years.

Compared with a previous preliminary economic assessment (PEA) and initial assessment (IA), Caledonia says the feasibility study reflects a higher gold price and refined mine scheduling, which prioritises early mining of shallow, higher-grade ore to improve project economics.

Although capital costs have increased by 45% compared with the PEA and the IA, driven by general cost escalation and exchange rate impact ($35-million), scope refinement and market-related adjustments ($86-million) and revisions to project services and contingency ($59-million), the company notes that the project remains attractive with robust margins and strong cash flow potential.

It explains that the project is fully permitted under Zimbabwean laws, adding that Caledonia intends to introduce employee and community participation schemes, following consultation with relevant authorities.

The company notes that plant throughput of 240 000 t a month is expected for the first six years of production, decreasing to 180 000 t a month for the remainder of the project.

The company also expects metallurgical recovery ranging from 83.6% to 88.9%.

“The finalisation of the feasibility study and the decision to implement the project is a defining moment for Caledonia in our journey to become a midtier gold producer,” says Caledonia CEO Mark Learmonth.

He says the feasibility study confirms that the project has robust economics, delivering 1.55-million ounces of gold over 10.8 years with first production expected in late 2028.

“The project has been decades in the making and represents the culmination of an extraordinary amount of work by our team and our partners and by the previous owners of the project.

“We believe Bilboes will transform Caledonia and significantly change our production profile,” he comments.

Learmonth adds that Bilboes should deliver substantial benefits to Zimbabwe, noting that a project of this scale should help the country reclaim its position as a major “gold destination” in the eyes of the international investment community.

The project should also deliver substantial benefits to Zimbabwe in terms of foreign exchange earnings and tax receipts, he says, adding that Caledonia intends to replicate some of the social and community structures it has successfully implemented at its Blanket mine, also in Zimbabwe.

“These have delivered significant benefits to the local community in terms of the ownership in Blanket by the Gwanda Community Share Ownership Trust and Blanket's community and social investment programmes.

Caledonia, advised by Cutfield Freeman & Co, says it expects most of the financing for Bilboes to be in the form of non-recourse senior debt, internal equity contributions from the Blanket mine and flexible instruments such as royalties, streams and mezzanine funding which may include the issue of convertible bonds.

Caledonia notes that management anticipates that a complete funding package will be in place by late 2026 or early 2027.

However, the company has already embarked on preparations to provide sufficient liquidity to allow for the early procurement of long lead-time items in the second half of 2026, thereby accelerating the project development timetable.

To support the funding strategy, Caledonia has recently entered into hedging arrangements, in the form of put options, with Auramet International and Standard Bank of South Africa, whereby it has hedged 3 000 oz a month of gold production from the Blanket mine for the next three years at a strike price of $3 500/oz.

The total cost of the hedging was $13.5-million (inclusive of interest), with $3.8-million paid upfront in cash and deferred payment terms of $4.2-million and $5.5-million payable in six months and 12 months respectively, which gives an approximate cost of $125/oz hedged.

Assuming cumulative production at Blanket of 233 000 oz and an average on mine cost of $1 270/oz, over the three years from 2026 to 2028 and no changes to the relevant fiscal or monetary regimes, the hedging arrangements are designed to underpin cash receipts by Caledonia from Blanket of about $200-million in the three years from January 1, 2026, to December 31, 2028, which broadly coincides with the peak capital investment period for the project.

The company says it will immediately commence with the front end engineering design (FEED) phase for the project.

Subject to arranging early funding before the finalisation of the senior debt, the company plans to procure the long-lead items as soon as the FEED phase has been completed, thereby reducing the overall development period.

Construction is expected to take about two years, with initial production anticipated at the end of 2028, followed by a five-month ramp-up period. In its first full year of production, Caledonia says Bilboes is anticipated to produce about 200 000 oz of gold.