17th Jul 2015 07:48
LONDON (Alliance News) - Caledonia Mining Corp on Friday said it has filed an updated technical report containing a summary of its revised preliminary economic assessment for the Blanket mine in Zimbabwe.
The company revised the preliminary economic assessment at the request of the Ontario Securities Commission.
In November 2014, Caledonia commissioned Minxcon (Pty) Ltd to complete a scoping level study. The original study and PEA defined the main project to a depth of 750 metres and then included an extension from below 750 metres to 1,080 metres.
The Ontario Securities Commission requested the company consider defining the extension below 750 metres as a separate project and not to include it as an extension to the existing project. As a result, Minxcon has adjusted the PEA to only include the project to a depth of 750 metres and to reflect the extension as a separate and stand-alone project.
In the original PEA there was also inferred mineral resources included that are now considered "too speculative geologically" to have the same economic assessments applied to them that would enable them to be categorised as mineral reserves.
Now that the extension is classed as a stand alone project, the PEA has been based on an assumption that Caledonia will need to raise further funds to develop it, but Caledonia said it still expects to fund this from existing cashflow.
On that basis, the best-estimated net present value of the extension project was calculated at USD65 million with an internal rate of return of 42%.
In comparison, the original PEA, which included the main project and the extension had a net present value of USD147 million and an internal rate of return of 267%.
"There have been no changes in the timing and quantum of anticipated production and capital and operating expenditures from the assumptions that were used in the PEA that was filed in December 2014," said Caledonia.
Caledonia must now sit and wait to see if the amended PEA and technical report will be accepted, and warned there is no certainty it will.
The original PEA lodged back in November also was a revised plan for the Blanket mine initiated by Caledonia to improve the underground infrastructure and logistics for an efficient and sustainable production build-up after the mine suffered from falling production and lower gold prices.
Caledonia Mining shares were down 2.9% to 51.00 pence per share on Friday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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