Disappointing Bilboes oxide operation tarnishes record Blanket production

Caledonia Mining reported record revenues and production, thanks to strong performance from the Blanket mine in Zimbabwe, while the "disappointing" Bilboes oxide operation is put on care and maintenance.

Caledonia reported revenues of US$41.2 million for the September quarter, up by 13% year-on-year, thanks to record production of 21,120oz gold, up by 3% year-on-year.

This higher production was driven by "excellent" performance from Blanket. A similar level of gold ounce output from the Blanket mine is expected in 2024.

The company in 2023 struck a deal to allow the sale of gold outside Zimbabwe. 

Caledonia maintained its 2023 production guidance for Blanket at 75-80,000oz.

But profits were pressured by rising costs from the Bilboes oxide operation, with profits down 2.9%, to US$15.5 million.

"The Bilboes oxide mine has been a disappointment and as a result of operating losses incurred at Bilboes it has been returned to care and maintenance with effect from 1 October," Caledonia chief executive Mark Learmonth said.

"This outcome has no bearing on the viability of the much larger sulphide project which was the reason for acquiring Bilboes," Learmonth said.

Caledonia in October said it was exploring options for a US$250 million funding for the Bilboes sulphide development, which could more than double the company's production. 

"We continue to work on a revised feasibility study for the sulphide project at Bilboes, which will consider updated commercial assumptions and will inform the most judicious way to commercialise the project."

"Placing the oxide operation at Bilboes on care and maintenance will cut the cash outflows while the company completed its feasibility work for the larger sulphide resource," SP Angel said in a note.