Mark Learmonth: Yes. That was — well, again, we discussed that sort of length in quarter one and quarter two. So the management team at Bilboes have been mining oxides for 10 years. They were confident they could continue to do it. All they needed or they thought they needed was extra capital expenditure, which they couldn’t fund themselves to do a certain amount of pushing back and stripping. But having incurred that cost to do the pushing back in the stripping, it then transpired what they expect to find in terms of oxide resources was either disappointing or just not there. And that was the problem. And having — so that we’re really being able to understand that in April, May and then by the end of June, we made the decision to return the business to care and maintenance but the contract had a three month notice period.
So we had that runoff for an extra month, which was not comfortable. I would say that the oxides — a certain element of oxide still remains and those oxides will be extracted in due course as part of the bigger sulfide project. The other thing I want to make absolutely clear is the Bilboes project has got 2.3 million ounces of sulfide material. The oxide was only ever a few tens of thousands of ounces, it’s not material. And so with the benefit of hindsight, with the benefit of hindsight, we would not have embarked on that oxide exercise and we would have put the mine on care and maintenance, immediately uncapped on care and maintenance, so with the benefit of hindsight that’s what we’ve done.
Unidentified Analyst : I’m sure you’ve discussed it already, but what you’re saying presumably is that the amount of oxides that you thought were there, were not there and that was the problem. But then presumably the sulphides and that further in, if the level of confidence of knowledge of the oxides wasn’t there, the question is and presumably, you’ve got the answer is that why is the level of confidence for the sulphides further down, still when you were let down by the level of confidence of the reserves?
Mark Learmonth: Because the sulphides have been directly drilled, not all of the oxides have been directly drilled. And you’re very welcome to visit and look at the core samples.
Unidentified Analyst : I’m sure you’ve asked yourself that question, but it just occurred to me that. So you basically — the main drilling has been on the sulphide. And sort of I appreciate you’re saying going to come back to the market. But — and again, you probably outlined this, but I missed those meetings. Sort of what time scale roughly we’re talking about bringing Bilboes into some sort of production we’re talking two or three years?
Mark Learmonth: If we — the critical thing is going to be the funding. Within that the critical thing is going to be the debt funding. Debt fund has moved relatively slowly, but let’s say we can get the funding in place by this time next year, which I think would be very optimistic and then probably two years to build.
Unidentified Analyst : And you’re still looking at debt funding, not an equity raise?
Mark Learmonth: We’ll ask exactly one of the things that we’re focusing on. We believe the project has a capacity to carry a high proportion of debt. And that’s the first thing we’ll do when we decided what’s the best way forward will be to firm up our understanding on that with — by having direct engagement with the lenders. I think we already have preliminary conversations with most likely lenders. And they’re not going to be western banks that people know. They’re going to be African development banks who’ve indicated a high degree of interest in this specific project, and they know this project because the previous management team at Bilboes had already engaged with them. And so that will be the first approach. And when it comes to funding the differential, we will consider any form of funding with a view to optimizing Caledonia NPV per share.
And so that — so in terms of non-debt funding, that would obviously think public equity markets private equity markets but also potential joint venture partners.
Unidentified Analyst : Okay. Very helpful.
Mark Learmonth: Any further questions, Camilla?
Camilla Horsfall: We’ve got a few written questions that just hold on. Compared to the cost of power from ZESA and the solar plant, which is more expensive. Secondly, has the power reliability improved?
Mark Learmonth: We get power from three sources, okay? We used to get power from ZESA. That’s now been replaced by getting power we import power directly into Zimbabwe, through a mechanism called the intensive energy user group. We’ve been doing that since I think about April, if memory serves me right. And that’s actually been an initiative fostered by the Zimbabwe government and that means that the power that we import is actually somewhat cheaper than the power we get from ZESA. Chester may have those numbers down. Chester, what’s the power differential between buying from ZESA and buying from the IUG, do you have that in your head?
Chester Goodburn : It’s about $0.035 per kilowatt hour.
Mark Learmonth: So $0.035 different. Yes, it’s not — we don’t pay IUG $0.035. So there is a slight benefit by beginning power through the IUG, but it still has to come through the grid. And so what it means is whilst we no longer suffer straight out power outages as you get into Africa, we do continue to get disruptions in our power supply and also peaks and troughs and the voltages because the ZESA grid is in very poor condition. So to deal with that the second source of power is done by diesel generators, which we’ve had for years. And then the third source of power, which we started using early in 2023, is the solar project, which provides about 1/4. That’s a bit less than 1/4 of our power during sunny times. Our overall power consumption has increased considerably, but our average unit cost is much lower.
So case in point the use of solar means that in 2023, we used just less than 1.5 million liters of diesel, whereas in 2022, before we had the solar project, we used nearly 4 million liters. And if diesel is costing you $1.50, $1.60, that’s an appreciable saving.
Chester Goodburn : Mark, maybe if I could add that there’s no cost first to the solar. It’s our solar plant. We own it. And we say approximately on a blended rate basis about $3.5 million per year.
Mark Learmonth: But I think what Chester is saying is the solar plant is owned Caledonia. And so the benefit arising from the solar plant is not reflected in on-mine costs is reflected at the Caledonia level. So the mine buys solar power from the solar project at a rate which reflects its average unit consumption cost of power. The thinking behind that is that we neither want to benefit, not disadvantage the minority shareholders in Blanket through the solar project. So if we sold power from the solar project to Blanket the cost that would mean that the minority shareholders were benefiting from a project that they didn’t fund. Again, it’s quite a complex answer to quite a simple question, I’m sorry.
Camilla Horsfall: So the next question is just with regards to Bilboes. How soon can we expect gold production beyond 80,000 ounces?
Mark Learmonth: As I said, if it takes a year to put the funding in place two years to build it, you can work from that. I got to say there’s a highly indicative at this stage, that timing.
Camilla Horsfall: Next question, how do you plan to raise the funding for Bilboes? And do you have a time line?
Mark Learmonth: As I’ve said, the initial focus is raising the — getting a handle on the debt to the point of getting a credit approved term sheet, the balance will be equity. And the equity will come from internal cash flows, public market equity, private equity or joint venture partners.
Camilla Horsfall: The next question.
Mark Learmonth: I mean, we will not be approaching the market for any, what I call non-debt funding until we got a better idea as to what the debt capacity is because, frankly, we do think it’s going to be as cheap as debt funding.
Camilla Horsfall: What was the key driver of the advisory fees in 2023?
Mark Learmonth: Well, we had our advisers and then because we have to pay for Bilboes advisers because they didn’t have the money to pay for it themselves. And even if they had paid it would just come off their cash pile anyway. It was a very complex long-running transaction. I think our involvement in the final stage was I think, two years. It was a very long-running process, very, very complex. I’m afraid I don’t enjoy paying up I have fees any more than anybody else.
Camilla Horsfall: I think — I mean the other question I think has pretty much been answered. It’s maybe, when do you expect the feasibility study to be completed, the other part where [inaudible].
Mark Learmonth: We’re working hard to get the consultants, the various consultants to — I mean just to put more context on it. There’s four main elements to the feasibility study. The first is the underlying geology. And there’s been very, very little change there other than removing a small element of oxide material. So there’s virtually no change there at all. There’s been some change to the pit designs and the mining plan, with a view to optimizing the capital spend. But again, very, very minor. There’s been no change to the metallurgical processing, but there have been quite substantial changes to the back end of the project, the tailings facility. And in that area, we’re using the experience that we gained a blanket over the course of 2023 by where we put in a new tailings facility, but we did it on a modular basis.
