Caledonia Mining Corporation Plc reports it has signed an option agreement that provides the Company special right to examine and, later, if exploration is successful and at its sole discretion, obtain the mining claims for the area called Glen Hume.
Glen Hume is a property located in the Gweru mining district in the Zimbabwe Midlands that has historically generated considerable amounts of gold.
Caledonia hopes that Glen Hume will provide considerable exploration potential. The agreement encompasses an area of around 350 hectares with considerable evidence of gold mineralization, such as historical mining activity.
Caledonia has carried out airborne geophysics, which shows attractive exploration targets and has also performed preliminary metallurgical work revealing favorable grade and recovery. A preliminary contract has been signed with the present drilling contractor and a drill program has been initiated.
Caledonia has obtained the right to investigate the area for a period of up to 15 months and obtain the mining claims over the area at its sole discretion if exploration is successful.
The entire consideration is an initial payment of $2.5 million in cash, followed by an additional payment of $2.5 million in cash or shares, which would be payable if Caledonia decides to practice its right to obtain the mining claims.
Caledonia has concurred to pay a 1% net smelter royalty ('NSR') to the vendor on gold that it produces from the area. The NSR can later be bought out at Caledonia’s discretion for a lump sum payment of $15 million in the initial five years after the acquisition by Caledonia of the claims, or $10 million until the tenth anniversary of operation or $5 million after that.
As we approach the completion of the Central Shaft, our production is expected to increase by 45 per cent to 80,000 ounces by 2022, we also expect to realise a substantial increase in cashflow as a result of increased production, reduced costs per ounce and lower capital expenditure.
Steve Curtis, Chief Executive Officer, Caledonia Mining Corporation
“This gives us the financial and management capacity to take on new opportunities in Zimbabwe and we are pleased to enter into this option agreement which give us the right to explore and subsequently to acquire mining claims over this property. This agreement represents the first step towards our goal of increasing our portfolio and becoming a multi-asset gold producer in Zimbabwe, one of the last gold frontiers in Africa,” added Curtis.