Blanket Mine investment to yield 267% internal rate of return

A preliminary economic assessment (PEA) on Toronto-listed Caledonia Mining Corporation’s Blanket mine has shown that the mine’s revised investment plan will yield an internal rate of return (IRR) of 267 percent.

In a statement, Caledonia said Minxcon Limited, an independent mining consultancy based in South Africa, had completed a scoping level study on the Blanket Mine in the form of the PEA.

“The key conclusions arising from the PEA are as follows: the IRR arising from the Revised Plan was calculated at 267 per cent, the net present value (NPV) for the Blanket Mine arising from reserves and the inferred resources used in the Revised Plan was calculated at $147 million; and of the ounces that need to be produced so that the cumulative cash flow arising from the Revised Plan becomes positive (i.e. the “Payback Area”), only 3 per cent will come from resources that are currently classified as inferred,” the company said.

Last month, Caledonia announced plans to invest $70 million to expand operations at Blanket Mine between next year and 2020 in the company’s revised investment plan and production projections for the mine. Under the plan, Blanket is expected to produce between 70-75 000 ounces of gold per annum by 2021.

The Revised Plan is expected to improve the underground infrastructure and logistics at the mine and allow an efficient and sustainable production buildup.

Caledonia CEO Steve Curtis said the project’s high returns expected from the revised investment plan is good for the company.

“I am encouraged that the revised investment plan for the Blanket mine has been validated by Minxcon, an external independent consulting group. The high projected IRR for the investment confirms this to be a very exciting project.

“The high proportion of the investment that will be recovered from the mining of reserves and resources with a higher level of confidence than inferred resources, also supports our view that the revised investment plan has been prepared on a conservative basis,”

Caledonia also said the revised plan would improve Blanket’s long term operational efficiency, flexibility and sustainability.

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