Is this microphone actually turned on? Can you hear me standing here? Oh, fantastic. Okay, let's start. It's 9:30 A.M. So good morning and welcome to this Caledonia Mining Capital Markets Day. In addition to the people in the room here today in New York, I believe we've got about 250 people joining us online from other parts of the world, primarily the U.K. and Zimbabwe. Today, we will show you how a proven Zimbabwe gold producer intends to grow from approximately 75,000 ounces of gold a year to more than 270,000 ounces of gold in 2029 while maintaining the operating and financial discipline that has defined our business. I'm Mark Learmonth, Chief Executive Officer. I've been with Caledonia since 2008 following a career in investment banking in Johannesburg and London. I became CEO in June 2022, having previously served as the company's CFO since 2014.
I draw your attention to the disclaimer, which contains important information regarding Forward-Looking statements, and you should read it in conjunction with today's presentations. Caledonia is built on high-quality gold projects, all located in Zimbabwe. Blanket Mine, our current cornerstone asset, which produced 76,000 ounces of gold in 2025 and made about $85 million of profit after tax. Bilboes is our immediate development project. It will produce 1.5 million ounces of gold over a life of mine of nearly 11 years, with first production expected at the end of 2028. It has a funding need of about $600 million and an NPV of over $1.5 billion at the prevailing gold price. Motapa is a large exploration project, which is immediately adjacent to Bilboes.
A few weeks ago, we announced a maiden resource of approximately half a million ounces of gold with plenty of further exploration potential over the next few years. Then finally, we have Maligreen, which is a relatively small development project with a further half million ounces of resources. This has been somewhat overtaken by events elsewhere in the portfolio and is not an immediate priority. Today is about bringing these assets to life and explaining how we expect them to translate into growth and long-term value for shareholders. I'd like to outline the program for this morning and to introduce our presenting team. Maurice Mason will give us a brief overview of Caledonia and how it has evolved into a focused Zimbabwean gold producer and how our portfolio supports the next phase of growth.
Over the last 20 years, the company has moved from a diversified collection of assets into a focused business with a clear growth trajectory. I will then do a presentation on Blanket Mine, our cornerstone asset. Blanket is an underground mine which we acquired from Kinross in 2006 for about $4 million. Over the last 20 years, we've invested over $250 million, almost all from internal cash generation, to increase production from 20,000 ounces per annum to the current level of 75,000 ounces per annum, and we've extended the mine life. Blanket shows that we can successfully design, fund, and deliver a major project in country in the form of the central shaft project. Blanket underpins our business.
It generates cash, supports our dividend, and demonstrates that we understand how to operate successfully and responsibly in Zimbabwe and how to build long, strong-term relationships with government employees and local stakeholders. Over the last nine years, Blanket has contributed over a quarter of a billion dollars to Zimbabwean stakeholders by way of taxes, royalties, and dividends. Blanket is 120 years old this year, but still has growth opportunities, and we will spend some time outlining these. The third presentation will be given by Victor Gapare, an executive director of Caledonia and our largest single shareholder. Caledonia's major growth project is a large, high-grade, open pitable project with very low operating costs and very attractive project economics. Total production from Bilboes is expected to be about 1.5 million ounces over a mine life of nearly 11 years.
Victor will give an overview of the project, an update on the current implementation activities, and set out the project timelines and milestones. First gold pour is expected in late 2028 and full production in 2029. Bilboes will cost about $600 million. Ross Jerrard, our CFO, will set out our funding strategy and provide an update on the status of the various funding initiatives, which I have got to say are very well advanced. Our fourth presentation will cover the various exploration opportunities in the group and will be given by Craig Harvey, who is our Vice President of Technical Services. Historically, exploration has not been a major focus for the group, largely because of capital constraints. We have now identified several exciting exploration opportunities which could significantly enhance our growth trajectory. Zimbabwe is highly prospective for gold but is significantly underexplored compared to other jurisdictions.
Our strong position in Zimbabwe gives us a significant advantage in terms of identifying opportunities and turning them to account. After these four presentations, there will be a brief ESG video. We then intend to break at that point. At that point, we intend to break for coffee, and then we will have an address after coffee by His Excellency, the Ambassador to the United Nations. After which, then we will have an opportunity for Q&A. Just a single Q&A session instead of the two as advertised. In addition to the Caledonia presenting team, we have other members of Caledonia's board and management here today. We have Camilla Horsfall, who organized this event. Many thanks to her. We also have John Kelly, and until May, he was Caledonia's Chairman, and he continues to serve as a Non-Executive Director. I think that gets to the end.
The order has changed somewhat slightly because I had not expected His Excellency, the Ambassador to arrive and sit through the whole morning. Thank you very much for joining us. I think it would just truncate things and make things go rather better if we have just a single Q&A session, which pulls everything together rather than have a staggered Q&A session. I hope that meets with everybody's approval. Okay, with that, I will hand over to Maurice.
Thank you, Mark. Hello, everyone. My name is Maurice Mason. I am Caledonia's Vice President of Corporate Development and Investor Relations, and it is great to be here today to share the company strategy and prospects with investors. Just a quick corporate snapshot. We are a Zimbabwean-focused gold mining business, headquartered in Jersey in the Channel Islands.
We have stock exchange listings here in New York, where the vast majority of the trading takes place. About 99% of the liquidity is traded here on the New York Stock Exchange. We also have listings in London on the AIM market and on the Victoria Falls Stock Exchange in Zimbabwe. We pay a quarterly dividend. We have been doing so consistently for approximately 14 years. Current yield is about 2.2%. We are trading at a relatively low PE, 7.4x , particularly given the growth prospects of the business, which my colleagues will explain to you later.
As far as shareholders are concerned, there are 19.3 million shares outstanding, 15% of which are held by management and insiders. Collectively, management and insiders represent the largest single shareholder block. A few things I would draw your attention to on the register. There are three passive funds, BlackRock, VanEck, and Dimensional. BlackRock, at 5% holders in their index fund, which track the Russell 3000. That is not a mining specific fund. Dimensional at 4% are a quant-based index fund. Non-discretionary investors, they sort of have a formulaic index following approach. VanEck at 2% hold us in their index fund that tracks the GDXJ. Baker Steel and Shining Capital were previous shareholders of Bilboes and became shareholders in Caledonia Mining as part of the Bilboes transaction in 2023.
There are also a few holders that came onto the register in Q1 this year as a result of the convertible bond transaction that we did in January, specifically Nomura and Alyeska. It is worth noting also that 20% of our shareholder base are Zimbabwean. As Mark said, the portfolio has evolved quite significantly over the past decade and a half. In the early 2000s, the company was a multi-jurisdictional junior, with a collection of exploration assets that frankly did not do particularly well. After we acquired Blanket Mine, and as Mark says, we acquired that for $4 million. If you look at the money it generates today, certainly a case of investing against the tide.
After we acquired that in 2006, and we saw what a great investment that was, in terms of the potential in Zimbabwe from both a geological perspective, a human capital perspective, and from a capital allocation perspective, which frankly, assets were cheap. They were cheaper than you could buy them anywhere else in the world, like the Blanket Mine acquisition. We started to dispose of those assets and became 100% focused on Zimbabwe. Since we focused 100% on Zimbabwe, we have evolved the company from a single asset producer, producing about 43,000 ounces into a multi-asset portfolio, producing approximately 75,000 ounces today, with a very attractive growth pipeline, which as you will see later, we expect to be producing approximately 280,000 ounces in 2029. Here you can see a location of the assets. They are centered around Bulawayo. Blanket Mine approximately a two-hour drive south of Bulawayo.
Then we have a regional office in Bulawayo, and then the Bilboes-Motapa complex to the north, and then Maligreen further to the north of that. Bulawayo is about an hour's flight from Johannesburg, and Johannesburg has daily flights internationally from just about all over the world. As most of you probably have seen, we are an unusual combination of yield and growth. Most companies with our growth profile do not pay a dividend, and certainly do not have the very low PE that we have as a result of having an operating business and operating cash flow. This is a chart we are quite proud of. It is a relative performance of Caledonia versus our peers. Our formula for success is very simple. We are careful, disciplined allocators of capital. We try to limit equity dilution, particularly when the share price is low.
You do not want to give away equity when the share price is too cheap. We have been paying a dividend for the past 14 years, and the effects of that are quite helpful over the long term in terms of the compounding value of that dividend. This chart shows exactly that. It shows the cumulative compound performance of Caledonia, including dividends relative to both or to three things, the gold price, the GDX, and the GDXJ, since 1 January 2016. As you can see, we have significantly outperformed any reasonable benchmark for a gold investor. Caledonia has delivered approximately a tenfold return for our investors over the past decade. When one considers the growth profile that we have to show you today, we are quite confident that we still have a very bright future, and we expect this trend to continue.
Long-term strategy, we are 100% focused on Zimbabwe. Our view from a diversification point of view, we get this question a lot, is that investors can diversify much cheaper and much more nimbly and much easier than we can. We have a cash-generating asset in Blanket, which is enormously helpful. Before this job, I was a Mining Analyst, analyzing companies like Caledonia, and I have seen lots of companies with good quality projects suffer significant value loss because they did not have a cash-generating asset and they had to go back to investors and dilute to keep the lights on. So having a cash-generating asset is very helpful and very important. We have organic growth from our project pipeline, so we do not have to acquire growth at inflated prices in this current gold market.
We built this portfolio several years ago, and our current growth profile will transform the company and will keep us busy in this market for at least the next five years. We have been and will continue to be disciplined capital allocators. We are experts operating in Zimbabwe, frankly, and we think the country's risk is significantly mispriced, as the chart of our performances has shown over the last decade. Just getting onto opportunities and challenges. As Mark mentioned, several of our directors are here with us today, and I can tell you that the board and management spend a great deal of time thinking about risks and opportunities and challenges of business. We have found that when the markets misprice those things, that is where the opportunities are to deliver outsized returns. So in terms of the challenges we manage, firstly, obviously, commodity price and gold price risk.
We like our position on the cost curve for our asset portfolio. We think it's very good, and we think it will get even better when Bilboes is in production, given the Bilboes cost profile from the feasibility study. We are confident we will remain cash generative at virtually any conceivable future gold price, given our current position on the cost curve. We have a hedge in place for our portion of the Blanket cash flow at $3,500 an ounce. We put that in place to ensure cash generation from Blanket for the Bilboes construction period, and Ross Jerrard will tell us more about that later. As far as operating risk, we are proven operators. We have been running Blanket and taking good care of it for 20 years. The resource has grown. The mine life keeps growing.
We have consistently grown those things and reinvested in the fixed asset base and invested in our people and processes and systems. As far as jurisdictional risk, this is one that we think is way overdone and mispriced, as I have mentioned. We have successfully operated in Zimbabwe for 20 years. We know how to operate there. We know the procedures. We can navigate the regulations and bureaucracy, and we have good relationships in country and an excellent reputation as a business. As I said, I repeat myself, but we think the jurisdictional risk of Zimbabwe is mispriced. Cost inflation is an issue for an industry like ours. We have not been immune from this, and we do have active plans to manage cost increases and can hopefully engineer some cost reductions underway. I will note this is a volume business and a high percentage of the costs are fixed.
One of the best defenses against cost inflation is to spread fixed costs over more ounces, and we do have plans in place for that. Investors are often concerned about resource nationalism. We highlight this because we think it is obviously a concern for investors. We think the risk is overstated and again, mispriced. We have 36% of Blanket owned by local partners and 20% of Caledonia Mining Corporation Plc is owned by Zimbabwean investors. So our interests are very strongly aligned with Zimbabwean investors, Zimbabwean communities, and the Zimbabwean government. So with that, thanks, and it is back to Mark.
Okay. Thank you, Maurice. Right. I would like to take the next 20 minutes or so to talk about Blanket, focusing in particular on its current cost structure and how we intend to reduce our cost per ounce. So as we have already said, Blanket is Caledonia Mining's cornerstone asset. It is located close to the town of Gwanda. The region has a strong and long mining culture with a good supply of experienced workers and mining and service supply companies. Specialized skills and materials can easily be brought in from Johannesburg. Caledonia Mining owns 64% of Blanket, as you have heard. 10% is owned by a workers' trust, a further 10% is owned by a community trust, and 16% is held by the Zimbabwe government. This degree of local ownership gives us a very strong social license to operate, which we will discuss later.
Blanket has 2.18 million ounces of M&I resources, and that's on a Canadian basis, so it's 100% and inclusive of reserves and a further 750,000 ounces of inferred resource. The current life of mine is out to 2034, although this is currently being reviewed to reflect the recent increase in resources. Craig will discuss our exploration later, but Blanket has been operating for 120 years, and we're very confident that with the ongoing deep-level exploration, we'll have further mine life extensions. Blanket currently produces about 75,000 ounces of gold, although we believe there's scope for production to increase perhaps towards 100,000 ounces over the course of the next few years. Blanket is a consistent cash generator. In the six months to June 2026, Caledonia Mining's cash flow from operations was $62 million. So that's before interest, tax, and CapEx, and all of that came from Blanket.
By way of background, I'd like to talk a little bit about the Central Shaft project, which we implemented between 2015 and 2022. This project effectively built a new mine underneath the pre-existing mine, which at that time only operated down to about 750 m below surface. The Central Shaft project involved sinking a six-meter diameter, four-compartment shaft from surface to 1,260 m. That's about 4,000 ft. We did this using our own workforce and only a handful of contractors. Blind shaft sinking is notoriously dangerous, but this project was achieved with no fatalities and with only two lost time injuries. The size and technical complexity of the project shows that we have the capacity to implement large-scale projects in Zimbabwe.
The project cost $150 million, and at that time we had no access to debt or equity, so the entire cost was funded from internal cash flows. I was a CFO at the time, and it required rigorous capital discipline and cost control. From a commercial perspective, the Central Shaft project created a platform for Blanket to increase production and extend its mine life. This slide shows how we've grown Blanket over the 20 years or so of our ownership, but it also demonstrates our ability to develop and implement a strategy and our capacity to deliver in Zimbabwe. At five-year intervals, from 2010 to 2025, we've increased gold production from 18,000 ounces- 76,000 ounces. Blanket's profit before tax has increased from $5 million to over $130 million, and Blanket's profit after tax has increased twenty-sevenfold from $3.5 million- $93 million.
Over that 20 years, we've also increased M&I resources from only 60,000 ounces to the current level of 2.18 million ounces. You'll also notice from this graph that Blanket's on-mine cost per ounce has increased substantially over the time series. For the rest of this presentation, I'll explain why this has happened and what are we going to do to address it. So two graphs here. In the left-hand graph, you can see that on-mine costs are shown by the orange line, and that's increased from $780 an ounce in 2020 to $1,250 an ounce in 2025. From the bars, you can see the cost increases were spread across all components: electricity, labor, and consumables. To some extent, this cost increase was due to general cost inflation. We've improved our electricity mix.
We reduced diesel component from 8% to only 2% over the last 20 years or so. We process more tons per employee, but the average cost per employee has increased by over 50%, and some consumable costs have more than doubled, particularly drills and steels. The biggest factor which contributed to cost escalation was the fact that between 2020 and 2025, Blanket Mine's operations changed in that we hoisted more ore from greater depth. In 2020, Blanket Mine hoisted 630,000 tons from a depth of 760 m. That equates to 470 million ton m. By 2025, we were hoisting 800,000 tons, mostly from a depth of 1,260 m, which equates to nearly 850 million ton m. This results in higher energy costs, higher costs because more energy is needed to hoist from a greater depth.
On the right-hand graph, the orange line shows an index of cost expressed per ton meter, and you can see it's much more stable, increased by only 8% over the course of the last five years. Blanket Mine's costs have largely increased for structural reasons. Three things, greater operating depth, higher input prices, and also the additional infrastructure that we've had to add as we've gone deeper. More ventilation, more cooling, and more rock engineering. Those three structural reasons have been amplified by three other factors. Lower grade. Increased mining dilution, which means that the in situ grade is further diluted by introducing waste into the ore mix. The third is reduced mining flexibility, which meant that we were temporarily unable to mine the high-grade areas. We understand why our costs have gone up, but what are we going to do to fix it?
Broadly, there are three responses. The first is to improve the grade by restoring access to high-grade areas and reducing mining dilution. The second is to increase production. Approximately 70% of Blanket Mine's costs are fixed. Increasing production means those fixed costs are spread over more ounces. Thirdly, we must do what we can to flat out reduce our costs. Let's first deal with grade improvement. This graph shows the average monthly plant feed grade from January 2024 to July 2026, and it broadly splits into three periods. The first, in dark blue, is January 2024 to June 2025, when the average grade was 3.16 g/ ton, and we were very happy at that point.
In the lighter blue, from July 2025 to December 2025, the grade averaged only 2.77 g/ ton, and that was due to a fall of ground in July 2025 in a particularly high-grade, high-volume area. As we didn't have access to other high-grade areas, we filled the mill with low-grade tons. January 2026 onwards, and that's in the light blue, I would characterize that as a recovery period. The average grade across those seven months was 2.86, but within those seven months it improved from 2.5 g/ton to around 3 g/ton in July. We broadly expect it to remain stable at that level. Just to put the effect of higher grades and lower grades in context, we mine about 200,000 tons of ore a quarter.
At a grade of 3.1 g/ton, that contains 200,000 tons, contains 20,000 ounces of gold. At a grade of only 2.5 g/ton, which is what we were doing in January, we are only mining 16,000 ounces a quarter. That difference is amplified because typically at lower grades, the recovery is also lower. So increased production arising from higher grades is free in the sense that there is no extra cost to achieve the higher production. Second thing is better mining control. How have we achieved this improved grade, and how are we going to sustain it? Again, there are three things. The first is that we have improved mine flexibility. We have accelerated our development to open up more mining areas. Over the last few years, we have also spent a lot of money to introduce modern mining technology to improve our stope design, our evaluation.
We have got better planning systems, and we have more closely aligned geology, planning, mining, and rock engineering. The third thing is that we have improved our operating controls to make sure that we actually do on a daily basis what we set out to achieve. The second is to increase production. We have broadly four initiatives to increase production at Blanket Mine. The first is grade improvement, which we have already discussed. The second is a new shift system, which we introduced in June, which means that Blanket now works seven days a week instead of six days a week. The third is a relatively new opportunity to go oxide mining at the newly discovered K-pits, which I will talk about in a little bit more detail.
The fourth is an upgrade to the elution plant, which will be completed later this month and should realize an extra 1,300 ounces of gold over the remainder of 2026, and thereafter, about 700 ounces per annum. In June 2026, we implemented a new shift system at Blanket, which has increased mining activity from six days a week to seven days a week. The new shift system was primarily introduced to reduce worker fatigue by reducing the opportunity for workers to work overtime on a Sunday. There was no capital cost to this exercise, but we did recruit 250 new employees. The net increase in operating cost arising from the new employees is expected to be about $300,000 per annum because that cost is offset by reduced overtime payments.
More importantly, the new shift system is expected to add an additional 100,000 tons per annum of run-of-mine material, and we have already seen a marked improvement in daily ore production as well as a reduction in overtime. In the short term, the increased mine production allows us to rebuild a stockpile, which we will need in 2027 when we convert the central shaft winder from AC to DC operations, and that is also expected to reduce our electricity use. Increased mine production also gives us the opportunity to increase mill throughput and increase gold production. In the short term, we will be processing 200 tons a day of the increased run-of-mine production through the Lima plant. The Lima plant is a small satellite metallurgical plant which is located 1.3 km from the main plant.
We've historically been using this plant for R&D work, but we've converted it back to its original use at a cost of about $300,000. The Lima plant is ramping up production as we speak today and is expected to add about 1,700 ounces of gold production in the remainder of 2027. Longer term, we'll upgrade the main method. Steady, Howard. We'll come back to that. Longer term, we'll upgrade the main metallurgical plant at number four shaft to handle all the increased mine production, and this should increase gold production by about 8,000 ounces per annum. The capital cost of the timing of those upgrades is currently being finalized. The upgrades required at the number four met plant really relate to the secondary crushing and the CIL capacity.
Earlier this year, we upgraded the milling capacity from 2,400 tons a day to 2,600 tons a day by upgrading number three ball mill at a cost of $800,000. As I said, we're just completing an upgrade to the elution plant at a cost of about $600,000. Secondary crushers are currently the main bottleneck. The existing crushers currently has a capacity of 2,450 tons a day. We could increase throughput, but that would just reduce the residence time and adversely affect recoveries. We're still working on the capital estimates and the timing for this upgrade. In our Q2 results, we increased sustaining CapEx guidance for the year by $3.5 million to cover the planned upgrades for the metallurgical plant that I've just outlined to you.
We're still refining these numbers, and so we're currently unsighted as to the time frame for the various bits of work to be done, and hence, today, we can't accurately guide when in 2026 the upgraded plant will be available to deliver the increased ounces. But in total, these works should convert the additional 100,000 tons per annum of ore production into increased production of 8,000- 9,000 ounces. The precise timing of that depends on when these works get completed. Let's move on to the K-pits. At the end of August, we published a resource update for Blanket, which includes a newly identified surface oxide resource of 22,000 ounces of gold. This isn't very large, but commercially it's very important because it could give rise to short-term cash generation. The initial metallurgical testing for the oxide ore is very, very encouraging, but that's only in lab conditions.
Between now and the end of the year, we will run a test heap leach pad using a 10,000-ton sample. Assuming this works, we plan to embark on full-scale oxide mining as early as we can. The constraining factor as to when we can do that is the need for a revised environmental permit. We submitted that application a few weeks ago, and the timeframe is typically 60 days to receive approval. Capital cost for the heap leach is expected to be about $4 million, as we set out in our Q2 results. At a target mining rate of about 40,000 tons a day, a grade of 0.9 g/ton, and assuming a recovery of 55%, that should give annualized production of 6,000 or 7,000 ounces of gold a year.
You can see from the map the location of the capids, which is inside the mine lease area and very close to the existing infrastructure. Craig will talk a little bit more about our exploration, but we do intend to continue those oxide exploration activities further northwards inside the lease area. The fourth initiative is to upgrade the elution plant. This is ongoing and has largely been completed. Elution is a process that takes the carbon pellets out of the CIL process when they are loaded with gold, and it transfers that gold into a liquid. That gold is then recovered from the liquid by the next stage of the process, which is electrowinning. The carbon pellets are then reused, but eventually, they become less good at absorbing and releasing gold. You just cannot continue to use them forever.
We currently accumulate about 2.5 tons a month of loaded carbon at a grade of anything between 500 and 700 g/ton, which the old elution plant could not process. So the upgraded elution plant will process the accumulated stockpile between now and the end of the year, and that should release an extra 1,300 ounces of gold. Once that stockpile is exhausted, the increased capacity of the new elution plants means we should no longer accumulate activated carbon. We should add about 700 ounces of gold production per annum. Excuse me. The third and final lever is to address our controllable costs. We believe there are opportunities to try and reduce costs in certain areas. The first is labor productivity. Blanket Mine employs about 2,500 people, the vast majority of whom are engaged in direct production.
That is drilling, lashing, tramming, and the engineering that is needed to keep the underground and the plant running. To be honest, there is very little scope to introduce automization or mechanization. But we can use our workforce more efficiently. So the shift system has already reduced overtime by around 50% and has resulted in lower employee fatigue and higher production.
We have recently installed modern access controls, so we can now develop more sophisticated shift and scheduling patterns, which means that workers get to their underground workplaces much more efficiently. The second area is to reduce our electricity consumption and improve reliability so that we have fewer interruptions to production and we make less use of very expensive diesel generators. 20% of Blanket Mine's power comes from a solar plant, and since 2020, we have reduced the percentage of power generated from diesel from 8%- 2% of the overall energy mix.
More recently, we have embarked on some really quite straightforward initiatives to reduce our power use. Things, for example, turning off the compressors during the re-entry period after each blast, automated lighting, and introducing solar geysers to heat water. So in the second quarter of this year, we reduced power consumption by 2.5%. We are also constructing a new power line to connect Blanket Mine to the 132 kV network. Again, that should reduce the frequency and length of power outages, thereby avoiding lost production and further reducing our use of expensive diesel generators. The third and final area is in the use and pricing of consumables. We are engaging with suppliers to get better terms, and we are more closely tracking our usage of consumables to see if we can achieve the same outputs by using fewer inputs.
To pull it all together, over the last five years, Blanket's costs have increased substantially. But we do now have a clear strategy to reduce our online costs, mainly by increasing production. As I explained, we are currently finalizing the effect and the cost and timing of some of these initiatives, which makes it very difficult at the moment to give clear guidance as to when we will begin to see these in accurate terms. We are also finalizing the timing of the startup of oxide mining, both of which will affect production targets in 2027. The current production target today for 2027 is around 78,000 ounces. This is included in the existing life of mine plan, which forms the basis of the last technical report for Blanket Mine.
We will publish a revised technical report for Blanket before the end of this year, I believe before the end of October, and this will include all of the factors I have discussed, and I expect the revised production plan to be significantly higher than the current forecast. With that, I will pause and hand over to Victor, who will talk about Bilboes. Okay, thank you.
Thank you, Mark. I welcome you all to this presentation, particularly His Excellency Ambassador Mushayavanhu. Thank you very much for coming along. I will present to you the opportunity Bilboes presents to Caledonia Mining and to the shareholders of Caledonia Mining. Bilboes is a fully owned, fully permitted large-scale project with reserves of 1.75 million ounces, targeting first production in October 2028. At peak capacity, Bilboes will produce 200,000 ounces per year, and that will be in 2029, its first full year of production. At a gold price of $4,156 per ounce, the project has an NPV of $1.5 billion and an IRR of 58%, and a payback of less than a year. In terms of project structure and the team delivering it, we spend a little bit of time putting together a team to deliver on the Bilboes project.
As you very well know, at the end of the day, a project is delivered by the people who you put to deliver it. We have put together a steering committee, which is led by our CEO, Mark Learmonth. He chairs the steering committee and is overly responsible. I am the executive sponsor for this project, and I have worked on this project. In fact, I have worked on Bilboes since 2001, really. That is quite a long time on this project, and the team from Bilboes has built quite some knowledge on this project. I joined Anglo American Corporation in 1987, straight from university as a graduate trainee, and rose to the position of director responsible for the gold in Pyrites. I left Anglo American in 2003 after I completed a management buyout of Bilboes.
As I have said, in fact, I've been president of the Chamber of Mines of Zimbabwe, and as Mark said, my family trust is a shareholder, single largest shareholder in Caledonia. It demonstrates the commitment I have in terms of this business which we're building in Zimbabwe. We've recruited a project director, Admire Makwaro. He's responsible for construction and delivery of the project. Admire has over 30 years of experience in mining and engineering, particularly in the areas of project management, operational efficiency, and business optimization. He's held key roles at major companies in Zimbabwe like Zimasco and Mimosa Platinum. At Mimosa, he successfully delivered the expansion projects that increased production in phases from 30,000 tons per month in the year 2000 to 235,000 tons per month in 2024. His expertise spans capital projects, equipment optimization, and cross-functional coordination. The second person is Simba Chimedza.
Simba Chimedza is the technical manager on this project and has worked on the Bilboes project since the Anglo American days. He joined Anglo American as a graduate trainee and rose through the ranks to become a mine geologist before becoming Bilboes' technical director. He was responsible for delivering the Bilboes definitive feasibility study before Caledonia acquired Bilboes. Under Admire and Simba is a team of discipline specialists who will work with the engineering, procurement, and construction, EPCM contractor during construction and will become the discipline heads when the project goes into production. Jones Michie is the geologist on the project. He's got quite some extensive experience and worked as a group geology manager for Bilboes. In his formative years, Jones underwent a rigorous graduate traineeship with Anglo American Corporation in Zimbabwe, covering both technical and leadership skills.
He's a highly experienced geologist with over 31 years in mining and exploration, covering gold and base metals. Jones' multi-commodity exploration experience covers gold, nickel, copper, cobalt, chromite, iron ore, limestone, tantalite, niobium, and lithium. On the mining side, we have Blake Matiwa. He's the mining engineer on this project. He's a seasoned mining executive. In fact, when we took over Bilboes in 2003, he was the mining manager at Bilboes, and he became the operations director for that operation. He's got more than 25 years of experience in the mining industry, spanning both greenfield and brownfield operations across Zimbabwe and other African countries. His expertise encompasses new mining establishment, mining production, mine planning and budgeting, business turnaround strategy, and the delivery of large-scale infrastructure development projects. He has successfully led complex mining operations in challenging environments and brings valuable expatriate experience to his professional portfolio.
Cassien Mavire is the engineer on this project. He's a highly analytical and performance-driven engineering professional with more than 30 years of experience in maintenance, engineering, project management, asset reliability, and mining operations leadership. He has successfully delivered major mining and processing projects, improved maintenance performance, implemented engineering best practices, achieved zero engineering accidents, and led large-scale asset management and reliability initiatives. As you can imagine, the commercial aspects of these projects are huge. We've recruited a commercial specialist, Upenyu Avazvi. He's a capital project and supply chain professional with experience across mining and infrastructure. Projects in Botswana, Sierra Leone, Lesotho, South Africa, and Zimbabwe. He brings strategic leadership, commercial discipline, and execution focus to the project. On the human capital side, we've got Shamiso Masawi. She is a strategic human resources practitioner with exposure and experience across manufacturing, food processing, local government, private enterprise, and the mining sectors.
Leveraging expertise from a consultancy background, Shamiso partners with leadership teams to build high-performing organizations, foster engaged workplace cultures, and deliver sustainable business outcomes. On the metallurgical side, we have Obed Chiangwa. He is a metallurgical process engineer with experience in minerals processing studies, plant design, commissioning, and operations. He has experience with a variety of minerals, including gold, copper, cobalt, and uranium. His work experience is actually all over Africa. He has worked in Zimbabwe, Botswana, South Africa, Zambia, Mali, Senegal, Mauritania, and Burkina Faso. He is quite experienced in that role. He has also worked for South African engineering companies in South Africa, mainly in process design of some large-scale gold and uranium projects. On the financial side, we have Kudakwashe, who is a qualified chartered accountant with over 14 years of experience, including more than 10 years in the mining sector.
He has extensive experience in financial management, financial reporting, risk management, internal controls, and taxation, with a proven track record of supporting business growth, improving governance, and ensuring regulatory compliance. On projects like this, safety, health, and environment is very important. We set about our business to make sure people go back to their families. We have Bonwell Nyevera, an experienced safety, health, and environment professional with over 20 years' experience in both surface underground mining operations. His expertise spans different minerals, including chrome mining and smelting, gold mining, mineral processing, occupational safety, environmental management, and strategic leadership. He is passionate about fostering a strong safety culture, driving continuous improvement, and leveraging technology and SHE management systems to enhance workplace performance. On a project of this scale, you need delivery partners. We have appointed DRA as our EPCM contractor. DRA have delivered the feasibility study for this project.
They have built mines all over the world, and they have built all three platinum mines in Zimbabwe. That is Mimosa, Zimplats, and Unki. DRA know how to deliver projects in Zimbabwe. We have contracted them as our EPCM contractor. We are going to use the Biox technology, and we have appointed Metso, who are the owners and suppliers of Biox technology. They have delivered various Biox plants all over the world, so we have got confidence in what they can do for us. We have also appointed SLR, which is a South African-based organization. They are the designers of the tailing storage facility, and they also looked after the geotechnical, geohydrological, and environmental work streams. We have appointed Catfield Freeman of London as our providers of independent financial advice. We also have a leading law firm from the U.K., HSFK. They provide legal cover for the project.
The funding is one of the most important aspects of this project for us to be able to deliver this project. We have a funding group which is chaired by our CFO, Ross Jerrard, whom you will be hearing from today. This group includes our financial advisors and our lawyers. We also have project support. This includes things like legal, risk management, project controls, etc. In terms of Bilboes' contribution, the Bilboes project will transform Caledonia into a mid-tier gold producer. With Bilboes producing 200,000 ounces in 2029, which is the peak year of production, and Blanket producing around 75,000 ounces in 2029, total Caledonian production will be around 275,000 ounces in 2029.
In terms of the production flow sheet, this is a conventional gold mine flow sheet, really, starting with mining, crushing and milling, flotation, the Biox carbon in leach, elution and gold room, with the final product being gold Doré and tailings handling. In terms of tailings handling, the tailings storage facility, there's the flotation tailings facility and the Biox tailings facility. Again, it's conventional in any mining situation. In terms of mining readiness, how are we getting ready for delivering this project? On the mining side, we've done quite a lot of work in terms of geometallurgical data. We've collected that and added to the block models alongside the gold grade. We've done scanning of existing core samples at 1-meter intervals. This is scheduled for completion by the end of September. In terms of production scheduling, this is underway and will be completed by December 2026.
This is a large open pit deposit. The mining contractor will be appointed by July 2027 so that mining can start early. The plan is to ensure that there is a stockpile on hand by the time the process plant is commissioned, so that the plant can run without interruptions. As far as the processing plant is concerned, I won't spend too much time on this. You can look at it on the brochure which has been circulated. It's just the layout of the plant itself. You can see the various plants in there. Again, the tailing storage facility, I've discussed that. The designs for the TSF commenced in July 2026 and should be completed by February 2027, with construction starting soon thereafter. The infrastructure and early works. Enabling infrastructure is being contracted now so that construction can start on schedule in October 2026.
There's already power at Bilboes because this is really a brownfields project. During construction, this project will require about 2 MVA of power from existing infrastructure. Discussions with the grid power company are in progress, and we expect to sign a construction power contract by the end of October 2026. The bulk power scope of work has been finalized, and this work stream will involve construction of a 132 kV overhead line and two substations. The bulk supply contract should be signed by the end of December this year, with construction work starting soon thereafter. In terms of water surety, as you can imagine, there's a lot of water involved in a processing plant like this one. The plan is progressing for implementation by the end of October 2026.
Accommodation and early works have been catered for with the EPCM camp location finalized, and strategy for the early works team are already agreed. As far as the procurement and construction readiness is concerned, six critical packages carry the schedule with earthworks and power driving the October 2026 construction start. The grinding mills package is on track and was adjudicated in August with the award being done now, mid-September. We're almost there. The thickness package is on track and was adjudicated mid-August with award expected mid-September. The crushers package is on track and was adjudicated early September with the award to be made by 20 October 2026. The flotation cells package is on track, having been adjudicated early August and awarded early September. The bulk earthworks package is on critical path, with adjudication having been done in July 2026, and the contractor appointed early September.
Actually, this one we have just signed, and it was a pleasure having to sign the first contract for this project. The bulk power package closed on 11 September and is on track to be awarded end of November. The next slide really just shows in more detail the various procurement packages which we are pursuing. I will not go into it. You can also look at it in the brochure which has been given. So what is our path to first gold? What has happened? In November 2025, the Caledonia board approved the feasibility study. The study was approved, and the technical and financial case was confirmed. The detailed engineering and early works are being completed in 2026. We are almost there. Like I said, the last item is actually the TSF, which will be completed very soon. The financing strategy is being executed in 2026 and early 2027.
Ross will cover that in more detail in his presentation. The main construction will be during the period 2027 to 2028. This will cover the open pit development, plant power, and water infrastructure. That is when the fun begins. The first ore to the mill will be in September 2028, and first gold will be in October 2028. This project generates considerable value and is value accretive in all three gold price scenarios evaluated in the Bilboes Gold Project Technical Report Summary, which was filed with the SEC and EDGAR in November 2025. The consensus three-year trailing average and September 2025 spot price outcomes have been published before, so I will not talk to them.
I will focus on the August 2026 spot price column, which shows that at an average gold price of $4,156 per ounce, the project is a post-tax NPV of $1.5 billion, a post-tax IRR of 58%, a payback of less than a year, and an operating margin of 73%. And most importantly, an all-in sustaining cost of $1,145 per ounce. At this stage, I will hand over to Ross to just talk about the financing, then I will talk about the risks and other aspects of this project. Ross, take it on.
Thank you, Victor, and good morning to everybody. My name is Ross Jerrard. I am the CFO of Caledonia, and I am delighted to talk to you this morning about our funding strategy, how it relates to the Bilboes financing, and how we have taken it forward over the last couple of months. As shown on this slide, the strategy is laid across four key pillars that have been deliberately designed to ensure that we have maximum liquidity as early as possible that we can deploy against the Bilboes project. This will ensure that we are able to place orders on long lead items and not delay any of those construction work streams. As Victor had highlighted with a one-year payback period, the biggest value destroyer on this project is time delays.
So we have ensured that we have got multiple levers in play and options available to us for the financing. The four pillars shown are delivered in a deliberate sequence. The first is to secure gold price hedging across our share of the Blanket production platform. This hedging program really effectively sets a floor and basically underwrites the internal cash generation that we could attribute to our corporate treasury war chest. The hedges are vanilla put options, which are active from January 2026 to December 2028, effectively covering the construction period. It provides a floor that supports those internal cash flows, both to us, but also in our discussions with the bank facilities. While still allowing us full participation in any upside in gold price, anything above $3,500 per ounce, we are not losing any of that upside. The program is basically an insurance policy.
That is the way I view it. Without giving away the benefit of that gold price, basically sets the floor or underwrites that $3,500 per ounce level. As well as securing the required cash flows that we generate internally, the hedging program allowed us to engage in open discussions with the financial institutions and elevate those prices used in the financial modeling when it came to discussing debt capacity across our Blanket production and the portfolio. Basically, we effectively increased the quantum of what we could go to the banks and ask to borrow. The second pillar was completing a convertible note offering of $150 million. This program took advantage of strong capital markets here in the U.S., and I must say, surprised us all to the upside. We were oversubscribed to the tune of some $600 million, showing strong investor demand at the time of the launch.
The notes are at 5.8% coupon and are convertible after 2032. Together with an embedded cap call option, means an effective elevated conversion price of just shy of $57 a share. Importantly, this second step gave us the ability to access cash quickly and continue to build our corporate war chest while we engaged with the various banks, knowing that the time horizon to implement some of those longer-term funding strategies could take some time. Moving on to the third pillar, which included working with a consortium of local Zimbabwean and South African banks to really position with an interim facility secured against Blanket Mine cash flows. This was really to provide a bridge in our financing needs while we looked at the longer-term traditional project finance facility. The co-leader arrangers that we appointed were Stanbic Bank Zimbabwe and CBZ Bank.
The objective of this pillar was to use the Blanket Mine cash flows to secure a $150 million facility that would either be repaid by the wider project-level facility that was ultimately going to be put in place. It was, again, effectively a bridge to ensure that we had enough funding in place as early as possible to place those early work orders. The work stream is well advanced, and we have been delighted with the interest shown across the whole bank consortium, with potentially up to eight banks participating. We are in the final stages of DD and documentation with the facility imminent, and hopefully we will get that closed in October 2026. It is very close to finalization. The final pillar is that traditional style standalone project finance facility, which will be secured against Bilboes.
Ultimately, the strategy was not to burden Blanket with the Bilboes funding. We wanted it to stand on its own. A formal process is well advanced with regional and global financial institutions, with completion expected over the coming six to nine months. Whilst pillars 3 and 4 have been running in parallel, the intention is that the interim facility would either be repaid by the proceeds from the project finance or the banks that are involved in that facility rolled up into that wider PF facility. We don't anticipate having both interim and PF in place and operating concurrently. Whilst we are conscious of the time involved in getting that project finance facility in place, we've been pleasantly surprised and really quite excited about how fast we have progressed with the institutions. We've conducted site visits.
The various DD work streams are well underway and we enter that documentation phase. We're really quite excited with the acceleration. Turning to the Bilboes funding overview. This page provides a summary of the Bilboes overview and really demonstrates that looking at the various pillars and functions, we're basically fully funded, particularly when you look at the elevated gold price scenarios. The slide is best read from right to left, and the column on the right shows the use of funds. Essentially, we're looking to deploy just under $600 million when you include interest and working capital. The two graphs on the left and center show the sources of funds at both $3,500 gold price, which is our hedge price, and also at an elevated gold price of $4,000 per ounce.
At $4,000 per ounce, $40 million less debt is required, funded by that higher forecast internal cash flow generation. You can clearly see that together with our current cash on hand of $172 million, generated from our cash flows from Blanket of $115 million, and then in a higher gold price environment, escalating to $155 million. The requirement for senior debt and other facilities is somewhere in the range of $263 million- $303 million. A quantum that we're very confident in achieving across the various work streams that I've just walked you through on the previous slide. Moving on to cash and available liquidity. Overall, the company has a very healthy liquidity position, as demonstrated on this slide.
With over $170 million of cash after the convertible bond raising and the normal bullion on hand, gold sales, receivables, et cetera, that you would typically expect to see. We've only drawn $4 million of our available facilities, so collectively, we have in excess of $200 million already available in terms of total liquidity, as you can see at the bottom of the chart. A very strong position, and I'm very glad to see how quickly it's all come together. This slide shows the breakdown of our existing debt and at Blanket level, at the Zim Co level, and also at group level. We have various loan notes in Zim Holdco level that have been used for discrete projects.
The construction of the solar plant in the past was used, and we expect to continue to roll these forward in the future, allocated against specific projects like the power line project, the upgrade of the main road, or similar type projects. We are going to keep those loan notes in place. At the Blanket Mine level, the borrowings are really working capital, ZIG facilities, and traditionally what you would expect from an operation such as ours. The PLC level, we have recently placed the convertible bond that I have mentioned already. Across the group, we have a healthy level of debt and certainly the capacity to raise this further funding when you look at the cash generation that we have across the business and the future growth potential within the portfolio.
We are very excited about where we are at, both in terms of current financial health, but also how we position to finance the Bilboes construction in the short term. I think we are in a very enviable position in terms of our project lifecycle and the financing. With that, I will hand back to Victor to talk around some risks and mitigations.
Thank you, Ross. Basically, any project you have to look at the risks involved and put in place the mitigation measures. There are basically three broad risk areas which face this project, and I will cover them. The first one is technical risk, the metallurgical variability. We have done extensive metallurgical test work on this project, especially during the feasibility study phase, resulting in a determination of a robust blending system for plant feed for optimal BIOX plant performance. As far as mining is concerned, the issue really is the strip ratio and mine plan. We have done detailed open pit optimization and pit designs with pushback strategy to manage the strip ratio in this project. As far as geotechnical conditions are concerned, SLR have done quite a lot of work in terms of geotechnical drilling and slope stability analysis. We are fairly confident about that.
As far as execution risk is concerned, this is where the highest risk sits, actually. As far as that is concerned, Ross talked about in terms of having money, the time delays associated. Time delays, that is where we will get quite a lot of leakage in this project. Ross and the team, we have done quite a fantastic work in terms of putting in place advance funding for this project, which will ensure on-time procurement. Capital cost inflation. We have included a capital cost contingency with major cost items benchmarked during the feasibility study phase. In terms of contractor availability, we have executed early engagement with the EPCM and mining contractors. Most importantly, Zimbabwe is an established mining skills base, so that counts for quite a lot. The next risk is country operating environment, the fiscal and regulatory stability.
We have a long operating history in Zimbabwe, and Mark has outlined that quite considerably. Caledonia has operated in Zimbabwe since 2006. Me, on the Bilboes party, I've operated in Zimbabwe since 1987. We've got considerable experience in operating in Zimbabwe. Again, as I have said, I was president of the Chamber of Mines during the period 2009 to 2011, and have been involved in the Chamber of Mines since 2003. This is the forum which we use to negotiate with government or other stakeholders in terms of critical elements. We're fairly confident about our experience there. In terms of currency exposure, we receive USD for our gold sales. Caledonia has been paying a dividend, as Ross has said, and has never struggled to get money out of Zimbabwe since it earns its revenues in US dollars.
In terms of power supply reliability, we have a combination of grid power and on-site backup solutions. For this project, in terms of economic contribution to Zimbabwe, Bilboes will be a significant contributor to the Zimbabwe economy over the life of mine. If we calculate this at a gold price of just over $4,000, it will contribute over $6 billion in foreign currency over life of mine. Over $300 million in royalties, over $975 million in corporate income tax, and over $150 million in royalty and withholding tax. A project of this kind, in any case, is going to have significant multiplier effects, which means the other industries will create other industries, it will create other taxpayers.
As you can imagine, based on the World Bank and the IFC on economic multiplier effect for mining companies, we estimate this to be 2x- 4x whatever Bilboes will be contributing. In terms of employment, this project will generate 500 operational jobs. These are permanent jobs during the life of mine. Skills development and training. There will be skills development and skills transfer, thereby building technical mining capability for the future. There will be over 1,200 construction jobs created during the period. That, ladies and gentlemen, is a summary of the Bilboes project, where we are going with the Bilboes project and how it will add value. Thank you very much. I'll call on Craig to give us something on exploration. Thank you.
Thank you, Victor. Good afternoon, everybody. My name is Craig Harvey. I oversee the exploration activities for Caledonia. Most people in this room kind of wonder what does— No, it's not on yet. What does exploration geology do? Basically, it is not a throw a dart at a dartboard. It's we need to follow a structured approach. As our CEO has said, we are not a greenfields exploration company, we are a gold producer. Just want to go back one. There we go. That's the one that was missing. Excuse me. Yeah, we don't sit around a dartboard, and that's not what we do. We follow a clear strategy of what we actually want to do, what we want to look at. It's not drill, baby, drill, put a hole in the ground at any expense. We have a structured approach.
We have four strategic pillars that we look at. Quite clearly, Blanket being the mainstay of Caledonia at the moment. We have at depth, so we have below the current mine. We have inside the current mine, opportunities that have been missed. We also have surface opportunities that our CEO alluded to, and that is at Blanket Mine, it is at Motapa. It still includes Bilboes. Bilboes is not finished. With the deep drilling, what we kind of look at is we want to drill below the mine infrastructure that we have at the moment and prove up new inferred mineral resources that we can then upgrade via underground development and further underground drilling, and take that through into the measured and indicated categories, which ultimately lead into proven and probable reserves.
The into ore body, what we kind of mean by that, test the lateral gaps, hidden shoots, structural repeats. Blanket is a shear zone. It is not one shear, it is multiple shears. There are shears behind shears. There are shears that connect other shears. We have not really tested that to completion. Basically in a nutshell, together, these kind of four areas that we have from current producing to surface exploration, it gives us a balanced pipeline across the whole various portfolio that we have. We will have a quick look at Blanket. We have seen many locality maps on that, but the kind of key thing there is those green areas are the greenstone belts that are well-known in Zimbabwe. We have a number of mineral resources that we have there. Blanket stays the operating base.
Anything that we do at Blanket, we have got to have stability at Blanket. We need to know that what a life-of-mine plan is saying is what we are actually going to do. Motapa, as you know, it lies to the north of Bulawayo. It is directly adjacent to Bilboes. It shares a common boundary. We have now just recently declared a maiden mineral resource estimate based on effectively two years of Caledonia exploration and collation of historic info. The Maligreen property, my colleagues kind of view it as the lost daughter. It might be small, but quite clearly, once we have a processing facility kind of in the Bilboes, Motapa area, it is not that far. Ore has been trucked in Western Australia from the 1970s into central processing plants and been toll treated for different companies.
Our strategic objective is to advance these projects that we have that are all in various stages into a pipeline in the next five years of what we can do and what we are actually going to execute. Looking at Blanket, just to go into a bit more detail, in order to maintain stability at Blanket because it is kind of crucial for the company that Blanket delivers on what Blanket is supposed to deliver. These two images illustrate what the effect of deep drilling actually does. When I talk about deep drilling, it is 300 m deep holes. Blanket is a vertical ore body, so in order to drill it, you have got to do some infrastructure development. The top image, again, is pre- well, it is pre-2023, the mineral resource estimate, all the big colors that you see there is the resource estimate as of 2023.
All those gray lines is essentially all of the long deep drilling that we have done. After all of that drilling and included in the new Blanket update that we have done, we have grown the Blanket mineral resource from half a million ounces in 2020 or 0.9 million ounces in 2020 M&I through to December 2023 to 1.8 million ounces and what we have just recently pushed out at 2.2 million ounces currently. The key takeaway here is that Blanket still remains open at depth. It is kind of what is going to stop us going down there? It is going to be technical issues. Currently what our focus is we need to maintain a 10-year reserve life. Reserves are measured and indicated that is converted into a proven and probable reserve and continue exploring at depth.
Currently, we are busy with a pre-feasibility study on what do we do after kind of 42 level. 42 level is more or less at the bottom of that red smudge that you see there, which is going to be the current deepest that we are going to go at Blanket. That is kind of the depth. The only problem with depth is that you kind of chase. As we have heard, Blanket has been operating for 120 years, since 1904. What has been the strategy? Maybe not intentionally, but it is kind of, well, we mined it above us, so it should be below us, so let us carry on going down. It is level to level to level and leapfrog and get deeper. What you kind of see here is there is actually one anecdote that I want to share.
During the independent struggle, Blanket was concerned about surface activities and surface attacks from whoever. What they actually did is they developed a haulage on nine level from the Blanket, which is on the it will be on your right-hand side, across to the Lima ore body. They developed it on nine level underground. What actually happened is they blindly intersected what we know as AR Main, which is the one kind of slap bang in the middle. They did not know about it. It was not known. It was not picked up anywhere before. AR Main has been a mainstay of Blanket for many years, kind of the 1990s, 2000s, 2010s. That leads us into those white areas that you see there. It does not mean that there is nothing there. The actual structure is there.
It just depends on, are the conditions conducive to gold deposition within the actual shear structure? What we are doing, and we have been hampered by, a lot of our underground drilling rigs are air-driven. It has got connotations for compressed air, costly, and things like that. One of the key things is that it is limited to 100 m drilling depth. Now on 30 and 34 level at AR Main, we know AR Main is 150 m into the hanging wall side of the drive. We actually cannot get there with the current rigs that we have. We have embarked on a drilling rig replacement program in which we are going to bring in some electro-hydraulic rigs, fairly small, fairly cheap, but they can drill to, depending on what size power pack you actually put in, to between 300m and 500 m.
That's going to open up, as you can see, all those lines, a tremendous area of potential. I can't say that there's anything there, but if you don't do the work, you're actually not going to know. The key thing is it's not new development to create drilling platforms. All of the infrastructure is there. We just can't get to the ore body. We're going to drill it out. That's kind of Blanket at depth, Blanket, still in Blanket but the upper levels. There's still more to Blanket. All right? If we have a look here, we are going to evaluate on a lateral basis on strike. It's a longitudinal section. All of those pretty colors that you see is the current Blanket underground workings. We've heard of the capes. We'll go into that in a bit more detail later.
But to the north within the current mining lease area, we have two other areas called Smiler and Old Lima. Both of those, clearly as the company, we have access to historical records. They have been mined sporadically across the years. I can sort of peg it to probably it's a gold price environment and things like that. But in today's gold prices, I can tell you that Smiler is very much like Blanket. It's kind of the same widths. It's kind of the same grades. We would like to access that, do a bit of surface exploration to drill a bit deeper. There is a shaft there. It hasn't got a winder at the moment. But these are kind of things that we can have a look at. You heard our CEO talk about tons per meter.
Clearly, if you're at 300 m, it could be a very different story. If we move on to a bit of near-surface opportunities, which is kind of our strategy at Blanket. What you see on the left-hand side, that blue area is the Blanket mining lease area. All right? All of the other little blocks that you see are claims that we have directly adjacent to our mining lease area. One of the things that I always say, again, we've heard about Blanket has been operating for 120 years. If anybody has been to Blanket or ever goes to Blanket, one of the things that you won't see is you won't see open pits. All right? You go to Bilboes, what will you see? You will see open pits. That was the strategy for Blanket at the time. We have historic sets of soil geochemistry.
We have geophysical data over the Blanket area and its surrounding claims. We have a number of records from what I would term wildcat drilling. Put a hole in and let's see what we get, kind of throw the dart at the dartboard. But using all of this information that we've got, we have devised a structured approach to our surface exploration, where we can follow up on a number of these targets and put a cross through an area. Or like the capes, we can put a big fat green tick. In the context of what the capes can do for us kind of right now, that's highly encouraging. We have tested some other areas. You can see the Beaver North area on the right-hand side of the image. We had a look at that. A couple of showings, not very strong. We kind of moved up north.
What our strategy is all along surface because we kind of know where these structures sit. We know where the band of iron formation sits. We know where the shears sit. We are trenching on surface, long, shallow trenches. Oxidation levels at Blanket are kind of low. Soil cover is minimal. Out of all of those trenches, anomalous areas showing anomalous gold values, we follow it up with reverse circulation drilling targeted for oxide mineralization. Yes, there is sulfide below it, but right now, Blanket, the underground mine has heaps. Better grades. It might be a bit more costly, but we can fill the plant with Blanket. Going forward, we are going to run up all the way through Old Lima, Smiler on surface all the way into Mpudzi, and hopefully we can report back with some positive news in the coming months and years.
If we look at, and I will just run through this quickly because we kind of saw a bit about the K pits. What did we actually do? At the K pits, we trenched over 2,000 m on surface. We followed this up with close-spaced reverse circulation drilling, line-spaced 25 m apart to an average depth of about 40 m. It was down to 40 m simply, as I said, the oxide weathering profile at Blanket, anywhere between 10, 15, maybe some of the deeper areas, 30 m. You can clearly see oxide zones. Some of the intersections included 23 m at 2.5 g/ ton. Below the oxide zones into the sulfides now, some of the intersections included 16 m at 6.04 g/ ton, very much like Blanket underground.
Clearly the oxide provides a near-term revenue opportunity, and let us not forget about the probable reduced mining cost which can help with the overall cost of Blanket. The deeper sulfides now provide a second opportunity. Why do we say that? It is currently when we project the K pit's ore body down into the Blanket workings, the closest known ore body that we have underground is between 200 m and 250 m to the east. It is around the sheet shaft. There are currently 30,000 measured and indicated ounces in the K pits with a further 14,000 inferred. If we then go on and have a look at what it actually means. On the left, it is just an overview and a nice image of what it looks like, the drill densities and things like that.
We are constructing, it is underway at the moment, a 10,000-ton a month, not a month, but a static 10,000-ton heap leach test pad. We have completed a whole number of laboratory-scale bottle rolls, but we have also completed up to eight column tests, bulk box scale column testing, all very positive to date. In the middle, that is basically a pit optimization that you see there. The pit shell. Within that pit shell, there is approximately 23,000 ounces using a cut-off grade of 0.3. At 40,000 tons per month, we are looking at approximately a 2.5-year operating life just for that. Importantly, it is still open to the north. It bent off our trench lines, but we know what we have got to go have a look at. It is not finished.
On the right-hand side is just a small little section with an interpreted extension of where this would go underground, showing our sheet ore body next to the sheet shaft 200 m away. We are in the process of siting some surface drill holes, in the process of, as I said, getting some electro-hydraulic rigs that we can also drill from nine level and seven level on Blanket underground. We need to evaluate that. If there's anything like six gram a ton sitting 200 m into the footwall side, that's something that we're definitely going to be having a look at. That's just Blanket. All right? There's a lot more to Caledonia. The whole greenstone belt, we have many opportunities. We are located on the Gwanda Greenstone Belt at Blanket, hosts banded iron formation, shear zones, disseminated sulfides, various mineral types.
This geological diversity expands the number of targets that we have, both from a surface opportunity and from an underground opportunity. All of our regional claims that we have provide a further pipeline. On the next slide, we've ranked what we term our regional claims. It comes from these have been in Blanket's stable for many years. There's been attempts to have a look at what is there. Clearly, our priority one remains the K pit Old Smiler Lima, which is in that blue block. We'll carry on with our trenching strategy and reverse circulation drilling strategy. It'll carry on into the Mbudzani block, and that's going to be 2026, 2027. Cinderella located kind of just to the left of Gwanda. We've recently done a bit of work there. It's on a tribute at the moment.
The work that we've done has shown that in light of the current gold prices, there's mineralization there that we cannot ignore. That's going onto the table for 2027, and we're going to execute the work stream very similar to what we've done at the caputs and take it from there. Abercorn and Valentine. Valentine is directly adjacent to Blanket. Again, it's on a tribute. Activity has picked up there. In a nutshell, it's kind of like being a kid in a candy store. You cannot have a dartboard. You cannot go, "Well, let's try this one and put a hole in. Let's try that one, put a hole in." We're going to put a cross or a tick through all of these claim areas. Excuse me. As we move on and away from Blanket, we talk about what we've done at Motapa.
Motapa is exciting. Clearly or as people know, Caledonia acquired Motapa in December 2022. You can see the nice light blue outline is the Motapa area, and the red outline is the Bilboes area. Directly adjacent to one another, they share a common boundary. The areas that are marked as Pluvius, Boomgate, Jupiter Shoal are the pits on the Motapa north trend. It's approximately 1,500 m as the crow flies to the Bilboes plant. You can do your own maths, you can do your own assumptions, but clearly that's where the ore is going to go. What did we do? In 2023, after acquisition, we did a data-gathering exercise because it is a brownfields area. It has been mined. There is a historic leach pad that there was oxide mining activities in the late 1990s. We did a LIDAR survey for topography.
We did an aeromag flight, and we did some ground-penetrating radar. 2024 accelerated. We did almost 13,000 m of surface trenching, which is represented by those red and light blue vertical lines. We did about 4,500 m of diamond drilling, and we did a further 5,500 m of reverse circulation drilling. This was spread over the project to get an idea of which areas are priority. Coming into 2025, we managed to squeeze out an expanded exploration budget, and that resulted in us doing 22,000 m of surface trenching, following up with 1,500 m of diamond drilling and about 18,500 m of reverse circulation drilling. All of this has culminated in the last two years of active work in a measured and indicated mineral resource estimate of approximately 379,000 ounces and an inferred resource estimate of about 131,000 ounces.
The implied discovery cost, not with acquisition but discovery cost only for what we have spent, is approximately $15.8 per ounce for M&I and approximately $11 per total mineral resource ounce. Put it into context with acquisition costs of the industry out there. People are paying anywhere from $40 up per total ounce for new properties, for new projects. We are advancing this, and as the resource base grows, clearly that is going to drop, and that number is actually going to get less. Just to give a very simplistic, quick overview of what the mineral resource estimate looks like. The big slide that you see there is Motapa North. The mineral resource that has been declared is approximately 80% is on Motapa North. There is a small portion that came out of Motapa Central. We only started drilling that late.
It has been defined through a combination of surface trenching, ripping the old pits on the pit floors, and as you know, a combination of reverse circulation drilling, diamond drilling. It has all been independent assay work and everything like that. The top right-hand image is just a simple section through essentially what the ore bodies look like. It is a multiple shear system. Again, it is very common in the greenstone belts of Zimbabwe. It is not one simple shear, it is a multiple shear system, exhibits a bit of pinch and swell. And that image clearly shows the surface topography of where the open pit oxides have been mined, and what we are kind of looking at. The bottom image is just a block model image with some grades there. We can see that we do have some higher-grade areas.
And this mineralization kind of moves between the shear zones. They pinch and swell. Some good grades, some moderate grades, and drilling will continue. On the last slide, just what we have planned for Motapa. We have had a look at essentially Motapa North. We are not finished. We still need to do some infill drilling. There are some areas that are not classified as a resource as yet. We still need to put some more holes in. The resource is down to 190 m below surface. There is possibility to take that down a bit further. Motapa North ongoing. The area marked as number two is what we like to call Motapa Central. We have Mpudzi, which is a banded iron formation outcropping on surface. Has not been historically mined in the context of you see a visible open pit. There has been a bit of artisanal working.
We are looking at the mineral resources below Britwell and Fosika. From there, we have commenced in 2027. We are having a look at Motapa South, drilling below Half Day and Trail. One of the exciting things that we want to have a look at is kind of at number 4. So number 4 is a northeast extension of Motapa South. There is no historical open pit on that area. You can see that we have trenched the area. We have put in four reconnaissance holes, so that is on the table for 2027. What I said about throwing the darts. Analyzing all the data that we've got, the small little area marked as number 5 is a new area that we have found. We've confirmed it with surface trenching. Currently, it's approximately 250 m long, about 8 m wide on surface.
We have put in some reconnaissance holes. I cannot tell you what the values are. It's not public information at the moment. That's going to be a further area that was not initially considered. The exploration program at Motapa, it provides a meaningful resource growth opportunity that really potentially is probably the perfect bolt-on to the Bilboes property that we have. Exploration at Caledonia is healthy. We have multiple opportunities, both near term, and as you can see, we have multiple opportunities both long term. With that, I'll hand over to the CEO who'll take us to the next section.
Thank you. Thank you, Craig. Right. I think just to bring an end to this part of the session, we'll just run a very quick video on ESG. This is being read by Colleen Parkins, who's our Head of ESG based in Johannesburg, and it shows some of our ESG initiatives. Environmental and social considerations have always been important to our operations. But over recent years, we've done a lot of work to refine and expand the scale and scope of what we do in both areas. Importantly, we've also substantially improved the way that we communicate these activities so that stakeholders have a clearer understanding of the impact that's being delivered across the business. I think with that, does the video start automatically, Camilla? Do I need to press something?
At Caledonia, we are building a platform for long-term sustainable growth. As a Zimbabwe-focused gold producer, we operate in a complex and evolving environment, and we recognize that how we manage environmental, social, and governance matters is fundamental to our success. ESG is not a standalone initiative. It is embedded in how we make decisions, manage risk, and create value for our stakeholders. Our approach is practical and focused, grounded in safe operations, responsible environmental management, strong community relationships, and disciplined governance. We listen carefully to our stakeholders and the issues that matter most to them. As part of this commitment, we recently undertook a double materiality assessment to identify the ESG topics that are most important to our internal and external stakeholders, including employees, management, local communities, suppliers, investors, and government representatives.
The assessment evaluated 33 ESG topics and identified five key priorities, including water management and pollution prevention; mine waste management, including tailings and effluent management; workplace health and safety; and local community and stakeholder engagement. Protecting the environment is central to how we operate. Our key focus areas span energy and diesel consumption, responsible tailings management, and water stewardship, each reflecting specific environmental challenges and responsibilities of operating in Zimbabwe. One of the key challenges is a constrained and sometimes unstable power supply. Historically, we relied on diesel generators as a backup power source during outages, an expensive and carbon-intensive solution. In 2025, we commissioned a 12 MW alternating current solar plant, which now supplies approximately 20% of Blanket Mine's daily electricity needs and reduces our diesel consumption. The impact has been significant, with the group's reliance on diesel power falling from 8% in 2020 to just 2% in 2025.
This progress was recognized at the Mining Indaba in Cape Town, where in 2024, Caledonia received the Responsible Resourcing Award for climate. We continue to build on this momentum through real-time energy monitoring dashboards, enabling us to optimize efficiency across our operations. Responsible tailings management is equally critical. At Blanket Mine, we operate two facilities. The legacy tailings storage facility, constructed in the 1990s, stopped receiving tailings in 2023 and is now being monitored as we progress towards its closure and rehabilitation. Our new TSF has been designed to high international standards, featuring a double liner system that minimizes environmental risk and has improved water recovery by approximately 66%. Both facilities are managed in alignment with the global industry standard on tailings management, ensuring safety and accountability. Water stewardship is another priority in the semi-arid area where we operate.
In 2025, we reduced total water consumption and significantly increased recycling, with over 1 million m³ of water reused across our processes. Our focus is on using less fresh water, improving process efficiency, and protecting shared water resources for surrounding communities. In 2024, we performed a climate change risk assessment for all of our mines and projects and confirmed four main climate risks in our area of operation. These are the potential for drought, wildfires, extreme weather events, and extreme heat. All have the potential to impact on our operations, our employees, and our local communities, and we actively manage these risks at an operational and group level. Underpinning all of this are strong environmental management systems. In 2025, we implemented IsoMetrix, an electronic integrated safety, health, environments, and community platform, enabling better data collection, monitoring, and incident reporting across our operations.
Alongside this, we have introduced digital dashboards to track energy, water, waste, and emissions, improving visibility and decision-making across the business. Looking ahead, the Bilboes Project is central to our growth strategy, with construction expected to begin shortly. Environmental and social impact assessments have been completed and approved, and our ESG systems are already in place to support responsible development from the outset. Our business is deeply connected to the communities in which we operate, and our social investment is designed to deliver long-term visible impact. Through the Sitezi Project, we have invested in meaningful infrastructure, including schools, healthcare facilities, and reliable access to electricity and water. In 2025, Sitezi Project was fully completed and handed over, transforming access to education in the area. We have also continued improving school infrastructure at Sabiwa, supporting better learning environments and outcomes for local students. Our community investments extend beyond education.
We have funded clinics, maternal health facilities, sanitation upgrades, and borehole drilling to improve access to safe water, all designed to raise the quality of life in our host communities across health, education, and basic services. We also support sustainable livelihoods. Our agricultural programs, including artificial insemination initiatives, are helping to strengthen cattle herds and improve resilience in rural communities facing climate pressures, contributing to long-term economic stability and food security. We have also assisted with supplementing water supply for cattle in local communities through the installation of boreholes and drinking troughs. A defining feature of Caledonia's approach is meaningful local ownership. This includes a 10% stake in Blanket Mine held by a trust on behalf of Blanket employees, a further 10% of Blanket Mine, which is owned by the Gwanda Community Share Ownership Trust, and 16% of Blanket, which is owned by the National Indigenisation and Economic Empowerment Fund.
This ownership structure ensures the economic benefits of Blanket's activities are shared directly with employees, communities, and the country. Caledonia makes substantial contributions to Zimbabwe's broader economy, with a total of over $256 million contributed to the Zimbabwean economy over the last 10 years through taxes, dividends, royalties, and community investments. In 2025, local supplier spending increased significantly to 55% of total procurement. Community investment continued to grow, and over 98% of Caledonia's workforce comprised Zimbabwean nationals, with 100% Zimbabweans employed at Blanket Mine. We have further supported the development of Zimbabwe's financial markets by issuing $11.5 million in bonds to local institutional investors. Strong governance underpins everything we do. As a company listed on the New York Stock Exchange, AIM, and the Victoria Falls Stock Exchange, we are committed to maintaining high standards of corporate governance, transparency, and accountability.
Our governance framework supports effective decision-making, robust risk management, and ethical business conduct across the group. We continue to uphold a culture of integrity, supported by clear policies, regular training, and a strong commitment to compliance. By maintaining rigorous governance standards, we aim to protect stakeholder interests, manage risk effectively, and support the sustainable growth of our business. At Caledonia, ESG is integral to how we operate, grow, and create value. As we evolve into a multi-asset gold producer, our ESG framework will continue to guide how we manage risk, invest responsibly, and build lasting partnerships with our stakeholders. We remain committed to responsible mining, and our focus is clear: to operate with integrity, support our people and communities, and deliver sustainable long-term value.
Okay. Well, I think that brings an end to the formal presentations. Can I suggest that we stop there? Pause for coffee. When we come back, Ambassador Taonga Mushayavanhu will give us a brief address, and then the floor is completely open for discussion and questions. Okay, so I think we should pause there and then have coffee now. So if that's okay. Thank you.
[Break]
Sorry. Okay, are we ready to restart again? The lesson's going to get very short. Let me just recap what we've heard this morning then, before I hand over to the ambassador. Maurice Mason gave us a brief presentation which showed that our focus on Zimbabwe was part of a disciplined and systematic strategy, and it wasn't something that happened by accident. I then spoke about Blanket.
I highlighted the historic increase that we've seen in our online costs and set out the general strategy that we're adopting, which is primarily based around increasing production to get those costs down again. Then you heard from Victor, who gave some very clear milestones as to the development activities and the progress at Bilboes. And set out that we've now created the team to implement the project. We're well advanced on the procurement, and the project's on its way. Ross told you how close we are now to finalizing the financing package for the Bilboes project. And then finally you heard from Craig, who touched on exploration at Blanket, which is very much a new horizon for us, and Blanket's got exploration potential, both at depth and in the shallower areas.
For a mine that's 120 years old, it still has great potential, both at this current production level and, we hope, much higher. But also the very exciting exploration potential at Motapa. So that's what you heard this morning. I'll hand over shortly to the ambassador, the Zimbabwean ambassador to the United Nations here in New York, Ambassador Taonga Mushayavanhu. Before I do that, I'd just like to give you five fun facts about Zimbabwe. The first is inflation. Clearly, people have got a perception about Zimbabwe as an inflationary environment. Inflation in Zimbabwe is currently 2.9%.
Annually.
Yes. Annually. Yes. Thank you, Howard. U.S.A. is 3.4%, and when I wrote this, the U.K. was 2.9%. It's now gone up to 3.2%. So Zimbabwe is by no means the high inflation environment that people expected. The currency is stable. Over the course of the last year or so, the ZIG has been within a trading range of plus/minus 0.4% against the US dollar. Zimbabwe is currently running a balance of trade surplus. In August, the World Bank removed Zimbabwe from the list of fragile and conflict-affected economies. And finally, last year, Zimbabwe's economy grew at a rate of 8.3% GDP. So with that background and those rosy opening comments, I'll hand over to His Excellence, the ambassador, to make a few words. Over to you.
Ladies and gentlemen, before the ambassador comes, I'll just introduce him briefly. Thank you. His Excellency Ambassador Taonga Mushayavanhu is the ambassador and permanent representative of Zimbabwe to the United Nations here in New York. Ambassador Mushayavanhu is a senior Zimbabwean diplomat with extensive experience in multilateral diplomacy, international trade, African affairs, and government. Before his appointment to the United Nations in New York, he served in the Office of the President and Cabinet as head of the president's secretariat and chief of staff. He previously served as chief director of multilateral affairs in the Ministry of Foreign Affairs and International Trade. From 2020 to 2022, he was Zimbabwe's permanent representative to the African Union and UNECA in Addis Ababa. He also served as Zimbabwe's permanent representative to the U.N. Office in Geneva and the World Trade Organization, alongside earlier diplomatic assignments in Beijing and London.
He holds a master's and honors degree in economic history from the University of Zimbabwe, with postgraduate qualifications in management from the University of London and diplomacy and international studies from the University of Nairobi. His career across the U.N., African Union, WTO, and Government of Zimbabwe gives him extensive experience in Zimbabwe's foreign policy and engagement with regional and international institutions. We are honored to have you, Ambassador, and we do acknowledge the support which we receive and the close working relationship which we have with the Government of Zimbabwe and the support we've been given over the years to be able to get to this milestone and to be able to take this forward. Thank you very much. Please come forward. Thank you.
Well, thank you, Victor, for that introduction, and thank you, Mark, for doing some of my work for me in terms of all these statistics about Zimbabwe. Let me start by also recognizing some of the board and management of Caledonia who are here, and also the distinguished investors, analysts, and development partners that are here, and those that are following us online. I'm really honored to deliver some remarks on behalf of the Minister of Mines and Mining Development, Honorable Polite Kambamura, who regrettably could not join us today. He really would have wanted to be with us, but I'll do this on his behalf. It is really a privilege for me.
We normally address diplomatic gatherings, political gatherings, but for me, it is really a privilege to be addressing an audience that makes decisions to allocate capital, to price risk, to shape investments measured in decades in terms of the mining industry. So I really want to commend Caledonia Mining for convening this important capital markets event. Blanket Mine, as we've already heard, which is located in Zimbabwe's renowned Gwanda Greenstone Belt, produced 76,000 ounces of gold in 2025, while Bilboes and Motapa continue to advance their development towards production. Caledonia's experience is compelling evidence of what patient capital, and sound management, and long-term commitment can achieve in Zimbabwe. This will really be the thrust of my presentation this morning.
As our President, Dr. Emmerson Mnangagwa, has consistently affirmed, Zimbabwe is open for business, and mining is central to that vision when we say Zimbabwe is open for business and will remain a key pillar of Zimbabwe's economy under our development blueprint, the National Development Strategy 2, which will span from 2026 to 2030. Zimbabwe is endowed, as we have heard, with more than 40 exploitable minerals. The Great Dyke, which was displayed earlier on a geological intrusion, hosts significant amounts of platinum group of metals reserves, and alongside gold, silver, chrome, and nickel, among others. Zimbabwe also holds Africa's largest lithium resources, in addition to diamonds, coal, rare earth elements, and so forth. But what makes the opportunity particularly compelling in terms of looking at Zimbabwe is that this mineral worth remains underexplored by modern-day standards.
In a world of maturing mining jurisdictions, Zimbabwe offers both established and large-scale deposits and also genuine greenfield potential. In the first half of 2026, Zimbabwe's mining sector generated approximately $ 5.7 billion in mineral export earnings. By our standards, that's quite a large amount. Excluding gold and silver, exports grew by 84.7% compared with the same period in 2025, placing the sector on course to surpass last year's record. We've been hitting records in these past years in terms of our mining industry. Our investment framework rests on three principles. First, policy stability. Mining projects are measured in decades, as we said earlier, and investors must be able to plan and deploy capital with confidence. Second, competitiveness. Zimbabwe is among other countries that compete for global capital, and we have to continue to benchmark our fiscal and regulatory frameworks against leading jurisdictions.
Third, issues of transparency and partnership. We're improving coordination across government, streamlining licensing, permitting, and also greater clarity on regulatory requirements. Government is also modernizing the Zimbabwe Geological Survey through digital technologies, through remote sensing, artificial intelligence, alongside a national airborne geophysical survey to provide investors with modern geoscientific data. The e-Mine Cadastral System is also being completed to ensure transparent, efficient, and verifiable administration of mineral titles. Zimbabwe permits 100% foreign ownership across all mineral sectors, providing a clear and open framework for international investment. I think this is one of the questions that was asked earlier about ownership structures. I was saying this time ownership is open. We, of course, always encourage some empowerment schemes. Our empowerment approach emphasizes local procurement, skills development, and community partnerships, alongside value addition and issues of beneficiation.
On that, in terms of beneficiation, Zimbabwe has shipped Africa's first battery-grade lithium sulfate from one of our mines called Arcadia Lithium Mine. With additional processing capacity, we think we can move further to lithium carbonate and other mines like one at Kamativi Mine, also processing lithium, and one of the oldest lithium mines called Bikita Minerals. They are also building their own processing capacities. This is the trend in Zimbabwe. We are pushing more and more the issues of beneficiation. At a place called Manhize, where we have a steel complex, iron ore is being transformed into steel. These developments are creating opportunities for investors to capture greater value downstream within Zimbabwe in terms of value addition.
In terms of investment, we are also advancing across issues of feasibility, construction, and production, while brownfield expansions and critical mineral projects are also increasing output and increasingly integrating Zimbabwe into the energy transition supply chains. With global demand for critical minerals rising and supply chains diversifying, Zimbabwe is well-positioned to benefit from these trends. This growth must also be a responsible growth. Our motto that is in the Ministry of Mines is, "Sustainable mining, our legacy." This reflects our commitment to issues of environmental compliance, progressive rehabilitation, safety, and genuine community benefit. I want at this stage to commend Caledonia in terms of their solar investment at Blanket Mine and for their community projects, which we saw in the video. Ladies and gentlemen, Zimbabwe's mineral endowment is well-established. Our policy direction is clear, and government is committed to being a reliable and predictable partner.
We welcome investors who see Zimbabwe not as a short-term opportunity, but as a long-term mining destination worthy of global capital. Caledonia is demonstrating that confidence through its long-term presence and its contribution to both the mining sector and the communities in which it operates really is the way to go. May this partnership continue to deliver mutually beneficial returns well into the future. To those who are not yet invested in Zimbabwe, my invitation is simple. Take a serious look at Zimbabwe. Put your stakes in a mining sector whose way it is forecast to be strong with a future that is promising. With that, I really want to conclude, and thanks once again to Mark and Victor for this opportunity to address this audience. Thank you.
Okay, I think we now move on to discussion Q&A. If I can ask the management team to come and occupy these fetching bar stools. I think we will take queries from the room, and to the extent there are queries being typed in online, someone will tell me what those are, and then we will allocate them and deal with it accordingly. Okay. So it is probably easiest if we start in the room first. If you have a question, please put your hand up and do it the normal way. Howard. Questions?
Yeah. Thanks for hosting this Capital Markets Day. It's very good presentations. I did have a couple of questions. First one is, it sounds like you're very close to finalizing that $150 million interim facility that'll be secured against Blanket. Because you're so close to financing it, my question is, can you give me any color on what the tenor of that facilities might look like and interest rates and just kind of want to stack it up versus maybe the cost of capital on the convert?
Ross.
Hi. No, thanks for the question. We're very close, and we're going to do a public announcement on it. The interim facility is all about this bridge. As I said, it's really looking at a three-year type time horizon. Whether we actually use that whole tenor horizon, we'll see in terms of timing of the other facilities that are there. I think at this stage, whilst it's very close, I'd be reluctant to give you pricing on that in terms of where it sits. But we're actually delighted in terms of the cost of those facilities at that time. But I just don't want to name a rate, yeah.
Before you jump to the next question, I would just point out, we should be looking at the cost of various forms of funding compared to our cost of equity. I'm hoping Maurice is listening. Our cost of equity can be anything up to 40%, 45%. I don't know what it is at the moment. Even higher. Whilst I wouldn't for a minute say that we're indifferent as to the cost of the funding we're going to get through the interim facility, the comparator is the alternative being equity. It just dwarfs it completely. It's all I can say.
My second one was that at Bilboes, that's obviously going to be the company maker for Caledonia. I'm curious, where does that stack up versus other large capital projects in Zimbabwe in terms of size, scope, potential government revenues? I don't mean just mining projects. It could be infrastructure, energy, anything. Just kind of curious where that would stack up.
The other big project that is happening at the moment is the Karo project. Victor, have you got more context on that?
Yeah, the Karo project is a platinum project within Zimbabwe. If I just look at the other investments which have taken place, obviously at the moment, the biggest mining investment in Zimbabwe has been Zimplats, right, on the platinum side. We have had now the lithium mines coming up, like Arcadia. I think someone talked about, the ambassador talked about Arcadia, the big investment which has taken place. There is also, for instance, the ambassador also talked about Manhize, which is the steel plant. It is actually quite huge. On the gold side, this project is probably the biggest one going on at the moment, which also just shows the potential for Zimbabwe in terms of other projects to come through.
I think it is not just the US dollar CapEx spend. I think the thing that marks out the Bilboes transaction is the strong economics, super fast pay round and pay turnaround in terms of moving in from the Zim government's perspective, turning into a taxpaying perspective. So I suspect we are substantially bigger than the others from that perspective. Any questions online, Scott?
A lot of questions online. First question is, do you see any problems on improving heavy equipment, sorry, importing heavy equipment in the new mine, time frames as well as logistics?
We don't see any issues in importing equipment into Zimbabwe. All this equipment which comes into Zimbabwe, if it's a mining project, it's actually duty-free. You can import quite easily. It's probably the logistics of moving it from wherever it is. But what we have done is to go out early in terms of the contracts, because obviously shipping times have increased since the Middle East conflict or even since COVID, really. So we have taken the deliberate move of actually going out to the market earlier. And Ross mentioned the importance of actually putting in the capital in place, the financing in place, which is what we have done. And the long lead items, we're busy placing orders now, and we're busy paying deposits for those. So we don't see any problem in moving heavy equipment into the country.
We move equipment up to Blanket all the time across borders, and I'm not aware of any significant difficulties getting stuff into the country, either from South Africa or elsewhere. As Victor says, the biggest issue that we've faced has been on the high seas. Things being delayed coming from a long, long way away or things being delivered at Durban docks and then being dropped and broken. But that's nothing to do with getting things into Zimbabwe. That's just a general run of business issue.
Thank you. Next question.
Might just end on that, Mark. At the end of the day, the Zimbabwe government is very supportive of capital projects. The kind of support we get from the Ministry of Finance, Ministry of Mines, the Ministry of Environment, everyone in the chain, they are really supportive of big projects like this because obviously they generate a lot of foreign currency. They generate employment generally.
But a case in point there would be the solar project where we imported $15 million worth of very visible kit and equipment. The Zimbabwe government facilitated that being transferred seamlessly through the border. So it was a really very good experience.
Thank you. Maybe a similar sort of question, but what has improved in Zimbabwe's investment environment, and what still needs to change?
Victor, do you want to have a go first before I Do you want to go first?
Generally, if you look at in terms of the policy environment, it has improved a lot. Stability. Mark did talk about the inflation environment, which has really stabilized. He's talked about the exchange rate. That's really stabilized at the end of the day. The kind of policy support which the government has been giving to industry to make sure that things go, that has really improved quite a lot. The issue of foreign currency remittances, if you have loans or if you want to remit dividends, that has improved quite a lot, especially if you are an exporter because you're earning your own foreign currency, so you can actually export money, pay dividends, pay loans, and things like that. That environment has improved quite a lot.
Yeah. There's been a liberalization in the foreign exchange regime. Clearly, we'd like to see that liberalization go further. But our engagement with the governor of the Reserve Bank and the Ministry of Finance gives us a high degree of comfort that that liberalization is on its way. I guess it really comes down to the daily business of bureaucracy. There is a bureaucracy to go through to do things, and that's simply just making sure that you press the right buttons in the right order. We're very, very good at that, having operated in Zimbabwe. I personally can't say if that bureaucracy is any worse in Zimbabwe than it is in other jurisdictions. I don't know, but we manage to make it work. Again, it's just process, it's not an obstacle.
Mark, if I could add the second part of the question about what needs to change, I don't think it's about change. I think we would be looking for consistency. All we want is the goalpost to remain the same, talking about that long-term tenure, visibility over the longer term, and just being able to plan with it.
Another good example I can give. As a gold producer, we are required to, once we produce gold, to send it to Fidelity Gold Refinery to refine. We used to sell to Fidelity. All we have to do is if we produce, we send to Fidelity. Fidelity refines the gold, takes away all those impurities, and gets it to 99.94% ore in terms of purity. When we export that gold, although we export it using Fidelity's license, we export it to a customer of our own choice. The money, the foreign currency, comes directly into our foreign currency account.
If you're borrowing offshore, like we're going to do for project finance, what it means is offshore, we can establish an offshore collection account and an offshore debt service account, which ensures that the financiers are actually assured that the money doesn't have to go to Zimbabwe and come back out. It's out there. They just grab their portion, which goes into the debt service account, and then we pay off the loans. That's improved quite a lot, and it has made it much easier for us to negotiate with the project finance teams or even the banks. We've been doing that for several years now, haven't we?
That's not new news. We've been doing that for several years. I've got to say, delivering our gold first to Fidelity for refining is by no means burdensome. They're extremely good at taking out some quite difficult impurities, which when we used to export directly ourselves, caused all sorts of difficulty. It cuts clean through any debate about how much gold we produce because they know how much we produce because they refined it for us. It's a very clean setup, and we like it. Any further questions there?
Yeah. Next question is, where are you selling gold through currently? Has it moved to selling exported gold through South Africa changed the risk profile, and do you expect to return to the Middle East export route?
We will continue to export to the Middle East and to South Africa. We would, as far as possible, have as many routes to market as possible. We delivered a consignment to South Africa on 6/29, hoping to sell it on 6/30, and it got stuck in a warehouse because there was what you could only describe as civil insurrection in South Africa. Clearly, there has been the events in the Middle East as well. So our objective would be to have as many different routes to market as possible to give us maximum flexibility to be able to cope with any unforeseen eventualities.
Thank you. Next question is, what is the status of the royalty situation in Zimbabwe given the proposed changes to royalty structure in late 2025? Can you also comment more generally on the broader fiscal stability up to and beyond delivery of Bilboes investment?
Do you want to talk about the royalty, or shall I do that?
Well, the-
Well, look, I think we've been very clear, and this issue about the royalties is old news that's been put to bed very comprehensively many months ago. Late November, the Zimbabwe government published a budget proposal which included a proposed increase in the gold royalty rate from 5%- 10%. We were horrified. We'd not seen that coming. It came as a real surprise. We engaged with the government immediately, and within a matter of weeks, a situation that had been resolved. The royalty rate returned back to 5% and will only go to 10% if the gold price exceeds $5,000. We'd still like to engage with government to see if that cliff edge increase can be modified. I think, again, the permanent secretary for the Ministry of Finance stood up at an event we did in Cape Town in February.
He was extremely transparent about this. To paraphrase him, he said that the increase was an unexpected development. It was a mistake. The critical thing about the Zimbabwe government is that having recognized the mistake, they corrected it very quickly. I think we'd agree with that wholeheartedly. So we don't see any jiggery-pokery with the royalty rate. The tax regime has been super stable for as long as I've been at Caledonia Mining. Again, changes to the overall tax regime is not something that we worry about. Ross, you?
Again, an earlier point about stability, so the tax regime is very beneficial. It hasn't changed over time, and particularly with the tax deductions for mining operation, they're very conducive. So, we're very happy with what we've got from a tax regime and status quo.
I can see Howard's got a question here in the other room. Exactly. That's the way we took it, yeah. Howard Flinker is saying that a long-term gold price of $5,000 is a high-class problem. That's exactly the way we see it. But having said that, we would like to get a more sensible smoothing of any phased increase of the royalty rate at higher gold prices. Instead, you've got a cliff edge at $5,000.01. That's all we'd ask.
Has the government offered to lend any part of that $150 million?
No, we wouldn't ask. We don't need it.
No?
No. We're completely comfortable working with the commercial sector. Another question in the room here.
I have one question for Blanket and one question for Bilboes. On the Blanket, if I'm not mistaken, the current estimate for 2027, the guidance is still 75, right?
It is. But what I've made very clear at the moment is that's going to change to the upside.
Right
When we've finished our deliberations about how and when we can increase the plant size.
Because I'm seeing you already have six to seven days. You already have the grade recovery.
Yes.
And you have the K pit coming up, and you have the crusher CIL upgrades coming up. All those things stack up, too.
Yeah. Craig's finishing a technical report, which he'll publish in the end of October. End of October. End of October. That will reflect all of those factors I spoke about this morning.
Okay. One thing isn't clear is the CIL and the crusher upgrade dates.
That is exactly right. We are not clear on those dates. Or indeed the precise cost, because that requires people to come and do things. We are kind of in the hands of procurement and contractors and that sort of stuff.
I think the presentation is already leading to about $2 million, $3 million. It is a relatively low cost.
In the Q2 results, we put in an estimate, I think, $3.5 million.
Yeah, $3.5 million.
That could change slightly for the upside or slightly for the downside. $3.5 million is our best estimate. It may be slightly different, for better or worse.
Is the bottleneck, if we're, say, talking about the past to 100K ounce, I think you mentioned that. Is the bottleneck at the hoists or it's at the processing?
No, the hoisting capacity is 3,500 tons a day up Central Shaft and probably another 1,500 up number four shaft, so about 5,000 tons a day. Simplistically, 5,000 tons a day would translate, I think, to something like 110,000, 120,000 ounces a year. So that's not the constraint. The constraint currently is the crushing and the CIL. So what we're doing is we're now beginning to ask ourselves, what could Blanket become? Frankly, what Blanket could become is going to be constrained by two things. First of all, it's the hoisting capacity. If you've got open pit operations, that kind of sidesteps the hoisting capacity. The other one would be the rate of rise on the tailings facility. I would estimate that would cap us at about 120,000, 130,000, I'd expect.
Good. Really great work there. Bub, I couldn't butcher the name.
Victor.
No, no, I know your name. But Bilboes.
Everyone knows.
You go. Actually, by the way, I start to get interested in the company because of you. I saw your name. There's nothing can break you. You have been on this mine for 20, 25 years.
Good.
The question is, the feasibility study. The reason feasibility study on the mine, one change is you front load the first year production to 200,000 ounce, right? Then in the second year and going forward is a little lower, 140,000- 150,000-ish. Versus the previous feasibility study, it was more flat. What was the rationale behind? I am assuming going to 200,000, a lot of other things you have to increase the capacity by milling, all those things.
It was never actually 200,000 throughout. But even in the original feasibility study, the top was 200,000. Again, it is very simple. When we were doing exploration, when we were on our own before our transaction with Caledonia Mining, what we simply looked for was a resource which would give minimum of a 10-year life of mine. Based on the drilling which we did, we had enough resource to peak at 200,000, but probably average around 150,000 ounces. Obviously, when you are operating, it is something else. Craig, the master of exploration, we expect him to do more exploration. So I cannot say to you it will be 200,000 throughout because we have not done the exploration. But what we have is based on the feasibility study, which we did.
Yes, I think Victor is making two points. The first is that, don't for a minute think that Bilboes' life is as set out in the feasibility study. There is further exploration potential to do. But if we continue exploring and exploring and exploring, we will never build it. So Victor's point is we have got a resource base that supports a very strong mining operation. Let us get that done and then see what comes later. In terms of why did the annual production for the first year go up? It is just simply the economics. We would prefer to get more cash out more quickly for every possible reason under the sun.
Mark, if I could put that into a bit of context. So Bilboes is comprised of what we call the McCays pit, the Isabella North pit, and the Isabella South pit. So there is a whole bunch of multiple pits that are there. So moving to the feasibility study that has been published now, there was obviously some, what can we schedule, move some tonnage around? We are starting off at the McCays pit, and the McCays pit has a higher grade as well. So it is one of the reasons for the bump in the answers.
Any further questions in the room, or shall we go back on?
It is okay.
Anything online?
We will move back to questions from the webcast at the moment. Zimbabwe's Ministry of Finance has indicated intention to return to mono currency by 2030. How do you see this risk affecting your operations?
Victor, you're much closer to that than me.
Okay. In February this year, just after Mining Indaba, we held a similar event to this which was a Zimbabwe Mining Breakfast workshop in Cape Town. We had the Secretary for Finance present. We had someone from the Reserve Bank of Zimbabwe present. The issue of mono currency obviously was at the forefront of most of the conversations. What the Zimbabwe government is saying is, what will drive us to mono currency are a few handles to achieve. Like for instance, import cover, inflation level, in terms of government expenditure, and all those nice things which the economists normally associate with a stable currency.
On top of that, the Zimbabwe government is saying, "Look, at the end of the day, everyone, an exporter or individuals, will be able to retain their money in foreign currency." The only difference is, if you want to trade locally, if you want to pay for something locally, you have to convert your money locally. But you still keep your money in foreign currency. We see very little risk as far as the issue of mono currency is concerned at this stage, based on what the government has said and also based on what has been happening so far.
And to be absolutely clear, George, the permanent secretary from the Minister of Mines, stood up in front of about 150 people in Cape Town and said exactly that. Okay? Again, that's not something we're concerned about. But the point Victor was making about the criteria to bring in the mono currency, that kind of speaks to this deadline. This deadline of 2030 isn't a deadline. It will happen when it happens based on achieving certain objectives.
Thank you. Do you see any problems on importing heavy equipment for the new mine, i.e., time frame as well as logistics?
I think we've addressed that. The answer to that is no, subject only to international supply chains, which, as we know, have become somewhat more challenged. We've deliberately done is we've put ourselves in a position where we have sufficient liquidity early on to make sure that we can make and pave the procurement bills really very quickly. So we're deliberately trying to sidestep that by making sure we've got the financial capacity to actually buy the mills and get them on the seas sooner rather than later. Having said that, a lot more of the procurement seems to be coming from South Africa than we'd expected. So not necessarily being on the high seas.
How confident is the management in the Bilboes capital cost estimate?
Victor, how confident are you?
Look, at the end of the day, we got to a point where we analyzed this project to paralysis in terms of relooking at it, how we could fund it, where we could actually improve and things like that. DRA is not a fly-by-night EPC or study manager. They have done a lot of these projects. So they have benchmarked this against other projects which they have done. Obviously, shocks in the world, like for instance, at the moment, if you look at the oil costs, for instance, they have gone up significantly compared to what they were when we were doing the study. So that might affect the cost of delivering the equipment. But again, having said that, we have put in a contingency. We have allowed for contingency in the capital cost.
As Victor explained, we are already partway through the procurement process, and once that procurement process finishes, then we will have the definitive cost of the project, and that should be sometime in November.
Yeah.
So clearly, we are somewhat at risk for price fluctuations now. But once we get to the end of November, we should be very clear.
Next question. How much scheduled contingency is built into the late 2028 first gold target?
There is already flexibility. We had an independent consulting company come and do the risk assessment with the teams, which included ourselves as Caledonia Mining, DRA Global, and some of the independent consultants. We did build in some contingency as far as the time is concerned.
Can I make sure people understand what this risk is, though? The project delay, as we have said several times, is the biggest value destroyer of the project. About every month delay, Maurice Mason, costs about $8 million on NPV. I also want to make it very clear, that does not mean the company is running out of money. Underneath all of this, we have got a producing asset. I do not want people to think that if the project gets delayed by six months, clearly, the NPV goes backwards because everything is then pushed to the right, but it does not mean that the company is in mortal jeopardy of going bust. We still have a business producing cash. Clearly, we want to get this thing done as quickly as possible to maximize the NPV, but it is not an existential crisis.
Thank you. From the plans we have seen, Motapa seems to have a larger land mass than that of the Bilboes area. Will the two properties share key infrastructure over time? Can you comment more generally on the exploration potential of Motapa compared to Bilboes?
The last bit, Craig Harvey can answer, but the whole point of buying Motapa is to put it together with Bilboes, and the intention is very much that one way or another, there will be shared infrastructure. It is too early to say what that will look like until we have got a clear view as to how much we have found at Motapa, but that is the obvious reason for putting this together. Craig, do you want to sort of-
Before Craig gives it a crack. In days gone by, when we were still part of Anglo American, we operated that Motapa asset. Motapa and Bilboes were together. Anglo American's strategy at that time was that the resource at Bilboes and the resource at Motapa, because they are just next door to each other, can support a processing plant and share infrastructure. That plan went out of the window when Anglo American decided they were not going to be in gold going forward, which is in the early 2000s, when they shed off AngloGold Ashanti. This JV, which Anglo had with the owners of Motapa, also fell by the wayside because Anglo was not going to put in money.
In terms of the original agreement, Anglo was going to put a certain amount of money in terms of exploration and feasibility study and earn up to a certain level. But 2 years prior to that, they had already been mining oxides at Motapa. It is not something which is new, it is something which already we knew about. The team, the Bilboes team, which is now part of the Caledonia team, actually operated Motapa for a while and did a bit of exploration on that property.
Getting Motapa was not just some happenstance, sort of serendipitous thing. It was part of a very deliberate strategy. Craig, do you want to do the last bit?
If you look at the Bilboes comprises what you see on those images that we showed, Isabella North, South, and McCays, but then 30 Ks further to the north as part of the Bilboes project is the Bubi area, and that is what makes up essentially the 1.75 million reserve ounces. If you look at Motapa, and I have got to be careful what I say, but quite clearly there is Motapa Central, Motapa North, Motapa South.
We have got a new area as well. We know when you are finished on Motapa North, we have got 500,000 ounces. I do not think it is unreasonable to expect that we will get a little bit more from Motapa North and that Motapa Central and Motapa South is going to repeat. You can do your own numbers, but Motapa is going to be bigger than the Isabella North, Isabella South, McCays portion of Bilboes.
But in terms of people pressing us to see what Bilboes and Motapa looks like, we're just not going to answer that question. We've just asked people to focus on the Bilboes project as it's currently set out with an NPV at $1.5 billion at the current gold price. That's more than enough to be getting on with. Thank you very much.
Thank you. Next question. Can you please comment on the shareholding of Bilboes regarding possible third-party investment and also the potential for community and worker participation longer term?
I'm not aware of any third-party investment that's needed in Bilboes. I don't understand that question, so if somebody wants to come back with more nuance on that question, I'll happily deal with it. There is no legal need requirement anymore for local equity ownership in any project in Zimbabwe. Having said that, our experience at Blanket suggests that very strongly we understand the need to have direct local economic exposure to the mining project, and that's from the workers and from the community. We're still working through how and to what level of, to what quantum we would do it, but that's a work in progress. But I don't think we're looking at something like the 34% that we've got at Blanket. I think that ship sailed a long time ago. Victor, do you want to add anything to that?
Yeah, absolutely. If you look, again, as Maurice pointed out, Caledonia, as a group, it's already more than 20%, around 20% owned by locals, including my own family trust. At the end of the day, we're committed to this. We see value in local ownership, and really, it's value accretive rather than value destructive.
I think we've got to put some numbers on it. The 10% shareholding held by the Blanket workers equates to a payment to each worker of just over $1,000 a quarter. If you recognize that the lowest NEC grade wage is about $420 a month, that's a very substantial payout. But you've also got to recognize that the Blanket structure has been, I think, uniquely successful in Zimbabwe, and that it's equity-based. Many other indigenization structures were equity-based, but because the underlying business didn't perform, they never paid out. We know the government is looking closely at whether an equity approach is the right approach to achieving sustainable local participation. We'll engage and have a sensible dialogue. But frankly, I don't care how we do it, I just care that the workers and the community get a meaningful participation in the business.
Thank you. Now, we are reaching 12:30 P.M. at the moment, so maybe we've got time for one more question, which is around power. Demand for power is rising rapidly in Zimbabwe. Power is obviously a potential risk in the Bilboes project. Maybe you could comment on what risk mitigation efforts are in place to manage this risk. We've also had another question just around the fact that Zimbabwe is blessed with lots of coal, has coal power infrastructure. Has the company thought of any coal-fired power to support operations?
Okay. Those are both very good questions. Look at Blanket and Bilboes together. At Blanket, we're putting in a 132 kV connection to connect Blanket up to the 132 kV grid. As part of the Bilboes project, there always was a connection to the 132 kV grid. Once you're connected directly to the 132 kV grid, clearly you've got access to power that's generated in Zimbabwe. You've also got power that you can also import. Some of the big platinum producers already import power. There is no shortage of power in that part of Africa for dollar payers. None at all. Provided we've got the 132 kV connection in, if there's no local supply, we can import. Actually, we were part of a government-sponsored scheme to import power. That seems to have fallen by the wayside.
But again, going back to our relationship with the government, we've seen consistently over the past many years now that government understands that businesses like mining need access to power, and if it can't come domestically, it will come internationally. The fallback position would be a coal-fired power station. We've considered that, but it's not something we need to pursue at this stage. But if we felt that we were power constrained, that is exactly what we'd do, is we'd build our own captive power station using local coal and supply ourselves exclusively. But we don't believe we'll have to push that button.
Thanks very much, Mark. That is all the time we have got for questions at the moment. Maybe I could just hand back to yourself for some closing remarks.
Good. Well, look, thank you for the people in the room and also the several hundred people who have participated online. This has been a first for us. If it was a bit creaky around the edges, I am sorry. Next time we will do it better. We thought it was important to, especially having had the very successful capital markets, very successful convertible issue in New York in January. I am very pleased that Cantor Fitzgerald & Co. are here today. We understand that we have got an obligation to help people understand as best as possible where we are and where we are going as transparently as possible. So thank you all very much for your participation. Thank you very much to Camilla for organizing this. I know it has been very stressful. Thank you very much to the Ambassador for coming and giving us those words.
Thank you for the management team, some of whom have flown an awful long way to get here, and now they have to fly an awful long way to get home again. So thank you all very much. If I have missed something, I am sorry, but thank you.