PGM

Caledonia Mining has announced that the electricity supply situation at the Blanket Mine in Zimbabwe has improved substantially in late August and September.

This is thanks largely to a timely and coordinated response from the Chamber of Mines, the Ministry of Mines, the Ministry of Energy and Power Development and the Zimbabwean Energy Regulatory Authority (ZERA) which introduced a new electricity pricing schedule for the mining industry to support the funding of imported electricity which is used exclusively to supply participating mining companies.

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Caledonia CEO, Steve Curtis, says:

"The disruptions we experienced early in the third quarter necessitated a larger than normal utilization of our diesel generator back-up.

"We have been pleased by the rapid and decisive response from both government and industry which has resulted in the alleviation of the supply shortages and a more stable US Dollar based pricing structure.

"The arrival of an additional 6 MW of back-up diesel generators on site is also a positive development for our business in Zimbabwe and will ensure future reliability in the face of a potentially difficult electricity supply situation in the Southern African region in the medium to long-term.

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"We look forward to their commissioning which will help sustain the pace of the Central Shaft project which is key to the achievement of our long-term production target of 80,000 ounces by 2022.

"Moreover, Caledonia is at an advanced stage in the evaluation of a Solar PV plant which could supply Blanket's baseload demand during peak sunlight hours.

"Engagements are commencing with potential equipment suppliers and regulatory authorities and the engineering and financial evaluation work on this project is well advanced.

"I would like to take this opportunity to thank our technical staff both at the mine and in support functions who have managed to maintain operations during a disruptive period in Zimbabwe and have, as usual, delivered technical solutions to ensure our future business resilience."

Electricity is now priced in US Dollars at a cost which is slightly lower than the pricing structure prior to the recent monetary devaluation.

The electricity supply authorities have also implemented an uninterrupted power supply agreement for the mining industry in an effort to support the sector and electricity supply has stabilised following these changes.

Caledonia does note recent media commentary regarding the electricity supply and pricing situation in Zimbabwe as a whole but notwithstanding this, Blanket continues to operate normally and electricity pricing in US dollar terms is stable and not affected by the increases recently announced.

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As previously disclosed, Blanket did experience electricity disruptions during the month of July and in early August and relied heavily on its installed diesel generator back-up capacity.

Prior to this time, Blanket had installed back-up generator capacity of approximately 12.5 megawatts (MW), sufficient to run the entire mine at full capacity but insufficient to sustain both the mine and the Central Shaft project. In response to the increased risk of electricity supply outages Blanket has purchased an additional 6 MW of diesel generator capacity.

The additional generators are on site and are currently being installed and are expected to be operational within the month of October after which Blanket's operations will be fully insulated from the risk of unstable electricity supply.

Caledonia is also in the advanced stages of evaluating a project to install solar photovoltaic generating capacity at Blanket to further reduce dependence on the electricity grid, reduce operating costs and ensure a more environmentally sustainable electricity supply.

Advanced engineering work is underway and Caledonia is in the process of applying for the relevant regulatory approvals and will shortly embark on a tender process from interested parties to build and operate the project.  

Caledonia expects to fund the project itself but the tender process will also invite proposals from potential funders who may be able to offer a more cost effective funding structure.

In the future, Caledonia anticipates that Blanket will have a blended electricity supply from grid, solar and back-up diesel generators which will deliver greater levels of operational reliability, lower operating costs and improved environmental sustainability.