Toronto, Canada — MININGREVIEW.COM — 30 January, 2008 – Caledonia Mining Corporation – a Toronto-listed exploration, development and mining company with a diversified portfolio of exploration projects in Canada, South Africa and Zambia – has signed a cobalt off-take agreement with a large Chinese refiner for the supply of cobalt from its new Zambian operations.
In terms of the agreement – announced here today – Caledonia will supply a minimum of 21 000 tonnes of cobalt metal equivalent in the form of cobalt hydroxide from its Nama cobalt project in northern Zambia over the next six years. The agreement – which is renewable – specifies that the price shall be based on the published monthly average for 99.3% cobalt from the London Metal Exchange, and it contains a guaranteed “take or pay” minimum cobalt price of US$12/lb of cobalt metal.
Caledonia’s 100% owned Nama Project is located in Northern Zambia. The company is planning
to commence mining there using open pit mining methods, and pre-concentration and conventional cobalt extractive technology.
The company announcement reveals that Caledonia is proceeding with detailed mine planning, and is targeting commencement of production for early 2009 at an expected annual level of 10 000 tonnes of cobalt metal. “An internal feasibility study has estimated capital expenditure at US$125 million (almost R900 million) and production costs at below US$10/lb,” it adds.
The cobalt project will become the main strategic focus for Caledonia going forward. Commenting on the announcement, company president and CEO Stefan Hayden said: “The signing of this cobalt off-take agreement marks an important milestone for Caledonia as we commence with the development of Nama, which I expect will prove to be one of the world’s largest primary cobalt deposits. This contract represents substantial value and confirms Caledonia’s potential to become one of the key primary players in the international cobalt market.