Tuesday , February 7 2023

Formation of an East African gold-focused mining company on the cards

In Kenya, a new mining player has emerged, and this player is serious about doing business. Its name is Caracal Gold, and manufacturing is its game.

In September 2020, the business took operational control of its 100 per cent owned Kilimapesa gold mine, restarted processing and the underground mine in January 2021, and completed the mine’s acquisition in April 2021. But this is only the beginning for this modest business, which has big plans for organic and acquisition expansion.

Brewer, CEO Robbie McCrae, and Gerard Kisbey-Green, the former CEO of Goldplat — the original owner of Kilimapesa – founded Caracal Gold. The three CEOs have devised a strategy that comprises the formation of an East African gold-focused mining company that will produce 50 000 ozpa of gold and have a resource in excess of 2 Moz in the next 12 – 18 months.

“Kilimapesa is our starting point, the leverage and catalyst that will let us execute our strategy swiftly and effectively, as well as the key to demonstrating our capacity to deliver on our operational commitments,” Brewer says.

To put things in perspective, the Caracal Gold vision began 15 months ago, when Mayflower Capital Investments purchased Kilimapesa’s gold mining and processing activities (on care and maintenance) from AIM-listed Goldplat. Mayflower was able to complete its intended reverse acquisition of mining-focused investment company Papillon Holdings, resulting in the formation of Caracal Gold.

Caracal Gold was able to raise £2.7 million prior to the IPO and another £2.8 million after the IPO, allowing it the flexibility to meet its strategic goals.

Why would you want to buy a gold-mining facility that only generated little amounts of gold and was eventually put on care and maintenance in 2019? “It’s simple,” Brewer adds. “Kilimapesa’s actual potential was never completely realized under its previous Goldplat owners, who were solely focused on the company’s garbage and recycling portfolio.” As a result, only a little amount of capital was invested in the Kenya mine.

Second, with existing licenses and a significant JORC resource, we were able to restart an old mine and processing plant and achieve production growth through minor optimisation work. This is a great decision for a student who wants to get the most money in the quickest amount of time.”

Caracal Gold is projected to benefit significantly from fully utilizing Kilimapesa. The mine is located in Narok County, about 230 kilometres west of Nairobi and 20 kilometres north of Tanzania, on the eastern end of the historically productive Migori Archaean Greenstone Belt, which accounts for the majority of Kenya’s gold production and is an extension of the granite-greenstone terrain of the Tanzanian Craton/Lake Victoria Gold Fields, which has seen extensive modern gold mining activity.

“At the moment, the mine has an established mineral resource of 8.7 Mt at 2.4 g/t gold for 671 446 oz at a cut-off of 1 g/t gold, but given our location, there is tremendous exploration upside.” On our licence, several exploration targets have been identified based on past mining activities, artisanal mining, surface mapping, and exploration drilling programs,” says Brewer. The goal is to increase Kilimapesa’s total resource to at least 2 Moz.

“With the existing infrastructure in place, this would enable an operation capable of producing 25 000 ozpa,” Brewer explains. “However, our approach is to walk before we run, and this would likely be considered a longer-term goal for this business.”

Apart from the mining, Brewer affirms Kenya as an investment and business-friendly jurisdiction. “The regulatory environment in the country is straightforward, which means there is less political risk.” Because it is not nearly as competitive as West Africa in terms of gold, the asset’s value was not overpriced.”

Caracal Gold marked a year since taking operational control of Kilimapesa on September 14, 2021. Following the re-opening and re-stocking of the processing plant and underground mine, production ramped up. It is now processing considerably above the 200 tpd that Goldplat was capable of — averaging above 500 tpd and occasionally reaching 600 – 700 tpd.

“This is the result of refurbishment, optimisation and reconfiguration work on the existing plant. Based on this current plant’s delivery and some additional work we have in the pipeline (a new crushing circuit and incorporation of a second ball mill), we are confident of increasing this to 1 000 tpd which will position this mine as a 25 000 ozpa producer from which we can comfortably continue to operate for more than 25 years,” Brewer confirms.

Kilimapesa consists of five adits (A, B, C, D and Bull), all of which reside as entrances into a small 150 m high hillside. The adits have intersected at least four gold-bearing veins, three of which have been developed through drives, raises, and stopes. At present, the B, D and Bull adits are functioning as production levels. The strike of the ore bodies is roughly east to west and the dip angle varies from 45 to 80°.

Caracal’s strategy and milestones for Kilimapesa is as follows:

  • Produce at a rate of 700 tpd (processed) and 1 000 oz of gold per month by the end of December 2021;
  • Define a 2 Moz JORC resource within 18 months from 1 September 2021;
  • Increase production from 12 000 ozpa to 15 – 25 000 ozpa within 18 months from Kilimapesa. This will include the procurement, installation and commissioning of additional processing capacity; switch-over to grid power, and continued increased run-of-mine production; and
  • Based on additional drilling increase the resource further, up to 3 Moz upon successful completion of a bankable feasibility study, thereby increasing production to +50 000 ozpa within 36 – 48 months

“A lot of work has been executed and completed in a small amount of time and we are showcasing the kind of mine and operation Kilimapesa has the potential to be. We are however still at the start of our journey and have much to achieve in the next year and a half,” Brewer states.

“We are delighted with the market reception since listing at the end of August and look forward to proactive engagement with shareholders as we rapidly advance our strategy of becoming a +50 000 ozpa producer and build a JORC-compliant resource base of +3 Moz within 12 to 18 months across our East African focussed gold mining and exploration activities,” concludes Robbie McCrae, CEO of Caracal Gold.

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