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Blanket Gold Mine

Exploration and Development

Blanket Mine's exploration interests in Zimbabwe include both producing claims (i.e on-mine) and a portfolio brownfields exploration projects ("satellite projects").

On-Mine Exploration and Development

On November 3, 2014, Caledonia announced its revised investment plan (“Revised Plan”) and production projections for the Blanket Mine.

Caledonia’s Board and Management have completed a review of alternative expansion and diversification plans for Caledonia.  Both the Board and Management have also addressed the revised production projections for the Blanket Mine and the possible benefits of diversifying Caledonia's production base.

Caledonia has concluded the best returns on investment remain at the Blanket Mine in Zimbabwe, which continues to be cash generative in the current adverse market conditions and also offers significant investment returns that exceed alternative investment opportunities.

The objectives of the Revised Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up.  The infrastructure improvements will include the continuation of the No. 6 Winze, the development of a “Tramming Loop” and the sinking of a new 6-meter diameter Central Shaft from surface to 1,080 meters. 

The increased investment pursuant to the Revised Plan is expected to give rise to production from inferred resources of approximately 70-75,000 ounces in 2021, this being in addition to projected production in 2021 from proven and probable mineral reserves of approximately 6,000 ounces.  The Revised Plan is also expected to improve Blanket’s long term operational efficiency, flexibility and sustainability.  

No. 6 Winze Peoject - Shaft Deepening to 1080 m

The No. 6 Winze project will provide access to the 3 Blanket resource bodies below 22 Level, i.e. Blanket 2 Ore Body, Blanket 4 Ore Body and Blanket Quartz Reef.  The pre-production capital cost of this project is estimated to be US$5 million, which will be funded from Blanket’s internal cash flows.  In terms of the Revised Plan, sinking of the No. 6 Winze will be suspended when it reaches 26 Level (860m below surface) to allow for earlier mining of the resources between 26 and 22 Levels.  Further deepening of the No. 6 Winze will recommence after the Central Shaft has been completed and will be deepened down to 980 m.

Trimming Loop

The Tramming Loop is being developed on 22 Level to improve underground logistics.  Work on the Loop commenced at the end of October 2014.  Of the 800 meters to be advanced 16 meters had been completed at November 7, 2014.  The Loop is expected to be completed by July 2015.

Central Shaft

The proposed Central Shaft will be a 3,000 tonne per day, 6-meter diameter, 4-compartment shaft that will transport men, equipment and material from surface to 1,080 meters below surface.  The shaft will be located between the AR Main and AR South ore bodies, in the middle of Blanket’s mining area. Construction on the shaft is expected to commence in July 2015, following completion of the Tramming Loop.  The capital cost of the Central Shaft is expected to be approximately US$23 million.  The shaft will be sunk in two simultaneous phases:  from surface from 750m below surface and is expected to be completed in July 2017.  Once complete, the Central Shaft will provide access for horizontal development in two directions on two levels below 750m.    

Blanket’s underground Infrastructure following the implementation of the Revised Plan is set out below.

 

The increased investment pursuant to the Revised Plan is expected to give rise to production from inferred resources of approximately 70-75,000 ounces in 2021, this being in addition to projected production in 2021 from proven and probable mineral reserves of approximately 6,000 ounces.  The Revised Plan is also expected to improve Blanket’s long term operational efficiency, flexibility and sustainability. 

The Revised Plan includes a revised life of mine plan for the Blanket Mine (the “LOM Plan”) in terms of which it is anticipated that the approximate production from existing proven and probable mineral reserves above 750 m level will be as set out below.

Approximate production from proven and probable mineral reserves above 750m (per LOM Plan)

 

2015

2016

2017

2018

2019

2020

2021

Tonnes milled (‘000)

430

460

430

380

230

100

50

Gold production (k.oz)

42

45

43

39

23

10

6

The new Central Shaft and the deepening of No 6 winze will provide access to the current inferred mineral resources below 750 meters and allow for further exploration, development and mining in these sections along the known Blanket strike, which is approximately 3 kilometers in length.  The PEA has been prepared in respect of the inferred mineral resources below 750 meters.  Based on the PEA, additional approximate production from current inferred mineral resources (excluding the projected production set out above) may be achieved in the following indicative ranges:

Possible production from inferred mineral resources below 750m (per PEA)

 

2015

2016

2017

2018

2019

2020

2021

Tonnes milled (‘000)

0

35

160

215

390

550

600

Gold production (k.oz)

0

4-5

20-22

27-30

46-50

63-67

70-75

Canadian rules do not allow production from inferred resources to be added to those from proven and probable reserves for reporting purposes.

The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves.  There is no certainty that the PEA will be realised. Diamond drilling and development will continue with the objective of increasing confidence in order to upgrade the categorization of the resources.  

The LOM Plan and the PEA have been reviewed by Minxcon Consulting, an independent mining consulting company.  A technical report prepared in compliance with National Instrument 43-101 which summarizes the revised LOM Plan and the PEA will be filed on SEDAR before December 17, 2014.  The most important assumptions on which the PEA is based include, a gold price of US$1,200 per ounce, achievement of the targeted production set out above and the accuracy of the projected capital costs.

It is also intended to continue exploration at two of Blanket’s satellite projects, Mascot and GG.  No production forecasts are attributed to mining activity at either GG or Mascot at this stage as neither of these currently have defined NI43-101 mineral reserves or resources.  

Exploration and Development of Non-Producing Claims ("Satellite Properties")

Blanket has 18 brownfields projects in the vicinity of the existing mine operations, many of which were mined commercially from the early 1900s until the 1960's. At the time of their closure, only the highest grade portions of these mines had been extracted, leaving significant amounts of lower grade mineralisation in the workings which are likely payable given the current gold price. In addition, these old ore shoots remain open to depth and require further exploration and development to determine their full potential. Advances in exploration, mining and metallurgical technologies over the last 40 years means that such old workings may now potentially be economically viable on a sustainable basis and not just because of the high gold prices which currently prevail.

Some of these workings therefore have developed shaft infrastructure in place which facilitates more rapid underground access for exploration, development, evaluation and the potential resumption of mining activity.

Blanket has commenced exploration on two of these areas (GG and Mascot) in order to better assess their suitability for further development as potential satellite operations. Depending on the successful outcome of exploration work, mining development and metallurgical test-work, it is intended that economic ore extracted from the satellites would be trucked to the Blanket plant for processing. The Blanket Mine metallurgical plant has existing surplus treatment capacity and when the planned crushing and milling plant extensions have been completed, could handle up to 3,500 tonnes per day of ore from Blanket underground and successful exploration project areas.

The brownfield projects that have been prioritised as targets for immediate exploration development are briefly described in the following paragraphs.

GG

GGThe GG project was previously the site of small-scale surface workings and is located approximately 7km south east of Blanket Mine.

Drilling programs were carried out at GG over the past eight years included seventeen diamond-cored holes that were drilled amounting to 4,751 metres of drilling. Two zones of potentially economic gold mineralisation have been established down to a depth of approximately 200 metres, each with an estimated strike length of approximately 150 metres.

Work commenced on sinking a 3m by 2m shaft in the 3rd quarter of 2012 and the shaft has reached the target depth of 120m. During shaft sinking operations, the shaft encountered a mineralized quartz shear with a near vertical orientation. As the shaft sinking extended below 40m, this quartz shear swelled and occupied the full width of the shaft. This zone of mineralisation has persisted down to 60m and on assay returned an average grade of 6.0g/t gold. The sulphide intensity of this mineralised shear exposed by the shaft between the 60m and 90m levels appear to have weakened but the shear structure remains intact. Underground diamond drilling will be undertaken to evaluate the mineralisation of this structure.

Horizontal development has commenced on the 60,90 and 120m levels, short side excavations from the main haulage drive ("cubbies") have been made to allow for diamond drilling of the identified mineralised zones. To date, four holes, totalling 400 metres have been drilled to investigate the North Main Shear and three of these holes have intersected mineralization with averaged grades and thicknesses of about 4g/t over about 2 metres. Further diamond drilling is in progress to allow for a better understanding of the geometry of the identified zones. A total of 3,000m of diamond drilling is planned from these three development levels during 2013.

Mascot Project Area

The Mascot Project Area comprises three existing shafts (Mascot, Penzance and Eagle Vulture) which extend down to various depths of up to 450 metres. These shafts and other infrastructure need extensive rehabilitation. Production at these shafts ceased decades ago due to a combination of political difficulties and the limitations of the technology that was then available. Blanket Mine Management believes that the application of modern exploration and processing techniques may allow some or all of these shafts to operate profitably for a period of time, and not just at the prevailing high gold price. Priority has been given to the rehabilitation and installation of infrastructure at Mascot. Work at Penzance and Eagle Vulture has been deferred pending completion of work and underground development at Mascot.

Mascot

MascotMascot was previously mined down to approximately 300 metres, exploiting an ore body which narrowed continuously with depth. The decrease in the extent of the mined out ore at depth is thought to have been the result of limitations on mining localised low ore grades and thereby not exposing the full extent of the mineralized zone. Previous drilling undertaken by Blanket has indicated the existence of two further mineralised zones, one on either side of the mined out area.

During the 2nd quarter of 2012, following the installation of the ZESA electricity connection, surface infrastructure was installed (headgear, winder house and winder, electricity substation and reticulation, and a 1,000cfm air compressor) and the shaft was re-accessed down to the 120 metre level below surface and found to be in reasonably good condition.

During the 3rd quarter of 2012 work focussed on re-equipping the shaft: rope guides were installed down to 120metres, the ladder-ways and all station platforms were installed and the installation of air, water and pump lines is 90% complete at 21st February 2013.