Caledonia Mining Corporation Plc (CMCL) Earnings Call Transcript & Summary

It's 2:00, should we start? Camilla, are you ready? Or not?

Yes, everything is ready.

Okay. Good. All right. Well, welcome to this. I think it will be quite a short presentation. If you just move down, Camilla, through the disclaimer, to the introduction. So on Wednesday, we published an RNS setting out a significant increase in Caledonia's reserves and resources at the Blanket mine, which was very good news. But the regulatory environment that we occupy is very complex, which means that the full benefit of this news may not be immediately apparent. So I just wanted to use this brief call to put the news in context and to help shareholders interpret this news more accurately. I'm joined today by Craig Harvey, who is our Vice President, Technical Services -- he's based in Johannesburg -- who was responsible for preparing this resource information. So just by way of background, Caledonia's subject to the regulatory requirements in the U.S.A., Canada, the U.K. and Zimbabwe. For the purposes of this particular announcement is the interplay between U.S. and Canadian reporting standards that was relevant. And a large proportion of our shareholders are neither American nor Canadian and therefore may not actually understand all of their requirements and implications that arise from these regulations. So just by way of background, on Wednesday, we published a document, which we refer to as the 20-F, which is effectively the U.S. SEC annual report, and it contains an absolutely vast amount of information relating to Caledonia, its performance, its governance. But particularly as part of the 20-F, we're also required to publish information about the resource base at all of the properties that we own as at 31st December 2023. So that includes Blanket. It includes Bilboes, which we acquired in January 2023. So this will be our first disclosure relating to Bilboes as an owned vehicle. We would have been obliged to put a thing out about Maligreen, but because nothing has happened at Maligreen in the course of 2023, nothing has changed, and therefore there's no need to put out any further information on that. Now the information we publish about the properties must satisfy the requirements of the U.S.A. and Canada, and they're quite divergent. They don't sort of dovetail at all neatly. So under the U.S. regulations, mineral resources are shown excluding mineral reserves, where in Canada they're shown including mineral reserves. Under U.S. regulations, mineral reserves and resources are shown on an attributable basis, so we own 64% of Blanket, whereas under Canadian rules they're shown on a 100% basis. But most importantly for interpreting this information, we got to understand that we are not allowed to add together measured and indicated information on the one hand, and inferred on the other hand, which -- so we show both those 2 categories separately. Now that's not too difficult when it just comes to looking at the overall resource endowment. It's quite simple to add together M&I ounces and inferred ounces and get to the right answer. But it's a serious impediment to showing investors an accurate picture of the future economic value of Blanket in that we can't show a production profile, which shows for a particular year, typically, say, 2024, the production that arises from measured and indicated and the production that arises from inferred. We'll come back to that in more detail later. But that, that in particular, is the primary thing that I want shareholders to understand. Also, let's touch on Bilboes. The 20-F requires us to publish a resource statement for Bilboes. Our work to assess the Bilboes project is not yet complete in the form -- which reflect the work that we've done to date. So I expect our work to be in a form that can be published, hopefully, by the end of this month, by the end of May. So let's be clear. By way of background, we bought Bilboes as a large sulfide resource with a very small oxide resource on the side. We bought it for the sulfides, not the oxides. For the purposes of the 20-F disclosure that we just published, we've updated the technical work that was prepared by the vendors. We've updated that to reflect the depletion of the oxide resource that arose from our brief sally into oxide mining, and to reflect the effect of the controlled drilling we did on the remainder of the oxides. And that's resulted, as set out on this page here, in a small drop in the resource base of about 3% on resources, 5% on reserves. And that relates to the oxides. There's been absolutely no change at all in respect to the sulfides. But I would encourage you to just sort of pause before you delve into the 200-odd page report in respect to Bilboes, because that will be superseded in very short order by another document which is currently being prepared, which reflects the work that we've done over the intervening period, okay? So can we just move on -- that's the background, can we just move on to the summary? So what you see here is a table which shows the reserves, measured and indicated resources inferred under the 2 reporting codes. So the middle column is 1300 S-K, which is the U.S. requirement. The right-hand column is the Canadian requirement. And you can see that the revised mineral reserves on an attributable basis: 519,000 ounces under the U.S. code; 812,000 under the Canadian code. And that reflects a doubling, 111% increase, 106% increase from what was there previously. Next slide shows that measured and indicated resources has increased by 50% under the U.S. code, 63% under the Canadian code. And inferred has gone up by a smaller amount, 26% under both codes. I would point out that the work, the exploration what we've been doing over the course of the last year or so, was focused on converting existing inferred resources to a higher level of confidence. So we weren't actually going out with a view to increasing the inferred resource at all, but the fact it did increase is very good news. So I think -- the following pages set out more detail on each one of those. So I'll ask Craig first of all to talk about the exploration program that we've been doing over the last sort of 15, 16 months or so, and then to take you through the tables in so far as they relate to the more detailed data in respect of each of the codes. So Craig, can I hand over to you?

Thanks. Thanks, Mark. Good afternoon or good morning to everybody, wherever you are. So just on the exploration program, on the drilling that's taken place at Blanket. The first line there says restarted drilling. So a bit of history was that while Central Shaft was busy being sunk, so for the last 3 or 4 years, there was a big hiatus in the amount of drilling that could actually take place. And this was simply due to the impact of the shaft-sinking activities. So the last 18 months has seen an uptick in the deep drilling, which we refer to as the deep drilling program. There were just over 13,000 meters drilled from approximately 45, 50 drills. We've published those results on our website, on those dates that you can see there in July and January. At the same time, our run-of-mine drilling has also picked up. Underground development has picked up. So all of the conversions or all of the upticks in the mineral resources and mineral reserves that you see is predominantly from the deep hole exploration drilling. A lot of it -- well, the fair portion of it is from run-of-mine drilling and our improved development rates that we're actually getting. The drilling is focused mainly on the Eroica and the Blanket ore bodies, and the Blanket ore bodies is the basal quartz reef. That's the Blanket 1 through to 6 ore bodies as well. And these have been focused on the areas, if I talk in terms of levels, it's from about 26 level down to 34 level. 34 level is the 1110 meters below surface. That is the deepest access directly to Central Shaft. So we're currently developing on 34 level. We're about halfway to Eroica at the moment. Below 34 level, only on the Blanket side, there's a decline going down to 38 level. So all of these resources that we have drilled now on this deep drilling is really everything that is currently in infrastructure plans. We -- as I say, we're on 34 level, developing to Eroica. On the [ decline ] we're just about to hit 36 level. So all of the resources that are reported here are obtainable with our current shaft and mine infrastructure. We do want to have a look at rejigging our exploration program, but I mean, as Mark has said, on our reserves only, proven and probable, which is a conversion of measured and indicated. We have a 10-year life of mine plan. And that 10-year life of mine plan, as per the requirements of all of the various reporting codes, is scheduled, designed, it's basically down on paper. That is the plan that we are going to be following for the next 10 years. Part of the reason why this is all -- also all been able to happen is Caledonia has invested heavily in Blanket in the past 3 years, in upgrading and updating the mineral resource management system. So in the past, so it was probably about 5 years ago, Blanket was still very much a manual type of mine. Lots of paper plans, lots of spotted, colorful plans of various grades on. And that's all fine for a small mine. But once you start upping production as Blanket has, you need to stay on top of what your drilling results are, what it's doing to your resource, to your ore, to your ore body. And you've got to be able to plan it out and schedule that out. Just to give you an idea, there are 43 discrete individual domains at Blanket, of which we can be mining any of those 43 at any time, but you need all of this software to be in. So we've gone with the Deswik suite of mining software. It's very well known across the industry, and we use it currently for our survey sampling and geology controls. We're using Datamine Studio. We just implemented at the beginning of the year -- well, halfway through last year, for our Mineral Resource estimation. And the budget was approximately $3 million. We're about $2.1 million in actual spend into this process at the moment. There's been lots of training that's been taking place because the intention is to have it on mine, the people on mine are trained on it. The people that know the ore body the best are the geologists on mine -- it's not me. And so we need to give them those skills. So if you can move on to the next one.

Just before -- just to interrupt. One of the other advantages of the introduction of the software that Craig has mentioned is that it allows us to be much more nimble, much more fleet of foot when it comes to adjusting our either mine planning or our capital development, take of -- as life continues and we get sort of a better understanding of what's underground, it has, in a couple of occasions, allowed us to very quickly reconfigure our capital plans to make it more effective and cheaper. So it just gives us much more day-to-day flexibility. Sorry to interrupt. Carry on.

No. [ 100% ], Mark ] So on this table, I mean there's lots of numbers. This is the S-K classification. So this is for reporting on the SEC or in the U.S.A. And we can basically see there that our grade on our measured has gone up by about 20%. I've got a bit more detail on that, so -- well, sorry, yes, ounces have gone up by 75%. The tonnage has gone up by about 40%, and the grade has gone up by about 20%. On the indicated side, remember that this is now 64% attributable. It's exclusive of mineral reserves and so forth. But in general, tonnes are up and grade is up. That all feeds into everything. You'll see on the inferred we're slightly down on the tonnage. And that is -- and the grade has gone up. The drilling that we did, the last holes, the deepest holes that we've got, I mean, the grades are really good, and that has helped to kick up the inferred grades. If you can go on to the next one. It should be the reserve. Yes. So on this one, again, it's 64%. So it's not 100%. It's very much in line with what it has always been. The big difference here, and you can see it very clearly on the NI estimates, the big difference here is that the measure has gone up slightly. And if you understand what the measured is, it's your most accurate, most confident level and it's typically around your development areas. Now as I said, the development has picked up. So we've been doing a bit more drilling. We've been doing a lot of on-reef or in-ore development. So there's been a slight uptick, but it's on the probable reserves that we actually get the biggest increase. You can see there that the tonnes, 173% up. And that is driven purely by the long hole drilling. So as we have -- can I say peppered the areas below where we were mining, the confidence in those grades and the confidence in the geological continuity of the ore body has increased significantly. And that is the big driver of this resource and reserve uptick. If you can go on to the next one. And as I'm saying this, so if you have a look at the measured from the first set of numbers is 22, the last set of numbers is [indiscernible].

Just to get it clearly. This is now in the Canadian -- under Canadian reporting. So this is on a 100% basis.

Yes, it's on a 100% basis, and it's inclusive of the mineral reserve as well. So what you can see there is that on the measured, on a tonnage basis, we've increased our tonnage by about 20%, the grade by about 10%. On the indicated, again, however, the tonnage is up by 60%. And the grades are good, and the grades have come up by about 18%. On the inferred, as I was saying a bit earlier, that's all about the stats and the geological continuity. So the inferred tonnage has gone down slightly, and that is also now because we're not including anything below 34 level on Eroica side, and we do have drill holes that are below that. But the big uptick, and it's evidenced in all of the drilling results that we've put out, is almost a 30% increase in grade. And it's not overboard. It was about 2.9, it's now about 3.7. And it's borne out of the facts of the drilling that we've done. And so this all of this -- Mark, shall I mention life of mine, o is it on the next one?