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

Welcome to the Caledonia Mining Q2 Trading Update. We're joined by Mark Learmonth and the management team. Mark, over to you.

Thank you, Scott. Could we get into the presentation, please? Okay. Well, good morning, good afternoon to you. Should we just quickly go to the disclaimer page? Okay, and then on to the presenting team. So I'm Mark Learmonth, Caledonia's Chief Executive, and we're joined today by Ross Jerrard, the CFO, Victor Gapare, another Executive Director who's running the Bilboes project; Craig Harvey, VP Technical Services. He runs exploration and MRM and also in attendance, we've got Maurice Mason, who is Vice President, Corporate Development, and Investor Relations. Should we move on? Okay. Just in terms of an overview, production was up 18% in the second quarter compared to the first quarter, which reflects improved access to higher-grade mining areas and benefits from various operating improvements. Revenue up 16% to $76 million and EBITDA up 16% to nearly $46 million, supported by stronger production and a robust gold price environment. Profit after tax up 27% compared to the comparable period in 2025, up to $30 million, and EPS was up 29% to $1.36 for the quarter. Operating cash flow was strong, $28.4 million. And cash and cash equivalents at the end of the quarter was $167.8 million. The growth pipeline is going well. We're making good progress at Bilboes as Victor will explain. We've got some very exciting exploration results coming out of Motapa where we expect to produce a main resource in the next 4 weeks or so, but also some quite exciting exploration results coming out of K-Pits at Blanket. And just for the record, we've declared our usual quarterly dividend of $0.14 a share for the quarter. Should we move on to the next slide. Okay, I'm going to canter through these operating results quite quickly. I mean, really, there's one thing that comes out and that's grade. So if we just move on. But before we get to that, let's talk about safety, an excellent safety performance for the quarter. We've had -- Well, now it must be over 400 consecutive days without any lost time injury. And that's a 5.5 million man hours worked without an LTI. So that's a very good performance. Clearly, that's sort of a lagging indicator. And the strong safety performance really reflects a couple of things. The first is the extent to which we're focusing on proactive and preemptive risk prevention. So things like we've undertaken risk propensity assessments on workers in high-risk areas. We're putting a strong focus on near miss reporting and things like that. So trying to preempt and predict where problems might be so that we can address them. And what underpins all of this is a renewed focus on training, culture and readiness. So a very pleasing safety performance and congratulations to the mining team for achieving that. Should we move on? Right, production has recovered in the quarter. And that really comes down to improved access to higher-grade areas. And as I said previously, we've been hampered over the last few quarters by some fall of ground incidents in the course of 2025, which locked us out of high-grade areas. So we've been effectively running the mine at a very low grade. In the first quarter, it was 2.5 grams a tonne. In the second quarter, it was about 2.88, and we're now targeting about 3.1 for the remainder of the year, and we're operating at that level. So higher access to higher-grade areas. We also, in June, moved the mine on to 7-day working week, primarily to address worker fatigue, but it also means that we've increased our blasting days by 18%. And that is flowing through into increased run-of-mine production. And from September onwards, we'll be processing a portion of that incremental production through the Lima plant, which we'll re-purpose. And then into 2027, we'll be spending some money you'll hear shortly, to upgrade main metallurgical plant to process all of that existing run of mine material through the main plant. At the end of this month, end of August, we will have completed an upgrade to the elution plant, which will allow us to process about 40 tonnes of material that we've accumulated over the last 18 months or so at a grade of 600 or 700 grams a tonne. So that will give us an extra 1,200 ounces across the months of September, October, November, December. And Q2 was well ahead of Q1 on the back of the higher grade access. So should we move on to the next page? It's traditional graphs, which we've seen before. I think the key things I'd draw out here are the top graph, the blue line, the stability that we've experienced now for many quarters, and that really is because of the stockpile that we developed and we've been running. Fair to say, during this quarter, quarter 2, the stockpile was run down to 0 and has now been -- now we started to rebuild that since we introduced the new shift system in June. The bottom line in that top graph is the grade. And you can see how the grade fell, came down from Q2 2025, reached a low point in the first quarter and has now recovered. As I say, in the second quarter, running at 2.88 grams a tonne target for the remainder of the year on average is about 3.16, and we're running at that level. And then the bottom graph just pulls it all together in terms of looking at the recovery and the ounces produced. It's fair to say that as the grade falls, your recovery falls, the tail grade. We can't do much better than tail grade of 0.2 grams a tonne. And so frankly, if the head grade is -- goes down and the tail grade stays at 0.2, that means that your recovery goes down. So it is good to see that recovery bounce back again. Move on? So that's just an overview of the operations. It all comes down to grade. So with that, I will hand over to Ross, who's got quite a lot to cover.

Thank you, Mark, and good afternoon, everyone. Just running through the financial results summary up on the table. You can see the impact of both gold sold and gold ounces produced. So we were down for both the 3 months and the 6 months in terms of ounces, but we did benefit from a higher average realized gold price of $4,259 an ounce. That was a 34% increase quarter-on-quarter. So we did produce some healthy revenues. And as we go through our cost profile, that's one of the impacts in terms of higher royalties driven by those higher revenues. I will take a bit of time to go through our cost updates in terms of where we ended up. But the key message is really our on-mine costs were largely in line with where we budgeted, and we're managing to. So in absolute terms, whilst those costs are shown to be up, there are some one-off or abnormal items that I'll talk you through in terms of why those transactions occurred. But broadly, we're very happy with our mine costs and teams are managing their cost base very well. Those top line ounces really impacted on our unit metrics in terms of an ounce sold basis. So you'll see our all-in sustaining and our on-mine cost per ounce sold were largely up, but there were some quite significant increases on an ounce profile metric. But in absolute terms, we're broadly in line. Going into our financials. We are very happy with our EBITDA. That was up some 28.5% for the 6-month period. And as you can see, some healthy numbers going through in terms of free cash flow and ultimate profit and earnings per share. Probably to highlight and remind everybody, our free cash flow number, the comparative period included our solar sale proceeds. So that's probably not indicative of a normal operating cycle, but we're very happy in terms of where we ultimately ended up with some $23.8 million worth of profit at the end of the 3-month period and close to $40 million for the 6 months or almost 35% up against the comparative period. If we can move on to the next slide and talk a little bit about the profit and loss. You'll see our top line revenue, as indicated, that was really driven by that higher average gold price, albeit that some of our sales ounces were a little bit down, but we are very happy in terms of our ultimate gross profit position, which was up some 17.4% for the 6 months or 16% for the quarter. Royalties were up, but that was driven by that higher top line performance. And also, we did have some shipments during the 6 months. I think there were 3 shipments over the $5,000 per ounce level, which attracted a higher royalty. But in terms of our production costs, we are up some 15% year-to-date, and I'll talk to some of those specific items that went through and there were some timing differences. So as really highlighted by Mark, there was a drawdown on the stockpile. And obviously, the costs that are released in terms of those ounces as they are put through, it does have a working capital impact. Below the line in terms of significant movements, probably the one to highlight is the administration expenses, and there were some quite significant one-off costs that are related to our advisory fees, particularly on the senior loan note transaction, but our broader financing facility. And as we go through Bilboes and our overall strategy, you'll see that we've made some significant progress in terms of our funding initiatives. So it's money well spent in terms of those work streams. I will also highlight the fair value gain on our derivative financial instruments. So that is a financial accounting and some volatility that will go through the P&L, and it does result in some significant movements, but I would ask you really to use -- treat those as separate items when you're looking at the P&L because they're really driven by some quite complex accounting. And I've got a couple of slides that I'll talk to you a little bit later in the day. But overall, we're very pleased with our profit for the period, up some 27% for the 3 months at $30 million and up 40% for our 6-month period just shy of $50 million. The tax expense was down, but that was really around the capital gains tax that was paid on the solar in the comparative period. So I guess our tax rate and effective tax rate is in line, and we're very happy with that. If we turn to the next slide, please. In terms of cash flows, probably the items to note is really the rolling of our various loan notes. So you'll see some ins and outs. But actually, there's no movement in terms of our net position there. In terms of pointing out significant movements, you'll see the acquisition of capped calls options, the $14.4 million in the 6-month period was a one-off item that came through. And equally, you'll see the impressive $145 million of proceeds in the convertible loan notes that came through and bulking up our cash at the year-end position, which closed at just shy of $168 million closing cash, which really puts us in good stead as we move forward in terms of our strategic objectives. So if we move to the next slide, you'll see our overall liquidity position, and we're very pleased with our cash on hand at $171 million. There is bullion on hand of $13 million, $13.5 million, which was really the ounces that are held on hand and ready for shipment. There was a slight delay on one shipment at the end of the 6-month period, which was driven by the demonstrations in Johannesburg. So there was a timing difference in terms of ounces that were held as we got them to the refiner, but those were delivered the day after and it was really driven by timing. So nothing untoward to highlight there. But overall, very pleasing to have a total liquidity of over $200 million as we stand at the end of the June period, a very healthy position as we move forward with the company and the various initiatives. The next slide just talks to our capital structure and debt, and we included that in terms of the summarizing basically our debt structure, what's held at our Caledonia Holdings Zimbabwe level in terms of our loan mix. And as I mentioned, those movements that you see were really the successful rolling over of loans in terms of what was expiring. We're not intending to increase or decrease. It's really status quo in terms of those loan notes, and what we wanted to do is allocate those against strategic projects. And in terms of our borrowings. We're keeping the facility levels at the same level. We have paid down a large portion of that. So then we're sitting in a very healthy position in terms of our overall funding. And then in terms of the new convertible bond that sits on the balance sheet, increasing our total consolidated structure up to that $167 million that I've mentioned previously. So that just gives you a picture in terms of our overall debt. Taking a bit more of a deep dive into those on-mine costs. If we move to the next slide, we just wanted to highlight in terms of on-mine costs of Blanket. And I think it's very important to pull out a few key, I guess, transactions or cost centers. The first one is salaries and wages. These have stayed broadly in line. And you can see a 4% movement year-to-date in terms of base increases in terms of salaries and wages. So well managed, and we're very happy in terms of that overall cost center. What has moved, however, is the Blanket Employee Trust distribution. So previously, we've had the facilitation loans, any distributions that are made from Blanket dividends have gone to offset or a portion of them have gone to offset those facilitation loans and those have now been paid off. And under IFRS, any distributions that are now made under that arrangement need to be classified as employee costs and sit within production costs. So you'll see a big significant $3.2 million charge going through in this last quarter, which has significantly moved our production costs. It hasn't changed any distributions or anything, and it's actually a reflection of a great operation in terms of distributing funds. But unfortunately, it sits within our mine costs and has quite a material impact and will continue to have a material impact in terms of the optics as we go forward. So that is a stand-alone item. We will be reporting it separately. So everybody will be able to see that and deal with that specific cost to a line item independently. Another big movement for the period was the electricity costs where you'll see that's gone up 25%. This is, in fact, driven by increased wheeling charges, but our actual consumption has decreased. So again, something that's large outside of our control, where we've done well in terms of our consumption of electricity, but we've been hit with some increased charges there. So again, another one-off that has hit us in terms of those cost centers. So largely, when you back up those areas, if you look at the performance in terms of where we've exited the 6-month period, it's really driven by lower grades. So those reduced ounces that have come through in terms of production is really -- hit us in terms of our unit metrics when you look at that on-mine cost metric and at the bottom right of the chart going up some 46% for the period. As that flows through onto the next slide, in terms of our all-in sustaining costs, you'll see that the higher on-mine costs that I've just discussed, together with the higher royalty driven by that higher revenue that I mentioned at the start, has really flowed through in terms of our calculation of all-in sustaining costs, whilst our capital expenditure is being well managed and in line with expectation. Those costs of the BETS distribution, so higher royalties and some higher administrative expenses, largely driven by those adviser fees and transaction fees for our funding strategy have all fallen into that all-in sustaining bucket and driven that increase in terms of our overall costs. So what does that mean? If we move to the next slide, we have had a look and done a whole 6 plus 6 exercise and look to the outlook for the end of the year and it has meant with those cost increases in the classifications as we look towards the end of the year, we've increased our on-mine cash costs per ounce sold, increasing that by $100 from our previous guidance range. So the updated guidance range is $1,600 to $1,800, so a 6% increase. And our all-in sustaining cost per ounce sold has increased by some $400, up from $2,100 per ounce to $2,500 an ounce at the lower end and increasing to $2,700 an ounce at the top end of the guidance range. Those are due to the factors I've just discussed, but we've also introduced some new additional spend, which is indicated in the table below, and that's really around how we expect some of the CapEx to drop this year. So we had previously announced in March that there was 133 kV power line project that have been approved by the Board, but we haven't done our costing and quotes, which have now come through subsequent to that announcement. And of the $14.2 million, $8.1 million is going to drop in 2026. So we've included that in the guidance together with an updated number for our AC/DC configuration, our Central Shaft Rock Winder project of $3.1 million. And there's also some additional spend in terms of key projects that we do need to deliver. One of them is the housing project, which is fundamental to our core operating activities, which we've included a further $1.3 million. And there's some exciting projects that I'll leave Craig to discuss in terms of K-Pits and Lima and our underground development, which again, are key additional spends that we need to deploy in terms of meeting our objectives. I just wanted to talk a little bit more about the CapEx profile. So if we move to the next slide, you'll see a breakdown in terms of what had previously been guided in terms of CapEx spend against with each particular project. So our previous guidance in terms of sustaining capital expenditure was $26.6 million introducing the 3 new initiatives, which you can see indicated by a reference B and E. It's the new power line, the AC/DC conversion and the K-Pits projects, which pushes that CapEx profile up to $48 million. But we've also got updates in terms of our growth capital expenditure. And again, going through our Bilboes development, and now having quotes coming through and a better understanding in terms of our -- I guess, our deposit requirements where previously, we had factored in that a large deployment of cash was needed upfront in terms of ordering those long lead items. We've got better financing terms. A lot of that cash has reduced, and we've been able to actually go with deposits and defer some of that cash into the early part of next year. So that Bilboes $132 million spend has now been reduced for 2026 to $48 million with $80-odd million being pushed into the first half of next year. And we also have a new Blanket mine plant upgrade which is a new project of $3.5 million, which has been updated into the second half of this year. So overall, our CapEx number has moved from $162 million down to $103 million, but a large portion of that is the Bilboes spend, which is really a reflection of timing. We'll highlight it's not to do with ability to finance or positioning in terms of the project, it won't delay the project, but that's just a wise or better use of deployment of funds and as you know, a very healthy update for us in terms of us moving forward. So if we move to the next slide, please. As mentioned earlier, we do have a quite significant movements in our P&L in terms of the accounting for convertible notes, and we're not proposing to go into chapter and verse in terms of the accounting but it's just to highlight that we have some significant movement with these convertible notes. It's driven by IFRS. We have independent valuations done and it's just to remind everybody that we have a split in terms of the accounting for the transaction where we have a host debt on one side of the senior note, which is really treated on the amortized cost basis, and we have an embedded derivative, which is a financial liability on the other side of the transaction, which moves with fair value accounting. And it does cause some quite considerable volatility through the P&L. It's fully disclosed. We are across it in terms of where we sit, and I'm happy to take a deep dive as we account for it for anybody on the call, but I'm not proposing to go through each stage now. But just to flag that to your attention that you will see some quite significant movements. And we'll keep everybody briefed in terms of how that is accounted for. And the last slide is really to remind everybody that we had the capped call option that was also associated with the [ con notes ]. If we just move to the last slide, please. The accounting for the capped call is another derivative financial asset, which is also fair value through the profit and loss and provide some volatility and [indiscernible]. So it does have an impact on the income statement as those fair values are recognized in the income statement each reporting period. And again, third-party valuations coming up with the numbers are fully disclosed and does provide some quite significant movements, as you can see in terms of original cost at $14.4 million and the various fair value movements as we sit and carry a net position of $4.4 million on the balance sheet at the end of the period. But again, happy to take a deep dive and explain that more fully for anybody who would like a bit more detail on that. And with that, that's -- I will hand across to Victor, who will talk us through the Bilboes update.

Thank you, Ross. Can we move to the next slide, please. Now thank you very much. Basically, the message which we want to leave with you today is that Bilboes continues to advance on schedule and remains central to Caledonia strategy to deliver sustainable long-term growth. What we have seen is that we've done quite some considerable work across various work streams, especially financing, engineering and development during this last quarter. We completed geotechnical investigations for the process plant site. That also includes the tailings storage facility. We've advanced process plant optimization studies. We're almost done with that. We're moving on that. We've substantially completed the tender processes and procurement for long lead items. Here, we're talking about the milling plants, really the processing plants, some items of the processing plant and the major earthworks on site. So this is going ahead. We've continued to engage with prospective financing providers. Ross will be back in a slide or 2 to just tell you where we are with that. But basically, what we're seeing is that quite a lot of progress is being made on this project. In terms of people moving on site, we expect the first -- the first contractor has to be on site around October, and we already have accommodation, but we're also starting additional work on accommodation facilities during October. Can we move to the next slide? As far as capital expenditure is concerned, Ross has already explained a few of the items. Year-to-date, we have spent $3.5 million against the budget of $8.3 million. This is really expenditure on the owner team. We have recruited the team, which will build this mine, our own team, which will be working with our EPC and contractor, DRA Africa. So that cost of that team, plus also the early work, which really at the beginning of the project is always the front engineering design work allows you to place orders for equipment. So that's where we've been spending money really. The forecast for 2026, as Ross has said, is $48 million compared to the $132 million which we had in the budget. As Ross again explained, this is really a timing issue. We've now gone out to tender. We've received firm offers, firm tenders from the various tenderers with our payment terms and a lot of those require us to pay a deposit and then the balance of the cost will be paid as contractual milestones are reached. There's really no change in the project timetable, the cost or scope at this stage. Can we move on? The economic analysis, we've highlighted the economical analysis of this project over time, and it still continues to -- it still is a very robust project for this company. And this will stand us in good stead in years to come. Can we go to the next slide, please? As far as the funding strategy for the project is concerned, Ross, can you take this one?

Thank you, Victor. We're delighted in terms of providing an update on the funding strategy. You'll see the 4 pillars that we've previously highlighted in terms of our step process, providing the hedge program, doing the convertible and then have an interim funding facility while we position the project finance facility. So the first 2 steps, as highlighted on the chart, have been delivered. It was important that we put that gold price hedging in place, and that basically hedged our position over the construction period, but provided a floor that supported the cash flows as we went through our discussions with the various banking institutions. You would have seen the delivery of the successful convertible note offering, again, oversubscribed and really delivered a great outcome in terms of treasury and positioning us well in terms of our funding initiatives. Those 2 pillars really meant that we've been able to advance with our banking syndications. The first being the interim funding facility. We've just come off the back of 2 weeks, our bank visits, both with the interim funders and also the project funding institutions, where we had very good due diligence, excuse me, site visits with those institutions across our assets. In terms of our interim funding facility, we've got credit approval from our 2 co-leader ranges, and we're working with other syndicate banks in terms of getting that $150 million facility in place. We're well down the track. We're going through all the final DD positions, and we hope that will -- we're planning for that to be closed in late August, early September. So well positioned in terms of that work stream. In parallel, we've been working with our project finance banks. And again, that process is well underway. We've been very excited in terms of the -- both the appetite and the reaction from those banks. And as I mentioned, we've just come off a good visit to Zimbabwe visiting both government, the assets and the various management teams in-country. So that's running parallel. We previously indicated in terms of timelines that we felt that it was little bit further out. So over the next 12 months, we thought that we could deliver that. But off the back of the work streams and how it's advancing, we're certainly planning for that to be closed by the end of the year or early into next year. So over the next 9 months maximum, but we're delighted with the progress, and we're well positioned in terms of the various discussions that we have at play. If we move to the next slide, we just wanted to give you a quick update in terms of that total funding requirement. So this is an update to a previous slide that we've done in previous updates. On the right, you'll see the use of funds. And I guess the deployment that we're looking for with the capital cost, but including interest and working capital, looking for the better part of $600 million of funding using that $3,500 per ounce pricing that we've done in terms of our hedging facility. You can see the breakdown of our cash on hand that we now have at the 30th of June of $172 million. Our forecast cash flows from Blanket being $115 million. And therefore, we're looking for best part of $300 million -- just over $300 million in terms of senior debt to other facilities to meet that funding requirement. If we look at the middle chart, and we've done that slicing at a price deck of $4,000 per ounce. And you can see in terms of where that sits and moving that up slightly, it certainly reduces our senior debt facility down closer to the order of $263-odd million. So both charts, we believe, totally achievable. I think we're well on track in terms of our funding work streams, and we're excited about the coming months in terms of making sure that those are closed out and we can really focus on delivering the project. And with that, I will hand it across to Craig Harvey.

Good afternoon, all. I'll take you through some of the exploration highlights that we've been encountering at Caledonia. So I think throughout the finance and through some of the CEO's remarks, you've heard the term K-Pits. So what is the K-Pits? The K-Pits is an area situated inside the Blanket mining lease area. During this period under review or based on the last 6, 6 months, we did over 2,000 meters of surface trenching. We did 7,000 meters of reverse circulation drilling -- shallow holes, only down to about a depth of about 40 meters purely to have a look at oxide -- to have a look at oxide mineralization potential. So what you can see there on the selected drill highlights on the right, we've got oxide grades ranging between 1.5 and 2.5 grams per tonne over drilling length, those are drill lengths between 15 and, call it, 25 meters, but these are within 40 meters of surface. Below that, pleased to see that the mineralization continues. And very pleased to see what the sulfide grades actually look like as well. So I mean we're talking grades of 6 grams a tonne over downhole widths of between 7 and 16 meters, all within 40 meters of surface. So what we're currently doing is quite clearly, we have completed our drilling exercise we are drawing up a resource statement. We are doing metallurgical testing in terms of column testing, various sizes, various heights. We are currently constructing a small heap leach trial test bed to actually test it under conditions similar to what the column tests are so that we can gauge that it's actually working. Results to date are encouraging. I, obviously, can't say anything here. One of the things that I just want to touch on is kind of those bottom 3 points, why this discovery matters? Well I think for anybody that knows Blanket mine, there was a whole lot of investment in Central Shaft. We can currently hoist and mine a lot more than what we can mill. Hence, there are some tweaks coming up to the plant in the near future. But still, this is an external heap leach source. Anything that we do here clearly does not need the actual Blanket main plant. So that's just for the oxide material. Where the zone is situated, it's situated about 200 meters to the east of the closest known ore body that we're mining in the underground section of Blanket. We are currently in the process of laying out some surface drill holes to drill below this area now. We're also looking at drilling from 9 level at our sheet shaft, which is about 200 meters below surface to look for this area. Now quite clearly, 200 meters vertical at quite a fat -- surface expression of ore body and sulfide grades like that, it just opens up a another whole opportunity. And I think I've said it on this call before. So one of the things that the people that know Blanket should notice is that when you arrive at Blanket, you only see head gear, you don't see open pits. Now at Bilboes, you see open pits. You don't see head gear. So this zone represents only a small portion of ground that we have rights to in terms of the mining license and in terms of our claim areas. And in the coming years, this is going to be the model that we're going to follow and it's going to be the first of many. I'm pretty sure of that. So if you could move on to the next slide. It's just going to be a recap of Blanket underground. I just highlighted 2 things in red at the bottom there, the 249 and the 248 drill holes, reminding that it's approximately 280 meters below 34 level which is our deepest mining level at the moment. That represents 4 main mining levels. So we are currently in the process. We're busy dotting Is and crossing the Ts on a Blanket mine mineral resource update, which will include surface. So you'll see the K-Pits numbers there. If we can go on to the next slide. And just to highlight that those holes right at the bottom, 280 meters below our current deepest mining still have orebody widths of 15 to 30 meters at grades of 2.5 to 2.5, But if you take selected core zones, sort of the minable zones. We're talking 8 meters wide stope at anywhere between 3 and 5 grams per tonne. That is very much what we are currently mining in and around 34 levels. So the takeaway here is that going deeper at Blanket, we aren't seeing the ore bodies getting thinner, disappearing, grades dropping or anything like it. In actual fact, we are finding Blanket a new zone, which we haven't known before, way up on the top at the K-Pits. There's a potential new zone. So the old lady termed Blanket is very, very far from sort of rolling over and playing dead. There is a lot yet to come. If you can go on to the next section, which we'll just deal with Motapa quickly, again, dotting Is and crossing the Ts, the mineral resource estimate is done. We should be publishing the results of that in the next couple of weeks. It's only based -- it's only based on the drilling results that we did in 2024 and 2025. The 2026 exploration program is ongoing, proceeding very well. That's focusing more on the Central and Southern shear zone. At the same time, we are continuing trenching. It's proving to be a great exploration tool for us. We have identified some new areas that will come out in a exploration drilling or exploration results through a release later in the year. But all these results are just underpinning Caledonia's view that Motapa is going to feed into the Bilboes project in some form or fashion and we are continuing doing the work. So in a nutshell, it's looking good. With that, we will hand back to our CEO, Mark, to close up.

Thank you, Craig. Look, we covered a lot of ground. We're taking 45 minutes. So just to draw it all together, the immediate focus by which I mean between now and the end of the year is to get -- build on the success we've had at Blanket in this quarter and get Blanket running sweetly, increased production and improve the cash generation. Clearly, the big focus is Bilboes and continue to deliver that project targeting first production towards the end of 2028 and the first full year in 2029. And then as you've heard from Craig, we've got some very exciting further development and exploration opportunities, both at Blanket and at Motapa. So we've taken 45 minutes. If we could pause there and open it for questions, please.

[Operator Instructions] We've got a first question is from Nic Dinham. Nic, please go ahead. Nic, if you're ready, you just unmute yourself.

I'm having some speaker issues here. Can you hear me now?

Yes, I can hear loud and clear, Nic.

Okay. Great. All right. I'm very interested in a couple of questions here around the potential capacity expansion that arises on the mine as a result of the [indiscernible] ups. So the first question would be does 18% more blast of the underground mine results in 18% more potential production regardless of what happens to the [ mill ].

You should do. Yes. I mean it's not currently running at 18% uplift in run-of-mine production because we're still opening up new areas. But in the fullness of time, yes, we would expect, as you've said, to that maths to work.

Okay. So it sounds like about 1 million tonnes a year?

A bit less. Just a little bit less, about 990, yes.

Okay. So now coming on to the plant itself. There's been a discussion about a ball mill and a tonnes per hour figure given. There was also a discussion of potential increasing the crushing. Now you're talking about elution circuits and you're talking about 200 tonnes per day, but what is that when it comes to the annual production capabilities of the plant when all of this is bedded down?

Well, that's exactly right. So we've -- the 200 tonnes a day that we're going to be putting through Lima is a short-term stop-gap measure, okay, just to start harvesting some of the increased run-of-mine production as soon as possible. So don't get distracted on that. And then that will -- what happens to the Lima plants after we've upgraded the main number 4 -- the main Number 4 Shaft plant is another story. The elution upgrade is something we plan to do anyway. So that's a 3 tonne elution vessel which will come on stream at the end of this month. And that not just allows us to reprocess these grits, these activated carbon, which currently we're accumulating, and we can't process. So the new expenditure will be the front end of the crushers. So we'll be upgrading the crushers to -- well, that will give us about 2,700 about -- it will give us -- we'll increase it to about 990,000 tonnes a year. So we'll be spending some money on those crushers. Then the back end, the CIL, we need to put another CIL tank in. This one will be about twice the size of the existing tanks and that's so that we can keep the residence time at about 40 hours. Otherwise, we end up losing recovery. So it's -- so the ball mill, we put in a new ball mill that was commissioned in June. So we're just basically bookending it, upgrading the crushing of the front end and upgrading the CIL at the back end. That will cost about $3.5 million. The actual phasing of that, how that gets phased, that's something we need to work on between now and the end of the year. So at this stage, I can't tell you between right now -- at what point, all of that work will be implemented so that the number -- the main met plant will be running at that sort of target rate of 990,000 tonnes a year. I can't answer that yet. We'll do that by the end of the year. We're -- also when we've been through the full sort of procurement and budgeting exercise. So what I can't -- at this stage, I can't tell you how that will convert into extra ounces in 2027 because at this stage, I don't know the exact timing of the implementation of the crusher and the CIL upgrades.

I'd like to -- the next question to ask a little bit about the capital program, you've upgraded to $48 billion plus some growth CapEx in Blanket again. Yet to date, I can only find about $13 million have been spent in H1. So this looks like quite a daunting task to spend the balance of the money, but you're obviously confident you can do it.

Yes. The spending isn't constrained by lack of funding. The spending is usually constrained by delivery of materials. I mean, case in point would be the AC/DC conversion -- the elution plant that we're working at the moment. We found that deliveries of steel have been slower than we expected, and that's a fairly consistent theme across all of our capital projects. It's not a failure on our part in terms of our capacity, it's just the supply chain that gets a bit stretched. But yes, we're comfortable we can get that.

Okay. And just a little bit about the new power line that you're proposing. So we heard about that previously. You've changed the scheduling of that slightly?

Again that's because of extraneous events. Things move slower than we'd like, especially when we're not all together in control of the project. So the 132 kV line that we're putting into Eagle Vulture requires extensive engagement with ZETDC, which can't take longer than you'd like, but that should be in by about June next year.

Okay. So the other question that was linked to that was that there were some question marks about how the pricing of power that would come through that line. And obviously, you now expect this enhanced capacity in the plant and at the mine to be able -- be able to create enough power from that or source enough power from that transmission line.