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Toronto-based Caledonia Mining hopes to complete a feasibility study on its Nama cobalt project, in Zambia, by early June, and will continue to work towards starting production as early as posssible next year, CEO Stefan Hayden said on Monday.

The firm, which announced on Monday it had signed formal agreements to sell its two South African gold mines in order to focus its attention on bringing Nama to production, then expects to be able to provide clarifications on its plans to finance the project during July.

The company is looking at “various options” to fund the project, which internal studies indicate will cost about C$125-million, but the firm will have a clearer picture once the feasibility study is completed.

“I don’t think we’re going to have problems raising funding for this project in the current environment,” Hayden commented on a conference call with analysts and investors.

Caledonia has already signed offtake agreements with refiners for 51 560 t of cobalt metal equivalent between 2009 and 2013, which represents Nama’s entire forecast production over the five-year period.

Prices for cobalt, like copper, have surged over the last two years, spurring miners to speed up the development of new mines and expansions of existing ones.

In light of the expected increase in supply, analysts have suggested that the price may have peaked, although market watchers are divided over whether new mines scheduled to come on stream, most notably in the Democratic Republic of Congo, will start production on time.

Hayden pointed out that the other new mines would produce cobalt as a co- or byproduct, while Nama would have the distinction of being a primary cobalt mine, and therefore not dependent on the fortunes of other metals, such as copper or nickel, for its success.

Cobalt is used in gas turbine aircraft engines, batteries and catalysts.

Caledonia currently holds a retention licence for the Nama property, and will focus this year on converting this to a large-scale mining licence.

The firm received approval last week for an environmental-impact assesment on plans for a new access road and power line routes, and is currently in negotiations with the Zambian government to conclude a mining convention, Hayden said.

Shares in Caledonia gained 2,86% in Toronto on Monday, to C$0,18 by 14:02 EDT.


In order to focus on successfully bringing Nama into production, Caledonia has started talks with a “suitable joint-venture partner” for its platinum-group metal assets, Hayden said, and has also signed formal sales agreements for its subsidiaries that own the mothballed Barbrook and Eersteling mines, in South Africa.

Eastern Goldfields SA will pay R70-million for the Barbrook mine, near Barberton, in Mpumalanga, and Vancouver-based Oretech Resources will pay C$3,8-million for the Eersteling mine, Caledonia announced on Monday.

Eersteling, which has been on care-and-maintenance since 1997, includes the Eersteling farm, where the first gold was believed to have been discovered in South Africa.


Besides Nama, Caledonia’s other primary asset is its producing Blanket gold mine, in Zimbabwe.

The mine was plagued last year by ongoing power outages, which Caledonia had since dealt with by negotiating an agreement with the Zimbabwe Electricity Supply Authority for a dedicated power supply to its gold mine in the country, in exchange for foreign currency.

However, power uncertainty and other woes in Zimbabwe, including delays in receiving foreign currency for gold sale proceeds from the Reserve Bank of Zimbabwe, had delayed the completion of the expansion of the number four shaft at Blanket, which had had a negative effect on output levels.

The mine produced 13 985 oz of gold in 2007.

While the company was optimistic that the recent elections could result in improved conditions for doing business, in the short to medium term, the outlook for operating in Zimbabwe remained “problematic”, Hayden said.