Earnings Call Transcript - CMCL Q1 2023

Operator, Operator

This meeting is being recorded. joined by Dana Roets, our Chief Operating Officer; Victor Gapare, who joined us from Bilboes, he's an Executive Director of Caledonia; by Chester Goodburn, our CFO; and by Camilla Horsfall, our Vice President of Investor Relations; and also Maurice Mason, our Vice President of Corporate Development. We're going to run through a slide deck, which hopefully addresses the main issues. The slide deck will be made available on our website immediately after this presentation. So I think I always feel very comfortable responding to tight questions because I don't always know if I'd answered the question properly.

Mark Learmonth, Unknown Executive

So with that, I'd like to start the presentation. Camilla is driving this. We seem to be on the summary page. Production for the quarter was just over 16,100 ounces, which is substantially down from the 18,500 ounces achieved in the first quarter of 2022. The average gold price remained virtually unchanged, so the decline in revenue was primarily due to lower production and decreased sales in working capital. Gross profit dropped significantly from nearly $17 million to just under $6 million, and the net profit attributable to shareholders fell from a $6 million profit in the first quarter of 2022 to a $5 million loss in this quarter, leading to a major reduction in earnings and loss per share. The dividend remained at $0.14, and rather than having a $10 million inflow from operating activities this quarter, we experienced about a $1 million outflow. This quarter marks the first that reflects our ownership of Bilboes, which we anticipated would have a short-term negative impact on our financial performance since we planned to begin work at Bilboes on stripping oxide material to expose the oxide material and only start production towards the end of the quarter. Unfortunately, we have been disappointed with the grade in some targeted mining areas, prompting us to revise our guidance. Victor will discuss the challenges at Bilboes oxides in more detail. Our Blanket production fell below plan mainly due to tonnage issues caused by equipment failures and logistical problems, which Dana will address shortly. There are signs of improvement in production in April, achieving about 80,000 ounces per annum on a daily basis. Operating costs at Blanket were higher than expected, primarily due to increased electricity consumption, which was further affected by a rise in the tariff we pay for grid power. We commissioned the solar plant in the quarter, which generates slightly more power than anticipated, and we are benefiting from that by reducing the weighted average cost of power while displacing expensive diesel. We have also started the feasibility study for the main Bilboes sulphide project, which we can discuss further. We completed a fundraising effort in Europe, South Africa, and Zimbabwe that raised a total of about $16.6 million, most of which was received during the quarter, and approximately $5 million was received immediately after the quarter ended. We maintain our production guidance for Blanket this year of between 75,000 and 80,000 ounces. Additionally, we will reiterate our online cost guidance for Blanket. So I'll ask Dana talk about this in a bit more detail. But look at the top graph in particular, the light line, the sort of light orange line, that shows tonnes. And you can see the tonnes was substantially down in the quarter. And grade was also down somewhat. The lower grade was also broadly as expected. We had expected the grade to be lower in the quarter, and so we weren't particularly disappointed by that. But the real factor that drove disappointing production was tonnes. So perhaps, I'd ask Dana to put a bit more context on why the tonnes were lower than we'd expected. Dana, could you help us?

Dana Roets, COO

In the first quarter, we typically face challenges getting started after the Christmas period. Last year, we had to increase our production by another 20% to reach our goal of 80,000 ounces. Compounding this, our main winder at 4 Shaft experienced a failure due to an electrical motor issue, which led to premature wear of the motor gear. Although we had spare parts available, we couldn't procure them from our preferred supplier in time. When we did manage to replace the brushes, additional issues arose, causing tripping problems. Subsequently, we needed to rush and manufacture more brushes, which led to further complications including communication issues with our electronic systems, costing us a couple of days to resolve. Ultimately, we lost 12 days of production because of these setbacks. Furthermore, at the same time, the new Central Shaft also encountered operational delays, creating a challenging situation at both shafts. Regarding concerns about future occurrences, it’s worth noting that the equipment at 4 Shaft had been operating without issue for 14 years, making this situation unusual. As we approach the second half of the year, we anticipate that 50% of our production will come from Central Shaft, which will alleviate some pressure on 4 Shaft. Going forward, we expect to operate 4 Shaft at around 50% of its capacity, while Central Shaft will run at about one-third of its capacity, positioning us better to handle any similar issues in the future.

Mark Learmonth, Unknown Executive

Okay. If anyone has any more questions on that, we can revisit it after the formal presentation. Let's move on to Bilboes. We acquired Bilboes based on a significant sulphide resource of over 2 million ounces at a grade exceeding 2 grams per tonne. It's a large and high-grade resource, and our confidence in that resource remains intact. The oxide project was intended as a small, short-term initiative over the next 2.5 years, during which we expect to produce about 50,000 ounces, mainly to generate cash for maintaining the operational integrity of the Bilboes business, which has approximately 150 employees, until we can start work on the main sulphide project. As Victor will elaborate, we conducted pre-stripping in the quarter to uncover the initial target mining area, but the grades there were disappointing. Therefore, we need to shift focus to other areas. Our strategy for the Bilboes oxide project now involves rigorous evaluation drilling at the next target areas before we move forward with waste stripping, allowing us to enhance the confidence in those target mining areas before incurring expenses. By the end of this month, which is the end of May, we will complete the evaluation drilling that will provide us a timeline extending to the end of September. From June and July onwards, we will conduct further drilling to prolong the life of the mine. Currently, we have withdrawn guidance for the Bilboes oxide project. However, we believe it will generally break even and may even contribute a small profit. Additionally, we are starting to assess the potential to identify oxide resources at the Motapa property, which is right next to Bilboes, and could help extend the life of the oxide mining operation. What I'd like Victor specifically to address is a question that we received by email in the last day or so, which is specifically address the issue as to how can people be confident that the difficulties we found on the oxide resource don't read across to the sulfide resource. Can you just comment on that, please?

Victor Gapare, Executive Director

Thank you, Mark. The company is highly confident in the sulphide mineral resource estimates. These estimates were derived from extensive drilling, totaling just over 93,000 meters, conducted over four distinct phases. The drilling for the sulphide resource constitutes all new drilling, with the initial phase starting in 1994 and managed by Anglo American, comprising 17,000 meters out of the 93,000. The remaining drilling began in 2010, and we have strong confidence in this drilling since it was performed in accordance with certain guidelines. The rock chips and costs from the last three phases of sulphide resource drilling are stored at the mine core yard for reference. The mineral resource estimates were compiled following the definitions and guidelines for the reporting of exploration information, mineral resources, and mineral reserves in Canada, specifically the CIM Standards on Mineral Resources and Reserves, Definition and Guidelines 2014. These estimates also comply with the rules and policies of the National Instrument 43101 Standards of Disclosure for Mineral Projects, Form 43101 F1, and Companion Policy 43101 CP. The resource classification follows the definition provided by the Canadian Institute of Mining and Metallurgy and Petroleum for inferred, indicated, and measured mineral resources. The classification of the estimated resources utilized a checklist approach, assessing various criteria to determine the confidence in the geology and grids. This checklist included data quality and integrity, data spacing for confidence in geological interpretations and grade interpolation, confidence in geological interpretation from both regional and local perspectives, and how that interpretation affects the controls for sulphide mineralization. Additionally, it included geostatistical confidence in grade continuity and geostatistical parameters such as kriging variance, kriging efficiency, and search distances to gauge relative confidence in the block estimates. Those estimates were verified by an independent Certified Professional and found to be compliant and accurate for the feasibility study. We are confident that our due diligence regarding the sulphide project was conducted properly, and we stand by our decision on the Bilboes sulphide project.

Mark Learmonth, Unknown Executive

Thank you for that. The key point is that the work conducted on the disappointing oxide project was completed many years ago, by a different vendor, not the current Bilboes vendors. It was outdated information that we inherited. I want to put this oxide situation into context. We can revisit this topic for any further questions later. Could I ask...

Victor Gapare, Executive Director

I suppose Mark...

Mark Learmonth, Unknown Executive

Yes.

Victor Gapare, Executive Director

When Caledonia was acquiring Bilboes, the deal was primarily focused on the sulphide project, and the oxide component did not factor into that valuation. The oxide was more of a bonus since it would naturally be generated during the stripping process, and it would be managed alongside the existing sales.

Mark Learmonth, Unknown Executive

Yes. It's fair to say that our economic evaluation of Bilboes was based purely on the sulphide and nothing on the oxides at all. So the oxides, as Victor said, was a cheeky freebie, which is good for us, but less good for Victor as a vendor. Okay. We can come back to Bilboes again, if anybody's got any further questions. But can I ask Chester to just canter through the financials, if you could please?

Chester Goodburn, CFO

Sure. Thanks, Mark. I'm just going to talk north-south being our existing flagship operations at banker. And when we started up oxide project of Bilboes, it's positive to see that in a challenging quarter while introducing the new oxide start-up operation, Blanket mine remained profitable, cash and both of our business remained robust with a least uncontrollable challenges we encountered at Blanket. Further, I was delighted to see productions Blanket in April and May, as shared by Victor, some will be shared by Victor as a plan to be cash neutral and cover costs and further increase our group profitability levels when we achieve this. Blanket mine, as you can see at the bottom contributes $5 million of guaranteeing profits in Q1 and weigh noncash items and working capital fluctuations are more generated approximately $8 million to our business, and that shows that Blanket...

Unknown Analyst, Analyst

Just can I just interject that. So the critical thing here is that clearly, revenue is down from $35 million to $29 million because of lower production. But production costs up from $13.7 million to $16.1 million. Can between you and you and Dana, could you just explain the reason why that's gone up primarily it is electricity. Could you just talk about that a bit?

Victor Gapare, Executive Director

Sure. Dana, would you like to begin or should I? Looking at the production numbers next, our electricity costs at the Blanket have increased, partly due to higher usage related to the grading work done this quarter. During this period, we also engaged with a consortium called IEUG that has negotiated a contract for us, allowing for a lower electricity rate. I anticipate a benefit of around $450,000 per quarter from this, which is not included in the current numbers. You'll see that reflected going forward. We're also promoting additional initiatives by our operators to monitor our kilowatt hour usage and have directed efforts more towards the Central Shaft, which helps reduce production costs in the north-west as we approach the 4 Shaft. Our kilowatt hour usage savings are not fully reflected in our pricing; we saved about $434,000 through the solar project, and we're pleased to report that it's performing slightly better than expected. Dana, would you like to add anything regarding the electricity aspect?

Dana Roets, COO

Yes. I think it's important to note as well that when we did the budget with what happened in the Ukraine dollar inflation, as we know, inflation worldwide went up. So our labor costs went up as well, way before we could get away with sort of a very stable working cost as far as labor is concerned. So we got our people a 4.5% increase. And then added to that, in the upper section of one section, we had some slowing where we had porting some of the spikes that we tried to undercut, and it just kept on coming down. And those big rocks blocked our draw points. And we were into a period where we had to do a lot of secondary blasting, which also cost us as far as exposes is concerned. So that also contributed to the higher cost.

Unknown Executive, Unknown Executive

In terms of labor, Dana, you can observe an increase in job creation factors compared to the previous quarter, which is attributed to the increase in production. This was not evident in the first quarter of 2022. If we can move on to the next slide, we can observe that production costs, including wages and salaries, have increased as Victor mentioned. It is also positive that we are compensating our labor force fairly, as evidenced by paying them 100% in U.S. dollars. Regarding electricity, we have discussed plans to reduce costs through better rates from initiatives implemented with IEUG, which we began to see the benefits of in April. Concerning the Bilboes oxide costs, we are working on improving those operations to achieve cash neutrality. We can proceed to the next slide. Just before you move on, there was a question regarding the IEUG. The IEUG is the Intensive Energy User Group, an initiative established under the President's guidance. Its purpose is to enable large-scale users like Blanket to directly import power from neighboring countries, such as Zambia or Mozambique, and transport that power through the Zimbabwe grid to us. We began utilizing this on April 1st and have noticed a decrease in tariff. At this point, I'm unsure if this has led to any reduction in load shedding. Dana, do you have any insight on whether we are experiencing less load shedding thus far?

Dana Roets, COO

Yes, we should actually start seeing it from next month more.

Unknown Executive, Unknown Executive

The question specifically pointed out that even if we're receiving power from Zambia or Mozambique, we are still vulnerable due to the Zimbabwe grid. Yes, we acknowledge that. Unfortunately, we cannot make improvements to the Zimbabwe grid. It's important to note that the Zimbabwe authorities generally prioritize industrial users over domestic users, which differs from the approach in South Africa. Dana, could you provide some insights on the new line we have established?

Dana Roets, COO

We have upgraded the additional line to the country, which provides us with an extra 6 MVA. We are currently busy connecting this line directly to our winders at Central Shaft. Additionally, we have a solar farm and 16 MVA of generator capacity. This gives us greater flexibility in managing load demands. Regarding the earlier question, there is nothing in the contract that allows ZESA to interrupt or take the power that we import; that is not stipulated.

Unknown Executive, Unknown Executive

Yes, but I think the question was more generally, if the grid collapses, the grid collapse, there's nothing we can do about it. Let's just deal with this electricity situation whilst we're talking about it. Victor, could you just give a comment as to where Bilboes is in terms of the grid, and how Bilboes is situated in terms of this grid supply?

Victor Gapare, Executive Director

Okay. Bilboes is more towards the north at the moment, in terms of the sulphide project, we've budgeted to build a new line, a direct line coming from a substation, I think that line will be about 75 kilometers or so. However, in the last 2 years or so, the Zimbabwe Electricity Transmission and Distribution Company has been building a line, which is coming direct from Hwange power station. As you know, at Hwange power station is constructed few generators, which will generate about 600 megawatts. So that line past is very close to the grip operations. So we've got a chance an alternative to actually connect from a much closer line, plus also electricity supply, which is closer to Hwange, it's much more reliable maybe than compared to the south of the country.

Mark Learmonth, Unknown Executive

So I think the key point is that while Blanket may not be the best location for the grid, it is still in a better position for the grid compared to Blanket. Apologies for the detour into electricity, but I felt it was important to address it while we were on the topic. Sorry for interrupting you, Chester, please continue.

Chester Goodburn, CFO

Sure. Turn the page, please. Administrative expenses increased due to a one-pass of approximately $3.1 million paid to advisers on acquiring Bilboes sulphide project. The Bilboes sulphide project is was worth of spending, and it's also an important note is a one-off cost. And all those expected to be highly profitable and much bigger than Blanket. Other than advisory fees, we had small increases in our uptick in travel post 2019 lockdowns and other than that, it's very comparable to the previous quarter. If you move on to cost per ounce. You can see the large portion of our price was due to the oxide start-up and that affected our online costs. We plan to turn the oxide cash neutral. Energy savings, as we mentioned, through the IEUGs expected to reduce energy costs and our production levels in the future quarters that we have seen realized both quarter and expected to lower online costs for the remainder of 2023. Online production cost guidance for Blanket is $770 per ounce to $850 per ounce and ranks amongst the line in the second, when compared to behind these peers. We move on to tax. Our effective tax rate was high in the quarter due to the oxide operating price and acquisition piece helping that $6.4 million being all be in the nondeductible. These costs are new piece for tax purposes. The future benefit of the success wise are not affected in the numbers. In future we'll be able to reap the benefit of sales for us in the oxide project as it can be profitable. Cash flows. Blanket as I said contributed approximately $8 million to the cash flows before working capital swings. And this previous Blanket remains strong and is expected to improve throughout this year. This is due to reduced supplies, reduced for the one-off advisory fees and the completion of the Bilboes sulphide project and an active cash flow is of oxide standard operation. We visioned solar bonds at the bank of $7 million, one-off $1 million of that was issued before quarter one hand and raised $16 million in equity raises, of which $5 million was not reflected in these numbers. The bullion receivable outstanding at quarter end of $6.7 million, as was received post quarter end. And to give out these mentioned cash flows represent approximately $40 million that drive further normalization of our volume receivable due to our new sales mechanism should improve our deliveries and our cash flows and make our deliveries less lumpy along with the cash flows as follows. Moving on to the balance sheet. Noncurrent assets included approximately $70 million due to the acquisition of the sulphide project. Current assets increased due to the increased cash availability in the group, and current liabilities included approximately $4 million of liabilities, not settled in cash, as were settled by positions of shares over strength deferred consideration for Bilboes and $4.5 million of liabilities was acquired in the Bilboes deal. Also excited to share Bilboes must have quality and that we expect to make a huge strength in our overall facilities by the end of 2023 when we pay of the large portion of our results. This is at the current production guidance levels on gold price. We can move over to cash. On the slide, the uptick in our net cash position is evident as we've improved the production at Blanket, you can see the premiums continue in May, giving an indication of production line has been funded. Further, we are expected to reduce our borrowings by year-end. And our transfer cash from Zimbabwe continued normally has enabled us to maintain the dividend of shares $0.40 per share per quarter and pay for related expenditures outside of the north-west.

Unknown Executive, Unknown Executive

Yes, just to pause, one of the changes over the last year or so is the availability of dollar-denominated debt in Zimbabwe. Since it is available, we choose to utilize it, guided by the principle that we prefer not to leave dollars sitting in Zimbabwe. If we can borrow in dollars there, we will do so. However, as Chester mentioned, over the course of the year, we plan to repay about $10 million of these overdrafts. If the dollar borrowings continue to be available, we will keep them in place and use the cash for other business needs. It's important to note that we are not accumulating a surplus of local Zimbabwe dollars that we cannot utilize.

Mark Learmonth, Unknown Executive

I think that very much wraps up the client segment. We'll move over to other matters.

Unknown Executive, Unknown Executive

We began serious work on the sulphides in April. Initially, we conducted three high-level studies aimed at achieving a production rate of 170,000 ounces annually. We are considering three different approaches: the first is a hop, skip, and jump method; the second involves a hop and a skip; and the third is a direct jump to 170,000 ounces a year. We are evaluating the balance between slower growth with a manageable funding profile to minimize dilution while aiming to maximize the net present value per share. I expect that the direct jump project may yield the best return, but it could pose funding challenges, so we might opt for a two-stage process instead. Currently, we are exploring all realistic options to determine the best fit. We aim to complete the bankable feasibility study by the end of the first quarter of next year. This work is very much in progress.

Mark Learmonth, Unknown Executive

As Chester mentioned, we have begun exporting gold directly. In 2022, regulatory changes were announced, allowing us to handle our own gold exports. However, it took about six months for those changes to be implemented in a way that satisfied the Zimbabwean authorities. We were pleased to make our first gold deliveries in early April to a refiner in Dubai. The most recent export occurred on Sunday, and we received payment in U.S. dollars on Monday directly into our Zimbabwe bank accounts. This considerably improves our cash flow and addresses a long-standing shareholder concern regarding credit risk, even though we haven't had significant issues getting paid by Fidelity. We raised equity in March and early April, amounting to about $16 million. We were surprised by the strong and widespread demand in Zimbabwe, which we are very pleased about. Our initial intention for the VFEX listing was merely to capitalize on various concessions, but it has turned out to be a genuine and competitive source of equity, which has been a pleasant surprise for us. We are issuing loan notes from the solar vehicle. We generated $4.5 million in the quarter and approximately $2.5 million under GAAP for the quarter. This is primarily to align the capital structure of the solar vehicle with what is appropriate for a company of that nature, which has a high level of predictable cash flows. Those are the other matters. In terms of outlook, we reiterate our production guidance for 2023 of 75,000 to 80,000 ounces. We also maintain our guidance for Blanket's price between $770 and $850 an ounce. However, we have withdrawn guidance for both production and costs related to Bilboes due to uncertainty. Bilboes will clearly have an impact on all-in sustaining costs. Excluding Bilboes, we anticipate an all-in sustaining cost for Blanket between $9.35 and $10.35 an ounce. We expect to complete the final feasibility study for Bilboes in the first quarter of 2024. Additionally, we have received Board approval to begin the first phase of an initial drilling campaign at Motapa, initially focused on searching for oxides to support our work at Bilboes, with the intention to later explore for substantial sulphide resources that will complement Bilboes. So I think that brings us the full part of the presentation to an end. Can we open this to questions, please. Is it the lines open or?

Unknown Executive, Unknown Executive

I can see one from Damian.

Unknown Analyst, Analyst

Okay. Cool. Thank you for the presentation. Yes, I thought that's very comprehensive, very good rundown. I suppose I got a couple of questions. I mean, profits, I mean, obviously, revenues and profits seem to have encountered pretty much every possible headwind you can imagine in this first quarter. Now I can make a judgment on which one of the headwinds are kind of one-off, which are ongoing. But I was wondering, what your perspective was on which headwinds are going to kind of continue throughout the year?

Mark Learmonth, Unknown Executive

I believe we have a good handle on production. The impact of higher electricity consumption will persist for some time until we can optimize the use of our infrastructure, which includes shutting down operations like the #4 shaft. However, we are starting to see advantages in terms of lower tariffs. The cash outflow we've experienced at the Bilboes should be addressed around June or July this year, allowing us to manage that situation.

Unknown Analyst, Analyst

Okay. And the second question was you guided the online cost at Blanket to be between $770 and $850 per ounce for this year, which is obviously above the $735 cost for full year '22. So this kind of suggests the remaining quarters. Is it going to return to a prior cost level or better, given how much higher Q1 was?

Mark Learmonth, Unknown Executive

Yes, you're correct. A significant portion of Blanket's costs are fixed. Therefore, increasing production creates a beneficial cycle, as the marginal cost per ounce decreases. This should lead to improvements. However, it's important to note that we've experienced inflationary pressures from wages, salaries, and input costs like cyanide and explosives. Additionally, the guidance range we've provided is higher than what we experienced in 2022, and there are valid reasons for this.

Unknown Analyst, Analyst

Okay. And actually, a third question has occurred to me is that, obviously, with Blanket, you're guiding production of 75,000 to 80,000 ounces this year. So obviously, 80,000 ounces was something that's achieved in a Central Shaft, is only scope for going higher than that from Blanket in terms of theirs best drilling exploration going on there, always all of your efforts being focused on the other side?

Mark Learmonth, Unknown Executive

No. The way you're discussing this is important. We lost Mark, but we need to remember that Blanket has been in a buildup phase for the last six years, during which we achieved our target of 80,000 ounces. Typically, during a buildup phase, you work hard to develop quickly and open up resources as fast as possible to create flexibility. This is what we need to concentrate on now. We want to enhance our flexibility, engage in significant development, and be in a stronger position to handle situations when things don't go as planned. Ideally, we should have at least two years of reserves in advance, along with greater flexibility to move forward. Currently, I do not expect us to exceed the 80,000 ounces, particularly for that. However, there are still many areas with exploration potential at Blanket. If we begin to explore those and they show promise, we would then need to expand the plant, as it is currently operating at full capacity. Pursuing that would entail a new business case since we are already running at full capacity investments.

Unknown Analyst, Analyst

Okay. Right. So I guess, yes, I mean really Blanket as kind of a steady state, hopefully, and it's still base the other sites that will provide the upside?

Unknown Executive, Unknown Executive

Yes. I think for material purposes, that's correct, yes. Okay. I don't see any more questions from anybody else? I just got a question.

Unknown Analyst, Analyst

I have a question about Bilboes. What is the target mining rate, around 20,000 ounces or 20,000 tonnes per month, and what is the head grade?

Unknown Executive, Unknown Executive

The oxides?

Unknown Analyst, Analyst

Yes, at oxide? We're not giving guidance on the oxides.

Unknown Executive, Unknown Executive

You mentioned that you want to be cash flow neutral, right? Yes. But that's as far as we go, we're not providing guidance on the oxides. We've made that very clear. If I start giving guidance on the oxides, I can't do that.

Unknown Analyst, Analyst

Okay. Well, the costs for April were $1.6 million. Is that sort of the typical cost that you expected normals?

Unknown Executive, Unknown Executive

Really, we're not giving any further guidance. I've already said this, we made very clear. Sorry, so helpful, but I mean we have withdrawn guidance in terms of costs and production from Bilboes oxide are accounting further than that.

Unknown Analyst, Analyst

Okay.

Unknown Executive, Unknown Executive

Any further questions? Yes. There is one here from Alan Ground.

Unknown Analyst, Analyst

Thank you for your presentation and for addressing my three questions. I would like to ask about Motapa. You purchased that resource with the intention of developing it alongside Bilboes. Do you have any preliminary insights based on historical drilling regarding how the sulphide resources might be developed there, or is it still too early to form any ideas?

Mark Learmonth, Unknown Executive

It is probably early stage. Well, Victor, do you want to comment on that?

Victor Gapare, Executive Director

Thank you, Mark. Before Anglo American was involved with this property, there was some drilling done. However, those results are outdated, and I believe it would be incorrect to rely on them for guidance. We do know there were positive indications from the drilling that took place. Our assessment is that this is an exploration property, which is what we have reported. We want to conduct exploration on it. We believe that in the long term, when combined with Bilboes, this could result in a significantly longer mine life and an increase in production.

Mark Learmonth, Unknown Executive

Yes. At this point, it's too early to determine if we will access some of the more remote mining areas at Bilboes. The Bilboes project has various mining areas, some that are closer and some that are further away. If we quickly find more material at Motapa, we may change our approach to accessing these remote areas, prioritizing those that are closer. However, it's premature to consider this option. As Victor mentioned, this could allow us to increase production beyond 170,000 or extend the production life past the initial period, or potentially both. We simply need to start drilling before we can discuss this in detail.

Unknown Analyst, Analyst

Okay. One question I've sent in by e-mail was a couple of years ago, there'd been talked about extending ownership of some thoughts about that?

Mark Learmonth, Unknown Executive

Yes, we previously had a 49% stake, which we increased to 64% when we acquired the 15% held by Fremiro. We are committed to retaining 10% for the workers and another 10% for the community, while a 16% stake was previously held by the National Indigenisation and Economic Empowerment Fund, a government entity. With the recent government change from Mugabe to Mnangagwa, the whole indigenisation framework has effectively disappeared. Consequently, the ownership structure of Blanket has shifted within government frameworks, making it difficult to identify the appropriate parties for discussions. Recently, it appears a Sovereign Wealth Fund has been established, and Blanket is one of its assets. However, any decisions regarding the Sovereign Wealth Fund's interest in Blanket will be primarily influenced by political factors, especially with elections approaching, which limits any political direction we might require. For now, we do not anticipate rapid developments, but we hope to engage further since it would provide the Sovereign Wealth Fund with a broader interest across the entire group, enhancing their perspective as a shareholder in Caledonia, rather than solely focusing on Blanket. Therefore, while it's a possibility, progress will likely be slow.

Victor Gapare, Executive Director

Mark, just to add to that, in terms of where that asset sits at the moment, it fits in the Ministry of Industry and Aviation. So in terms of the reorganization, we like end up with the Sovereign Wealth Fund, we expect it to end up in the Sovereign Wealth Fund. But the moment, it sits in the Ministry of Industry.

Mark Learmonth, Unknown Executive

Any further questions? Can you see anything Pamela?

Operator, Operator

No, I haven't, there are any more questions?

Mark Learmonth, Unknown Executive

Okay. Well, with that, thank you all for joining. We'll have another call at the end of our Q2 results, which we'll put out in the middle of August, and hopefully it will be rather much cheerful than in the first quarter. So thank you very much for your attendance.

Unknown Executive, Unknown Executive

Thanks, Mark. Thanks, everyone.