Caledonia Mining (CMCL) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer – Mark Learmonth
• Chief Financial Officer – Ross Jerrard
• Executive Director – Victor Gapare
• Vice President of Technical Services – Craig Harvey
• Corporate Development and Investor Relations – Maurice Mason

TAKEAWAYS

• Revenue — $78.9 million, representing a 10.5% increase year over year driven by a significantly higher gold price.
• Gold Production — 17,030 ounces at the Blanket Mine, a decrease of 11% compared to the prior year due to compressed air shortages and metallurgical plant inefficiencies.
• Average Realized Gold Price — $4,134 per ounce, an increase of 20% from $3,434 per ounce in the third quarter of 2025.
• EBITDA — $28.1 million, down 16% as lower production and sales volumes partially offset the benefit of higher gold prices.
• Profit After Tax — $11.3 million, a 39.3% decline resulting primarily from a $12.9 million noncash fair value loss on derivative financial instruments.
• On-mine Cost — $1,514 per ounce sold, rising 23% as fixed and semi-fixed costs were absorbed over fewer ounces produced.
• All-in Sustaining Costs (AISC) — $2,344 per ounce sold, up 21% driven by lower production volumes and increased royalty payments.
• Revised 2026 Production Guidance — 69,000 to 72,500 ounces, lowered from previous targets to account for operational challenges at the Blanket Mine.
• Revised 2026 CapEx Guidance — $94.3 million, reduced from $103.3 million primarily due to the timing of the 132kV power line project.
• Derivative Loss — $12.9 million, representing a noncash movement in the fair value of convertible senior notes and gold price hedge put options.
• Quarterly Dividend — $0.14 per share, approved for payment on Dec. 11, 2026, to shareholders of record as of Nov. 27.
• Cash and Cash Equivalents — $161.9 million at the end of the quarter, compared to $35.7 million at the end of 2025.
• Pro Forma Liquidity — $350 million, including a new $150 million interim facility secured after the quarter end.
• Interim Funding Facility — $150 million, comprising a $100 million term facility and a $50 million revolving credit facility from a syndicate of eight Zimbabwean banks.
• Measured and Indicated Resources — 2.178 million ounces at Blanket Mine, an increase of 22% resulting from successful underground development and drilling.
• Motapa Maiden Resource — 379,000 ounces measured and indicated at a grade of 1.51 grams per tonne, located adjacent to the Bilboes project.
• October Gold Production — 6,940 ounces, demonstrating improved operational run rates following the resolution of compressed air issues.
• October Built-up Head Grade — 3.07 grams per tonne, representing an improvement from the 2.7 grams per tonne achieved during the third quarter.
• Bilboes NPV — $1.5 billion based on a gold price of $4,156 per ounce, with a post-tax internal rate of return of 58%.
• Gold Inventory Lock-up — 1,300 ounces of recoverable gold, contained in a stockpile of 61 tonnes of activated carbon at the end of the period.
• Lima Plant Throughput — 160 tonnes per day in October, with a plan to ramp up to 200 tonnes per day by the end of the fourth quarter.
• Bilboes Project Funding — $600 million total estimated requirement, including capital costs, working capital, and capitalized interest.

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RISKS

• Learmonth stated, “Production, as we’ve previously indicated, was somewhat disappointing at just over 17,000 ounces for the quarter,” reflecting constraints caused by compressed air shortages in deeper mining areas.
• Jerrard warned that while capital expenditure is in line with expectations for the year, “it is at risk, and it is about execution in terms of being able to make sure that those projects are delivered” by year end.

SUMMARY

Caledonia Mining Corporation Plc (CMCL +0.20%) reported third-quarter revenue of $78.9 million, focusing on the resolution of operational constraints at the Blanket Mine that hampered production and recovery. Management reported that mechanical issues and inventory lock-ups led to disappointing production of 17,030 ounces, though a 20% increase in the realized gold price helped maintain gross profit growth. The company stated that it secured a $150 million interim facility to advance its flagship Bilboes project while continuing to build mineral resources at Blanket and Motapa. Management confirmed that mining operations have normalized following the commissioning of additional infrastructure, with production and grade metrics improving in the early fourth quarter.

• CEO Learmonth stated that the commissioning of two replacement compressors on Oct. 31 resolved the compressed air shortage that previously restricted access to high-grade mining areas.
• Management reported that the commissioning of a new elution vessel on Oct. 16 enabled the recovery of approximately 750 ounces of gold from the metallurgical circuit as of Nov. 7.
• Learmonth noted that the company declared a maiden mineral resource at the Motapa property, which the company believes provides significant synergy potential given its proximity to the Bilboes project.
• Management indicated that they expect first gold production from the K-Pits trial heap leach pad by the end of Nov. 2026, which may allow for full-scale oxide mining in early 2027.
• CFO Jerrard noted that the $150 million interim facility with a syndicate of eight Zimbabwean banks provides liquidity to advance procurement while negotiations for larger project financing continue.
• The company stated that the newly refurbished Lima plant throughput reached 160 tonnes per day in Oct. 2026 and is planned to increase to 200 tonnes per day during the fourth quarter.

INDUSTRY GLOSSARY

• AISC: All-in sustaining costs, a non-GAAP financial measure that represents the ongoing costs of gold production including sustaining capital.
• BIOX: A biological oxidation process used for the treatment of refractory gold ores.
• CIL: Carbon-in-leach, a gold recovery process where activated carbon is added to the leach tanks to absorb gold.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization.
• Elution: The process of removing gold from activated carbon in a metallurgical plant.
• IRR: Internal rate of return, a metric used to estimate the profitability of potential investments.
• M&I: Measured and Indicated, categories of mineral resources that have a high level of geological confidence.
• NI 43-101: A Canadian national instrument for the Standards of Disclosure for Mineral Projects.
• NPV: Net present value, the current value of future cash flows discounted at a specific rate.

Full Conference Call Transcript

Operator: Welcome to Caledonia Mining’s Third Quarter Results Presentation. I’d like to pass over to Mark Learmonth, CEO, to start the presentation. Mark, over to you.

Mark Learmonth: Thank you, Scott, and welcome to this results presentation for Caledonia’s third quarter. Can we open the presentation, please? Okay. Let’s move on to the disclaimer, which I trust you’ll consider and digest. Let’s move on. As I have said, I’m Mark Learmonth, Caledonia’s Chief Executive. I’m joined by Ross Jerrard, who’s our CFO; by Victor Gapare, who’s another Executive Director, and he is primarily responsible for the Bilboes project. Craig Harvey is our Vice President of Technical Services. He’s going to talk to us about exploration. And Maurice Mason is also in attendance. He does Corporate Development and Investor Relations. Could we move on, please? All right. Just highlighting half a dozen things that come out of the quarter.

The thing that’s not on this slide is that actually it was an excellent safety quarter, which we’ll talk about in a moment. The gold price was good. We realized over $4,100 an ounce, which was 20% up on the comparable period. Production, as we’ve previously indicated, was somewhat disappointing at just over 17,000 ounces for the quarter. And that was — we’ll go into that in more detail, but that was relating to production problems arising from a lack of compressed air compounded by some problems in the metallurgical plant. The financial — operating financial performance was quite strong. EBITDA was $28 million for the quarter. And for the 9 months, that puts us nearly $108 million.

Ross will talk in a lot more detail about that, but it’s fair to say that below EBITDA, there’s an awful lot of very complex financial accounting, largely relating to the financial accounting for some derivatives, which went a long way to unpicking the reasonably solid financial performance. At the end of the — or after the end of the quarter, we’re delighted to announce that we’ve secured the third leg of our funding package for Bilboes, which is a $150 million interim funding facility. But again, Ross will talk about that in more detail.

Craig will talk a little bit more about this, but we were also very pleased to announce a significant increase in the measured and indicated resources at Blanket, up 22% and that includes quite an exciting short-term opportunity in respect of some oxides which Craig will talk about. And then also a maiden resource at the Motapa property, just under 400,000 ounces there, and that’s immediately adjacent to Bilboes, and we believe will, in due course, give rise to some exciting potential there. And then finally, it’s worth just noting that we’ve declared another quarterly dividend of USD 0.14 per share, which will be paid, I think, at the end of this month. Shall we move on? Okay.

Let’s just talk a little bit more about production. I’ve already indicated that for the quarter, it was just over 17,000 ounces, just over 49,000 ounces for the 9 months, and that was somewhat less than we’d expected. So on the back of that, we did revise the guidance for 2026 down to a level of 69,000 to 72,500 ounces for the year, which implies a good strong quarter for Q4, which I’ll go into in a bit more detail. And really, it’s worth saying what held us back in the third quarter. As I said, there was 2 issues. The first related to mining.

We had a shortage of compressed air, which reduced our ability to mine effectively in the high-grade deeper areas of Blanket. We have seen this coming, and we’ve ordered 4 extra compressors to give us the additional compressed air capacity. Two of them arrived. Two of them, unfortunately, were held up at the port in Beira, Mozambique due to congestion there. And those — we’ll talk a little bit more about the — what happened after the end of the quarter. But what it meant is that during the — particularly towards the end of the third quarter, we just weren’t able to get the tonnes we planned from the deeper higher-grade areas.

Then the other difficulty we faced in the quarter was really 2 sort of mutually reinforcing issues in the metallurgical plant. The first related to some changes that we’ve made to the gravity gold circuit, which meant that more free gold was reporting into the CIL plant, and that was compounded by a historic lack of efficiency and lack of capacity in the elution circuit, which meant that we weren’t able to recover that increased loading in the CIL — capacity in the CIL process. So 2 mutually reinforcing factors that meant that at the end of the quarter, we had about 11,000 ounces of gold trapped in the CIL plant.

So our focus for 2026 and into 2027 is to increase the compressor capacity to support mining in the high-grade areas on 30 and34 levels. It is to add the elution capacity, and first of all, stop the gravity circuit de-counting into the CIL, which we’ve done and then add elution capacity to recover the retained gold and then also move on to recover the gold in the activated carbon that we’ve got sitting there. Also, we’re focused on increasing production at the Little Lima metallurgical plant, which we’ve recommissioned in the course of the third quarter.

It made a very modest contribution in the third quarter, but we’re ramping up production there, and that should add more ounces in the fourth quarter. And also, we’re now beginning to reap the benefit of the accelerated development that we commenced earlier in the year to give us improved access to higher-grade mining areas and also to improve our operating flexibility to protect us from any unforeseen eventualities. So that’s an overview of production in the quarter. Shall we just move on? And given the sort of dynamic situation we’re in, we thought it’s appropriate to give an immediate update as to what’s happened after the end of the quarter. So that’s in October.

In October, Blanket produced just under 7,000 ounces of gold. So that’s a significant improvement from the run rate in the previous months. And you can see that was largely driven by an increase in grade. So the grade we achieved in October was 3.07 grams a tonne, which compares to I think about 2.7 that we achieved in the third quarter. So a significant improvement in performance at Blanket. It’s fair to say that we’re pending the new compressors, the replacement compressors were commissioned at the end of — right at the end of October.

But prior to that, in October, we have refocused what compressed air capacity we had to make sure that we delivered the planned tonnes from the high-grade areas. And so that reduced the rate at which we were filling the plant with low-grade material. And then we also commissioned the new elution vessel on the 16th of October, and that’s allowed us to make some inroads now into the 11,000 ounces of gold that was locked in inventory at the end of September. We do smelting about once a week. And so the most recent smelt to which I’ve got full results was done on the 7th of November.

And at the 7th of November, we recovered about 750 ounces out of the 1,100 that were trapped, and we’d expect the remaining ounces to be recovered maybe in the next smelt. And then once those trapped ounces have been recovered, we can then use the increased dilution capacity to address the 1,300 ounces of gold that are contained in, I think, about 60 tonnes of stockpiled activated carbon. So that’s production at Blanket. And then also which you’ll see coming towards the end of the quarter and then into next year is the work that we’re doing on the K-Pits, that’s oxide mining and processing at Blanket.

We’ve loaded or we’re currently loading the test heap leach pads with about 10,000 tonnes of material. That should be completed by the end of this week, and then we’ll start irrigating on Monday. And then we’d expect to start seeing gold production by the end of November into December. And depending on the outcome, let’s face it, this is still a test heap leach, depending on the outcome of that process, we’ve received the EIA approval, which means that we should be able to move pretty much immediately into the full-scale oxide mining and processing activity where we’re targeting a throughput of about 40,000 tonnes a month. So that’s looking very encouraging.

So that’s what’s happened since the end of the quarter. Shall we proceed, please? So just a little bit more detail about the operations in the quarter. Next slide. It was a — as I said, a very strong quarter in terms of health and safety. We had no lost time injuries, and we now had a record of over 500 days without an LTI. So that’s an excellent outcome and long may it continue. Could we move to the next slide, please. This is a graph that we’ve used before, but it helps just focus on the main components that drive production. The top graph shows grade and tonnes.

You can see the top line shows that tonnes were stable, but you can see the grade even in Q3 only recovered to a level of about 2.7. Yes, it was higher than we had experienced in the first quarter, but not as high as we would expected it to be. So in the first quarter and a little bit of the second quarter, our ability to access high-grade areas was constrained by just lack of physical access. In the third quarter, we could get the access, but we couldn’t actually go mining there as we planned because we have, as I said, the shortage of compressed air.

If you look at the second lower graph, the bars show the ounces, but the line shows the recovery. And you can see the recovery took a bit of a hit in the third quarter, and that reflects both the slightly disappointing grade, but also more importantly, the fact that the gold was being locked up in the CIL circuit, and therefore, we weren’t getting the recoveries. And so a combination of lower-than-expected grades plus lower recovery contributed to a somewhat disappointing gold production in the quarter. Shall we move on? So that’s a quick overview of what’s happened in the quarter and what’s happened after the end of the quarter.

With that, I’ll hand over to Ross, who will run us through in more detail the financial results for the third quarter.

Ross Ian Jerrard: Thank you, Mark, and good afternoon, everyone. I’m delighted to talk you through the results. If we turn to the next page and talk through the summary. I guess my overarching comments on our financial results for the quarter, whilst it was a challenging quarter in terms of top line gold ounces produced and sold, and also some results in terms of working capital tie-up, as Mark has articulated, but also the fair value adjustment that’s gone through for the quarter. We do see the results coming through in terms of a solid Blanket performance, and we’re excited about the reset and the closeout of the year in the Q4 and importantly, as we go into 2027.

So the activities and the expenditures and all our initiatives are coming through and bearing fruit. But very briefly, in terms of summary, you’ll see on the slide, our gold ounces produced were down some 11% and Mark has already talked us through the compressed air shortages and some of the gold retained in the plant. We did have a higher on-mine cost where you jump to on-mine cost that’s up some 23% based on some higher volume movement, but also those ounce — lower ounces produced and sold, which affect that metric.

I think the key thing is really looking at our on-mine cost per tonne milled, where that’s gone up some 9%, but importantly, for the year is only up 4%. So it’s very much in line with our expectation and performance. So in terms of the absolute costs, the teams have done well in terms of controlling their activities and their costs and making sure that they flow through. We did benefit from the gold price, up some 20% at $4,134 per ounce, which went some way in terms of offsetting the lower ounces, but did increase our royalties.

So you’ll see in our all-in sustaining costs that have gone up some 21% in terms of ounces sold metric, that average realized price of 20% increase in terms of gold price has affected that and drop through in terms of our AISC number. Overall, our EBITDA is down for the quarter, down some 16%, driven by those activities. And I’m just going to dive into a bit more detail in our P&L, and we can talk through some of those specifics. So if we can turn to the next slide, please.

Just quickly walking through the profit and loss statement, you’ll see our top line revenue was up some 10%, which was that combination of the higher gold price and some lower sales volumes. The flow-on impact in terms of the royalty that I’ve discussed shows the royalty charge going and increasing some 15% on the comparative quarter. Production costs broadly in line with our expectations, albeit up some 6%, but well controlled and happy with those activities. And then gross profit up 14%, driven by those improved margins and because of the gold price. So we’ve benefited at the top line.

Going below the gross profit line, most of those line items are in line, and there have been movements, some reductions, but the key one is that $12.9 million derivative loss for the movement in the fair value on the derivative. I would highlight that this is a noncash movement, and it’s driven in terms of the various valuation models. I would also highlight that we’ve booked gains in the first and second quarter. So if you look in the 9-month period, we’re actually still up $2.5 million on that accounting. But it is noncash and it all gets booked at corporate, but it significantly impacted our performance in the challenging quarter.

And if you drop down a little bit lower to the profit for the period and importantly, what that means for the NCI, whilst Blanket had a solid performance even with the challenges and produced cash and distributed and made a profit, those deployment of funds, both to Blanket, but also the corporate adjustments that have gone through that I’ve mentioned did mean that there was a lower NCI or higher NCI versus profit attributable to the company, which ended up being just a shade under $3 million for the quarter. We move to the next slide, please. Talking a little bit through cash flows.

Top line cash inflow from operations was up some 19% at $31 million for the quarter. We’ve had our first finance cost charge come through in terms of the finance cost on the convertible bond of $4.3 million. And ultimately, the net cash flow from operating activities of $13.6 million was largely deployed against our capital expenditure profile, but is in line with our expectation for the year, and I’ll talk a little bit more about CapEx expenditure in a minute, but very much on track and in line with what we’ve previously guided. And then outside of that, there were not many other movements within cash flows apart from our dividend payment of $9.2 million.

So basically, the cash that was generated was deployed to CapEx and equally, we had our dividend distributions which meant that the cash balance went down by just a shade under $10 million for the quarter, and we ended the period with cash and cash equivalents of $158 million. If you move to the next slide, please. What that has meant for our liquidity position is shown in this table, and you’ll see that the cash on hand is now sitting at $161 million. We had a larger buildup in terms of bullion on hand and our gold sales receivables.

So there was 3,700 gold ounces sitting on bullion on hand at the end of the period and also 1,600 ounces of gold sales receivables. And together with our normal facilities, which sits at around $20 million with deployment amount at just under $4 million, giving us total liquidity of $196 million across those various categories. We were delighted with our interim financing facilities. So as announced in November, we’ve now delivered on that strategy. So post period end, we’re now sitting with just under $350 million worth of pro forma liquidity that’s available to us. Move to the next slide, please. Just a quick reminder in terms of our updated cost guidance, and this is all as previously announced.

We updated our guidance in line with the Blanket gold production. I would say and comment on the CapEx profile. So whilst we have reassessed the CapEx with the re-guidance, this wasn’t about delaying expenditures or deferring any deployment of funds. This is all around execution in terms of being able to make sure that those projects are delivered. There are some significant projects that are in the pipeline, and there’s a lot of deployment of funds that are scheduled. So whilst we currently look as though we’re behind our CapEx spend, there is a large amount that is likely to drop or we’re expecting it to drop before year-end.

But it is at risk, and it is about execution in terms of making sure that all those projects come in and are delivered. So whilst we’ve maintained our CapEx profiles, I just wanted to highlight that it is very much around execution and delivery rather than a deliberate attempt to delay any expenditures on our CapEx. If we move to the next slide, please. And I’ll hand over to Victor to talk through our Bilboes project.

Victor Gapare: Thank you, Ross. Can you move to the next slide, please? As a recap, Bilboes is our flagship development project with 1.75 million ounces of proved and probable reserves. At peak, it will produce 200,000 ounces of gold per year. At a gold price of USD 4,156 per ounce, it has an NPV of $1.5 billion and a post-tax IRR of 58%. Can we move to the next slide, please? We’ve started work at Bilboes. So what I will go through is what we have done so far and what is next. We signed the EPCM contract with DRA and they commenced the front-end engineering designs, otherwise known as the FEED phase in March 2026.

The FEED phase is at an advanced stage with designs for the long lead items already completed. The housing strategy for contractors and employees was finalized and is being implemented. The earthworks contract was signed and the contractor started work in October. The clearing and grabbing of the plant site is completed. Excavation of the plant clearance has commenced. I’ll be able to show you some pictures towards the end of my presentation. The quantity surveying and site surveying services contracts were signed and the contractor has started work given that we started the earthworks contract. The BIOX license with Metso was signed.

The mine planning is at an advanced stage with mining block models and mine designs having been completed. Mine scheduling is underway and is due to be completed by the end of this month. The process plant area configuration and layout has also been completed. The orders for the long lead items have been placed and these include the mills, the cyclones and then the flotation cells contract is near signing and order placing is imminent. Again, this shows that the project is actually moving ahead. Next slide, please. You’ve gone one ahead. Go back one slide. Sorry I think there’s a slide which has gone somewhere or maybe you’re just keeping it. Anyway, what is next?

What are the items we are working on at the moment? The BIOX equipment supply contract is being finalized and is expected to be in place by the end of this month. The crushers, screens, feeders and samplers packages are under evaluation, with contract signing targeted before the end of the year. The construction power contract is to be in place by the end of this month. As you know, we have to bring power from Shangani, and we are going to have to construct a 132 kV overhead line. The Environmental and Social Impact Assessment study is underway and is expected to be completed by the end of this month.

Soon after completion of that ESIA study, we expect to award the contract for the construction of the overhead line itself. The mining contract scope of work for tendering is expected to be completed by the end of January. That work is well underway, and once that’s completed, we expect to award the contract by May ’27, May next year. The water supply study was completed, and there is enough water on site. The water storage and reticulation strategy is now what we are working on, and we have made some progress on that. We also expect to complete that early next year.

The strategy for structural mechanical piping and plate work is to be completed by the end of December, which means next month. This is actually a big contract, so it should be completed by the end of December and then awarded sometime next year. And finally, the tailing storage facility, otherwise known as the TSF. The designs for this TSF are to be completed by the end of this month, with tendering for construction expected to be done in February next year. Can you move to the next slide? Here, we’re just showing some pictures of the work which has taken place.

So if you look at the first picture starting on the right there, you’ve got the aerial view of the earthworks contractor accommodation and workshop. Then the contractor’s workshops in the middle, and the last picture on the top right. Then below, we’re showing the work which has already started, the clearing and the grubbing, the bulk earthworks underway, and actually the equipment of the contractor already working on the site. So at least you can — those are the visuals which we can show you today in terms of the work which is being carried out. And that is the presentation from me. Maybe you can move to the next slide, Ross. You can talk about the financing.

Ross Ian Jerrard: Thank you, Victor. Very exciting to see those activities. And importantly, from an update on the funding strategy. As previously laid out to you, we’ve articulated a 4 pillar approach in terms of our funding strategy, in terms of gold price hedging, convertible notes, the interim facility, and wider project finance. And as we’ve discussed and announced, we’ve now finalized the third pillar of the strategy. So we completed our $150 million interim facility, and that’s across a syndicate of 8 Zimbabwean banks. So we’re delighted with the outcome. We’d like to thank our co-lead arrangers in Stanbic Standard and CBZ Capital, and also the syndicate banks in terms of their participation. The facility is made up of 2 parts.

There’s a term facility of $100 million, and then also a revolving credit facility of $50 million. Importantly, the interim facility was very much that in terms of interim. It was designed to make sure that we had enough liquidity and basically to allow us time while we navigated the wider project financing for Bilboes. Equally, in terms of that work stream, it has been well progressed. We’re under advanced stage of negotiations, due diligence, and lender engagement on those — on that wider project facility, and we’re looking to close that out early in the new year.

But this interim facility really supports our strategy to allow us time to navigate that process, but equally make sure that we’ve got enough funding in place to make sure that we can deploy the funds against Bilboes. So overall, fantastic result, and I think we’ve moved forward very nicely in terms of the overall funding strategy to match the activities that Victor had articulated. So if we turn to the next slide, we just provide the update in terms of the normal slide, in terms of our use of funds and source of funds.

And again, if you look at the right-hand side, you will see the makeup of circa $600 million of funding requirement across both capital costs, working capital, and some capitalized interest. And then the makeup of those source of funds at both our hedge price of $3,500 per ounce and also the $4,000 ounce mark. And it really points to that middle bar of senior debt and other facilities of being somewhere in the order of $317 million to a lower amount of $277 million. And in our discussions and our work streams with that pillar 4, we are certainly very confident that we can get that delivered and make sure that can all get rolled out early next year.

So with that update, I will hand across to Craig to talk to us about exploration.

Craig Harvey: Thanks, Ross. If we can move on to the next section there. Thank you. So on the next slides, if you can go to the next one. So during the quarter for Blanket, we have had some good news. We have announced an update to our mineral resource estimate for Blanket, both for underground and as you have heard, we now have a small at-surface mineral resource. So for underground, our measurement indicated mineral resources have increased by 22%. Up to just under 2.2 million ounces of gold, sitting within 17.7 million tonnes of ore, at an average grade of just on 3.8 grams per tonne.

The total mineral resource has only increased 3% from 2.85 to 2.92, and there is cumbersome reasons behind that. So what this mineral resource actually represents is an improvement in our resource categorization, our confidence levels, and is really driven by on-reef development. So on-reef development, typically close-space samples, levels 15 meters apart, it drives the measured resource category. And then of course, we have got the normal run-of-mine drilling that we do, and then we have got the deeper long-hole drilling that we publish results for every 6 months to every 9 months. So what comes after this is we are now refining our life-of-mine plan.

There is a number of engineering-type things that are taking place because we would like to take advantage of it. So a revised life-of-mine plan which then offers a conversion into a mineral reserve, will follow shortly. So as we said, in addition to the underground, we have now got a small but quite a valuable surface mineral resource at the moment. There is approximately 22,000 ounces of indicated oxide and transitional material, with a further 8,000 ounces in sulfide. Of note, everybody must bear in mind that the drilling that we did was intentionally for oxide resources only, so the deepest level of drilling that we did was only effectively 40 meters deep.

On the back of what we have seen, we did indicate that we would be looking and drilling from underground. So I can say that we’ve intersected the mineralized structure at depth on 18 level at Blanket Mine. It’s about 500 meters below surface. Assays are still pending. It’s all independent laboratories, and that will be made public in due course. So what do we do with it? Looking ahead, as we have heard, we’ve constructed a trial leach pad. All of the approvals are in place for if the trial is successful, we can move ahead and kind of execute on this. So on the next slide, we’ll see what the activities are.

If we can just move to the next one, please. So this is kind of the activities that are taking place at what we call the K-pits heap leach pad or heap leach surface operation. So there’s approximately 10,000 tonnes loaded, which is the intention for our trial. We need to confirm what all of our column testing has been telling us in terms of actual recovery from a proper pad, test the metrics of the various reagents and concentrations that we trialed in the column testing. And you can see, there’s the heap leach. We’ve got all the requisite pregnant ponds, barren ponds, overflow ponds, emergency ponds, ponds coming out our ears.

And then down at the bottom, you can see where the open pit is situated. The haul road distance, it’s approximately — it’s slightly over 1 kilometers away from the heap leach. So it’s kind of close. And the exploration opportunity for surface, you can just see to yourself, we’re actually looking north there, but all of those structures continue north. Now, whether or not they actually have gold in economic quantities, that’s what we need to have a look at. So if we can go onto the next slide and we can talk a little bit about Motapa.

So again, during the quarter, we managed to publish a maiden mineral resource for Motapa, 379,000 ounces of measured and indicated, 7.8 million tonnes at a grade of 1.51, with a further inferred mineral resource of 131,000 ounces, 2.7 million tonnes at just under 1.5. What is important about this is that 500,000 ounces is not small. I mean, it’s actually quite good. The majority of this mineral resource is reported out of Motapa North. Even in the Motapa North area, there are still mineralized shears that we have not got enough intersections on to actually do mineral resource evaluation and make a grade estimation on it. So this represents exploration 2024 and 2025.

So what the 2026 exploration program has been focusing on is infill drilling at Motapa North, gaining more intersections to, one, bring more resources in; and two, to actually up the confidence in what we currently see here now. 2027, we are going to actively move into Motapa Central and Motapa South. So if we can go onto the next slide, one of the core takeaways here, and it’s been mentioned, just for everybody’s benefit, one of the key potential synergies is Motapa in that lovely purple color, which is the Motapa mining lease, and then what currently comprises the Bilboes project that is on the table and being executed. We’ve heard that it’s adjacent.

I mean, we can see there that it’s adjacent, so in due course, discussions will all be had, but 500,000 ounces adjacent to Bilboes, I think it can only bode well. So with that, I’ll hand over to Mark for any closing comments.

Mark Learmonth: Okay, thank you. Can we move on to the next slide, please? Okay, so we’ve got 4 clear focuses as we move forward. The first is to restore Blanket to some sort of production consistency, and the key elements to that have already been implemented in terms of increasing the compressed air capacity and increasing the elution capacity. The second is to continue with the fundraising for Bilboes, with the objective of delivering first gold at the end of 2028, with 2029 being the first full year of production. Continue our exploration activities at Motapa to build on that maiden resource, and in due course, evaluate how potentially Motapa could be folded into a bigger project at Bilboes.

The final thing is to continue exploration and another activity at Blanket to extend Blanket’s mine life, potentially increase production beyond where we are at the moment, and unlock the oxides that we’ve got there. So I think the outlook is looking particularly rosy. So that’s the end of the presentation. We can open it to questions.

Operator: [Operator Instructions]. So we’ve got our first question from Nic Dinham.

Nic Dinham: I just wanted to ask a little bit about the CapEx on Bilboes, which has fallen, the estimate which fell from $132 million, then to $43 million in this year, and now down at about $38 million, what’s left. So that’s all going to be spent in this quarter. Has there been any sense from you about what the underlying escalation sin CapEx could be? I see you’re referring to the previous study — the feasibility study, but do you have a sense that some of the costs may be rising quicker or in line with what you had expected?

Mark Learmonth: Who’s going to deal with that, Ross or Victor? I would point out that we are currently in the middle, towards the end of the actual procurement process, which is giving us visibility. So Ross, Victor, do you want to engage with us?

Ross Ian Jerrard: Happy to take it, but Victor, I think you’ve been on the course as well.

Victor Gapare: Yes, sure. We are in the middle of procuring the different packages, as I have indicated in the presentation. What we actually have left are the packages which have gone to tender, which we haven’t received the final figures. So we’ll actually know about that, the final figure towards the end of January next year. Once we receive for the TSF, then the mining will come later. That’s when we’ll be able to give you a clear indication.

Mark Learmonth: Are we seeing anything that is particularly alarming at this stage?

Victor Gapare: Nothing alarming at this stage.

Mark Learmonth: There you go. It is the best we can give you, Nic.

Nic Dinham: So something about June next year. Sorry, can you hear me? Okay. Something about June next year, you are expecting to have your metallurgical plant up and running at full capacity, and also the Lima plant up and running at full capacity. So part of the strategy that you originally developed for that was to have a large stockpile ahead of all of those plant expansions. Is that still the plan, and how much do you think the stockpiles will be at the end of June?

Mark Learmonth: Well, we need a stockpile to do some work on the central shaft. We are converting the central shaft winder from AC operation to DC operation to improve the controls for safety reasons and also to reduce the operating cost. That will require the central shaft to suspend operation for about 15 days, and so we need a stockpile to see us through that. That stockpile would need to be about 30,000-35,000 tonnes, because obviously we will continue to hoist some material at #4 shaft. Thereafter, the stockpile — the only need for the stockpile after that is to provide a buffer for future production.

So the need for the stockpile is really only — the only real need for the stockpile is to provide us that sort of — that leeway during the AC/DC conversion.

Nic Dinham: Okay. My last question, Mark, is that you have put a lot more people underground, and I know you have been prevented from seeing the full benefit of that because of the lack of access that you talked about and the lack of equipment that you talked about. Have you seen any material benefit of those people yet, and in what way?

Mark Learmonth: Yes, because we’ve got a stockpile. If you remember, we’d run the stockpile down to pretty much zero in the middle of the year before we initiated the new 7-day working system. At the moment, we’ve got a stockpile of about 18,000 tonnes. So yes, we are seeing a benefit in terms of run-of-mine production, and we’re also seeing a benefit which will come through in the second half of the fourth quarter in terms of increased mining activity and therefore increased overall grade, as we’re doing more mining from the deeper, higher-grade areas. Yes, we are seeing that benefit.

Operator: [Operator Instructions]. Well, we don’t have any further questions at the present time, so maybe if I could hand back to you, Mark, for any closing remarks.

Mark Learmonth: No, I’d like to thank you for your participation. Challenging…

Operator: Actually, sorry, Mark. We do have one further question if you’d like to take it.

Mark Learmonth: It depends, who it’s from.

Operator: Sorry, Jonathan has actually just put his hand down.

Mark Learmonth: No, go ahead. No, we can take another question. This is…

Operator: No, he’s actually taken his hand down. So I will pass back to you and hand back to Mark. You are good to do your closing remarks, Mark.

Mark Learmonth: Okay, good. It’s a challenging third quarter, and we’ve set ourselves up for a fairly high target for the fourth quarter, which I’m confident we’ll deliver. As I say, the outlook, both at Blanket and elsewhere in the group, for a strong 2028 is looking very attractive — sorry, strong 2027 is looking very attractive. Thank you for your participation.