By Dr. Michael Green

Rapid progress continues at Caracal Gold, with news this morning on further measures being adopted on the expansion of the Kilimapesa Gold Mine in Kenya.

There is clearly going to be no hanging around here. The team embarked on an initial three-phase operational plan to further increase gold production and improve efficiencies at the flagship Kilimapesa Gold Mining and Processing Operations. Following the successful completion of the first two phases of this programme since listing in August 2021, the decision has now been taken to accelerate the third phase and increase production to 24,000oz per annum. This expected to be implemented over the next 6 months.

To achieve the growth planned in Kenya for 2022, as well as increasing the monthly ROM production and increasing underground and open pit production, management will be masterminding the optimisation of the tailings retreatment and the new heap leach plant. Also, the process plant upgrades will be overseen by a major engineering company. All this is expected to allow monthly gold sales to increase to 2,000 ounces and allow gold revenues and operational cash flow to rise substantially. At the same time the team is seeking to increase the JORC compliant resources at Kilimapesa to 1.5Moz.

The operational plan at Kilimapesa extends across mining processing and infrastructure. Below we focus on some of the key parts of the accelerated development plan. Importantly, run-of-mine (ROM) production from the existing open pit and underground mining operations is already at levels to support a 100% increase in the milling circuit capacity from 500tpd to 1,000tpd. So, additional capital will be assigned to underground and open pit mining to increase development rates and working capital for pre-strip.

The accelerated development plan will see the processing operations at Kilimapesa Gold Mine being upgraded. Source: Company

The milling circuit is planned to see the installation of the second mill and addition of new crushing and screening plant, upgrades to thickeners and installation of additional tanks and milling capacity boosted to 1,000tpd. Plus, there will be construction of a heap leach plant to treat up to 10,000tpm of lower grade material and upgrades to the tailings retreatment plant to increase capacity to 1,000tpd.

In addition, the accelerated development plan also calls for a new elution plant to treat increased carbon from the milling plant – elution is the process of extracting one material from another by washing with a solvent. At the same time, there are planned upgrades in engineering services to support this expansion.

At the time CEO Robbie McCrae was able to point out that “We are both encouraged and excited to move very quickly to the next phase of development and operational activities at our flagship project, which once completed, will see gold production achieve the targeted levels of approx 24,000oz pa. The decision to move to this next phase of development has been made significantly ahead of schedule and within the first 6-months of our stock exchange listing in London……The next phase of development will be completed over approx. 6-months and will be completed by an experienced and competent engineering company overseen by our recently appointed new General Manger. We want to thank shareholders for their ongoing support and look forward to hitting the next milestones in our bid to become a major gold producer and new mine developer in East Africa.”

For those not in the know – Caracal Gold is a mid-tier gold producer in the making with a very compelling organic and acquisitive growth strategy in highly prospective East Africa. The company is the old Papillon Holdings which joined the LSE in 2016 as a shell. After a couple of false dawns, the Kilimapesa Gold Mine has been reversed into it together with a highly experienced management team equipped with the necessary funds to recommence production and really get things moving.

Caracal was readmitted to the LSE in August 2021 with big plans to rapidly increase gold production and build a substantial JORC compliant resource base in short order by taking advantage of later stage opportunities in gold projects across Kenya, Tanzania, and Uganda.

The company’s impressive management team has a bold ambition of achieving annual gold production of 50,000 ounces and a Mineral Resource Estimate (MRE) in excess of 3 million ounces of gold by the end of 2022. Gold production has risen swiftly at Kilimapesa since the re-opening to 1,000oz per month. Well-defined development plans are in place to optimise operations to significantly increase production, while rapidly building up the resource base to create a reasonably sized long life mine with good margins.

In early December 2021, the company announced the acquisition of Nyakafuru and Simba, snapped up in Shanta Gold’s backyard. It does rather look as though Caracal caught Shanta Gold napping in acquiring two cracking gold projects in Tanzania. These add JORC resources of 1Moz to the company’s existing 671,400ozs. These are advanced projects in proven gold districts which are planned to be developed as conventional open pit mining operations.

There are also big plans for growth in Tanzania in 2022. The news flow from here is expected to include approval of the acquisition of major gold development projects, updated JORC resource and reserve and open pit optimisation studies, a new Project Team appointed to complete development studies and the completion of an updated Feasibility Study. All this work ought to pave the way for the commencement of site preparation and mine construction.

There is no doubt in our mind that Caracal has an enviable pipeline of acquisition opportunities to be actioned in 2022. Certainly, the acquisition pipeline includes one project that is close to production coming with a recently finalised Bankable Feasibility Study (BFS). In addition, there is also a Kilimapesa look alike which is already in production. As before, vendors seem more than happy to take paper as they appreciate that the Caracal team is successfully and rapidly adding value.

Align Research very recently initiated coverage on Caracal Gold with a Conviction Buy stance and a target price of 2.73p. We are more than happy to confirm our stance.

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