Caledonia lays out Bilboes funding strategy after upsized $150m notes offering

(Sharecast News) - Caledonia Mining Corporation outlined a structured, multi-stage funding strategy to advance development of its Bilboes gold project in Zimbabwe on Wednesday, underpinned by the successful closing of an upsized $150m convertible senior notes offering that attracted strong institutional demand from the United States.

The AIM-traded company said investor demand for the seven-year convertible notes exceeded $600m after three days of marketing, prompting an increase in the deal size from an initial $100m to $125m, before the full exercise of a $25m greenshoe option took the total to $150m.

It said the notes would carry a 5.875% coupon and mature in January 2033, with holders able to convert on or after 15 October 2032, subject to standard early conversion and redemption provisions.

"The successful convertible notes offering - with the upsizing of the offering to $150m due to exceptionally strong support - marks a major milestone for Caledonia," said chief executive Mark Learmonth.

"Receiving more than $600m of demand from high quality North American investors is a tremendous endorsement of our strategy, the quality of our assets, our operational track record, and the long-term prospects of the company."

Caledonia said the convertible notes formed one pillar of a four-part funding plan designed to allow Bilboes to be progressed "at pace" while maintaining capital discipline following publication of the project's feasibility study in November.

As part of the strategy, the group also implemented a gold price hedging programme, purchasing put options in December to lock in a minimum gold price of $3,500 per ounce on 3,000 ounces per month from January this year through to December 2028.

The hedges were intended to underpin cash flows from Blanket Mine during the peak capital investment phase for Bilboes and to support lender appetite for project financing.

In addition, Caledonia said it was in the process of arranging an interim funding facility of up to $150m with a consortium of Zimbabwean and South African commercial banks, secured against Blanket Mine cash flows.

The company said it expected the facility to be in place by mid-2026, subject to lender approvals, and said robust price protection from the hedging programme should support its size and structure.

Alongside that, Caledonia planned to launch a formal project finance process in the first quarter of 2026, which it expected to take a year or more as financiers carry out independent assessments of the Bilboes resource and feasibility study.

The company said the four-part funding strategy, together with ongoing cash generation from Blanket Mine, should maintain adequate liquidity through the initial phase of Bilboes development and allow long-lead equipment to be ordered in the third quarter of 2026, in line with the timetable set out in the feasibility study.

"Since publishing the Bilboes feasibility study in November, we have acted quickly to begin to implement a robust and carefully sequenced funding plan," Learmonth said.

"The combination of our hedging programme, the proceeds from the convertible notes offering and our expectation with respect to putting in place the Interim funding facility by mid-year will ensure we have the financial strength to begin ordering long lead equipment for Bilboes in the third quarter of this year."

He added that the approach "allows us to manage risk, minimise dilution and position Bilboes as the next large scale, long life, gold production hub in Zimbabwe".

Caledonia said net proceeds from the convertible notes were approximately $130m after underwriting fees, issue costs and the purchase of capped call options, which were designed to reduce potential shareholder dilution by increasing the effective conversion price from about $40.51 per share, a 25% premium to the 14 January closing price, to around $56.72 per share, representing a 75% premium.

The capped call structure cost around 10% of the gross proceeds and was expected to offset dilution or excess cash payments on conversion, subject to a cap.

Cantor Fitzgerald acted as sole manager and capped call coordinator for the offering.

At 1108 GMT, shares in Caledonia Mining Corporation were down 3.27% at 2,070p.

Reporting by Josh White for Sharecast.com.