Blanket Focus, Bilboes Update
Nic Dinham
Bilboes/CMC Funding: In Q1 2026, CMC raised $150m in convertible notes (CNs). The successful and timely issue was four times oversubscribed, indicating the extent of US investor interest in CMC's Zimbabwean gold assets.
Capped Call Options: CMC also bought cash settled options from January 2032. This innovative use of options neutralises the possible impact of the CNs on share dilution and cash outflows within a share price range of between $40.51/s and $56.72/s.
Bilboes Momentum: Most of the c. $130m of net cash received by CMC Jersey/UK will be used to keep the Bilboes timeline intact, with first pour in Q4 2028. It will also reduce CMC's reliance on Blanket dividends.
Interim Funding: CMC intends to borrow $125m from Zimbabwean institutions in Q3 2026. In the interest of flexibility and speed, CMC may fall back on another CN issue instead.
Bilboes Risks Falling? Bilboes still faces several hurdles before the project becomes a reality. These include the need for up to $350m of Term debt funding which depends on regulatory approvals and concessions. These and other obstacles appear to be less of an issue than they were a year ago.
Blanket Recovery: After two difficult years caused by Fall of Ground (FOG) incidents, Blanket Mine will operate continuously from 2026H2 (Conops). This should boost production and support mill upgrades to increase gold output to >80koz/a in the medium term.
Deep Drilling, Deep Mine: The latest deep drilling results have confirmed depth extensions of key orebodies to below the lower limit of the current mine plan. The results also support a view that Blanket could be mined to 50 Level (1,690mbs) and extend the 2041 LOM to beyond 2046.
Blanket Dividends: Despite cost increases, Blanket distributed a record $60m of dividends in 2025 of which CMC received c. $50m. Even with higher capex forecast for 2026 and NCIs free of facilitation loans for the first time, CMC should still receive $40m/a to $45m/a from Blanket if current prices persist.
Valuation: We have valued Blanket Mine based on its 2034 LOM cash flows, using a 20% real discount rate and a $4,000/oz gold price. We value Bilboes based on cash flows for the first time based on a 25% real discount rate. Our FVVR is now $23.13/s to $29.78/s with a midpoint of $26.46/s, which is >25% higher than the current share price
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