Bilboes: Growth without Dilution?

Record 2025FY Earnings: If the gold price can maintain current levels of $3,300/oz for the rest of the CMC financial year, CMC should enjoy BEPs of $2.94/c, of which $0.40c/s is attributable to the sale of its SPP.

Blanket Performance: Blanket Mine (Blanket) is setting new hoisting and milling records, while head grades are improving after a poor Q1 start. The grade recovery is due to both improved access to a key high-grade stope as well as better mining controls. Gold output for 2025FY should be at the upper end of guidance. 

Blanket Drilling Success: Blanket continues to invest in resource and reserve definition drilling with success. The next iteration of reserve estimation by year-end is likely to maintain its current 10-year life intact. 

Blanket Recapitalisation: Blanket is investing $34m in 2025FY in improving its mining flexibility, lowering costs, and stabilising its power supply. Blanket is also investing in building a stockpile of ore to underpin future production targets.

Blanket Dividends: We expect Blanket to be able to distribute c.$60m of dividends in 2025FY, most of which will flow to CMC. This should allow CMC to accumulate c.$55m in cash or net cash of $30m by 2025FY-end, a strong reversal after several cash-lean years.

Bilboes Capex: The recent PEA indicated that the original 180,000oz/p.a., 3mtpa “big bang” approach to Bilboes would require more than $414m, with final capital costs in 2025 money terms likely to approach $500m. This was certain to require CMC equity dilution, which, along with the project’s technical and financial risks, may have created negative shareholder sentiment.

Bilboes Delay: The finalisation of the Feasibility Study of CMC’s key growth asset has been postponed, allowing for the Zimbabwe government’s more relaxed attitude to the export of concentrates. This could materially reduce the initial capital cost of the project and, potentially, the scale of the operation.

Bilboes Reimagined: To reduce the big bang capex as well as to adapt to the possibility of concentrate exports, CMC is re-imagining Bilboes as a smaller, higher-grade operation. One possibility is that Bilboes could become a 60,000oz/p.a. mine, without a Biox plant having an initial capital cost of c. $250m.

Growth Without Dilution? A smaller Bilboes will probably offer a lower NPV, but at considerably lower financial and technical risk. It could also allow CMC to fund the equity component with a combination of accumulated cash, corporate bonds, and internal cash flows – but without diluting shareholders.

Valuation: CMC’s value is dominated by the spot gold price. Spot gold price has increased dramatically, from $2,500/oz we used in January, to current levels of $3,300/oz. This has materially increased our DCF-based valuation range for CMC, from $10.47/s to $12.48/s, to $19.56/s to $25.25/s. We have also increased the value of the E&E assets to full historical costs.

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