Kenya: Caracal Gold plans further exploration after raising Kilimapesa production

By David Whitehouse
Posted on Tuesday, 18 October 2022 06:00

Caracal's gold processing facility at Kilimapesa in Kenya. Photo supplied.

Caracal Gold is looking for a “company-making” project to add to its existing holdings in Kenya and Tanzania, CEO Robbie McCrae tells The Africa Report.

The company plans further exploration in Kenya and east Africa after its hits a targeted increase in gold production at the Kilimapesa mine in Kenya, McCrae says. Kenya is “very underexplored” though Caracal is also open to opportunities in other parts of east Africa, he says.

Kilimapesa, located 20km north of the Tanzanian border, has resources of 706,000 ounces of gold. The company’s current focus is on increasing production there to 24,000 ounces per year in the first quarter of 2023. Caracal is on course to deliver that goal, McCrae says, and is “continually evaluating options” in Kenya. McCrae is also open to opportunities in other commodities.

The company’s shares trade on the London and Frankfurt stock exchanges, and Caracal has plans to list in Nairobi. The largest single shareholder is Hargreaves Lansdown Stockbrokers with 17.5%, and McCrae has a stake of 5.5%. Current expansion plans are fully funded with no need to raise capital, with the company generating enough cashflow to fund further exploration, McCrae says.

  • Reaching the Kilimapesa production target will help Caracal hit its goal of becoming a medium-tier gold miner with over 50,000 ounces of annual production within the next 24 months.
  • The company can’t be a target for merger and acquisition (M&A) activity until it raises output, McCrae says.
  • Its market cap of about 12m pounds is too small to enable it to contemplate M&A as a buyer, but a new project could transform its scale, he argues.

Tanzania project

McCrae traces the lack of exploration in Kenya to developed tourism and financial-services industries, which meant that mining was not given a high priority. East Africa-focused explorers preferred Tanzania, where gold mining was better established, he says. “The industry was ignored here.”

Tanzania is much better explored than Kenya, McCrae says. “It’s pretty difficult to pick up good ground there.” But the greenstone belts shared by Tanzania and Kenya mean that Kenya “is the next destination in east Africa.” As well as gold, Kenya has rare earths resources which would have been developed had they been in a different country, he says.

  • Kenya has a sound mining code introduced in 2016 which has yet to be put to the test, McCrae says. “We need more companies to come to Kenya and put it on the map.”
  • Few junior miners have two “solid” projects such as those held by Caracal in Kenya and Tanzania, he says. In Tanzania, the company is in the process of buying the Nyakafuru gold project in the Lake Victoria gold fields area.
  • Caracal has paid the purchase price and is waiting for regulatory approvals to be completed.
  • The project includes 11 granted exploration licences spread over 280 square km. The company says Nyakafuru has the potential to produce 50,000 ounces of gold per year.

Bottom line

Ramping up gold output at Kilimapesa would put Kenya on the map as a gold producer.

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