Caledonia Nama Limited, a wholly owned subsidiary of Caledonia, holds four contiguous Large Scale Mining Licences, which cover approximately 800 square kilometres on the northern extension of the Zambian Copperbelt. The northern boundary of Caledonia's licence areas is the border with the Democratic Republic of the Congo ("DRC") and the eastern boundary is with licences areas that are held by a joint venture between Vale and African Rainbow Minerals where a new copper mine (the Lubambe mine) has recently been commissioned. Prior to the 2011 programme, exploration activities had defined three main styles of mineralization in the Nama Licence area:
- "A-type" cobalt oxide mineralisation;
- "D-type" iron oxide bodies which are mostly enriched in Cobalt; and
- Copper dominated ore shale hosted copper-cobalt mineralisation, commonly observed elsewhere in the Copperbelt and which is being exploited by neighbouring mines to the east and south of the Nama Licence Areas.
Status of the Nama Licences
On September 24, 2012 Caledonia announced that, following discussions with the Zambian Mines Development Department (the "Department"), Caledonia must comply with certain conditions to continue to hold the Nama Licences. These conditions include, inter alia:
- the commencement of cobalt production by June 30, 2013;
- the submission of an updated copper sulphide mineral resource and reserve statement and associated feasibility study and program of operations by June 30, 2013; and
- the commencement of copper sulphide resource exploitation by March 31, 2015.
Further discussions have been held with the Department to clarify the precise terms of certain of these conditions. Caledonia intends to comply with these conditions and believes that its proposed course of action will do so. Further information on the Nama Copper Project and the Nama Cobalt project is set out below
2011 WORK PROGRAM
The 2010 exploration programme identified two resource targets at Nama (being "Konkola East" and "Kafwira") which were characterised as belonging to the ore shale-hosted copper-cobalt style of mineralisation. The Konkola East Target area was identified as a priority target for the 2011 work programme due to its proximity to the neighbouring Konnoco Mine. The primary objective of the 2011 exploration programme was to test for the presence of the Ore Shale at depth in the target area by drilling four widely spaced vertical diamond core holes to a depth of approximately 1,200 metres below surface. A secondary objective was to establish the economic potential of this portion of the Ore Shale, a unit which is well mineralized on the adjacent mining properties of the Konnoco and Nchanga mines.
Drilling commenced in March 2011 on borehole NKC 01 close to the border with Konnoco. The last hole in the program, NKC 05, was completed at the end of November, 2011. A total of 5,352 metres was drilled over 240 days, an average of 22 metres per day. Although the programme was planned for four holes, a decision was taken towards the end of the 2011 exploration season to split the last hole into two shorter holes to gain a further intersection. This additional information was necessitated by the geological complexity of the area and the uncharacteristic style of mineralization encountered.
The Ore Shale
All five boreholes intersected the Ore Shale, the intersection depths being between 300 m and 1,460 m. The Ore Shale was considerably deeper than anticipated owing to a major fold structure which caused the strata in the licence area to plunge some 600 metres deeper. While boreholes NKC 01 and 02, sited closest to the neighbouring Konnoco property, intersected typical Ore Shale rocks, the last three holes which were drilled further west encountered more complex strata and the Ore Shale was not clearly discernible.
Typical Ore Shale is a finely laminated shale with minor ore minerals and partial oxidation along shears where minor copper enrichment was evident. Copper values returned for the five Ore Shale intersections rarely exceeded 0.4% Cu in individual samples and the average intersection values over enriched portions of the Ore Shale ranged between 0.06% and 0.24% copper (see table below). Cobalt values are even lower, generally less than 0.01%. From the values obtained it is clear that the copper mineralization at Konnoco does not extend onto the Nama licence area and the Ore Shale intersected in this area does not warrant further exploration.
The Mineralized Alteration Zone
A zone of pervasive alteration containing copper sulphides was intersected in borehole NKC 03 at a depth of about 300 to 400 metres, and about 600 metres above the Ore Shale. A consistent zone of 56 metres was found to average 0.48% copper. Boreholes NKC 04 and 05 were drilled so as to intersect a shallower portion of the Ore Shale. Both holes intersected a zone of alteration immediately above the Ore Shale. These intersections of the Alteration Zone have similar characteristics to those observed in NKC 03, to the extent that they may be regarded as being part of a single widespread style of alteration. The estimated weighted average copper grade for intersections of the Alteration Zone between 280 and 450 meters is 0.47% copper over an estimated weighted average thickness of 41 meters. Although the average grades are uniformly low, copper values as high as 6% Cu occur where the mineralization occurs in fracture vein fillings. The zone is also conspicuous by the low levels of cobalt in the mineralized zone.
2012 WORK PROGRAM
The 2011 work programme identified a zone of copper mineralization at relatively shallow depth. This Alteration Zone is atypical of Copper Belt ores and was further explored and evaluated during the 2012 work programme.
Phase 1 of the 2012 work programme commenced in March 2012 and consisted of six holes comprising approximately 2,400m of drilling with the objective of identifying a continuation towards surface of the mineralized zone identified in 2011. This phase of the work programme was extended into Phase 2 with the objectives of identifying extensions of this mineralised zone and increasing the confidence level of the information on this mineralised zone. The 2012 total drilling programme comprised 10,903m over 20 holes.
Preliminary Results of the 2012 Drilling Programme
Based on results achieved to date, that the 2012 drilling programme has confirmed the existence of a mineralised copper zone of substantially greater extent than first identified in 2011. The in-fill drilling has established that the mineralised zone is locally disturbed by breccia zones and fold structures which have resulted in some geological losses and local duplication of mineralization. In-fill drilling on the north-eastern and north-western limits of the target area also identified that the grade and thickness of the mineralised zone has decreased in those areas. The full extent of these disruptions, which will only be finally established and quantified once the detailed drilling currently underway is complete, are not anticipated to have a major impact on the quantum of the resource.
2013 DRILLING PROGRAM
Caledonia's Board has authorised a program of percussion drilling to be undertaken on the identified zone in the 2nd quarter of 2013 to improve resource definition close to surface and to establish whether there is potential for an open-pit operation. Caledonia expects to issue a NI 43-101 compliant copper resource statement by June 30, 2013 and a pre-feasibility study by the end of 2013 on the possible mining of any economic near-surface oxide material.
Caledonia's Board has also approved approximately 2,400m of diamond drilling to be carried out on additional zones of mineralisation that have been identified to the immediate west and south of the mineralised zone that could extend the copper resource both at surface and possibly at depth. A further 5,000m of diamond drilling will be commenced when the work described above has been completed on a broad copper geochemical anomaly which has been identified further to the west of the identified zone.
The budgeted cost of the 2013 exploration programme, the preparation of the NI 43-101 resource report and the feasibility study is approximately US$2.2 million, which will be funded from Caledonia's cash on hand.
Nama Cobalt Project
Caledonia has undertaken to commence cobalt production by June 30 2013. Accordingly, Caledonia has submitted a proposal to the Zambian Mines Development Department for a cobalt mining operation on the following basis:
- Identified resource to be mined: approximately 2 million tonnes grading approximately 0.2% cobalt and 0.1% copper;
- Phase 1: mining at a target rate of approximately 30,000 tonnes per month to produce cobalt oxide concentrate using gravity separation;
- Phase 2: mining at a target rate of approximately 60,000 tonnes per month to produce cobalt hydroxide using hydrometallurgical processing; and
- The estimated capital investment to achieve mine start-up and to complete phase 1 is approximately US$1.1million.