TORONTO (miningweekly.com) – Despite ongoing challenges regarding power supply stability, new indigenisation legislation and working capital pressures, indications are that Caledonia Mining's Blanket gold operation in Zimbabwe will reach its targeted annualised output level of 40 000 oz/y before year-end, CEO Stefan Hayden said on Wednesday.

The Blanket mine was halted from October 2008 to April 2009, because of “continuing nonpayment” of foreign exchange by the country's Reserve Bank, for the sale of gold delivered to the Bank's Fidelity Printers and Refiners.

But the mine reopened after the government approved a new policy under which gold producers can market and sell their gold directly and are also allowed to keep the payment for their gold in foreign exchange.

Caledonia is also working on an expansion project at Blanket's number-four shaft and the crushing/milling section of the plant, which should be completed by the end of the year and will enable the operation to ramp up production to the 40 000-oz/y level.

“The rapid resumption of gold production at Blanket and re-starting the number-four shaft expansion project have been challenging,” Hayden said in a statement.

Still, “compared to previous years, the operating environment in Zimbabwe has stabilised and we expect that Blanket can continue to export its gold and retain 100% of the proceeds in US dollars,” he said.

Caledonia posted a fourth-quarter net loss of C$,7-million, compared with a C$2,6-million loss a year earlier.

Revenue from sales was C$4,2-million for the quarter, up from 29 000 in the fourth quarter of 2008, as the Blanket mine was halted for most of the period.

Caledonia said it is working with the Chamber of Mines Zimbabwe regarding ongoing discussions with the country's government regarding the level and terms of indigenisation for the mining industry, under the new indigenisation law.