Caledonia Mining has signed a memorandum of understanding (MOU) to acquire Fremiro Investments’ 15% stake in the Blanket gold mine in Zimbabwe.

The $16.66m transaction will result in Caledonia increasing its interest in the mine to 64%.

The deal comes after the Zimbabwe Government amended the Zimbabwean Indigenisation and Economic Empowerment Act in March. According to the amendment, gold mining businesses are no longer required to implement the 51% indigenisation requirement.

The deal involves the cancellation of the $11.46m loan between the two entities and the issuance of 727,266 new shares in Caledonia at an issue price of $7.15 a share.

“By moving its participation up from Blanket to Caledonia, Fremiro is well-positioned to participate with Caledonia in any further investment opportunities.”

Caledonia Mining CEO Steve Curtis said: “Blanket is well-advanced on implementing the investment programme, which commenced in early 2015 and is expected to result in Blanket achieving an annual production rate of at least 80,000oz per annum by 2021, at a low cash cost.

“By moving its participation up from Blanket to Caledonia, Fremiro is well-positioned to participate with Caledonia in any further investment opportunities.”

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The closure of the transaction is conditional upon the receipt of approvals from Zimbabwean regulatory authorities.

Other stakeholders in the mine include The National Indigenisation and Economic Empowerment Fund (16%), Blanket Employee Trust Services (10%), and Gwanda Community Share Ownership Trust (10%).

Caledonia is on course to produce 80,000oz of gold by 2021.

The company will focus on the implementation of the investment plan at the mine, which outlines an extension to the Central Shaft project.

The implementation plan involves providing access to deeper levels for production and additional exploration, thereby extending the life of the mine.