Caledonia Mining asks Voltalia to build solar plant to power its Blanket Mine project

Having announced last month that it was trying to raise funds to invest in constructing a solar plant, on Wednesday Caledonia Mining Corporation (AIM, CMCL) announced it had appointed Voltalia (EPA:VLTSA) as the contractor for the project.

The aim of the project is for Caledonia Mining to have a solar power plant to supply electricity to its Blanket Mine project in Zimbabwe. Having agreed an initial design phase for the project, Caledonia said that once an Engineering, Procurement and Construction (EPC) contract has been drawn up, Voltalia will commence procurement and construction.

At present, the indicated commissioning for the 12MW solar plant is expected to be in the final quarter of 2021. Upon completion, the plant is expected to provide some 27% of the mine’s electricity demand, which Caledonia says will reduce the risk of any further deterioration in the quality of grid power.

The contractor, Voltalia, is a Paris-listed renewable energy provider, with ‘considerable’ experience in developing, constructing, operating and maintaining solar plants. The company already have operations in Burundi, Malawi and South Africa.

Speaking on the solar power fundraiser and shareholder considerations, the Caledonia Mining statement read:

“As previously announced, Caledonia raised the funds required to construct the plant by way of an at the market sales process on NYSE American conducted by Cantor Fitzgerald & Co on its behalf.  Pursuant to the process, the Company issued 597,963 shares, representing considerably fewer issued shares than the expected 800,000 that it had initially applied to list.”

“The project is primarily intended to protect the Blanket Mine from any further deterioration in the electricity supply situation.  Whilst the project is therefore being done for largely defensive reasons, it is expected to yield a modest return to shareholders after taking account of the dilutive effect of the equity issued to fund it.”

Following the seemingly positive news, Caledonia Mining shares dipped by 2.88% or 40.00p, to 1,350.00p a share  07/10/20 11:06 BST. This is p since the start of the year, but below its year-to-date high of 1,890p a share.

The company currently has a dividend yield of 1.60%, and a p/e ratio of 4.69, below the basic materials sector average of 34.14.