LONDON (ShareCast) - (Sharecast News) - Caledonia Mining Corporation announced on Wednesday that the electricity supply situation at the Blanket Mine improved "substantially" in late August and September, which it put down primarily to a "timely and coordinated" response from the Chamber of Mines, the Ministry of Mines, the Ministry of Energy and Power Development and the Zimbabwean Energy Regulatory Authority.

The AIM-traded firm said those bodies introduced a new electricity pricing schedule for the mining industry, to support the funding of imported electricity which was used exclusively to supply participating mining companies.

Electricity was now priced in US dollars at a cost which was "slightly lower" than the pricing structure prior to the recent monetary devaluation.

The electricity supply authorities also implemented an uninterrupted power supply agreement for the mining industry, in an effort to support the sector, with Caledonia reporting that electricity supply had stabilised following the changes.

Caledonia did note recent media commentary regarding the electricity supply and pricing situation in Zimbabwe as a whole, but notwithstanding that, it said it was continuing to operate normally with electricity pricing in dollar terms described as "stable", and not affected by the increases recently announced.

As it had previously disclosed, Blanket did experience electricity disruptions during the month of July and in early August, and relied heavily on its installed diesel generator back-up capacity.

Prior to that time, Blanket had installed back-up generator capacity of approximately 12.5 megawatts - sufficient to run the entire mine at full capacity, but insufficient to sustain both the mine and the Central Shaft project.

In response to the increased risk of electricity supply outages, Blanket had now purchased an additional 6 MW of diesel generator capacity.

The additional generators were on site, and were currently being installed with a view to being operational within the month of October, after which the board aid Blanket's operations would be fully insulated from the risk of unstable electricity supply.

Caledonia said it was also in the advanced stages of evaluating a project to install solar photovoltaic generating capacity at Blanket, to further reduce dependence on the electricity grid, reduce operating costs and ensure a more environmentally sustainable electricity supply.

Advanced engineering work was underway, the board said, with Caledonia in the process of applying for the relevant regulatory approvals.

It said it would shortly embark on a tender process from interested parties to build and operate the project.

Caledonia said it expected to fund the project itself, but the tender process would also invite proposals from potential funders who could offer a more cost effective funding structure.

In the future, the company said it anticipated that Blanket would have a blended electricity supply from grid, solar and back-up diesel generators, which would deliver greater levels of operational reliability, lower operating costs and improved environmental sustainability.

"The disruptions we experienced early in the third quarter necessitated a larger than normal utilization of our diesel generator back-up," said chief executive officer Steve Curtis.

"We have been pleased by the rapid and decisive response from both government and industry which has resulted in the alleviation of the supply shortages and a more stable US dollar based pricing structure.

"The arrival of an additional 6 MW of back-up diesel generators on site is also a positive development for our business and will ensure future reliability in the face of a potentially difficult electricity supply situation in the Southern African region in the medium to long-term."

Curtis said the company "looked forward" to the commissioning, which would help sustain the pace of the Central Shaft project - something he described as "key" to the achievement of Caledonia's long-term production target of 80,000 ounces by 2022.

"Moreover, Caledonia is at an advanced stage in the evaluation of a Solar PV plant which could supply Blanket's base load demand during peak sunlight hours.

"Engagements are commencing with potential equipment suppliers and regulatory authorities and the engineering and financial evaluation work on this project is well advanced."

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