LONDON (ShareCast) - (Sharecast News) - Caledonia Mining has entered into another option agreement for an area in Zimbabwe, in addition to the Glen Hume area it was already in an option agreement over, it announced on Thursday.
The AIM-traded firm said the option agreement gave it the exclusive right to explore and subsequently, if exploration was successful and at its sole discretion, acquire the mining claims over an area known as Connemara North.

It said that, like Glen Hume, the property was situated in the Gweru mining district in the Zimbabwe Midlands, which had historically produced "significant" quantities of gold.

Connemara North was the northern section of the currently-closed Connemara mine, which was previously owned by First Quantum Minerals, and was placed on care and maintenance in 2001 and disposed of in 2003.

It had not been commercially mined since then, but before being placed on care and maintenance, the mine produced around 20,000 ounces of gold each year from an open-pit heap leach operation.

Previous public disclosures made by First Quantum in 2001 indicated that they had plans to expand the existing open pit operations at Connemara mine, when gold prices were around $300 per ounce.

Caledonia said that at the current stage, it was not possible for it to verify any of the work performed by previous owners or to ascertain what proportion of any purported resource lay within the boundaries of the Connemara North property.

It said the property was about 30 kilometres from Glen Hume, with "good" road access between them, offering the potential of operating synergies should Caledonia decide to develop both areas.

The board said the option gave the company the right to explore the area for a period of up to 18 months and subsequently, if exploration was successful and at its sole discretion, to acquire the mining claims over the area.

The total consideration was an initial payment of $0.3m, followed by a further payment of $5m payable in cash or shares at the discretion of the vendor, should Caledonia decide to exercise its right to acquire the mining claims.

Caledonia said it had also agreed to the payment of a 1% net smelter royalty to the vendor on gold it produces from Connemara North.

"We are pleased to enter into this option agreement which gives us the right to explore and subsequently to acquire mining claims over the Connemara North property, part of a wider area that contained a previously operational mine which shows great potential and has been lying untapped for 20 years," said chief executive officer Steve Curtis.

"Connemara North is also in close proximity to the Glen Hume property over which we have already acquired an option.

"We are excited at the prospectivity of these two properties and if evaluation work proves successful and our exploration programs deliver favorable results, Caledonia will have a great opportunity to establish a footprint in the highly prospective Zimbabwe Midlands which could deliver operating synergies between the two sites."

At 1630 GMT, shares in Caledonia Mining Corporation were up 5.53% at 1,240p.

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