Caledonia Mining Corp is exploring options to raise $250-million needed to develop its Bilboes project into what could be Zimbabwe's biggest gold mine.

The company, which also owns the Blanket gold mine in Zimbabwe, could raise the money via a combination of debt, its own cash reserves and equity, Maurice Mason, Caledonia's vice president, corporate development, told Reuters.

The Bilboes project could potentially produce about 170 000 ounces of gold annually, boosting Caledonia's total bullion output to around 250 000 ounces, Mason said.

Caledonia, backed by investors including Cape Town-based fund manager Allan Gray, is one of a number of mining investors that are searching for new opportunities in Zimbabwe even as the economy buckles from ongoing challenges such as intermittent power cuts, scarcity of US dollars and hyperinflation.

Caledonia, which plans to construct the Bilboes mine over two years, is doing studies to find solutions to reduce the up-front capital, Mason said.

"It will be Zimbabwe biggest gold mine by far," Mason told Reuters via email. "We are considering phased capital raising, but that will depend on the outcome of the review of the feasibility study."

Mason said that while investors were cautious to commit to big mining projects, "our experience has been for quality projects with good returns investors have been supportive."

Zimbabwe has been struggling to attract big investors from early 2000 when its economy imploded following the government's seizure of white-owned commercial farmland for distribution to Blacks.

The scarcity of dollars means some investors often struggle or fail to remit profits.

While Caledonia has been able to pay dividends from its Blanket mine, Mason said in general terms some international investors remain concerned about repatriating profits from investments in Zimbabwe as well as about the country's policy stability.

"Foreign investors need to know that they can repatriate the fruits of their investment," Mason said.

Gold is among Zimbabwe's top foreign currency earning commodities alongside shipments of tobacco and platinum metals mined by units of Impala Platinum and Anglo American Platinum.

Caledonia, which has long sought to expand gold output in Zimbabwe, acquired the Bilboes project last year. Its also searching for more gold deposits at Motapa and Maligreen projects.