By Chris Takudzwa Muronzi

HARARE, Nov 25 (Reuters) - Caledonia Mining Corp CALq.L will proceed with its Bilboes gold project after a feasibility study projected strong returns, it said on Tuesday of what is expected to become Zimbabwe's largest gold mine.

The company, which bought Bilboes in 2023, estimates peak funding at $484 million and total capital costs at $584 million. It plans to finance the project mainly through debt and equity from its Blanket gold mine in the Matabeleland South province.

"This project has been decades in the making," Chief Executive Mark Learmonth said of Bilboes, adding that it should help Zimbabwe to regain its status as a leading gold producer.

Bilboes is forecast to produce 1.55 million ounces of gold over nearly 11 years. Output is expected to begin in late 2028, ramping up to about 200,000 ounces in 2029.

Caledonia, backed by investors including Allan Gray and BlackRock, is among miners seeking opportunities in Zimbabwe despite challenges such as power shortages, dollar scarcity and high inflation.

(Reporting by Chris Takudzwa MuronziEditing by Sfundo Parakozov and David Goodman)

((ChrisTakudzwa.Muronzi@thomsonreuters.com;))