Caledonia Mining Corp Plc 6-K, filed May 12, 2022
Caledonia Mining Corp Plc (CMCL)
About this 6-K
Caledonia Mining Corp Plc filed this 6-K on May 12, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
Of the Securities Exchange Act of 1934
For the month of May 2022
Commission File Number: 001-38164
CALEDONIA MINING CORPORATION PLC
(Translation of registrant's name into English)
B006 Millais House
Castle Quay
St Helier
Jersey JE2 3EF
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F
Form 20-F X Form 40-F ______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ______
INCORPORATION BY REFERENCE
Exhibits 99.1 to 99.4 included with this report on Form 6-K are expressly incorporated by reference into this report and are hereby incorporated by reference as exhibits to the Registration Statement on Form F-3 of Caledonia Mining Corporation Plc (File No. 333-255500), as amended or supplemented.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CALEDONIA MINING CORPORATION PLC | |||
| (Registrant) | |||
| By: | /s/ Steve Curtis | ||
| Dated: May 12, 2022 |
Name: |
Steve Curtis | |
| Title: | CEO and Director |
||
Exhibit Index
| Exhibit | Description |
| 99.1 | Interim Financial Statements/Report |
| 99.2 | Interim MD&A |
| 99.3 | 52-109F2 - Certification of Interim Filings - CEO |
| 99.4 | 52-109F2 - Certification of Interim Filings - CFO |
Exhibit 99.1
Caledonia Mining Corporation Plc
| MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION |
To the Shareholders of Caledonia Mining Corporation Plc:
Management has prepared the information and representations in this interim report. The unaudited condensed consolidated interim financial statements of Caledonia Mining Corporation Plc and its subsidiaries (the “Group”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and, where appropriate, these statements include some amounts that are based on best estimates and judgment. Management has determined such amounts on a reasonable basis in order to ensure that the unaudited condensed consolidated interim financial statements are presented fairly, in all material respects.
The accompanying Management Discussion and Analysis (“MD&A”) also includes information regarding the impact of current transactions, sources of liquidity, capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.
The Group maintains adequate systems of internal accounting and administrative controls, within reasonable cost. Such systems are designed to provide reasonable assurance that relevant and reliable financial information are produced.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting (“ICOFR”). Any system of ICOFR, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
At March 31, 2022 management evaluated the effectiveness of the Group’s ICOFR and concluded that such ICOFR was effective based on the criteria set forth in the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organisations of the Treadway Commission.
The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Audit Committee is composed of three independent non-executive directors. This Committee meets periodically with management, the external auditor and internal auditor to review accounting, auditing, internal control and financial reporting matters.
These unaudited condensed consolidated interim financial statements have not been audited by the Group’s independent auditor.
The unaudited condensed consolidated interim financial statements for the period ended March 31, 2022 were approved by the Board of Directors and signed on its behalf on May 12, 2022.
| (Signed) S. R. Curtis | (Signed) J.M. Learmonth | |
| Chief Executive Officer | Chief Financial Officer |
| 1 |
Caledonia Mining Corporation Plc |
Consolidated statements of profit or loss and other comprehensive income
For the three months ended March 31,
(in thousands of United States Dollars, unless indicated otherwise)
| Unaudited | Note | 2022 | 2021 | |||||||
| Revenue | 35,072 | 25,720 | ||||||||
| Less: Royalty | (1,758 | ) | (1,289 | ) | ||||||
| Production costs | 6 | (14,359 | ) | (12,857 | ) | |||||
| Depreciation | 12 | (2,063 | ) | (1,193 | ) | |||||
| Gross profit | 16,892 | 10,381 | ||||||||
| Other income | 2 | 23 | ||||||||
| Other expenses | 7 | (793 | ) | (258 | ) | |||||
| Administrative expenses | 8 | (2,371 | ) | (1,610 | ) | |||||
| Cash-settled share-based expense | 9.1 | (367 | ) | (152 | ) | |||||
| Equity-settled share-based expense | 9.2 | (82 | ) | – | ||||||
| Net foreign exchange gain | 10 | 909 | 273 | |||||||
| Derivative financial instrument expenses | 11 | (1,738 | ) | (114 | ) | |||||
| Operating profit | 12,452 | 8,543 | ||||||||
| Finance income | 1 | 3 | ||||||||
| Finance cost | (117 | ) | (121 | ) | ||||||
| Profit before tax | 12,336 | 8,425 | ||||||||
| Tax expense | (4,719 | ) | (3,002 | ) | ||||||
| Profit for the period | 7,617 | 5,423 | ||||||||
| Other comprehensive income | ||||||||||
| Items that are or may be reclassified to profit or loss | ||||||||||
| Exchange differences on translation of foreign operations | 693 | (202 | ) | |||||||
| Total comprehensive income for the period | 8,310 | 5,221 | ||||||||
| Profit attributable to: | ||||||||||
| Owners of the Company | 5,940 | 4,550 | ||||||||
| Non-controlling interests | 1,677 | 873 | ||||||||
| Profit for the period | 7,617 | 5,423 | ||||||||
| Total comprehensive income attributable to: | ||||||||||
| Owners of the Company | 6,633 | 4,348 | ||||||||
| Non-controlling interests | 1,677 | 873 | ||||||||
| Total comprehensive income for the period | 8,310 | 5,221 | ||||||||
| Earnings per share | ||||||||||
| Basic earnings per share ($) | 0.45 | 0.37 | ||||||||
| Diluted earnings per share ($) | 0.45 | 0.37 | ||||||||
The accompanying notes on pages 6 to 26 are an integral part of these condensed consolidated interim financial statements.
On behalf of the Board: “S.R. Curtis”- Chief Executive Officer and “J.M. Learmonth”- Chief Financial Officer.
| 2 |
Caledonia Mining Corporation Plc |
Consolidated statements of financial position
(in thousands of United States Dollars, unless indicated otherwise)
| Unaudited | March 31, | December 31, | ||||||||
| As at | Note | 2022 | 2021 | |||||||
| Assets | ||||||||||
| Property, plant and equipment | 12 | 159,566 | 149,102 | |||||||
| Exploration and evaluation asset | 13 | 8,405 | 8,648 | |||||||
| Deferred tax asset | 92 | 194 | ||||||||
| Total non-current assets | 168,063 | 157,944 | ||||||||
| Inventories | 14 | 20,297 | 20,812 | |||||||
| Prepayments | 15 | 4,393 | 6,930 | |||||||
| Trade and other receivables | 17 | 10,215 | 7,938 | |||||||
| Income tax receivable | 37 | 101 | ||||||||
| Cash and cash equivalents | 16 | 15,286 | 17,152 | |||||||
| Total current assets | 50,228 | 52,933 | ||||||||
| Total assets | 218,291 | 210,877 | ||||||||
| Equity and liabilities | ||||||||||
| Share capital | 83,471 | 82,667 | ||||||||
| Reserves | 138,554 | 137,779 | ||||||||
| Retained loss | (54,998 | ) | (59,150 | ) | ||||||
| Equity attributable to shareholders | 167,027 | 161,296 | ||||||||
| Non-controlling interests | 20,937 | 19,260 | ||||||||
| Total equity | 187,964 | 180,556 | ||||||||
| Liabilities | ||||||||||
| Provisions | 19 | 3,217 | 3,294 | |||||||
| Deferred tax liabilities | 7,275 | 8,034 | ||||||||
| Cash-settled share-based payment - long term portion | 9.1 | 817 | 974 | |||||||
| Lease liabilities - long term portion | 320 | 331 | ||||||||
| Total non-current liabilities | 11,629 | 12,633 | ||||||||
| Cash-settled share-based payment - short term portion | 9.1 | 818 | 2,053 | |||||||
| Lease liabilities - short term portion | 136 | 134 | ||||||||
| Derivative financial liabilities | 11.1 | 4,037 | 3,095 | |||||||
| Income tax payable | 3,108 | 1,562 | ||||||||
| Trade and other payables | 20 | 9,743 | 9,957 | |||||||
| Overdraft | 16 | 856 | 887 | |||||||
| Total current liabilities | 18,698 | 17,688 | ||||||||
| Total liabilities | 30,327 | 30,321 | ||||||||
| Total equity and liabilities | 218,291 | 210,877 | ||||||||
The accompanying notes on pages 6 to 26 are an integral part of these condensed consolidated interim financial statements.
| 3 |
Caledonia Mining Corporation Plc |
Consolidated statements of changes in equity
(in thousands of United States Dollars, unless indicated otherwise)
Unaudited
| Note | Share capital | Foreign currency translation reserve | Contributed surplus | Equity- settled share-based payment reserve | Retained loss | Total | Non- controlling interests (NCI) | Total equity | ||||||||||||||||||||||||||
| Balance December 31, 2020 | 74,696 | (8,794 | ) | 132,591 | 14,513 | (71,487 | ) | 141,519 | 16,524 | 158,043 | ||||||||||||||||||||||||
| Transactions with owners: | ||||||||||||||||||||||||||||||||||
| Dividends declared | - | - | - | - | (1,337 | ) | (1,337 | ) | (355 | ) | (1,692 | ) | ||||||||||||||||||||||
| Total comprehensive income: | ||||||||||||||||||||||||||||||||||
| Profit for the period | - | - | - | - | 4,550 | 4,550 | 873 | 5,423 | ||||||||||||||||||||||||||
| Other comprehensive income for the period | - | (202 | ) | - | - | - | (202 | ) | - | (202 | ) | |||||||||||||||||||||||
| Balance at March 31, 2021 | 74,696 | (8,996 | ) | 132,591 | 14,513 | (68,274 | ) | 144,530 | 17,042 | 161,572 | ||||||||||||||||||||||||
| Balance December 31, 2021 | 82,667 | (9,325 | ) | 132,591 | 14,513 | (59,150 | ) | 161,296 | 19,260 | 180,556 | ||||||||||||||||||||||||
| Transactions with owners: | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Dividends declared | - | - | - | - | (1,788 | ) | (1,788 | ) | - | (1,788 | ) | |||||||||||||||||||||||
| Share-based payment: | ||||||||||||||||||||||||||||||||||
| - Shares issued on settlement | 9.1 | 804 | - | - | - | - | 804 | - | 804 | |||||||||||||||||||||||||
| - Equity-settled share-based payment granted | 9.2 | - | - | - | 82 | - | 82 | - | 82 | |||||||||||||||||||||||||
| Total comprehensive income: | ||||||||||||||||||||||||||||||||||
| Profit for the period | - | - | - | - | 5,940 | 5,940 | 1,677 | 7,617 | ||||||||||||||||||||||||||
| Other comprehensive income for the period | - | 693 | - | - | - | 693 | - | 693 | ||||||||||||||||||||||||||
| Balance at March 31, 2022 | 83,471 | (8,632 | ) | 132,591 | 14,595 | (54,998 | ) | 167,027 | 20,937 | 187,964 | ||||||||||||||||||||||||
| Note | 18 | |||||||||||||||||||||||||||||||||
The accompanying notes on pages 6 to 26 are an integral part of these condensed consolidated interim financial statements.
| 4 |
Caledonia Mining Corporation Plc |
Consolidated statements of cash flows
For the three months ended March 31,
(in thousands of United States Dollars, unless indicated otherwise)
Unaudited
| Note | 2022 | 2021 | ||||||||
| Cash generated from operations | 21 | 11,844 | 2,550 | |||||||
| Net finance costs paid | (30 | ) | (123 | ) | ||||||
| Tax paid | (1,659 | ) | (464 | ) | ||||||
| Net cash from operating activities | 10,155 | 1,963 | ||||||||
| Cash flows used in investing activities | ||||||||||
| Acquisition of property, plant and equipment | (9,734 | ) | (6,344 | ) | ||||||
| Acquisition of exploration and evaluation assets | (224 | ) | (190 | ) | ||||||
| Proceeds from disposal of subsidiary | – | 340 | ||||||||
| Net cash used in investing activities | (9,958 | ) | (6,194 | ) | ||||||
| Cash flows from financing activities | ||||||||||
| Dividends paid | (1,788 | ) | (1,692 | ) | ||||||
| Term loan repayments | – | (104 | ) | |||||||
| Payment of lease liabilities | (40 | ) | (32 | ) | ||||||
| Net cash used in financing activities | (1,828 | ) | (1,828 | ) | ||||||
| Net decrease in cash and cash equivalents | (1,631 | ) | (6,059 | ) | ||||||
| Effect of exchange rate fluctuations on cash and cash equivalents | (204 | ) | (6 | ) | ||||||
| Net cash and cash equivalents at the beginning of the period | 16,265 | 19,092 | ||||||||
| Net cash and cash equivalents at the end of the period | 14,430 | 13,027 | ||||||||
The accompanying notes on pages 6 to 26 are an integral part of these condensed consolidated interim financial statements.
| 5 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 1 | Reporting entity |
Caledonia Mining Corporation Plc (“Caledonia” or the “Company”) is a company domiciled in Jersey, Channel Islands. The Company’s registered office address is B006 Millais House, Castle Quay, St Helier, Jersey, Channel Islands.
These unaudited condensed consolidated interim financial statements as at and for the three months ended March 31, 2022 are of the Company and its subsidiaries (the “Group”). The Group’s primary involvement is in the operation of a gold mine and the exploration and development of mineral properties for precious metals.
Caledonia’s shares are listed on the NYSE American LLC stock exchange (symbol – “CMCL”). Depository interests in Caledonia’s shares are admitted to trading on AIM of the London Stock Exchange plc (symbol – “CMCL”). Caledonia listed on the Victoria Falls Stock Exchange (“VFEX”) (symbol – “CMCL”) on December 2, 2021. Caledonia voluntary delisted from the Toronto Stock Exchange (the “TSX”) on June 19, 2020. After the delisting the Company remains a Canadian reporting issuer and has to comply with Canadian securities laws until it demonstrates that Canadian shareholders represent less than 2% of issued share capital.
| 2 | Basis of preparation |
| i) | Statement of compliance |
These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all the information required for full annual financial statements. Accordingly, certain information and disclosures normally included in the annual financial statements prepared in accordance with IFRS as issued by the IASB have been omitted or condensed. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended December 31, 2021.
| ii) | Basis of measurement |
These unaudited condensed consolidated interim financial statements have been prepared on the historical cost basis except for:
| · | cash-settled share-based payment arrangements measured at fair value on grant and re-measurement dates; |
| · | equity-settled share-based payment arrangements measured at fair value on the grant date; and |
| · | derivative financial liabilities measured at fair value. |
| iii) | Functional currency |
These unaudited condensed consolidated interim financial statements are presented in United States Dollars (“$” or “US Dollars” or “USD”), which is also the functional currency of the Company. All financial information presented in US Dollars has been rounded to the nearest thousand, unless indicated otherwise. Refer to note 10 for changes to Zimbabwean real-time gross settlement, bond notes or bond coins (“RTGS$”) and its effect on the consolidated statement of profit or loss and other comprehensive income.
| 6 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 3 | Use of accounting assumptions, estimates and judgements |
In preparing these unaudited condensed consolidated interim financial statements, management has made accounting assumptions, estimates and judgements that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recognised prospectively.
| 4 | Significant accounting policies |
The same accounting policies and methods of computation have been applied consistently to all periods presented in these unaudited condensed consolidated interim financial statements as compared to the Group’s annual consolidated financial statements for the year ended December 31, 2021. In addition, the accounting policies have been applied consistently by the Group.
| 5 | Blanket Zimbabwe Indigenisation Transaction |
On February 20, 2012 the Group announced it had signed a Memorandum of Understanding (“MoU”) with the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe pursuant to which the Group agreed that indigenous Zimbabweans would acquire an effective 51% ownership interest in the Zimbabwean company owning the Blanket Mine (also referred to herein as “Blanket” or “Blanket Mine” as the context requires) for a paid transactional value of $30.09 million. Pursuant to the above, members of the Group entered into agreements with each indigenous shareholder to transfer 51% of the Group’s ownership interest in Blanket Mine whereby it:
| · | sold a 16% interest to the National Indigenisation and Economic Empowerment Fund (“NIEEF”) for $11.74 million; |
| · | sold a 15% interest to Fremiro Investments (Private) Limited (“Fremiro”), which is owned by indigenous Zimbabweans, for $11.01 million; |
| · | sold a 10% interest to Blanket Employee Trust Services (Private) Limited (“BETS”) for the benefit of present and future managers and employees for $7.34 million. The shares in BETS are held by the Blanket Mine Employee Trust (“Employee Trust”) with Blanket Mine’s employees holding participation units in the Employee Trust; and |
| · | donated a 10% ownership interest to the Gwanda Community Share Ownership Trust (“Community Trust”). In addition, Blanket Mine paid a non-refundable donation of $1 million to the Community Trust. |
The Group facilitated the vendor funding of these transactions which is repaid by way of dividends from Blanket Mine. 80% of dividends declared by Blanket Mine are used to repay such loans and the remaining 20% unconditionally accrues to the respective indigenous shareholders. Following a modification to the interest rate on June 23, 2017, outstanding balances on these facilitation loans attract interest at a rate of the lower of a fixed 7.25% per annum payable quarterly or 80% of the Blanket Mine dividend in the quarter. The timing of the loan repayments depends on the future financial performance of Blanket Mine and the extent of future dividends declared by Blanket Mine. The Group related facilitation loans were transferred as dividends in specie intra-group and now the loans and most of the interest thereon is payable to the Company.
| 7 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 5 | Blanket Zimbabwe Indigenisation Transaction (continued) |
Accounting treatment
The directors of Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”), a wholly-owned subsidiary of the Company, performed a reassessment using the requirements of IFRS 10: Consolidated Financial Statements (IFRS 10). It was concluded that CHZ should continue to consolidate Blanket Mine after the indigenisation. The subscription agreements with the indigenous shareholders have been accounted for accordingly as a transaction with non-controlling interests and as a share-based payment transaction.
The subscription agreements, concluded on February 20, 2012, were accounted for as follows:
| · | Non-controlling interests (“NCI”) were recognised on the portion of shareholding upon which dividends declared by Blanket Mine will accrue unconditionally to equity holders as follows: |
| (a) | 20% of the 16% shareholding of NIEEF; |
| (b) | 20% of the 15% shareholding of Fremiro; and |
| (c) | 100% of the 10% shareholding of the Community Trust. |
| · | This effectively means that NCI was initially recognised at 16.2% of the net assets of Blanket Mine, until the completion of the transaction with Fremiro, whereby the NCI reduced to 13.2% (see below). |
| · | The remaining 80% of the shareholding of NIEEF and Fremiro was recognised as NCI to the extent that their attributable share of the net asset value of Blanket Mine exceeds the balance on the facilitation loans, including interest. At March 31, 2022 the attributable net asset value did not exceed the balance on the respective loan account and thus no additional NCI was recognised. |
| · | The transaction with BETS is accounted for in accordance with IAS 19 Employee Benefits (profit sharing arrangement) as the ownership of the shares does not ultimately pass to the employees. The employees are entitled to participate in 20% of the dividends accruing to the 10% shareholding in Blanket Mine if they are employed at the date of such distribution. To the extent that 80% of the attributable dividends exceeds the balance on the BETS facilitation loan, they will accrue to the employees at the date of such declaration. |
| · | BETS is an entity effectively controlled and consolidated by Blanket Mine. Accordingly, the shares held by BETS are effectively treated as treasury shares in Blanket Mine and no NCI is recognised. |
Fremiro purchase agreement
On November 5, 2018 the Company and Fremiro entered into a sale agreement for Caledonia to purchase Fremiro’s 15% shareholding in Blanket Mine. On January 20, 2020 all substantive conditions to the transaction were satisfied. The Company issued 727,266 shares to Fremiro for the cancellation of their facilitation loan and purchase of Fremiro’s 15% shareholding in Blanket Mine. The transaction was accounted for as a repurchase of a previously vested equity instrument. As a result, the Fremiro share of the NCI of $3,600 was derecognised, shares were issued at fair value, the share-based payment reserve was reduced by $2,247 and the Company’s shareholding in Blanket Mine increased to 64% on the effective date.
| 8 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 5 | Blanket Zimbabwe Indigenisation Transaction (continued) |
Accounting treatment (continued)
Blanket Mine’s indigenisation shareholding percentages and facilitation loan balances
| Balance of facilitation loan # | ||||||||||||||||||||
| USD | Shareholding | Effective interest & NCI recognised | NCI subject to facilitation loan | March 31, 2022 | December 31, 2021 | |||||||||||||||
| NIEEF | 16 | % | 3.2 | % | 12.8 | % | 10,359 | 10,359 | ||||||||||||
| Community Trust | 10 | % | 10.0 | % | 0.0 | % | – | – | ||||||||||||
| BETS ~ | 10 | % | - | * | - | * | 6,353 | 6,353 | ||||||||||||
| 36 | % | 13.2 | % | 12.8 | % | 16,712 | 16,712 | |||||||||||||
| * | The shares held by BETS are effectively treated as treasury shares (see above). |
| ~ | Accounted for under IAS19 Employee Benefits. |
| # | Facilitation loans are accounted for as equity instruments and are accordingly not recognised as loans receivable. |
The balance on the facilitation loans is reconciled as follows:
| 2022 | 2021 | |||||||
| Balance at January 1 | 16,712 | 19,175 | ||||||
| Finance cost accrued | – | 345 | ||||||
| Dividends used to repay loan | – | (944 | ) | |||||
| Balance at March 31 | 16,712 | 18,576 | ||||||
Advance dividend loans and balances
In anticipation of completing the underlying subscription agreements, Blanket Mine agreed to advance dividend arrangements with NIEEF and the Community Trust. Advances made to the Community Trust against their right to receive dividends declared by Blanket Mine on their shareholding were as follows:
| · | a $2 million payment on or before September 30, 2012; |
| · | a $1 million payment on or before February 28, 2013; and |
| · | a $1 million payment on or before April 30, 2013. |
These advance payments were debited to a loan account bearing interest at a rate at the lower of a fixed 7.25% per annum, payable quarterly or the Blanket Mine dividend in the quarter to the advanced dividend loan holder. The loan is repayable by way of set-off of future dividends on the Blanket Mine shares owned by the Community Trust. Advances made to NIEEF as an advanced dividend loan before 2013 have been settled through Blanket Mine dividend repayments in 2014. The advance dividend payments were recognised as distributions to shareholders and they are classified as equity instruments. The loans arising are not recognised as loans receivables, because repayment is by way of uncertain future dividends. The final payment to settle the advance dividend loan to the Community Trust was made on September 22, 2021. Future dividends to the Community Trust will be unencumbered.
| 9 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 5 | Blanket Zimbabwe Indigenisation Transaction (continued) |
Amendments to advanced dividend loan agreements
Advance dividend loan modification - Community Trust
On February 27, 2020, the Group, Blanket Mine and the indigenous shareholders of Blanket Mine reached an agreement to change the repayment terms of the advance dividend loan to the Community Trust. The amendment allowed that 20% of the Community Trust share of the Blanket dividend accrues on declaration of the dividend and that the remaining 80% be applied to the advance dividend loan from February 27, 2020. The modification was not considered beneficial to the indigenous shareholders.
The movement in the advance dividend loan to the Community Trust is reconciled as follows:
| 2022 | 2021 | |||||||
| Balance at January 1 | – | 994 | ||||||
| Finance cost accrued | – | 17 | ||||||
| Dividends used to repay advance dividend loan | – | (400 | ) | |||||
| Balance at March 31 | – | 611 | ||||||
| 6 | Production costs |
| 2022 | 2021 | |||||||
| Salaries and wages | 5,927 | 4,414 | ||||||
| Consumable materials – Operations | 5,126 | 4,136 | ||||||
| Consumable materials – COVID-19 | – | 72 | ||||||
| Electricity costs | 2,277 | 2,140 | ||||||
| Safety | 231 | 182 | ||||||
| Cash-settled share-based expense (note 9.1(a)) | 513 | 210 | ||||||
| Gold work in progress | (395 | ) | 1,166 | |||||
| On mine administration | 642 | 444 | ||||||
| Pre-feasibility exploration costs | 38 | 93 | ||||||
| 14,359 | 12,857 | |||||||
| 10 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 7 | Other expenses |
| 2022 | 2021 | |||||||
| Intermediated Money Transaction Tax | 174 | 127 | ||||||
| COVID-19 donations | – | 74 | ||||||
| Community and social responsibility cost | 152 | 6 | ||||||
| Impairment of property, plant and equipment - plant and equipment (note 12) | – | 51 | ||||||
| Impairment of exploration and evaluation assets (note 13) | 467 | – | ||||||
| 793 | 258 | |||||||
| 8 | Administrative expenses |
| 2022 | 2021 | |||||||
| Investor relations | 125 | 90 | ||||||
| Audit fee | 68 | 67 | ||||||
| Advisory services fees | 295 | 87 | ||||||
| Listing fees | 155 | 99 | ||||||
| Directors fees – Company | 127 | 122 | ||||||
| Directors fees – Blanket | 14 | 11 | ||||||
| Employee costs | 1,151 | 1,061 | ||||||
| Other office administration cost | 100 | 60 | ||||||
| Management liability insurance | 241 | – | ||||||
| Travel costs | 95 | 13 | ||||||
| 2,371 | 1,610 | |||||||
| 9 | Share-based payments |
| 9.1 | Cash-settled share-based payments |
The Group has expensed the following cash-settled share-based expense arrangements for the three months ended March 31:
| Note | 2022 | 2021 | ||||||||
| Restricted Share Units and Performance Units | 9.1(a) | 367 | 161 | |||||||
| Caledonia Mining South Africa employee incentive scheme | 9.1(b) | – | (9 | ) | ||||||
| 367 | 152 | |||||||||
| 11 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 9 | Share-based payments (continued) |
| 9.1 | Cash-settled share-based payments (continued) |
| (a) | Restricted Share Units and Performance Units |
Certain management and employees within the Group are granted Restricted Share Units (“RSUs”) and Performance Units (”PUs”) pursuant to provisions of the 2015 Omnibus Equity Incentive Compensation Plan (“OEICP”). All RSUs and PUs were granted and approved at the discretion of the Compensation Committee of the Board of Directors.
RSUs vest three years after grant date given that the service conditions of the relevant employees have been fulfilled. The value of the vested RSUs is the number of RSUs vested multiplied by the fair market value of the Company’s shares, as specified by the OEICP, on the date of settlement.
PUs have a performance condition based on gold production and a performance period of one up to three years. The number of PUs that vest will be the relevant portion of the PUs granted multiplied by the performance multiplier, which will reflect the actual performance in terms of the performance conditions compared to expectations on the date of the award. Refer to note 9.2 for the performance conditions and performance period for Equity-settled share-based payments.
RSU holders are entitled to receive dividends over the vesting period. Such dividends will be reinvested in additional RSUs at the then applicable share price. PUs have rights to dividends only after they have vested.
RSUs and PUs allow for settlement of the vesting date value in cash or, subject to conditions, shares issuable at fair market value or a combination of both at the discretion of the unitholder.
The fair value of the RSUs at the reporting date was based on the Black Scholes option valuation model less the fair value of the expected dividends during the vesting period multiplied by the performance multiplier expectation. At the reporting date it was assumed that there is a 93%-100% probability that the performance conditions will be met and therefore a 93%-100% (2021: 93%-100%) average performance multiplier was used in calculating the estimated liability.
The fair value of the PUs at the reporting date was based on the Black Scholes option valuation model. The liability as at March 31, 2022 amounted to$1,635 (December 31, 2021: $3,027). Included in the liability as at March 31, 2022 is an amount of $513 (2021: $210) that was expensed and classified as production costs; refer to note 6. During the period PUs to the value of $2,272 vested and $1,028 were settled in cash and $1,244 in share capital (2021: $420 settled in cash).
| 12 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 9 | Share-based payments (continued) |
| 9.1 | Cash-settled share-based payments (continued) |
| (a) | Restricted Share Units and Performance Units (continued) |
The following assumptions were used in estimating the fair value of the cash-settled share-based payment liability on:
| March 31,2022 | December 31,2021 | |||||||||||||||
| RSUs | PUs | RSUs | PUs | |||||||||||||
| Risk free rate | 2.32 | % | 2.32 | % | 1.52 | % | 1.52 | % | ||||||||
| Fair value (USD) | 15.68 | 15.15 | 12.06 | 11.63 | ||||||||||||
| Share price (USD) | 15.21 | 15.16 | 11.71 | 11.71 | ||||||||||||
| Performance multiplier percentage | – | 93-100% | – | 93-100% | ||||||||||||
| Volatility | 0.78 | 1.78 | 1.20 | 1.06 | ||||||||||||
| Share units granted: | RSUs | PUs | RSUs | PUs | ||||||||||||
| Grant - January 11, 2019 | – | 95,740 | – | 95,740 | ||||||||||||
| Grant - March 23, 2019 | – | 28,287 | – | 28,287 | ||||||||||||
| Grant - June 8, 2019 | – | 14,672 | – | 14,672 | ||||||||||||
| Grant - January 11, 2020 | 17,585 | 114,668 | 17,585 | 114,668 | ||||||||||||
| Grant - March 31, 2020 | – | 1,971 | – | 1,971 | ||||||||||||
| Grant - June 1, 2020 | – | 1,740 | – | 1,740 | ||||||||||||
| Grant - September 9, 2020 | – | 1,611 | – | 1,611 | ||||||||||||
| Grant - September 14, 2020 | – | 20,686 | – | 20,686 | ||||||||||||
| Grant - October 5, 2020 | – | 514 | – | 514 | ||||||||||||
| Grant - January 11, 2021 | – | 78,875 | – | 78,875 | ||||||||||||
| Grant -April 1, 2021 | – | 770 | – | 770 | ||||||||||||
| Grant - May 14, 2021 | – | 2,389 | – | 2,389 | ||||||||||||
| Grant - June 1, 2021 | – | 1,692 | – | 1,692 | ||||||||||||
| Grant - June 14, 2021 | – | 507 | – | 507 | ||||||||||||
| Grant - August 13, 2021 | – | 2,283 | – | 2,283 | ||||||||||||
| Grant - September 1, 2021 | – | 553 | – | 553 | ||||||||||||
| Grant - September 6, 2021 | – | 531 | – | 531 | ||||||||||||
| Grant - September 20, 2021 | – | 526 | – | 526 | ||||||||||||
| Grant - October 1, 2021 | – | 2,530 | – | 2,530 | ||||||||||||
| Grant - October 11, 2021 | – | 500 | – | 500 | ||||||||||||
| Grant - November 12, 2021 | – | 1,998 | – | 1,998 | ||||||||||||
| Grant - December 1, 2021 | – | 936 | – | 936 | ||||||||||||
| Grant - January 11, 2022 | – | 96,359 | – | – | ||||||||||||
| Grant - January 12, 2022 | – | 825 | – | – | ||||||||||||
| Grant - February 1, 2022 | – | 1,077 | – | – | ||||||||||||
| RSU dividends reinvested | 1,288 | – | 1,066 | – | ||||||||||||
| Settlements/ terminations | – | (228,554 | ) | – | (30,600 | ) | ||||||||||
| Total awards | 18,873 | 243,686 | 18,651 | 343,379 | ||||||||||||
| 13 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 9 | Share-based payments (continued) |
| 9.2 | Equity-settled share-based payments |
| (a) | Performance Units |
Equity-settled share-based payment PUs have a performance condition based on gold production, average normalized controllable cost per ounce of gold and a performance period of up to three years. The number of PUs that vest will be the relevant portion of the PUs granted multiplied by the performance multiplier, which will reflect the actual performance in terms of the performance conditions compared to expectations on the date of the award.
PUs have rights to dividends only after they have vested.
The shares issued are subject to a minimum holding period of until at least the first anniversary of the PUs vesting date.
The fair value of the PUs at the reporting date was based on the Black Scholes option valuation model less the fair value of the expected dividends during the vesting period multiplied by the performance multiplier expectation. At the reporting date it was assumed that there is a 100% probability that the performance conditions will be met and therefore a 100% average performance multiplier was used in calculating the expense. The equity-settled share-based payment expense as at March 31, 2022 amounted to $82 (2021: $Nil).
The following assumptions were used in estimating the fair value of the equity-settled share-based payment liability on:
| March 31, | ||||
| 2022 | ||||
| Grant date | January 24, 2022 | |||
| Shares granted and outstanding as at valuation date | 130,380 | |||
| Share price (USD) | 11.50 | |||
| Fair value (USD) | 10.15 | |||
| Performance multiplier percentage | 100 | % | ||
| Total fair value of PUs | $ | 1,323 | ||
| 10 | Net foreign exchange gain |
On October 1, 2018 the RBZ issued a directive to Zimbabwean banks to separate foreign currency from RTGS$ in the accounts held by their clients and pegged the RTGS$ at 1:1 to the US Dollars. On February 20, 2019 the RBZ issued a further monetary policy statement, which allowed inter-bank trading between RTGS$ and foreign currency. The interbank rate was introduced at 2.5 RTGS$ to 1 US Dollars and traded at 142.42 RTGS$ to 1 US Dollars as at March 31, 2022 (December 31, 2021: 108.67 RTGS$). On June 24, 2019 the Government issued S.I. 142 which stated, “Zimbabwe dollar (“RTGS$”) to be the sole currency for legal tender purposes for any transactions in Zimbabwe”. Throughout these announcements and to the date of issue of these financial statements the US dollar has remained the primary currency in which the Group’s Zimbabwean entities operate and the functional currency of these entities.
| 14 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 10 | Net foreign exchange gain (continued) |
Previously there was uncertainty as to what currency would be used to settle amounts owed to the Zimbabwe Government. The announcement of S.I. 142 clarified the Zimbabwean Government’s intentions that these liabilities were always denominated in RTGS$ and that RTGS$ would be the currency in which they would be settled. The devaluation of the deferred tax liabilities contributed the largest portion of the foreign exchange gain set out below.
In June 2021 the RBZ announced that companies that are listed on the Victoria Falls Stock Exchange (“VFEX”) will receive 100% of the revenue arising from incremental production in US Dollars. Blanket has subsequently received confirmation that the “baseline” level of production for the purposes of calculating incremental production is 148.38 Kg per month (approximately 57,000 ounces per annum). The payment of the increased US Dollars proceeds for incremental production was applied from July 1, 2021. In December 2021, Caledonia obtained a secondary listing on the VFEX and Blanket has received all amounts due in terms of this revised policy up to the date of approval of these financial statements. The CMCL listing on the VFEX should mean that at an illustrative production rate of 80,000 ounces per annum Blanket would receive approximately 71.5% of its total revenues in US Dollars and the balance in RTGS$.
The table below illustrates the effect the weakening of the RTGS$ and other foreign currencies had on the consolidated statement of profit or loss and other comprehensive income.
| 2022 | 2021 | |||||||
| Unrealised foreign exchange gain | 1,948 | 266 | ||||||
| Realised foreign exchange (loss)/ gain | (1,039 | ) | 7 | |||||
| Net foreign exchange gain | 909 | 273 | ||||||
| 11 | Derivative financial instruments |
The fair value of derivative financial instruments not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where available. The company did not apply hedge accounting to the derivative financial instruments and all fair value losses were recorded in the consolidated statement of profit or loss and other comprehensive income. Transaction costs are recognised in profit or loss as incurred.
| Derivative financial instrument expenses | 2022 | 2021 | ||||||||
| Cap and collar options (February 17, 2022) and Call options (March 9, 2022) | 11.1(a) | 273 | – | |||||||
| Gold loan | 11.1(a) | 456 | – | |||||||
| Call options (December 13, 2021) | 11.1(b) | 213 | – | |||||||
| Call options transaction costs (March 9, 2022) | 11.1(a) | 796 | – | |||||||
| Gold exchange-traded fund ("Gold ETF") | – | 114 | ||||||||
| 1,738 | 114 | |||||||||
| 15 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 11 | Derivative financial instruments (continued) |
| 11.1 | Derivative financial liabilities |
The table below summarises the derivative financial liabilities balances as at:
| March 31, 2022 | December 31, 2021 | |||||||||
| Cap and collar options (February 17, 2022) and Call options (March 9, 2022) | 11.1(a) | 273 | – | |||||||
| Gold loan | 11.1(b) | 3,322 | 2,866 | |||||||
| Call options (December 13, 2021) | 11.1(b) | 442 | 229 | |||||||
| 4,037 | 3,095 | |||||||||
| (a) | Cap and collar options and Call options |
On February 17, 2022 the Company entered into a zero cost contract to hedge 20,000 ounces of gold over a period of 5 months from March to July 2022. The hedging contract has a cap of $1,940 and a collar of $1,825 over 4,000 ounces of gold per month expiring at the end of each month over the 5-month period.
On March 9, 2022 in response to a very volatile gold price the Company purchased a matching quantity of Call options at a strike price above the cap at a total cost of $796 over 4,000 ounces of gold per month at strike prices of $2,100 per ounce from March 2022 to May 2022 and $2,200 per ounce from June 2022 to July 2022 in order to limit margin exposure and reinstate gold price upside above the strike price.
| (b) | Gold loan and Call options |
On December 13, 2021 the Company entered into two separate gold loan and option agreements with Auramet International LLC (“Auramet”).
In terms of the agreements the Group:
| · | received $3 million less transaction costs from Auramet at inception of the Gold loan agreement; |
| · | is required to make two deliveries of 925 ounces each on May 31, 2022 and June 30, 2022 in repayment of the Gold loan or pay the equivalent in cash; and |
| · | granted Call options on 6,000 ounces to Auramet with a strike price of $2,000 per ounce, expiring monthly in equal monthly tranches from June 30, 2022 to November 30, 2022. |
Accounting for the Gold loan and the Call options transactions:
| · | At inception the fair value of the Gold loan was calculated at the amount received less the fair value of the Call options. |
| · | As at March 31, 2022 the fair value of the gold loan was calculated by discounting the fair value of the gold deliveries at a forward rate of $1,833 due by a market related discount rate. |
| · | At inception and at March 31, 2022 the Call options were valued at the quoted prices available from the CME Group Inc. at each respective date. |
| · | Differences in the fair values were accounted for as Fair value losses on derivative financial instruments in the consolidated statement of profit or loss and other comprehensive income. |
| · | The Call options were classified as level 1 in the fair value hierarchy and the Gold loan as level 2. |
| · | Derivative liabilities are not designated as hedging instruments. |
| 16 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 11 | Derivative financial instruments (continued) |
| 11.1 | Derivative financial liabilities (continued) |
| (b) | Gold loan and Call options (continued) |
Proceeds received under the Gold loan and Call options agreements were allocated as follows:
| December 13, 2021 | |||
| Net proceeds received | 2,960 | ||
| Fair value of Call options | 208 | ||
| Fair value of Gold loan | 2,752 |
| 17 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 12 | Property, plant and equipment |
| Cost | Land and Buildings | Mine development, infrastructure and other | Plant and equipment | Furniture and fittings | Motor vehicles | Solar Plant ~ | Total | |||||||||||||||||||||
| Balance at January 1, 2021 | 11,757 | 108,839 | 40,644 | 1,235 | 2,995 | 392 | 165,862 | |||||||||||||||||||||
| Additions* | 318 | 25,529 | 3,531 | 134 | 176 | 1,581 | 31,269 | |||||||||||||||||||||
| Impairments@ | – | (65 | ) | (1,565 | ) | – | – | – | (1,630 | ) | ||||||||||||||||||
| Derecognised plant and equipment | (192 | ) | – | – | – | – | – | (192 | ) | |||||||||||||||||||
| Reallocations between asset classes # | 3,120 | (24,913 | ) | 21,785 | 8 | – | – | – | ||||||||||||||||||||
| Foreign exchange movement | (25 | ) | – | (76 | ) | (35 | ) | (2 | ) | (33 | ) | (171 | ) | |||||||||||||||
| Balance at December 31, 2021 | 14,978 | 109,390 | 64,319 | 1,342 | 3,169 | 1,940 | 195,138 | |||||||||||||||||||||
| Additions* | – | 5,387 | 1,220 | 14 | – | 5,744 | 12,365 | |||||||||||||||||||||
| Foreign exchange movement | 28 | – | 160 | 42 | 3 | (36 | ) | 197 | ||||||||||||||||||||
| Balance at March 31, 2022 | 15,006 | 114,777 | 65,699 | 1,398 | 3,172 | 7,648 | 207,700 | |||||||||||||||||||||
| * | Included in additions is an amount of $6,455 (2021: $19,413) relating to capital work in progress (“CWIP”) and contains $Nil (December 31, 2021: $17) of borrowing costs capitalised from the term loan. As at period end $37,062 of CWIP was included in the cost closing balance (2021: $42,145). |
| ~ | On July 6, 2020 the Board appointed Voltalia as the contractor for the engineering, procuring and constructing of a solar plant to be owned by a subsidiary of the Company and supply Blanket Mine with power. Construction of the 12MWac solar plant is expected to be completed in the second quarter of 2022. Included in Prepayments is an advance payment to Voltalia to the amount of $728 (2021: $1,821) in terms of the EPC agreement and $Nil (2021: $704) for equipment. Also included in Prepayments is an amount of $Nil (2021: $426) to entities in Zimbabwe for civil and construction work related to the solar plant. Refer to note 15. |
| @ | Included in impairments are Gensets at a cost of $1,001 and Guide ropes at a total cost of $310. These assets were impaired as they are no longer in a working conditions as intended for the use in production or day to day operations. |
| # | Included in the reallocation between asset classes is an amount of $18,509 for the Central Shaft. |
| 18 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 12 | Property, plant and equipment (continued) |
| Accumulated depreciation and Impairment losses | Land and Buildings | Mine development, infrastructure and other | Plant and equipment | Furniture and fittings | Motor vehicles | Solar Plant | Total | |||||||||||||||||||||
| Balance at January 1, 2021 | 6,446 | 6,973 | 22,685 | 849 | 2,430 | – | 39,383 | |||||||||||||||||||||
| Depreciation for the year | 1,217 | 2,537 | 3,953 | 136 | 203 | – | 8,046 | |||||||||||||||||||||
| Accumulated depreciation for derecognised plant and equipment | (230 | ) | – | – | – | – | – | (230 | ) | |||||||||||||||||||
| Accumulated depreciation for impairments | – | – | (1,133 | ) | – | – | – | (1,133 | ) | |||||||||||||||||||
| Foreign exchange movement | (1 | ) | – | – | (27 | ) | (2 | ) | – | (30 | ) | |||||||||||||||||
| Balance at December 31, 2021 | 7,432 | 9,510 | 25,505 | 958 | 2,631 | – | 46,036 | |||||||||||||||||||||
| Depreciation for the period | 321 | 911 | 736 | 42 | 53 | – | 2,063 | |||||||||||||||||||||
| Foreign exchange movement | 2 | – | – | 31 | 2 | – | 35 | |||||||||||||||||||||
| Balance at March 31, 2022 | 7,755 | 10,421 | 26,241 | 1,031 | 2,686 | – | 48,134 | |||||||||||||||||||||
| Carrying amounts | ||||||||||||||||||||||||||||
| At December 31, 2021 | 7,546 | 99,880 | 38,814 | 384 | 538 | 1,940 | 149,102 | |||||||||||||||||||||
| At March 31, 2022 | 7,251 | 104,356 | 39,458 | 367 | 486 | 7,648 | 159,566 | |||||||||||||||||||||
| 19 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 13 | Exploration and evaluation assets |
| Glen Hume | Connemara North | Maligreen | GG | Sabiwa | Abercorn | Valentine | Total | |||||||||||||||||||||||||
| Balance at January 1, 2021 | 2,661 | 300 | – | 3,523 | 284 | – | – | 6,768 | ||||||||||||||||||||||||
| Acquisition costs: | ||||||||||||||||||||||||||||||||
| - Mining claims acquired | – | – | 4,000 | – | – | – | – | 4,000 | ||||||||||||||||||||||||
| Decommissioning asset acquired | – | – | 135 | – | – | – | – | 135 | ||||||||||||||||||||||||
| Exploration costs: | ||||||||||||||||||||||||||||||||
| - Consumables and drilling | 1,074 | 71 | 14 | 16 | – | 12 | 31 | 1,218 | ||||||||||||||||||||||||
| - Contractor | 42 | 51 | – | – | – | – | 24 | 117 | ||||||||||||||||||||||||
| - Labour | 60 | 41 | 47 | 46 | – | 4 | 10 | 208 | ||||||||||||||||||||||||
| - Power | – | – | – | 33 | 6 | – | – | 39 | ||||||||||||||||||||||||
| Impairment * | (3,837 | ) | – | – | – | – | – | – | (3,837 | ) | ||||||||||||||||||||||
| Balance at December 31, 2021 | – | 463 | 4,196 | 3,618 | 290 | 16 | 65 | 8,648 | ||||||||||||||||||||||||
| Exploration costs: | – | |||||||||||||||||||||||||||||||
| - Consumables and drilling | – | – | 104 | 12 | – | – | – | 116 | ||||||||||||||||||||||||
| - Contractor | – | 4 | – | – | – | – | – | 4 | ||||||||||||||||||||||||
| - Labour | – | – | 80 | 11 | – | 3 | – | 94 | ||||||||||||||||||||||||
| - Power | – | – | – | 7 | 3 | – | – | 10 | ||||||||||||||||||||||||
| Impairment * | – | (467 | ) | – | – | – | – | – | (467 | ) | ||||||||||||||||||||||
| Balance at March 31, 2022 | – | – | 4,380 | 3,648 | 293 | 19 | 65 | 8,405 | ||||||||||||||||||||||||
| * | Caledonia has completed sufficient work to establish that the potential orebody at the Glen Hume and Connemara North properties will not meet Caledonia’s requirements in terms of size, grade and width. Accordingly, Caledonia will not exercise the option to acquire this property. |
| 20 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 14 | Inventories |
| 2022 | December 31, 2021 | |||||||
| Consumable stores | 20,606 | 21,516 | ||||||
| Gold in progress | 638 | 243 | ||||||
| Provision for obsolete stock | (947 | ) | (947 | ) | ||||
| 20,297 | 20,812 | |||||||
| 15 | Prepayments |
| 2022 | December 31, 2021 | |||||||
| Suppliers - South Africa | 1,020 | 1,552 | ||||||
| - Zimbabwe | 2,255 | 1,766 | ||||||
| Solar (note 12) | 728 | 2,951 | ||||||
| Other prepayments | 390 | 661 | ||||||
| 4,393 | 6,930 | |||||||
| 16 | Cash and cash equivalents |
| 2022 | December 31, 2021 | |||||||
| Bank balances | 15,286 | 17,152 | ||||||
| Cash and cash equivalents | 15,286 | 17,152 | ||||||
| Bank overdrafts used for cash management purposes | (856 | ) | (887 | ) | ||||
| Net cash and cash equivalents | 14,430 | 16,265 | ||||||
Included in the cash and cash equivalents is a restricted cash amount of USD2.3 million (denominated in RTGS$) held by Blanket Mine which has been earmarked by Stanbic Bank Zimbabwe as a letter of credit in favour of CMSA. The letter of credit was issued by Stanbic Bank Zimbabwe on March 25, 2022 and has a 90-day tenure to settlement. The cash on maturity will be transferred to CMSA’s bank account, denominated in South African rands.
| Interest rate | ||||||||
| Overdraft facilities | ||||||||
| Stanbic Bank - RTGS$ denomination | 300,000,000 | 32 | % | |||||
| Stanbic Bank - USD denomination | 1,000,000 | 10 | % | |||||
| * | Blanket obtained an additional overdraft facility of USD2 million was obtained from CABS Bank of Zimbabwe at an interest rate of 7.75% after quarter end. |
| 21 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 17 | Trade and other receivables |
| 2022 | December 31, 2021 | |||||||
| Bullion sales receivable | 6,999 | 4,528 | ||||||
| VAT receivables | 2,872 | 3,162 | ||||||
| Deposits for stores, equipment and other receivables | 344 | 248 | ||||||
| 10,215 | 7,938 | |||||||
The net carrying value of trade receivables was considered a reasonable approximation of fair value and are short-term in nature. No provision for expected credit losses were recognised as all scheduled payments were received as expected up to the date of approval of these financial statements. The Bullion sales receivable was received after quarter-end.
| 18 | Share capital |
Authorised
Unlimited number of ordinary shares of no par value.
Unlimited number of preference shares of no par value.
Issued ordinary shares
| Number of fully paid shares | Amount | |||||||
| January 1, 2021 | 12,118,823 | 74,696 | ||||||
| Shares issued: | ||||||||
| - options exercised | 18,000 | 165 | ||||||
| - equity raise* | 619,783 | 7,806 | ||||||
| December 31, 2021 | 12,756,606 | 82,667 | ||||||
| Shares issued: | ||||||||
| - share-based payment - employees (note 9.2(a)) | 76,520 | 804 | ||||||
| March 31, 2022 | 12,833,126 | 83,471 | ||||||
| * | Gross proceeds of $7,834 with a transaction cost of $28 were raised by issuing depository receipts on the VFEX in December 2021. |
| 19 | Provisions |
Site restoration
Site restoration relates to the estimated cost of closing down the mines and represents the site and environmental restoration costs, estimated to be paid throughout the period up until closure due to areas of environmental disturbance present at the reporting date as a result of mining activities. Regarding Blanket Mine the costs of site restoration are discounted based on the estimated life of mine. Site restoration costs at Blanket Mine are capitalised to mineral properties on initial recognition and depreciated systematically over the estimated life of the mine.
| 22 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 19 | Provisions (continued) |
| Reconciliation of site restoration provision | 2022 | December 31, 2021 | ||||||
| Balance January 1 | 3,294 | 3,567 | ||||||
| Unwinding of discount | 78 | – | ||||||
| Change in estimate - adjustment capitalised in Property, plant and equipment | (155 | ) | (408 | ) | ||||
| Acquisition - Maligreen | – | 135 | ||||||
| Balance March 31 | 3,217 | 3,294 | ||||||
The discount rates currently applied in calculating the present value of the Blanket Mine provision is 2.59% (2021: 1.94%), based on a risk-free rate and cash flows estimated at an average 2.29% inflation (2021: 2.26%). The gross rehabilitation costs, before discounting, amounted to $3,087 (2021: $3,087) for Blanket Mine as at March 31, 2022.
| 20 | Trade and other payables |
| 2022 | December 31, 2021 | |||||||
| Trade payables and accruals | 1,521 | 2,503 | ||||||
| Electricity accrual | 2,835 | 888 | ||||||
| Audit fee | 183 | 260 | ||||||
| Other payables | 876 | 749 | ||||||
| Financial liabilities | 5,415 | 4,400 | ||||||
| Production and management bonus accrual - Blanket Mine | 527 | 899 | ||||||
| Other employee benefits | 578 | 657 | ||||||
| Leave pay | 2,425 | 2,410 | ||||||
| Bonus provision | 8 | 645 | ||||||
| Accruals | 790 | 946 | ||||||
| Non-financial liabilities | 4,328 | 5,557 | ||||||
| Total | 9,743 | 9,957 | ||||||
| 23 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 21 | Cash flow information |
Non-cash items and information presented separately on the cash flow statement:
| 2022 | 2021 | |||||||
| Operating profit | 12,452 | 8,543 | ||||||
| Adjustments for: | ||||||||
| Impairment of property, plant and equipment | – | 51 | ||||||
| Impairment of exploration and evaluation assets - Connemara North (note 13) | 467 | – | ||||||
| Unrealised foreign exchange gains (note 10) | (1,948 | ) | (265 | ) | ||||
| Cash-settled share-based expense (note 9.1) | 367 | 297 | ||||||
| Cash-settled share-based expense included in production costs (note 6) | 513 | 210 | ||||||
| Cash portion of cash-settled share-based expense | (1,468 | ) | (420 | ) | ||||
| Equity-settled share-based expense | 82 | – | ||||||
| Depreciation | 2,063 | 1,193 | ||||||
| Fair value loss on derivative liabilities and derivative assets (note 11) | 942 | 114 | ||||||
| Cash generated from operations before working capital changes | 13,470 | 9,723 | ||||||
| Inventories | 1,045 | 2,416 | ||||||
| Prepayments | (3,651 | ) | (2,597 | ) | ||||
| Trade and other receivables | 780 | (6,904 | ) | |||||
| Trade and other payables | 200 | (88 | ) | |||||
| Cash generated from operations | 11,844 | 2,550 | ||||||
| 22 | Operating Segments |
The Group's operating segments have been identified based on geographic areas. The strategic business units are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. Zimbabwe and South Africa describe the operations of the Group's reportable segments. The Zimbabwe operating segment comprises Caledonia Holdings Zimbabwe (Private) Limited and subsidiaries Blanket Mine (1983) (Private) Limited and Caledonia Mining Services (Private) Limited. The South African geographical segment comprises a gold mine that is on care and maintenance (and now sold), as well as sales made by Caledonia Mining South Africa Proprietary Limited to the Blanket Mine. The holding company (Caledonia Mining Corporation Plc) and Greenstone Management Services Holdings Limited (a UK company) responsible for administrative functions within the Group are taken into consideration in the strategic decision-making process of the CEO and are therefore included in the disclosure below. Reconciling amounts do not represent a separate segment. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management report that are reviewed by the Group's CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
| 24 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 22 | Operating Segments (continued) |
Information about reportable segments
| For the three months ended March 31, 2022 | Zimbabwe | South Africa | Inter-group eliminations adjustments | Corporate and other reconciling amounts | Total | |||||||||||||||
| Revenue | 35,072 | – | – | – | 35,072 | |||||||||||||||
| Inter-segmental revenue | – | 4,436 | (4,436 | ) | – | – | ||||||||||||||
| Royalty | (1,758 | ) | – | – | – | (1,758 | ) | |||||||||||||
| Production costs | (13,723 | ) | (4,316 | ) | 3,680 | – | (14,359 | ) | ||||||||||||
| Depreciation | (2,551 | ) | (39 | ) | 542 | (15 | ) | (2,063 | ) | |||||||||||
| Other income | 2 | – | – | – | 2 | |||||||||||||||
| Other expenses | (326 | ) | – | – | (467 | ) | (793 | ) | ||||||||||||
| Administrative expenses | (47 | ) | (642 | ) | 13 | (1,695 | ) | (2,371 | ) | |||||||||||
| Management fee | (970 | ) | 970 | – | – | – | ||||||||||||||
| Cash-settled share-based expense | – | – | 513 | (880 | ) | (367 | ) | |||||||||||||
| Equity-settled share-based expense | – | – | – | (82 | ) | (82 | ) | |||||||||||||
| Net foreign exchange gain (loss) | 1,283 | 322 | (124 | ) | (572 | ) | 909 | |||||||||||||
| Fair value loss on derivative liabilities | – | – | – | (1,738 | ) | (1,738 | ) | |||||||||||||
| Net finance cost | (244 | ) | (7 | ) | – | 135 | (116 | ) | ||||||||||||
| Dividends (paid) received | (3,200 | ) | – | – | 3,200 | – | ||||||||||||||
| Profit before tax | 13,538 | 724 | 188 | (2,114 | ) | 12,336 | ||||||||||||||
| Tax expense | (4,362 | ) | (114 | ) | (83 | ) | (160 | ) | (4,719 | ) | ||||||||||
| Profit after tax | 9,176 | 610 | 105 | (2,274 | ) | 7,617 | ||||||||||||||
| As at March 31, 2022 | Zimbabwe | South Africa | Inter-group eliminations adjustments | Corporate and other reconciling amounts | Total | |||||||||||||||
| Geographic segment assets: | ||||||||||||||||||||
| Current (excluding intercompany) | 38,395 | 3,564 | (11 | ) | 8,280 | 50,228 | ||||||||||||||
| Non-Current (excluding intercompany) | 166,379 | 850 | (4,733 | ) | 5,567 | 168,063 | ||||||||||||||
| Expenditure on property, plant and equipment (note 12) | 9,036 | (1,111 | ) | 4,440 | – | 12,365 | ||||||||||||||
| Expenditure on evaluation and exploration assets (note 13) | 220 | – | – | 4 | 224 | |||||||||||||||
| Intercompany balances | 33,085 | 11,186 | (93,032 | ) | 48,761 | – | ||||||||||||||
| Geographic segment liabilities: | ||||||||||||||||||||
| Current (excluding intercompany) | (12,164 | ) | (1,246 | ) | – | (5,288 | ) | (18,698 | ) | |||||||||||
| Non-current (excluding intercompany) | (10,667 | ) | (200 | ) | 175 | (937 | ) | (11,629 | ) | |||||||||||
| Intercompany balances | (12,554 | ) | (35,114 | ) | 93,032 | (45,364 | ) | – | ||||||||||||
| 25 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
(in thousands of United States Dollars, unless indicated otherwise |
| 22 | Operating Segments (continued) |
| For the three months ended March 31, 2021 | Zimbabwe | South Africa | Inter-group eliminations adjustments | Corporate and other reconciling amounts | Total | |||||||||||||||
| Revenue | 25,720 | – | – | – | 25,720 | |||||||||||||||
| Inter-segmental revenue | – | 4,107 | (4,107 | ) | – | – | ||||||||||||||
| Royalty | (1,289 | ) | – | – | – | (1,289 | ) | |||||||||||||
| Production costs | (12,777 | ) | (3,812 | ) | 3,732 | – | (12,857 | ) | ||||||||||||
| Depreciation | (1,251 | ) | (38 | ) | 107 | (11 | ) | (1,193 | ) | |||||||||||
| Other income | 28 | (5 | ) | – | – | 23 | ||||||||||||||
| Other expenses | (258 | ) | – | – | – | (258 | ) | |||||||||||||
| Administrative expenses | (35 | ) | (481 | ) | – | (1,094 | ) | (1,610 | ) | |||||||||||
| Management fee | (579 | ) | 579 | – | – | – | ||||||||||||||
| Cash-settled share-based expense | (271 | ) | (128 | ) | 210 | 37 | (152 | ) | ||||||||||||
| Net foreign exchange gain (loss) | 207 | (90 | ) | 56 | 100 | 273 | ||||||||||||||
| Fair value loss on derivative assets | – | (114 | ) | – | – | (114 | ) | |||||||||||||
| Net finance cost | (954 | ) | 3 | – | 833 | (118 | ) | |||||||||||||
| Profit before tax | 8,541 | 21 | (2 | ) | (135 | ) | 8,425 | |||||||||||||
| Tax expense | (2,828 | ) | (30 | ) | (144 | ) | – | (3,002 | ) | |||||||||||
| Profit after tax | 5,713 | (9 | ) | (146 | ) | (135 | ) | 5,423 | ||||||||||||
| As at March 31, 2021 | Zimbabwe | South Africa | Inter-group eliminations adjustments | Corporate and other reconciling amounts | Total | |||||||||||||||
| Geographic segment assets: | ||||||||||||||||||||
| Current (excluding intercompany) | 28,544 | 3,899 | (16 | ) | 11,806 | 44,233 | ||||||||||||||
| Non-Current (excluding intercompany) | 138,848 | 955 | (4,471 | ) | 3,393 | 138,725 | ||||||||||||||
| Expenditure on property, plant and equipment (note 12) | 6,556 | 274 | (342 | ) | (47 | ) | 6,441 | |||||||||||||
| Expenditure on evaluation and exploration assets (note 13) | 26 | – | – | 164 | 190 | |||||||||||||||
| Intercompany balances | 18,611 | 6,859 | (72,235 | ) | 46,765 | – | ||||||||||||||
| Geographic segment liabilities: | ||||||||||||||||||||
| Current (excluding intercompany) | (7,617 | ) | (1,190 | ) | – | (2,247 | ) | (11,054 | ) | |||||||||||
| Non-current (excluding intercompany) | (9,626 | ) | – | 113 | (819 | ) | (10,332 | ) | ||||||||||||
| Intercompany balances | 280 | (34,161 | ) | 72,235 | (38,354 | ) | – | |||||||||||||
Major customer
Revenues from Fidelity amounted to $35,072 (2021: $25,720) for the three months ended March 31, 2022.
| 26 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
| (in thousands of United States Dollars, unless indicated otherwise |
Additional information |
DIRECTORS AND OFFICERS at May 12, 2022
| BOARD OF DIRECTORS | OFFICERS |
|
L.A. Wilson (2) (3) (4) (6) (8) Chairman of the Board |
S. R. Curtis (5) (6) (7) (8) Chief Executive Officer |
| Non-executive Director | Johannesburg, South Africa |
| Washington DC, United States of America | |
| S. R. Curtis (5) (6) (7) (8) | D. Roets (5) (6) (7) (8) |
|
Chief Executive Officer Johannesburg, South Africa |
Chief Operating Officer Johannesburg, South Africa |
| J. L. Kelly (1) (2) (3) (4) (6) (8) | M. Learmonth (6) (7) |
|
Non-executive Director Connecticut, United States of America |
Chief Financial Officer Jersey, Channel Islands |
| J. Holtzhausen (1) (2) (4) (5) (6) | A. Chester (7) (8) |
|
Chairman Audit Committee Non-executive Director, Cape Town, South Africa |
General Counsel, Company Secretary and Head of Risk and Compliance Jersey, Channel Islands |
| M. Learmonth (6) (7) | BOARD COMMITTEES |
|
Chief Financial Officer Jersey, Channel Islands |
(1)Audit Committee |
| (2)Compensation Committee | |
| (3)Corporate Governance Committee | |
| N. Clark (4) (5) (6) | (4)Nomination Committee |
| Non-executive Director | (5)Technical Committee |
| East Molesey, United Kingdom | (6)Strategic Planning Committee |
| (7)Disclosure Committee | |
| G. Wildschutt (1) (3) (4) (6) (8) | (8)ESG Committee |
| Non-executive Director | |
| Johannesburg, South Africa | |
| D. Roets (5) (6) (7) (8) | |
| Chief Operating Officer | |
| Johannesburg, South Africa | |
| G. Wylie (4) (5) (6) | |
| Non-executive Director | |
| Malta, Europe |
| 27 |
Caledonia Mining Corporation Plc |
Notes to the Condensed Consolidated Interim Financial Statements |
| (in thousands of United States Dollars, unless indicated otherwise |
Additional information |
CORPORATE DIRECTORY as at May 12, 2022
| CORPORATE OFFICES | SOLICITORS |
| Jersey | Mourant Ozannes (Jersey) |
| Head and Registered Office | 22 Grenville Street |
| Caledonia Mining Corporation Plc | St Helier |
| B006 Millais House | Jersey |
| Castle Quay | Channel Islands |
| St Helier | |
| Jersey JE2 3NF | Borden Ladner Gervais LLP (Canada) |
| Suite 4100, Scotia Plaza | |
| South Africa | 40 King Street West |
| Caledonia Mining South Africa Proprietary Limited | Toronto, Ontario M5H 3Y4 |
|
No. 1 Quadrum Office Park |
Canada |
|
Constantia Boulevard |
|
| Floracliffe | Memery Crystal LLP (United Kingdom) |
| South Africa | 165 Fleet Street |
| London EC4A 2DY | |
| Zimbabwe | United Kingdom |
| Caledonia Holdings Zimbabwe (Private) Limited | |
| P.O. Box CY1277 | Dorsey & Whitney LLP (US) |
| Causeway, Harare | TD Canada Trust Tower |
| Zimbabwe | Brookfield Place |
| 161 Bay Street | |
| Capitalisation (May 12, 2022) | Suite 4310 |
| Authorised: Unlimited | Toronto, Ontario |
| Shares, Warrants and Options Issued: | M5J 2S1 |
| Shares: 12,833,126 | Canada |
| Options: 10,000 | |
| Gill, Godlonton and Gerrans (Zimbabwe) | |
| SHARE TRADING SYMBOLS | Beverley Court |
| NYSE American - Symbol “CMCL” | 100 Nelson Mandela Avenue |
| AIM - Symbol “CMCL” | Harare, Zimbabwe |
| VFEX – Symbol “CMCL” | |
| Bowman Gilfillan Inc (South Africa) | |
| BANKER | 11 Alice Lane |
| Barclays | Sandton |
| Level 11 | Johannesburg |
| 1 Churchill Place | 2196 |
| Canary Wharf | |
| London E14 5HP | AUDITOR |
| BDO South Africa Incorporated | |
| NOMINATED ADVISOR | Wanderers Office Park |
| Cenkos Securities Plc | 52 Corlett Drive |
| 6.7.8 Tokenhouse Yard | Illovo 2196 |
| London | South Africa |
| EC2R 7AS | Tel: +27(0)10 590 7200 |
| MEDIA AND INVESTOR RELATIONS | REGISTRAR AND TRANSFER AGENT |
| BlytheRay Communications | Computershare |
| 4-5 Castle Court | 150 Royall Street, |
| London EC3V 9DL | Canton, |
| Tel: +44 20 7138 3204 | Massachusetts, 02021 |
|
Tel: +1 800 736 3001 or +1 781 575 3100
|
28
Exhibit 99.2
| CALEDONIA MINING CORPORATION PLC | May 12, 2022 |
Management’s Discussion and Analysis
This management’s discussion and analysis (“MD&A”) of the consolidated operating results and financial position of Caledonia Mining Corporation Plc (“Caledonia” or the “Company”) is for the quarter ended March 31, 2022 (“Q1 2022” or the “Quarter”). It should be read in conjunction with the Interim Financial Statements of Caledonia for the Quarter (the “Interim Financial Statements”) which are available from the System for Electronic Data Analysis and Retrieval at www.sedar.com or from Caledonia’s website at www.caledoniamining.com. The Interim Financial Statements and related notes have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. In this MD&A, the terms “Caledonia”, the “Company”, the “Group”, “we”, “our” and “us” refer to the consolidated operations of Caledonia Mining Corporation Plc and its subsidiaries unless otherwise specifically noted or the context requires otherwise.
Note that all currency references in this document are to thousands of US Dollars, unless otherwise stated.
TABLE OF CONTENTS
| 1. | Overview |
| 2. | Highlights |
| 3. | Summary Financial Results |
| 4. | Operations |
| 4.1 | Safety, Health and Environment |
| 4.2 | Social Investment and Contribution to the Zimbabwean Economy |
| 4.3 | Gold Production |
| 4.4 | Underground |
| 4.5 | Metallurgical Plant |
| 4.6 | Production Costs |
| 4.7 | Capital Projects |
| 4.8 | Indigenisation |
| 4.9 | Zimbabwe Commercial Environment |
| 4.10 | Opportunities and Outlook |
| 4.11 | Sale of Eersteling |
| 4.12 | COVID-19 |
| 4.13 | Solar project |
| 5. | Exploration |
| 6. | Investing |
| 7. | Financing |
| 8. | Liquidity and Capital Resources |
| 9. | Off-Balance Sheet Arrangements, Contractual Commitments and Contingencies |
| 10. | Non-IFRS Measures |
| 11. | Party Transactions |
| 12. | Critical Accounting Estimates |
| 13. | Financial Instruments |
| 14. | Dividend Policy |
| 15. | Management and Board |
| 16. | Securities Outstanding |
| 17. | Risk Analysis |
| 18. | Forward-Looking Statements |
| 19. | Controls |
| 20. | Qualified Person |
| 2 |
| 1. | OVERVIEW |
Caledonia is an exploration, development and mining corporation focused on Zimbabwe. Caledonia’s primary asset is a 64% ownership in Blanket Mine (“Blanket”), a gold mine in Zimbabwe. Caledonia consolidates Blanket into the Interim Financial Statements; accordingly, operational and financial information set out in this MD&A is on a 100% basis, unless otherwise specified. Caledonia’s shares are listed on the NYSE American LLC ("NYSE American"), depositary interests in Caledonia’s shares are admitted to trading on AIM of the London Stock Exchange plc and depositary receipts in Caledonia’s shares are listed on the Victoria Falls Stock Exchange (“VFEX”) (all under the symbols “CMCL”).
| 2. | HIGHLIGHTS |
| Q1 2021 | Q1 2022 | Comment | |
| Gold produced (oz) | 13,197 | 18,515 | Record quarterly gold production for any first quarter. The 40% increase in gold production was due to increased tonnes milled, grade and recoveries. |
| On-mine cost per ounce ($/oz)1 | 836 | 698 | On-mine cost per ounce decreased by 16% due to higher production, which spread fixed costs over more production ounces, and a lower electricity cost due to reduced usage of the diesel generators. |
| All-in sustaining cost (“AISC”) | 1,044 | 968 | AISC per ounce fell by 7%, which reflects the lower on-mine cost per ounce offset by higher royalty, administrative and share-based payment costs. |
| Average realised gold price ($/oz)1 | 1,738 | 1,848 | The average realised gold price reflects international spot prices. |
| Gross profit2 | 10,381 | 16,892 | Gross profit for the Quarter increased due to higher production and lower on-mine cost per ounce. |
| Net profit attributable to shareholders | 4,550 | 5,940 | Net profit increased due to the higher gross profit, offset by increased non-operating costs such as the costs of share-based payments and hedging |
| Basic IFRS earnings per share (“EPS”) (cents) | 37.3 | 44.6 | IFRS EPS reflects the movement in IFRS profit attributable to shareholders. |
| Adjusted EPS1 | 51.6 | 62.5 | Adjusted EPS excludes foreign exchange gains and losses, deferred tax and impairments. |
| Net cash from operating activities | 1,963 | 10,155 | Net cash from operating activities increased due to higher operating profit and lower working capital growth |
| Net cash and cash equivalents | 13,027 | 14,430 | Net cash remains robust. |
1 Non-IFRS measures such as “On-mine cost per ounce”, “AISC”, “average realised gold price” and “adjusted EPS” are used throughout this document. Refer to section 10 of this MD&A for a discussion of non-IFRS measures.
2 Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses, other income, interest and finance charges and taxation.
Safety
Regrettably, a fatal accident occurred on February 21, 2022 as a result of a vehicle accident underground. The directors and management of Caledonia and Blanket express their sincere condolences to the family and colleagues of the deceased. Management has provided the necessary assistance to the Ministry of Mines Inspectorate Department in its enquiries into the incident. Caledonia takes the safety of its employees very seriously and, accordingly, measures have been taken to reinforce adherence to prescribed safety procedures. Safety is discussed further in section 4.1.
| 3 |
An excellent operating and financial performance
Production for the Quarter was 18,515 ounces, a 40% increase from the first quarter of 2021 (the “comparable quarter” or “Q1 2021). Production for the Quarter exceeded our expectations and represents a new record for production in the first quarter of any year. Production for the Quarter excludes approximately 1,500 ounces of recoverable gold included in an ore stockpile that was accumulated during the Quarter.
Excellent production, a higher gold price and good cost control contributed to a 19.5% increase in IFRS earnings per share and a five-fold increase in net cash from operating activities.
Rising production in 2022 and 2023
Production is expected to continue to increase in the next two years. Production guidance for 2022 is a range of 73,000 to 80,000 ounces; guidance from 2023 onwards is 80,000 ounces – 38% higher than production in 2021.
6,797 ounces of gold were produced in April 2022 which is an annualised production rate of approximately 81,500 ounces of gold.
Changes to the board and management
The following changes to management and the board were announced during the reporting period:
| · | On January 20, 2022, Mr Dana Roets, Chief Operating Officer, was appointed to the board as an executive director; |
| · | On February 28, 2022, Mr John McGloin, resigned from the board as a non-executive director; and |
| · | On May 4, 2022, Mr Gordon Wylie was appointed to the board as an independent non-executive director with effect from May 5, 2022. Mr Wylie has over 46 years’ experience in the mining industry in both mining and exploration geology. Between 1997 and 2005, Mr Wylie was part of AngloGold Ashanti Limited’s senior management team where he was responsible for the company’s global exploration programs, mining geology and associated technical services, covering around 40 countries and 5 continents. |
Progress on solar project accelerates following delays due to COVID-19 and supply chain problems
The Company is constructing a 12MWac solar plant at a cost of approximately $14 million to improve the quality and security of Blanket’s electricity supply and to reduce Blanket’s environmental footprint. The plant is expected to provide approximately 27% of Blanket’s total daily electricity demand. Progress on this project has resumed and it is anticipated that it will be commissioned in June 2022.
Caledonia has commissioned a technical proposal for an expansion of this project to further reduce Blanket’s reliance on the Zimbabwe grid.
Strategy and Outlook: increased focus on growth opportunities
Caledonia’s immediate strategic focus is on Blanket: to increase production, reduce operating costs and increase the flexibility to undertake further development and exploration, thereby safeguarding and enhancing Blanket’s long-term future. Management believes there is excellent exploration potential at Blanket at depth, in the older shallower areas of the mine and in brownfield sites immediately adjacent to the existing Blanket footprint.
Caledonia continues to evaluate other opportunities further afield from Blanket. The Company is evaluating geological information at the Maligreen mining claims in the Zimbabwe midlands which is estimated to host a NI 43-101 compliant inferred mineral resource of approximately 940,000 ounces of gold in 15.6 million tonnes at a grade of 1.88g/t3.
________________________________
3 Refer to technical report entitled "Caledonia Mining Corporation Plc NI 43-101 Mineral Resource Report on the Maligreen Gold Project, Zimbabwe" by Minxcon (Pty) Ltd dated November 2, 2021 and filed on SEDAR on November 5, 2021.
| 4 |
Our approach to new projects is highly disciplined: after further evaluation, during the Quarter the Company decided not to exercise the option to acquire the Connemara North property as it does not meet our investment criteria.
| 3. | SUMMARY FINANCIAL RESULTS |
The table below sets out the consolidated profit and loss for the Quarter and Q1 2021 prepared under IFRS.
| Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (unaudited) | ||||||||
| ($’000’s) | 3 months ended March 31 | |||||||
| 2021 | 2022 | |||||||
| Revenue | 25,720 | 35,072 | ||||||
| Royalty | (1,289 | ) | (1,758 | ) | ||||
| Production costs | (12,857 | ) | (14,359 | ) | ||||
| Depreciation | (1,193 | ) | (2,063 | ) | ||||
| Gross profit | 10,381 | 16,892 | ||||||
| Other income | 23 | 2 | ||||||
| Other expenses | (258 | ) | (793 | ) | ||||
| Administrative expenses | (1,610 | ) | (2,371 | ) | ||||
| Net foreign exchange gain | 273 | 909 | ||||||
| Cash-settled share-based expense | (152 | ) | (367 | ) | ||||
| Equity-settled share-based expense | - | (82 | ) | |||||
| Derivative financial instrument expenses | (114 | ) | (1,738 | ) | ||||
| Operating profit | 8,543 | 12,452 | ||||||
| Net finance costs | (118 | ) | (116 | ) | ||||
| Profit before tax | 8,425 | 12,336 | ||||||
| Tax expense | (3,002 | ) | (4,719 | ) | ||||
| Profit for the period | 5,423 | 7,617 | ||||||
| Other comprehensive income | ||||||||
| Items that are or may be reclassified to profit or loss | ||||||||
| Exchange differences on translation of foreign operations | (202 | ) | 693 | |||||
| Total comprehensive income for the period | 5,221 | 8,310 | ||||||
| Profit attributable to: | ||||||||
| Owners of the Company | 4,550 | 5,940 | ||||||
| Non-controlling interests | 873 | 1,677 | ||||||
| Profit for the period | 5,423 | 7,617 | ||||||
| Total comprehensive income attributable to: | ||||||||
| Owners of the Company | 4,348 | 6,633 | ||||||
| Non-controlling interests | 873 | 1,677 | ||||||
| Total comprehensive income for the period | 5,221 | 8,310 | ||||||
| Earnings per share (cents) | ||||||||
| Basic | 37.3 | 44.6 | ||||||
| Diluted | 37.2 | 44.6 | ||||||
| Adjusted earnings per share (cents) | ||||||||
| Basic | 51.6 | 62.5 | ||||||
| Dividends declared per share (cents) | 11.0 | 14.0 | ||||||
Revenue in the Quarter was 36% higher than the comparable quarter due to a 28% increase in the quantity of gold sold supported by a 6% increase in the average realised gold price. Production in the Quarter included 443 ounces (net) of work-in-progress (Q1 2021: 1,584 ounces) but excludes recoverable gold in an ore-stockpile. Gold production is discussed in section 4.3 of this MD&A.
The royalty rate payable to the Zimbabwe Government was unchanged at 5% in the Quarter.
| 5 |
Production costs increased by 11.7% in the Quarter compared to the comparable quarter. Production costs in the Quarter were largely as budgeted other than the cost of electricity which was lower than expected due to the reduced use of diesel generators following the installation of a further autotap changer in late 2021. The on-mine cost per ounce in the Quarter decreased by 16.5% compared to the comparable quarter. Costs are discussed in section 4.6 of this MD&A.
The depreciation charge in the Quarter increased substantially because of increased production (fixed assets are depreciated over production ounces) and the charge arising on the Central Shaft assets following its commissioning at the end of March 2021.
Other expenses are detailed in note 7 to the Interim Financial Statements and include an impairment of $467 on the accumulated expenditure on the Connemara North exploration project as discussed in Section 5.
Administrative expenses are detailed in note 8 to the Interim Financial Statements and include the costs of Caledonia’s offices and personnel in Johannesburg, the UK and Jersey which provide the following functions: technical services, finance, procurement, investor relations, corporate development, legal and company secretarial. Administrative expenses in the Quarter were 47% higher than the comparable quarter. The increase was due mainly to higher legal and professional fees (primarily relating to executive search initiatives) and an increase in the charge for directors’ liability insurance.
Net foreign exchange movements relate to gains and losses arising on monetary assets and liabilities that are held in currencies other than the US Dollar. Foreign exchange movements principally arose due to the further devaluation of the Zimbabwe currency against the US Dollar which is discussed in section 4.9 of this MD&A. The net foreign exchange movement in the Quarter was higher than in the comparable period reflecting the accelerated depreciation of the Zimbabwe currency in the Quarter.
The cash-settled share-based payment expense reflects an accrual for a payment which is expected to arise from the long-term incentive plan (“LTIP”) awards under the Company’s 2015 Omnibus Equity Incentive Compensation Plan (the “OEICP” or the “Plan”) to certain executives, heads of department and staff in the form of Restricted Share Units (“RSUs”) and Performance Units (“PUs”) and which may be settled in cash or, subject to conditions, shares or a combination of both at the request of the award holder. The equity-settled share-based expense relates to awards made to executives and certain other senior members of management on January 24, 2022, which are only settled in shares and are subject to enhanced performance criteria. The LTIP expense reflects a combination of factors, including the change in the Company’s share price, which increased significantly in the Quarter. Further information on the calculation of the charge is set out in note 9 to the Interim Financial Statements.
The tax expense comprises the following:
| Analysis of Consolidated Tax expense/(credit) for the Quarter | ||||||||||||||||
| ($’000’s) | ||||||||||||||||
| Zimbabwe | South Africa | UK | Total | |||||||||||||
| Income tax | 2,885 | 71 | - | 2,956 | ||||||||||||
| Withholding tax | ||||||||||||||||
| Management Fee | - | 48 | - | 48 | ||||||||||||
| Deemed Dividend | 111 | - | 160 | 271 | ||||||||||||
| Deferred tax | 1,449 | (5 | ) | - | 1,444 | |||||||||||
| 4,445 | 114 | 160 | 4,719 | |||||||||||||
The overall effective taxation rate in the Quarter was 38% (Q1, 2021: 36%); most of the tax charge comprised income tax and deferred tax in Zimbabwe.
Income tax in Zimbabwe is calculated at 24.72% of taxable profits (2021: 24.72%) which is IFRS profit before tax (in local currency terms) after adjustments which include the deduction of the government royalty and capital expenditure and the add-back of depreciation. Deferred tax reflects the difference between the accounting and tax treatments of capital investment: 100% of capital expenditure is deductible in the year in which it is incurred for tax purposes; whereas for accounting purposes depreciation commences when the project enters production.
South African income tax arises on intercompany profits arising at Caledonia Mining South Africa Proprietary Limited (“CMSA”).
Zimbabwe withholding tax arose on the management fees paid to CMSA and on dividends paid from Zimbabwe to the UK.
| 6 |
Following the acquisition by the Company of a further 15% interest in Blanket in January 2020, the effective non controlling interest share in profit or loss reduced from 16.2% to 13.2% of Blanket’s net profit. The non-controlling interest as a percentage of consolidated profit is higher due to costs and taxes incurred by the Group outside Blanket.
IFRS basic EPS for the Quarter increased by 19.6% from 37.3 cents in the comparable quarter to 44.6 cents. Adjusted EPS for the Quarter, which excludes inter alia the effect of foreign exchange gains and deferred tax increased by 21% from 51.6 cents in the comparable quarter to 62.5 cents due to the higher net foreign exchange and the lower deferred tax adjustment in the Quarter. A dividend of 14 cents per share was declared and paid in the Quarter. Caledonia’s dividends are discussed further in section 14.
Risks that may affect Caledonia’s future financial condition are discussed in sections 4.9 and 17.
The table below sets out the consolidated statements of cash flows for the Quarter and the comparable quarter prepared under IFRS.
| Condensed Consolidated Statement of Cash Flows (unaudited) | ||||||||
| ($’000’s) | 3 months ended March 31 | |||||||
| 2021 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Cash generated from operations | 2,550 | 11,844 | ||||||
| Interest paid | (123 | ) | (30 | ) | ||||
| Tax paid | (464 | ) | (1,659 | ) | ||||
| Net cash from operating activities | 1,963 | 10,155 | ||||||
| Cash flows used in investing activities | ||||||||
| Acquisition of property, plant and equipment | (6,344 | ) | (9,734 | ) | ||||
| Acquisition of exploration and evaluation assets | (190 | ) | (224 | ) | ||||
| Proceeds from disposal of subsidiary | 340 | - | ||||||
| Net cash used in investing activities | (6,194 | ) | (9,958 | ) | ||||
| Cash flows from financing activities | ||||||||
| Dividends paid | (1,692 | ) | (1,788 | ) | ||||
| Term loan repayments | (104 | ) | - | |||||
| Payment of lease liabilities | (32 | ) | (40 | ) | ||||
| Net cash used in financing activities | (1,828 | ) | (1,828 | ) | ||||
| Net decrease in cash and cash equivalents | (6,059 | ) | (1,631 | ) | ||||
| Effect of exchange rate fluctuations on cash and cash equivalents | (6 | ) | (204 | ) | ||||
| Net cash and cash equivalents at beginning of the period | 19,092 | 16,265 | ||||||
| Net cash and cash equivalents at end of the period | 13,027 | 14,430 | ||||||
| 7 |
Cash generated from operating activities is detailed in note 21 to the Interim Financial Statements which shows that cash generated by operations before working capital changes in the Quarter was $13.5 million, 39% higher than the $9.7 million in the comparable quarter.
Working capital increased in the Quarter by $1.6 million (Q1 2021: $7.2 million increase) due to increased prepayments for capital items. Movements in working capital items are discussed below in the review of the Summarised Consolidated Statements of Financial Position.
Tax paid in the Quarter reflects the increased pre-tax profits at Blanket and is after the offset of part of the overdue VAT recoverable.
Investment in property, plant and equipment remains high due to the continued investment in new development associated with the Central Shaft project, which is discussed further in section 4.7 of this MD&A in sustaining capital investment and includes approximately $5.7 million of investment in the solar project as discussed in section 4.13.
The acquisition of exploration and evaluation assets relates to the ongoing work at the Maligreen claims and geological evaluations as discussed further in section 5.
Dividends comprise dividends paid by the Company as discussed in section 14.
The effect of exchange rate fluctuations on cash held predominantly reflects gains or losses on cash balances held in currencies other than the US Dollar. The effect on cash balances forms part of an overall foreign exchange gain or loss arising on all affected financial assets and liabilities.
The table below sets out the consolidated statements of Caledonia’s financial position at the end of the Quarter and December 31, 2021 prepared under IFRS.
| Summarised Consolidated Statements of Financial Position | ||||||||||
| ($’000’s) | As at | Dec 31 | Mar 31 | |||||||
| 2021 | 2022 | |||||||||
| Total non-current assets | 157,944 | 168,063 | ||||||||
| Inventories | 20,812 | 20,297 | ||||||||
| Prepayments | 6,930 | 4,393 | ||||||||
| Trade and other receivables | 7,938 | 10,215 | ||||||||
| Income tax receivable | 101 | 37 | ||||||||
| Cash and cash equivalents | 17,152 | 15,286 | ||||||||
| Total assets | 210,877 | 218,291 | ||||||||
| Total non-current liabilities | 12,633 | 11,629 | ||||||||
| Lease liabilities – short term portion | 134 | 136 | ||||||||
| Trade and other payables | 9,957 | 9,743 | ||||||||
| Derivative financial liabilities | 3,095 | 4,037 | ||||||||
| Income tax payable | 1,562 | 3,108 | ||||||||
| Overdraft | 887 | 856 | ||||||||
| Cash-settled share-based payments - short term portion | 2,053 | 818 | ||||||||
| Total liabilities | 30,321 | 30,327 | ||||||||
| Total equity | 180,556 | 187,964 | ||||||||
| Total equity and liabilities | 210,877 | 218,291 | ||||||||
Non-current assets increased due to the investment at Blanket in the Central Shaft and related infrastructure, electrical infrastructure and sustaining investment; investment in the solar project; and the acquisition and investments in exploration and evaluation properties.
Inventories remain at a high level; management is focussed on reducing inventory levels consistent with maintaining a prudent level of inventory.
| 8 |
Inventories include 443 ounces of gold work-in-progress (December 2021: 444 ounces). For logistical reasons, this gold was delivered and sold to Fidelity Printers and Refiners (Private) Limited (“Fidelity”), a subsidiary of the Reserve Bank of Zimbabwe (“RBZ”), early in April 2022.
Prepayments represent deposits and advance payments for goods and services. Prepayments decreased largely due to the reduction in prepayments in respect of the solar project as it nears completion.
Trade and other receivables are detailed in note 17 to the Interim Financial Statements and include $7.0 million (December 31, 2021: $4.5 million) due from Fidelity in respect of gold deliveries prior to the close of business on March 31, 2022 and $2.9 million (December 31, 2021: $3.2 million) due from the Zimbabwe Government in respect of VAT refunds. The increased receivable due from Fidelity reflects the higher gold price and a particularly large delivery of gold at the end of the Quarter; the full amount due from Fidelity in respect of gold deliveries was received as it fell due in April 2022.
Some of the VAT receivable is outside its normal due date and management continues to pursue recovery of all amounts due, which includes offsetting VAT receivables from the amounts paid in respect of other taxes.
The distribution of the consolidated cash across the jurisdictions where the Company operates was as follows:
| Geographical location of cash ($’000’s) | ||||||||||||||||
| As at | June 30, 2021 | Sept 30, 2021 | Dec 31, 2021 | Mar 31, 2022 | ||||||||||||
| Zimbabwe | 3,162 | 2,072 | 8,092 | 5,842 | ||||||||||||
| South Africa | 3,155 | 1,704 | 635 | 1,861 | ||||||||||||
| UK/Jersey | 10,352 | 9,234 | 7,538 | 6,727 | ||||||||||||
| Total net cash and cash equivalents | 16,669 | 13,010 | 16,265 | 14,430 | ||||||||||||
Included in the cash and cash equivalents of $5.8m that is shown as being held in Zimbabwe is a restricted cash amount of US$2.3 million (denominated in RTGS$) held by Blanket Mine which has been earmarked by Stanbic Bank Zimbabwe as a letter of credit in favour of CMSA. The letter of credit was issued by Stanbic Bank Zimbabwe on March 25, 2022 in RTGS$ and has a 90-day tenure to settlement. The cash on maturity will be transferred to CMSA’s bank account, denominated in South African rands.
The derivative financial liability relates to a gold loan and related options which were entered into in the previous quarter, and the liabilities relating to a cap and collar hedge that was entered into in February 2022 and further hedging arrangements that were entered into in March 2022 in the light of the volatility in the gold price following the Russian invasion of Ukraine. Hedging arrangements are discussed further in section 7.
The short-term portion of the cash-settled share-based payment liability is in respect of awards made to employees at Caledonia, CMSA and Blanket in terms of the OEICP. The awards can be settled in cash or, subject to conditions, shares at the option of the recipient.
The following information is provided for each of the eight most recent quarterly periods ending on the dates specified. The figures are extracted from underlying financial statements that have been prepared using accounting policies consistent with IFRS.
| 9 |
| ($’000’s except per share amounts) | June 30, | Sept 30, | Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Mar 31, | ||||||||||||||||||||||||
| 2020 | 2020 | 2020 | 2021 | 2021 | 2021 | 2021 | 2022 | |||||||||||||||||||||||||
| Revenues | 22,913 | 25,359 | 28,128 | 25,720 | 29,977 | 33,496 | 32,136 | 35,072 | ||||||||||||||||||||||||
| Profit attributable to owners of the Company | 5,134 | 4,433 | 2,973 | 4,550 | 2,694 | 6,939 | 4,222 | 5,940 | ||||||||||||||||||||||||
| EPS – basic (cents) | 43.1 | 36.6 | 24.0 | 37.3 | 21.1 | 56.8 | 33.3 | 44.6 | ||||||||||||||||||||||||
| EPS – diluted (cents) | 43 | 36.5 | 23.9 | 37.2 | 21.1 | 56.7 | 33.3 | 44.6 | ||||||||||||||||||||||||
| Net cash and cash equivalents | 11,639 | 21,562 | 19,092 | 13,027 | 16,669 | 13,010 | 16,265 | 14,430 | ||||||||||||||||||||||||
Fluctuations in profit attributable to owners of the Company on a quarterly basis are due to, inter alia, substantial foreign exchange profits as discussed in the relevant MD&As and financial statements.
| 4. | OPERATIONS |
| 4.1 | Safety, Health and Environment |
The following safety statistics have been recorded for the Quarter and the preceding seven quarters.
| Blanket Mine Safety Statistics | ||||||||||||||||||||||||||||||||
Classification | Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||
| Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | ||||||||||||||||||||||||
| Lost time injury | 1 | 1 | 3 | 0 | 1 | 0 | 2 | 0 | ||||||||||||||||||||||||
| Restricted work activity | 2 | 5 | 1 | 4 | 0 | 1 | 1 | 0 | ||||||||||||||||||||||||
| First aid | 1 | 0 | 0 | 0 | 0 | 1 | 0 | 2 | ||||||||||||||||||||||||
| Medical aid | 2 | 5 | 5 | 2 | 5 | 6 | 8 | 6 | ||||||||||||||||||||||||
| Occupational illness | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Total | 6 | 11 | 9 | 6 | 6 | 8 | 11 | 9 | ||||||||||||||||||||||||
| Incidents | 15 | 21 | 14 | 17 | 9 | 26 | 10 | 9 | ||||||||||||||||||||||||
| Near misses | 7 | 7 | 7 | 11 | 3 | 6 | 2 | 4 | ||||||||||||||||||||||||
| Disability Injury Frequency Rate | 0.42 | 0.80 | 0.55 | 0.53 | 0.14 | 0.12 | 0.24 | 0.12 | ||||||||||||||||||||||||
| Total Injury Frequency Rate | 0.83 | 1.48 | 1.23 | 0.79 | 0.85 | 0.98 | 1.58 | 1.07 | ||||||||||||||||||||||||
| Man-hours worked (000’s) | 1,443 | 1,491 | 1,460 | 1,509 | 1,418 | 1,629 | 1,643 | 1,686 | ||||||||||||||||||||||||
Blanket’s headcount has increased in the last 12 months and, despite intensive training for new employees, they appear to have lower safety awareness. The Nyanzvi safety training initiative was resumed in the previous quarter as COVID-19 restrictions were relaxed; management believes this will help to increase general safety awareness.
Unfortunately, on February 21, 2022 there was a fatal accident in a development haulage involving a LHD loader. The board and management of Caledonia extended their condolences to the family and colleagues of the deceased.
| 4.2 | Social Investment and Contribution to the Zimbabwean Economy |
Blanket’s investment in community and social projects which are not directly related to the operation of the mine or the welfare of Blanket’s employees, the payments made to the Gwanda Community Share Ownership Trust (“GCSOT”) in terms of Blanket’s indigenisation, and payments of taxation and other non-taxation charges to the Zimbabwe Government and its agencies are set out in the table below.
| 10 |
| Payments to the Community and the Zimbabwe Government ($’000’s) | ||||||||||
| Period | Year | Community and Social Investment | Payments to GCSOT | Payments to Zimbabwe Government (excl. royalties) | Total | |||||
| Year | 2013 | 2,147 | 2,000 | 15,354 | 19,501 | |||||
| Year | 2014 | 35 | - | 12,319 | 12,354 | |||||
| Year | 2015 | 50 | - | 7,376 | 7,426 | |||||
| Year | 2016 | 12 | - | 10,637 | 10,649 | |||||
| Year | 2017 | 5 | - | 11,988 | 11,993 | |||||
| Year | 2018 | 4 | - | 10,140 | 10,144 | |||||
| Year | 2019 | 47 | - | 10,357 | 10,404 | |||||
| Year | 2020 | 1,689 | 184 | 12,526 | 14,399 | |||||
| Year | 2021 | 1,163 | 948 | 16,426 | 18,537 | |||||
| Q1 | 2022 | 152 | - | 4,091 | 4,244 | |||||
Community and social investment expenditure in the Quarter was focussed on the completion of existing projects such as the Phakama Isolation clinic and the renovations at Sabiwa High School.
No dividends were paid to GCSOT in the Quarter because Blanket did not declare or pay any new dividends in the Quarter so that cash could be directed towards capital expenditure.
| 4.3 | Gold Production |
Tonnes milled, average grades, recoveries and gold produced during the Quarter, the preceding 8 quarters, the years 2019, 2020 and 2021 and April 2022 are shown in the table below.
| Blanket Mine Production Statistics | ||||||||||||||||||||
| Year | Tonnes Milled (t) | Gold Head (Feed) Grade (g/t Au) | Gold Recovery (%) | Gold Produced (oz) | ||||||||||||||||
| Year | 2019 | 556,331 | 3.31 | 93.4 | 55,182 | |||||||||||||||
| Quarter 1 | 2020 | 140,922 | 3.35 | 93.8 | 14,233 | |||||||||||||||
| Quarter 2 | 2020 | 143,210 | 3.13 | 93.9 | 13,499 | |||||||||||||||
| Quarter 3 | 2020 | 157,343 | 3.19 | 93.9 | 15,155 | |||||||||||||||
| Quarter 4 | 2020 | 156,487 | 3.19 | 93.5 | 15,012 | |||||||||||||||
| Year | 2020 | 597,962 | 3.21 | 93.8 | 57,899 | |||||||||||||||
| Quarter 1 | 2021 | 148,513 | 2.98 | 93.0 | 13,197 | |||||||||||||||
| Quarter 2 | 2021 | 165,760 | 3.34 | 93.8 | 16,710 | |||||||||||||||
| Quarter 3 | 2021 | 179,577 | 3.48 | 94.2 | 18,965 | |||||||||||||||
| Quarter 4 | 2021 | 171,778 | 3.57 | 94.3 | 18,604 | |||||||||||||||
| Year | 2021 | 665,628 | 3.36 | 93.9 | 67,476 | |||||||||||||||
| Q1 | 2022 | 165,976 | 3.69 | 94.1 | 18,515 | |||||||||||||||
| April | 2022 | 61,104 | 3.69 | 93.9 | 6,797 | |||||||||||||||
Gold production for the Quarter was 40.3% higher than the comparable quarter due to a 11.8% increase in tonnes milled, a 23.7% increase in the grade and higher recovery. Tonnes milled and grade are discussed in section 4.4 of this MD&A; gold recoveries are discussed in section 4.5 of this MD&A.
An ore stockpile of approximately 11,000 tonnes was created during the Quarter because the rate of mining and hoisting exceeded the milling capacity of the plant due to a delay in the installation of an additional mill because of COVID-19-related production delays at the manufacturer. The new mill is expected to be installed in the second quarter of 2022.
| 11 |
Production in April showed a further improvement in the monthly rate of production, which now exceeds the monthly rate required to achieve annualised production of 80,000 ounces. The increased production in April was due to the commissioning of the Lima crushers which allows a modest increase in milling capacity pending the installation of the larger new crusher at the main metallurgical plant.
| 4.4 | Underground |
Tonnes milled in the Quarter were 11.8% higher than the comparable quarter. The increased production is due to the commissioning of the Central Shaft at the end of March 2021; Central Shaft currently handles most of the development waste, which creates capacity at No. 4 Shaft to hoist ore.
The grade in the Quarter was higher than in the comparable quarter due to mine sequencing.
| 4.5 | Metallurgical Plant |
Recoveries in the Quarter were 94.1% compared to 93.0% in the comparable quarter. The improved recovery was due to the improved grade.
An additional re-grind mill will be installed before the end of the second quarter of 2022 to achieve the required daily throughput at a consistently fine grind.
| 4.6 | Production Costs |
A narrow focus on the direct costs of production (mainly labour, electricity and consumables) does not fully reflect the total cost of gold production. Accordingly, cost per ounce data for the Quarter and the comparable quarter have been prepared in accordance with the Guidance Note issued by the World Gold Council on June 23, 2013 and is set out in the table below on the following bases:
| i. | On-mine cost per ounce[4], which shows the on-mine costs of producing an ounce of gold and includes direct labour, electricity, consumables and other costs that are incurred at the mine including insurance, security and on-mine administration; |
| ii. | All-in sustaining cost per ounce4, which shows the on-mine cost per ounce plus royalty paid, additional costs incurred outside the mine (i.e. at offices in Harare, Johannesburg and Jersey), costs associated with maintaining the operating infrastructure and resource base that are required to maintain production at the current levels (sustaining capital investment), the share-based expense (or credit) arising from the LTIP awards less silver by-product revenue; and |
| iii. | All-in cost per ounce4, which shows the all-in sustaining cost per ounce plus the costs associated with activities that are undertaken with a view to increasing production (expansion capital investment). |
| Cost per Ounce of Gold Sold (US$/ounce) | ||||||||
| 3 months ended March 31 | ||||||||
| 2021 | 2022 | |||||||
| On-mine cost4 | 836 | 698 | ||||||
| All-in sustaining cost per ounce4 | 1,044 | 968 | ||||||
| All-in cost per ounce4 | 1,477 | 1,597 | ||||||
A reconciliation of costs per ounce to IFRS production costs is set out in section 10.
_______________________________
4 On-mine cost per ounce, all-in sustaining cost per ounce and all-in cost per ounce are non-IFRS measures. Refer to section 10 for a reconciliation of these amounts to IFRS.
| 12 |
On-mine costs
On-mine cost comprises labour, electricity, consumables, and other costs such as security and insurance. Production costs are detailed in note 6 to the Interim Financial Statements. On-mine costs include the procurement margin paid to CMSA on the grounds that this cost represents a fair value that Blanket would pay for consumables if they were sourced from a third party but exclude the cost of work in progress.
On-mine cost per ounce for the Quarter was 16% lower than the comparable quarter due to the increased production which meant that fixed costs were spread over more production ounces and good control of costs that are subject to management control On-mine cost was also lower because the installation of a further autotap changer at the end of 2021 reduced the frequency of power interruptions resulting from power surges on the incoming grid power and significantly reduced the generator use and diesel expense during the Quarter.
On-mine cost per ounce for the Quarter was within the guidance range of between $669 to $736 per ounce.
All-in sustaining cost
The All-in sustaining cost excludes the intercompany procurement margin as this reflects the consolidated cost incurred at the group level. The all-in sustaining cost per ounce was 7% lower than the comparable period because of the lower on-mine cost per ounce which was offset by higher royalty and administrative costs, increased share-based payments expenses and higher sustaining capital expenditure.
All-in sustaining cost per ounce for the Quarter of $968 per ounce was within the guidance range for the whole of 2022 of between $880 to $970 per ounce.
All-in cost
All-in cost includes investment in expansion projects at Blanket which remained at a high level in the Quarter due to the continued investment, as discussed in section 4.7 of this MD&A. All-in cost does not include pre-feasibility investment in exploration and evaluation projects.
| 4.7 | Capital Projects |
The main capital development project is the infrastructure relating to the Central Shaft which will allow for three new production levels (26, 30 and 34 levels) below the current operations; a fourth level (38 level) is intended to be added in due course via a decline construction. Central Shaft is currently being used to hoist development waste, men and material – thereby freeing up capacity at No. 4 Shaft to hoist ore. Work in the Quarter at Central Shaft included equipping the [grizzlies] at the ore passes on 26 and 30 levels. Development from Central Shaft has continued northwards and southwards on 30 and 34 levels towards AR South and Eroica. The total advances in the Quarter on 30 level and 34 level were 387 metres and 346 metres respectively.
In addition to the Central Shaft, work continued on the following developments:
| • | Eroica Decline 3: this decline will continue down to the 30 and 34 levels (990m and 1,110m below collar, respectively) and will connect to the haulages from Central Shaft. Progress in the Quarter has been good and the decline has advanced to a depth of 855m; |
| • | Decline 4: this decline has reached 930m where an intermediate haulage has been cut to facilitate early production in 2022. This haulage will cover the high-grade areas of the Blanket No.3 orebody and the Blanket Quartz Reef and will continue south to open the extensive strike of Blanket No.2 orebody. Twin raises have been mined up to 870m and multiple sub-levels are now being mined to expose the orebody where grades are expected to be over 5g/t; and |
| • | Decline 5: the decline branches from Decline 4 at 885m and heads towards the high-grade AR South east-west limb. This decline has reached its destination at 930m and run-of-mine development is now in progress. |
In total, 1,572m of capital development were achieved in the Quarter compared to a plan of 1,754m.
| 13 |
| 4.8 | Indigenisation |
Transactions that implemented the indigenisation of Blanket (which expression in this section and in certain other sections throughout this MD&A refers to the Zimbabwe company that owns Blanket) were completed on September 5, 2012 following which Caledonia owned 49% of Blanket and received a Certificate of Compliance from the Zimbabwe Government which confirms that Blanket is fully compliant with the Indigenisation and Economic Empowerment Act.
Following the appointment of President Mnangagwa in 2017 the requirement for gold mining companies to be indigenised was removed by a change in legislation with effect from March 2018. On November 6, 2018, the Company announced that it had entered into a sale agreement with Fremiro Investments (Private) Limited (“Fremiro”) to purchase Fremiro’s 15% shareholding in Blanket for a gross consideration of $16.7 million which was to be settled through a combination of the cancellation of the loan between the two entities which stood at $11.5 million as at June 30, 2018 and the issue of 727,266 new shares in Caledonia at an issue price of $7.15 per share. This transaction was completed on January 20, 2020 following which Caledonia has a 64% shareholding in Blanket and Fremiro held approximately 6.3% of Caledonia’s enlarged issued share capital.
As a 64% shareholder, Caledonia receives 64% of Blanket’s dividends plus the repayment of vendor facilitation loans which were extended by Blanket to certain of the indigenous shareholders. The outstanding balance of the facilitation loans at March 31, 2022 was $16.71 million (December 31, 2021: $16.71). The facilitation loans (including interest thereon) are repaid by way of dividends from Blanket; 80% of the dividends declared by Blanket which are attributable to the beneficiaries of the facilitation loans are used to repay such loans and the remaining 20% unconditionally accrues to the respective indigenous shareholders. The dividends attributable to GCSOT, which holds 10% of Blanket, were withheld by Blanket to repay the advance dividends which were paid to GCSOT in 2012 and 2013 and which had an outstanding balance of $Nil at March 31, 2022 (December 31, 2020; $Nil).
The final payment to settle the advance dividend loan to GCSOT was made on September 22, 2021. Future dividends to GCSOT will be unencumbered.
The facilitation loans are not shown as receivables in Caledonia’s financial statements in terms of IFRS. These loans are effectively equity instruments as their only means of repayment is via dividend distributions from Blanket. Caledonia continues to consolidate Blanket for accounting purposes. Further information on the accounting effects of indigenisation at Blanket is set out in note 5 to the Interim Financial Statements.
| 4.9 | Zimbabwe Commercial Environment |
Monetary Conditions
The current situation in Zimbabwe can be summarized as follows:
| · | Although there continues to be a shortage of foreign currency in Zimbabwe, Blanket has had satisfactory access to foreign exchange to date. |
| · | The rate of annual inflation increased from 5% in September 2018 to approximately 500% by December 2019; the rate of inflation appears to have moderated to an annual rate of 96% for the 12 months to the end of April 2022. A high rate of inflation has little effect on Blanket’s operations because Blanket’s employee remuneration was partly paid in US Dollars and the local currency component was adjusted each month to reflect the increased cost of living – this is discussed further below. |
| · | Since October 2018, bank accounts in Zimbabwe have been bifurcated between Foreign Currency Accounts (“FCA”), which can be used to make international payments, and local currency (known as “ZWL$”, “RTGS Dollars” or “RTGS$”) accounts which can only be used for domestic transactions. |
| · | On February 20, 2019 the RBZ allowed limited inter-bank trading between currency held in the RTGS$ system and the FCA system. Prior to this, the RBZ had stipulated that a Dollar in the RTGS$ system was worth 1 US Dollar in the FCA system. The interbank exchange rate at each quarter end since the introduction of the interbank rate in February 2019 is set out below. |
| 14 |
| Interbank Exchange Rates (ZWL$:US$1) | ||||
| February 20, 2019 | 2.50 | |||
| March 31, 2019 | 3.00 | |||
| June 30, 2019 | 6.54 | |||
| September 30, 2019 | 15.09 | |||
| December 31, 2019 | 16.77 | |||
| March 31, 2020 | 25.00 | |||
| June 30, 2020 | 57.36 | |||
| September 30, 2020 | 81.44 | |||
| December 31, 2020 | 81.79 | |||
| March 31, 2021 | 84.40 | |||
| June 30, 2021 | 85.42 | |||
| September 30, 2021 | 87.67 | |||
| December 2021 | 108.66 | |||
| March 31, 2022 | 142.42 | |||
| April 27, 2022 | 159.35 | |||
|
· | The interbank trading mechanism addressed the most pressing difficulty that emerged after the October 2018 policy implementation, being the erosion of the purchasing power of Blanket’s employees due to rapidly increasing retail prices which had an adverse effect on employee morale. In February 2020, the RBZ announced its intention to further liberalise the interbank market with the objective of increasing liquidity and transparency. However, in response to the COVID-19 pandemic, the Minister of Finance subsequently reversed this policy and re-established a fixed exchange rate of ZWL$25:US$1 with effect from March 26, 2020. On June 23, 2020, the RBZ introduced an “auction system” whereby, on a weekly basis, buyers and sellers of local currency and foreign exchange submit tenders which the RBZ uses to determine a revised interbank rate. During the Quarter the official exchange rate diverged significantly from the “unofficial” rate (i.e. the rate that could be obtained in the informal market). RTGS$ denominated goods and services are typically priced using a US Dollar reference point to which the informal exchange rate is applied. The official exchange rate does not reflect the local rate of inflation. This means that individuals who receive a RTGS$-denominated salary which references a US Dollar value at the official exchange rate suffer a significant reduction in their purchasing power. In addition, goods and services that are paid for in local currency have become much more expensive when the price is converted to US Dollars at the official exchange rate. Blanket employees are now paid 100% in US Dollars. |
| · | Zimbabwean gold producers, including Blanket, are required to sell their gold to Fidelity. Prior to May 26, 2020, 55% of the sale proceeds were received in US Dollars and the balance was received in RTGS$. From May 26, 2020 gold producers received 70% of their sale proceeds in US Dollars and the balance was received in RTGS$. With effect from 7 January 2021, gold producers received 60% of their revenues in US Dollars and the balance in RTGS$. |
| · | After the reduction in the proportion of revenues received in US Dollars from 70% to 60% with effect from January 7, 2021, Blanket participated in the weekly auction system to access the resultant shortfall in US Dollars. From early June 2021, Blanket and other gold producers were excluded from the weekly auctions on the grounds that they are deemed to be exporters and therefore do not qualify to participate. Blanket subsequently secured allocations of foreign exchange from the RBZ to compensate for its exclusion from the auctions. Blanket has also increased the proportion of its expenditure that is made in local currency. As at the date of this MD&A, Blanket has not accumulated excess local currency. |
| · | In June 2021 the RBZ announced that companies whose shares are listed on the Victoria Falls Stock Exchange (“VFEX”) will receive 100% of the revenue arising from incremental production in US Dollars. Blanket subsequently received confirmation that the “baseline” level of production for the purposes of calculating incremental production is 148.38 Kg per month (approximately 57,000 ounces per annum). In addition, the payment of the increased US Dollar proceeds for incremental production was backdated to July 1, 2021. As Blanket intends to increase its production from approximately 58,000 ounces of gold in 2020 to 80,000 ounces of gold from 2022 onwards, a listing on the VFEX should mean that Blanket will receive approximately 71.5% of its total revenues in US Dollars and the balance in local currency. Accordingly in December 2021 Caledonia obtained a secondary listing on the VFEX. Blanket has received all amounts due in terms of this revised policy. |
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| · | In addition to the higher proportion of revenues payable in US Dollars (as outlined above), gold producers are also theoretically allowed to directly export incremental production. However, the practical modalities to achieve this have not yet been clarified; management continues to engage with relevant parties to obtain the necessary clarifications. |
| · | Throughout these developments and to the date of issue of the Interim Financial Statements the US Dollar has remained the primary currency in which the Group’s Zimbabwean entities operate and the functional currency of these entities. |
| · | Blanket sells its gold production to Fidelity, which refines and on-sells the gold into the international market. During the first quarter of 2021, responsibility for making payments for gold deliveries from Blanket moved from the RBZ to its gold refining subsidiary Fidelity. This move simplified and improved the mechanism for making payments for gold and the new system is operating well. |
Electricity supply
The poor quality of electricity supply from the Zimbabwe Electricity Supply Authority (“ZESA”) is the most significant production difficulty at Blanket. Blanket experiences interruptions to its power supply from the grid and the supply from the grid is also subject to frequent surges and dips in voltage which, if not controlled, cause severe damage to Blanket’s electrical equipment. To address this matter, in 2019 and early 2020 Blanket increased its diesel generating capacity to 18MW of installed capacity which was sufficient to maintain all operations and capital projects but only on a stand-by basis. Blanket also installed a 10MVA auto tap transformer to protect some of its equipment from voltage fluctuations on the incoming grid supply. A second 10MVA auto tap transformer was installed in December 2021 at a cost of approximately $0.5 million to protect equipment at No.4 Shaft and the main metallurgical plant. Following the installation of this transformer, Blanket has used less diesel in the production of gold – consumption in the Quarter was 83,332 litres compared to 1,169,297 litres in the preceding quarter.
The quality of the incoming grid supply has deteriorated further in the Quarter and in April 2022 which means that generators continue to be used at Central Shaft on a nearly constant basis. As the work at Central Shaft relates to capital projects, the continued high usage of generators at Central Shaft has an adverse effect on capital spending and not on production costs.
Due to the higher than anticipated use of the diesel generators in October 2021 because of the further deterioration in the ZESA supply, Blanket lost two of its 2.5 MVA generators; replacement units were commissioned in early 2022 at a cost of approximately $1.2 million. Additional capital costs relating to poor electricity supply of approximately $3.2 million are anticipated in 2022.
Caledonia’s board has approved a project to construct a 12 MWac solar plant which should provide approximately 27% of Blanket’s average daily electricity demand from June 2022 at a cost of approximately $14 million (including construction costs and other project planning, structuring, funding and administration costs). Caledonia is considering increasing the scale of the solar plant to further reduce Blanket’s reliance on the grid and diesel generators. This is discussed further in section 4.13.
The continued deterioration in the ZESA supply means that the power factor regularly falls to 60%, which means that Blanket is effectively paying for 100% of the power but receives only 60%.
In light of the continued deterioration in the grid supply and Blanket’s anticipated increased requirement for power at higher production levels, Caledonia’s board has approved a further $2.8 million capital programme which includes: installing capacitors to improve the power utilization efficiency; installing further autotap changers to stabilize the power at Central Shaft; and optimizing power use. This investment programme is in addition to the approved capital investment of approximately $3.2 million which was included in the 2022 capital budget. It is estimated that these new measures will result in a 15% reduction in anticipated total power consumption and improve the mix of power by reducing the use of diesel generators from an expected 21mWh to approximately 2mWh. The overall savings arising from the new programme are expected to be approximately $9 million per annum assuming a diesel cost at $1.70 per litre. As mentioned above, Caledonia is evaluating the possibility of further increasing the scale of the solar project.
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Water supply
Blanket uses water in the metallurgical process. Blanket is situated in a semi-arid region and rainfall typically only occurs in the period November to February. The 2021/2022 rainy season has been adequate, and management believes water supply is satisfactory.
Taxation
The main elements of the Zimbabwe tax regime insofar as it affects Blanket and Caledonia are as follows:
| • | A royalty is levied on gold revenues at a rate of 5% paid in RTGS$ if the gold price is above $1,200 per ounce; a royalty rate at 3% applies if the gold price is below $1,200. With effect from January 1, 2020, the royalty is allowable as a deductible expense for the calculation of income tax. |
| • | With effect from February 4, 2022 the 5% royalty was payable 60% in US Dollars and 40% in RTGS$ |
| • | Income tax is levied at 24.72% (2020: 25.75%) on profits as adjusted for tax purposes. The main adjustments to profit for the purposes of calculating tax are the add-back of depreciation and most of the management fees paid by Blanket to CMSA. 100% of all capital expenditure incurred in the year of assessment is allowed as a deductible expense. As noted above, the royalty is deductible for income tax purposes with effect from January 1, 2020. The calculation of taxable income is performed using financial records prepared in RTGS$, which has significantly reduced the deferred tax liability. |
| • | Withholding tax is levied on certain remittances from Zimbabwe i.e. dividend payments from Zimbabwe to the UK and payments of management fees from Blanket to CMSA. |
| 4.10 | Opportunities and Outlook |
Central Shaft Project to Increase Production and Extend Mine Life
As discussed in section 4.7, following the commissioning of the Central Shaft production is expected to increase to the targeted rate of approximately 80,000 ounces per annum from 2022 onwards. The Central Shaft will also create the operational flexibility to establish drilling platforms and resume deep-level exploration drilling.
Production Guidance
Production guidance for 2022 is between 73,000 and 80,000 ounces. The critical factors that influence whether Blanket can achieve this target include:
| · | Blanket’s ability to maintain an adequate supply of consumables and equipment if there is any resurgence in the COVID-19 pandemic and/or disruption to the supply chain arising from unrest in South Africa; |
| · | Blanket’s workforce remaining healthy; |
| · | Blanket continuing to receive payment in full and on-time for all gold sales; |
| · | Blanket and Caledonia continuing to be able to make local and international payments in the normal course of business; and |
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| · | Blanket’s ability to manage the erratic supply of electricity from ZESA. |
This is forward looking information as defined by National Instrument 51-102. Refer to section 18 of this MD&A for further information on forward looking statements.
Cost Guidance
On-mine cost per ounce guidance for 2022 is in the range of $669 to $736 per ounce; guidance for AISC is $880 to $970 per ounce. This is forward looking information as defined by National Instrument 51-102. Refer to section 18 of this MD&A for further information on forward looking statements.
Capital Expenditure
Capital expenditure at Blanket in 2022 is budgeted to be higher than the guidance of $15.2 million which was provided in the technical report entitled “Caledonia Mining Corporation Plc NI 43-101 Technical Report on the Blanket Gold Mine, Zimbabwe” dated May 17, 2021 prepared by Minxcon (Pty) Ltd and filed by the Company on SEDAR (www.sedar.com) on May 26, 2021 and which has an effective date of January 1, 2020. Capital investment for 2022 is now expected to be approximately $30 million, the increase being due to the following factors:
| · | A cost overrun of approximately $0.8 million on the Central Shaft development that was envisaged in the initial project plan, this overrun being due mainly to the higher than anticipated running cost of the trackless equipment that is used in capital development on 30 and 34 levels; |
| · | Additional development as a result of delays in the Central Shaft (as discussed in section 4.7) at a cost of approximately $3.4 million; |
| · | Additional capital costs resulting from the poor quality of Blanket’s electricity supply from ZESA of approximately $3.2 million (as discussed in section 4.9). This excludes any further investment to increase the scale of the solar plant which is currently being constructed at Blanket; |
| · | Investment of approximately $2.6 million to upgrade the workers’ village to accommodate the larger than anticipated workforce and upgrade the water and sewerage system; |
| · | Investment of approximately $0.8 million to increase the capacity of the metallurgical plant so that it can handle the increased tonnes required to sustain a production level of 80,000 ounces per annum in the context of the expected reduction in the future head grade as discussed in section 4.4; |
| · | Investment of $1 million for additional compressors; and |
| · | Further investment of $2.8 million to address the continued deterioration in the quality of the incoming grid power as discussed in section 4.9. |
The cash effect on Caledonia of the increased capital expenditure in 2022 will be mitigated somewhat by income tax relief at 24.72% and the 13.2% effective economic interest of Blanket’s indigenous shareholders. The investments to address the deteriorating electricity are expected to result in operating costs being reduced by approximately $9 million per annum.
Strategy
Caledonia’s immediate strategic focus following the commissioning of the Central Shaft at Blanket is to:
| • | increase production to the target rate of 80,000 ounces of gold per annum from 2022; |
| • | re-commence deep level drilling at Blanket with the objective of upgrading inferred mineral resources, thereby extending the life of mine; |
| • | commence exploration at Blanket above 750 meters; and |
| • | commence exploration within the Blanket lease area that are outside the current mine footprint. |
Caledonia will continue geological evaluations at the Maligreen claims with the objective of increasing the confidence level of the existing estimated mineral resource base as discussed in section 5 of this MD&A.
Caledonia will also evaluate further investment opportunities in Zimbabwe and elsewhere.
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| 4.11 | Sale of Eersteling |
On May 31, 2018, the Group entered into a share sale agreement to sell the shares and claims of Eersteling Gold Mining Company Limited (“Eersteling”), a South African subsidiary which owns a mine that was on care and maintenance since 1997. The share sale agreement allowed for a purchase price of $3 million to be settled by three payments of $1 million, the last of which fell due on July 30, 2020. The purchaser was unable to make the final payment due to the closure of the operation during the South African lock-down period and the death of two of the purchaser’s principals. Caledonia received further consideration of $340 in the previous quarter. Operations at Eersteling were suspended in late 2021 - as it is no longer clear that the remaining consideration of $761 can be recovered, it was fully impaired in the previous quarter.
| 4.12 | COVID-19 |
Blanket employs over 1,900 employees the vast majority of whom live with their dependents on the mine village. One case of COVID-19 was recorded at Blanket during 2020; 232 cases of COVID-19 were detected in 2021 of which there was, regrettably, two deaths of an employee and a dependent. Further cases have been detected at the Company’s offices in Harare, Johannesburg and St Helier. Blanket procured sufficient doses of an approved vaccine for all adult employees and their spouses; as at March 31, 2022 1,077 of Blanket’s employees and 620 of the Blanket employee dependents living on the Blanket site have been vaccinated on site.
COVID-19 had no significant effect on production, costs or capital projects in the Quarter.
| 4.13 | Solar project |
As noted in section 4.9, Blanket suffers from unstable grid power and load shedding which results in frequent and prolonged power outages. In late 2019 Caledonia initiated a tender process to identify parties to make proposals for a solar project to reduce Blanket’s reliance on grid power. After careful consideration, Caledonia’s board approved the construction of a 12MWac solar plant at a revised construction cost of approximately $14 million. The plant is expected to provide all of Blanket’s minimum electricity demand during daylight hours; Blanket will continue to rely on the grid and generators to provide additional power during daylight hours and at night. It is estimated that the solar plant will provide approximately 27% of Blanket’s total daily electricity requirement.
In 2020 the Company raised $13 million (before commission and expenses) to fund the project through the sale of 597,963 shares at an average price of $21.74 per share.
The status of the project is as follows:
| • | the 40-hectare site for the project has been cleared and fenced; |
| • | Caledonia has obtained the necessary licences and permits for the project; |
| • | Voltalia, an international renewable energy provider, has been appointed as contractor for the project under an engineering, procurement and construction contract; |
| • | Caledonia provided Voltalia with a notice to proceed in March 2021 and has made an advance payment of $1.8 million for long lead time items that are required to construct the plant; |
| • | orders have been placed for approximately 95% of the solar equipment required to build the plant; |
| • | civil works on the internal roads, drainage, foundations for equipment and the operations and maintenance building have commenced and nears completion; |
| • | the majority of the equipment to construct the project has either been delivered or is en route to site and final assembly has commenced; |
| • | approximately 4,300 holes have been drilled and filled for the ground mounting structure to be constructed; and |
| • | The mounting structure has been constructed for one of the four main blocks and 7,728 panels have been installed of the 25,760. 15,770 meters of LV cabling has been installed of the total 15,932 meters. |
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The Company is in talks with the Zimbabwe Electricity Transmission & Distribution Company (“ZETDC”) to coordinate the commissioning and connection of the plant to the 33 KV grid and it is expected that the plant will be commissioned in June 2022. Manufacturing delays and port closures due to the current Covid lockdowns in China could impact the supply of the remaining equipment and may cause delays to the commissioning date. This equipment is not currently on the critical path to complete the project.
The Company has commenced the evaluation of a further phase for the solar project to provide Blanket’s peak demand during daylight hours. This will require an agreement between the Company and the Zimbabwe authorities regarding the treatment of power that will be generated by a second phase that is surplus to Blanket’s requirements and/or the installation of storage capacity.
| 5 | EXPLORATION |
Caledonia’s exploration activities are focussed on Blanket and Maligreen.
Blanket
There was no deep exploration drilling at Blanket in the Quarter. Deep level exploration drilling will re-commence after the related development, in the Central Shaft area, has been completed to provide access to new drilling positions. Exploration at Blanket’s portfolio of satellite properties was suspended in 2016 so that resources could be re-deployed at Blanket. Since then, the Company has evaluated other investment opportunities in Zimbabwe and has concluded that the satellite properties other than GG are unattractive due to their relatively small size, low grade, limited exploration potential, operating complexity and metallurgical incompatibility with the existing Blanket plant. Accordingly, in 2021, Blanket completed the sale of Mascot, Eagle Vulture and Penzance properties for a cash consideration of $500. The GG satellite property remains on care and maintenance.
Connemara North
In December 2020 Caledonia entered into an option agreement which gave the Company the exclusive right to explore for a period of 18 months (i.e. until May 2022) and subsequently, if exploration is successful and at its sole discretion, acquire the mining claims over an area known as Connemara North.
After further evaluations, in March 2022 Caledonia decided that the asset does not meet the Company’s criteria for further investment and accordingly the option to acquire the mining clams will not be exercised. The accumulated expenditure on this property of $163 was impaired in the Quarter.
Maligreen
In 2021 Caledonia purchased the mining claims over the Maligreen project ("Maligreen"), situated in the Zimbabwe Midlands, for a cash consideration of US$4 million.
Maligreen is a substantial brownfield exploration opportunity with significant historical exploration and evaluation work having been conducted on the property over the last 30 years.
As at August 31, 2021 the property is estimated to contain a NI 43-101 compliant inferred mineral resource of approximately 940,000 ounces of gold5 in 15.6 million tonnes at a grade of 1.88g/t. Of the inferred mineral resource 76% (approximately 712,000 ounces) is shallower than 220m indicating the potential for an open pit mining operation. The inferred mineral resource has been estimated using a cut-off grade of 0.4g/t for a potential open pit and 1.5g/t for a potential underground mine (further information on the assumptions used is set out in the news release dated September 23, 2021 and in the technical report mentioned in the footnote below). Initial assessments of the inferred mineral resource indicate a favourable grade tonnage curve; by applying a higher cut-off grade of 1.0g/t, the total estimated inferred mineral resource reduces by 12% to approximately 827,000 ounces at a grade of 2.79g/t, a 48% higher grade. These favourable grade tonnage dynamics offer a high level of flexibility in the evaluation of a future mining operation.
The total area of Maligreen is approximately 550 hectares comprising two historic open pit mining operations which produced approximately 20,000 oz of gold mined from oxides between 2000 and 2002 after which the operation was closed. Caledonia expects to drill an initial 4,800 meters at an estimated cost of US$1.6 million over a period of 18 to 24 months to improve its understanding of the existing resource and assess the potential for a mining operation. Further exploration opportunities exist within the claims area and a subsequent exploration programme is under consideration to explore for continuations of the existing inferred mineral resource at depth to the north-west and the strike extension in the northern part of the property.
________________________________
5 Refer to technical report entitled “Caledonia Mining Corporation Plc NI 43-101 Mineral Resource Report on the Maligreen Gold Project, Zimbabwe dated November 5, 2021 prepared by Minxcon (Pty) Ltd and filed on SEDAR (www.sedar.com).
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Activities in the Quarter have focussed on re-evaluating data from previous exploration with the objective of upgrading the confidence level of the resource in the second quarter of 2022. Thereafter, it is expected that on-the-ground exploration activities will commence.
| 6. | INVESTING |
An analysis of investment in the Quarter, and the years 2021, 2020 and 2019 is set out below.
| ($’000’s) | 2019 | 2020 | 2021 | 2022 | ||||||||||||
| Year | Year | Year | Q1 | |||||||||||||
| Total Investment – Property, plant and equipment | 20,423 | 24,778 | 31,269 | 12,365 | ||||||||||||
| Blanket | 20,128 | 24,315 | 29,323 | 6,601 | ||||||||||||
| Solar | - | 372 | 1,581 | 5,744 | ||||||||||||
| Other | 295 | 91 | 365 | 20 | ||||||||||||
| Total investment – Exploration and evaluation assets | 172 | 3,058 | 1,582 | 224 | ||||||||||||
| Connemara North | - | 300 | 163 | 4 | ||||||||||||
| Glen Hume | - | 2,661 | 1,176 | - | ||||||||||||
| Other Satellite properties | 172 | 97 | 243 | 220 |
Investment in property, plant and equipment at Blanket is in terms of the investment plan that was announced in October 2014 and which is discussed in section 4.7 of this MD&A; investment in solar is as discussed in section 4.13; investment in exploration and evaluation assets is as set out in section 5. All further investment is expected to be funded by internal cash flows and cash resources.
| 7. | FINANCING |
Caledonia financed all its operations using funds on hand, funds generated by its operations, the proceeds of a secondary listing on the VFEX, the proceeds of a gold loan and Blanket’s overdraft facilities which were as set out below at March 31, 2022.
| Overdraft facilities | |||||
| Lender | Date drawn | Principal value | Balance drawn at March 31, 2022 | Repayment terms | Security |
| Stanbic Bank Zimbabwe Limited | Sep-21 | RTGS$300 million | RTGS$128 million | On demand | Unsecured |
| Stanbic Bank Zimbabwe Limited | Dec-21 | US$1 million | Nil | On demand | Unsecured |
After the end of the Quarter Blanket obtained an additional overdraft facility for $2 million with CABS, a Zimbabwean bank, which will be used to enhance the flexibility of Blanket’s working capital.
On February 17, 2022 the Group entered into a zero cost contract to hedge 20,000 ounces of gold over a period of 5 months from March to July 2022. The hedging contract has a cap of $1,940 and a collar of $1,825, over 4,000 ounces of gold per month expiring at the end of each month over the 5-month period.
On March 9, 2022 in response to a very volatile gold price, the Company purchased a matching quantity of call options at a strike price above the cap at a total cost of $796,000 over 4,000 ounces of gold per month at strike prices of $2,100 per ounce from March 2022 to May 2022 and $2,200 per ounce from June 2022 to July 2022 in order to limit margin exposure and reinstate gold price upside above the strike price. Refer to note 11 of the Interim Financial Statements for more detail on the hedging agreements.
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| 8. | LIQUIDITY AND CAPITAL RESOURCES |
An analysis of Caledonia’s capital resources at March 31, 2022 and at the end of each of the preceding 5 quarters is set out below.
| Liquidity and Capital Resources | ||||||||||||||||||||||||
| ($’000’s) | ||||||||||||||||||||||||
| As at | Dec 31 | Mar 31 | Jun 30 | Sep 30 | Dec 31 | Mar 31 | ||||||||||||||||||
| 2020 | 2021 | 2021 | 2021 | 2021 | 2022 | |||||||||||||||||||
| Term facility | 408 | 286 | 178 | 70 | - | - | ||||||||||||||||||
| Gold ETF | 1,184 | 1,045 | - | - | - | - | ||||||||||||||||||
| Gold loan | - | - | - | - | 2,866 | 3,322 | ||||||||||||||||||
| Cash and cash equivalents in the statement of cashflows | 19,092 | 13,027 | 16,669 | 13,010 | 17,152 | 14,430 | ||||||||||||||||||
| Working capital | 34,622 | 33,179 | 34,804 | 35,729 | 35,360 | 31,530 | ||||||||||||||||||
Movements in Caledonia’s net cash, the overdraft and working capital and an analysis of the sources and uses of Caledonia’s cash are discussed in section 3 of this MD&A. The overdraft and term facilities are held by Blanket with Zimbabwean banks with security and repayment periods as detailed in section 7. The gold loan is held by Caledonia on the terms detailed in section 7. The Company’s liquid assets as at March 31, 2022 plus anticipated cashflows exceed its planned and foreseeable commitments as set out in section 9.
| 9. | OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL COMMITMENTS AND CONTINGENCIES |
There are no off-balance sheet arrangements apart from the facilitation loans of $16.7 million which are not reflected as loans receivable for IFRS purposes (refer to note 5 of the Interim Financial Statements). The Company had the following contractual obligations at March 31, 2022:
| Payments due by Period | ||||||||||||||||||||
| ($’000’s) | ||||||||||||||||||||
| Falling due | Within 1 year | 1-3 Years | 4-5 Years | After 5 Years | Total | |||||||||||||||
| Trade and other payables | 9,743 | - | - | - | 9,743 | |||||||||||||||
| Provisions | - | 366 | 677 | 2,174 | 3,217 | |||||||||||||||
| Capital expenditure commitments | 3,768 | - | - | - | 3,768 | |||||||||||||||
| Derivative financial liabilities | 4,037 | - | - | - | 4,037 | |||||||||||||||
| Lease liabilities | 136 | 320 | - | - | 456 | |||||||||||||||
| Cash-settled share-based payments | 818 | 817 | - | - | 1,635 | |||||||||||||||
The capital expenditure commitments relate to materials and equipment which have been ordered by CMSA and which will be sold on to Blanket. In addition to the committed purchase obligations set out above:
| · | Blanket intends to invest a further $26.2 million in 2022; and |
| · | Caledonia further intends to pay a further $9.2 million for the solar project in 2022. |
Other than the proposed investment in the solar project and at the exploration properties, the committed and uncommitted investment will be used to maintain Blanket’s existing operations and implement the final development relating to the Central Shaft which is discussed in section 4.7 of this MD&A.
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Committed and uncommitted purchase obligations are expected to be met from the cash generated from Blanket’s existing operations and Blanket’s existing borrowing facilities and, in respect of the solar project and the exploration properties, from Caledonia’s cash resources
The Group leases property for its administrative offices in Jersey, Harare and Johannesburg; following the implementation of IFRS 16 the Group recognises the liabilities for these leases. As of March 31, 2022, Caledonia had potential liabilities for rehabilitation work on Blanket – if the mine is permanently closed – at an estimated discounted cost of $3.4 million (December 30, 2020: $3.6 million).
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| 10. | NON-IFRS MEASURES |
Throughout this document, we provide measures prepared in accordance with IFRS in addition to some non-IFRS performance measures. As there is no standard method for calculating non-IFRS measures, they are not a reliable way to compare Caledonia against other companies. Non-IFRS measures should be used along with other performance measures prepared in accordance with IFRS. We define below the non-IFRS measures used in this document and reconcile such non-IFRS measures to the IFRS measures we report.
| 10.1 | Cost per ounce |
Non-IFRS performance measures such as “on-mine cost per ounce”, “all-in sustaining cost per ounce” and “all-in cost per ounce” are used in this document. Management believes these measures assist investors and other stakeholders in understanding the economics of gold mining over the life-cycle of a mine. These measures are calculated on the basis set out by the World Gold Council in a Guidance Note published on June 23, 2013 and accordingly differ from the previous basis of calculation. The table below reconciles non-IFRS cost measures to the production costs shown in the financial statements prepared under IFRS.
| Reconciliation of IFRS production costs to non-IFRS cost measures Reconciliation of IFRS Production Cost to Non-IFRS Costs per ounce | ||||||||
| ($’000’s unless otherwise indicated) | ||||||||
| 3 months ended March 31 | ||||||||
| 2021 | 2022 | |||||||
| Production cost (IFRS) | 12,857 | 14,359 | ||||||
| COVID-19 expenses included in operating cost | (78 | ) | - | |||||
| Cash-settled share-based expense | (210 | ) | (513 | ) | ||||
| Less exploration and site restoration costs | (182 | ) | (231 | ) | ||||
| Other cost | (35 | ) | (375 | ) | ||||
| On-mine production cost* | 12,352 | 13,240 | ||||||
| Gold sales (oz) | 14,781 | 18,957 | ||||||
| On-mine cost per ounce ($/oz) | 836 | 698 | ||||||
| Royalty | 1,289 | 1,758 | ||||||
| Exploration, remediation and permitting cost | 91 | 50 | ||||||
| Sustaining capital expenditure | 235 | 460 | ||||||
| Administrative expenses | 1,610 | 2,371 | ||||||
| Silver by-product credit | (26 | ) | (31 | ) | ||||
| Cash-settled share-based payment expense included in production cost | 210 | 513 | ||||||
| Cash-settled share-based payment expense | 152 | 367 | ||||||
| Equity-settled share-based payment expense | - | 82 | ||||||
| Procurement margin included in on-mine cost* | (484 | ) | (458 | ) | ||||
| All-in sustaining cost | 15,429 | 18,352 | ||||||
| Gold sales (oz) | 14,781 | 18,957 | ||||||
| AISC per ounce ($/oz) | 1,044 | 968 | ||||||
| COVID-19 donations | 74 | - | ||||||
| COVID-19 labour and consumable expenses | 78 | - | ||||||
| Permitting and exploration expenses | 41 | 18 | ||||||
| Non-sustaining capital expenditure | 6,206 | 11,905 | ||||||
| Total all-in cost | 21,828 | 30,275 | ||||||
| Gold sales (oz) | 14,781 | 18,957 | ||||||
| All-in cost per ounce ($/oz) | 1,477 | 1,597 | ||||||
* The on-mine cost reflects the cost incurred on-mine to produce gold. The procurement margin on consumable sales between CMSA and Blanket is not deducted from On-mine cost as the cost represent a fair value that Blanket would pay for consumables if they were sourced from a third party. The procurement margin on these sales is deducted from All-in sustaining costs and All-in costs as these numbers represent the consolidated costs at a group level excluding intercompany profit margins.
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| 10.2 | Average realised gold price per ounce |
The table below reconciles “Average realised gold price per ounce” to the Revenue shown in the financial statements which have been prepared under IFRS.
| Reconciliation of Average Realised Gold Price per Ounce | ||||||||
| ($’000’s unless otherwise indicated) | ||||||||
| 3 months ended March 31 | ||||||||
| 2021 | 2022 | |||||||
| Revenue (IFRS) | 25,720 | 35,072 | ||||||
| Revenues from sales of silver | (26 | ) | (31 | ) | ||||
| Revenues from sales of gold | 25,694 | 35,041 | ||||||
| Gold ounces sold (oz) | 14,781 | 18,957 | ||||||
| Average realised gold price per ounce (US$/oz) | 1,738 | 1,848 | ||||||
| 10.3 | Adjusted earnings per share |
“Adjusted earnings per share” is a non-IFRS measure which management believes assists investors to understand the Company’s underlying performance. The table below reconciles “adjusted earnings per share” to the Profit/Loss attributable to owners of the Company shown in the financial statements which have been prepared under IFRS.
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| Reconciliation of Adjusted Earnings per Share (“Adjusted EPS”) to IFRS Profit Attributable to Owners of the Company | ||||||||
| ($’000’s unless otherwise indicated) | ||||||||
| 3 months ended March 31 | ||||||||
| 2021 | 2022 | |||||||
| Profit for the period (IFRS) | 5,423 | 7,617 | ||||||
| Non-controlling interest share of profit for the period | (873 | ) | (1,677 | ) | ||||
| Profit attributable to owners of the Company | 4,550 | 5,940 | ||||||
| Blanket Mine Employee Trust adjustment | (34 | ) | (255 | ) | ||||
| Earnings (IFRS) | 4,516 | 5,685 | ||||||
| Weighted average shares in issue (thousands) | 12,119 | 12,757 | ||||||
| IFRS EPS (cents) | 37.3 | 44.6 | ||||||
| Add back/(deduct) amounts in respect of foreign exchange movements | ||||||||
| Realised net foreign exchange losses | (7 | ) | 1,039 | |||||
| - less tax | 4 | (256 | ) | |||||
| - less non-controlling interest | 1 | (103 | ) | |||||
| Unrealised net foreign exchange losses/(gains) | (266 | ) | (1,948 | ) | ||||
| - less tax | 36 | 633 | ||||||
| - less non-controlling interest | 19 | 230 | ||||||
| Adjusted IFRS profit excl. foreign exchange | 4,303 | 5,280 | ||||||
| Weighted average shares in issue (thousands) | 12,119 | 12,757 | ||||||
| Adjusted IFRS EPS excl. foreign exchange (cents) | 35.5 | 41.4 | ||||||
| Add back/(deduct) amounts in respect of: | ||||||||
| Reversal of Blanket Mine Employee Trust adjustment | 34 | 255 | ||||||
| Impairment of property, plant and equipment | (51 | ) | - | |||||
| Deferred tax | 2,059 | 811 | ||||||
| Non-controlling interest portion deferred tax and impairment | (208 | ) | (106 | ) | ||||
| Hedge loss | 114 | - | ||||||
| Fair value losses on derivative financial instruments | - | 1,738 | ||||||
| Adjusted profit | 6,251 | 7,978 | ||||||
| Weighted average shares in issue (thousands) | 12,119 | 12,757 | ||||||
| Adjusted EPS (cents) | 51.6 | 62.5 | ||||||
| 11. | RELATED PARTY TRANSACTIONS |
There were no related party transactions in the Quarter.
| 12. | CRITICAL ACCOUNTING ESTIMATES |
Caledonia's accounting policies are set out in the Interim Financial Statements which have been publicly filed on SEDAR. In preparing the Interim Financial Statements, management is required to make estimates and assumptions that affect the amounts represented in the Interim Financial Statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Discussion of recently issued accounting pronouncements is set out in note 4 of the Interim Financial Statements.
Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the Interim Financial Statements is included in the following notes:
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| i) | Indigenisation transaction |
The directors of Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”), a wholly owned subsidiary of the Company, performed an assessment, using the requirements of IFRS 10: Unaudited Condensed Consolidated Interim Financial Statements (IFRS 10), and concluded that CHZ should continue to consolidate Blanket and accounted for the transaction as follows:
| · | Non-controlling interests (“NCI”) are recognised on the portion of shareholding upon which dividends declared by Blanket accrue unconditionally to equity holders as follows: |
| (a) | 20% of the 16% shareholding of National Indigenisation and Economic Empowerment Fund (“NIEEF”); and |
| (b) | 100% of the 10% shareholding of GCSOT. |
| · | This effectively means that NCI is recognised at Blanket at 13.2% of its net assets. |
| · | The remaining 80% of the shareholding of NIEEF is recognised as a non-controlling interest to the extent that its attributable share of the net asset value of Blanket exceeds the balance on the facilitation loans including interest. At March 31, 2022 the attributable net asset value did not exceed the balance on the loan account and thus no additional NCI was recognised. |
The transaction with Blanket Employee Trust Services (Private) Limited (“BETS”) is accounted for in accordance with IAS 19 Employee Benefits (profit sharing arrangement) as the ownership of the shares does not ultimately pass to the employees. The employees are entitled to participate in 20% of the dividends accruing to the 10% shareholding in Blanket if they are employed at the date of such distribution. To the extent that 80% of the attributable dividends exceeds the balance on BETS’ facilitation loan they will accrue to the employees at the date of such declaration.
The Employee Trust, which owns BETS, and BETS are structured entities which are effectively controlled and consolidated by Blanket. Accordingly, the shares held by BETS are effectively treated as treasury shares in Blanket and no NCI is recognised.
| ii) | Site restoration provisions |
The site restoration provision has been calculated for Blanket based on an independent analysis of the rehabilitation costs performed in 2021. Estimates and assumptions are made when determining the inflationary effect on current restoration costs and the discount rate to be applied in arriving at the present value of the provision. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates take account of any material changes to the assumptions that occur when reviewed by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs which will reflect the market condition at the time the rehabilitation costs are incurred. The final cost of the currently recognized site rehabilitation provisions may be higher or lower than currently provided for.
| iii) | Exploration and evaluation (“E&E”) expenditure |
The Group makes estimates and assumptions regarding the possible impairment of E&E properties by evaluating whether it is likely that future economic benefits will flow to the Group, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available. The recoverability of the carrying amounts of exploration and evaluation assets depends upon the availability of sufficient funding to bring the properties into commercial production, the price of the products to be recovered and the undertaking of profitable mining operations. As a result of these uncertainties, the actual amount recovered may vary significantly from the carrying amount.
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| iv) | Income taxes |
Significant estimates and assumptions are required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Caledonia records its best estimate of the tax liability including any related interest and penalties in the current tax provision. In addition, Caledonia applies judgement in recognizing deferred tax assets relating to tax losses carried forward to the extent that there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized or sufficient estimated taxable income against which the losses can be utilized.
| v) | Share-based payment transactions |
The fair value of the amount payable to employees in respect of share-based awards, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period over which the employee becomes unconditionally entitled to payment. The liability is re-measured at each reporting date. Any changes in the fair value of the liability are recognised as a personnel expense in profit or loss. Additional information about significant judgements and estimates and the assumptions used to estimate fair value for cash settled share-based payment transactions are disclosed in note 9 to the Interim Financial Statements.
| vi) | Impairment |
At each reporting date, Caledonia determines if impairment indicators exist and, if present, performs an impairment review of the non-financial assets held in Caledonia. The exercise is subject to various judgemental decisions and estimates. Financial assets are also reviewed regularly for impairment.
| vii) | Depreciation |
Depreciation on mine development, infrastructure and other assets in the production phase is computed on the units-of-production method over the life-of-mine based on the estimated quantities of reserves (proven and probable) and resources (measured, indicated and inferred), which are planned to be extracted in the future from known mineral deposits. Where items have a shorter useful life than the life-of-mine, the mine development, infrastructure and other assets are depreciated over their useful life. Confidence in the existence, commercial viability and economical recovery of reserves and resources included in the life-of-mine plan may be based on historical experience and available geological information. This is in addition to the drilling results obtained by the Group and management’s knowledge of the geological setting of the surrounding areas, which would enable simulations and extrapolations to be done with a sufficient degree of accuracy. In instances where management can demonstrate the economic recovery of resources with a high level of confidence, such additional resources are included in the calculation of depreciation.
| viii) | Mineral reserves and resources |
Mineral reserves and resources are estimates of the amount of product that can be economically and legally extracted. In order to calculate the reserves and resources, estimates and assumptions are required about a range of geological, technical and economic factors, including but not limited to quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity prices and exchange rates. Estimating the quantity and grade of mineral reserves and resources requires the size, shape and depth of orebodies to be determined by analysing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological assumptions and calculations to interpret the data. Estimates of mineral reserves and resources may change due to the change in economic assumptions used to estimate mineral reserves and resources and due to additional geological data becoming available during operations.
The Group estimates its reserves (proven and probable) and resources (measured, indicated and inferred) based on information compiled by a Qualified Person principally in terms of the Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) relating to geological and technical data of the size, depth, shape and grade of the ore body and suitable production techniques and recovery rates. Such an analysis requires geological and engineering assumptions to interpret the data. These assumptions include:
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| · | correlation between drill-holes intersections where multiple reefs are intersected; |
| · | continuity of mineralisation between drill-hole intersections within recognised reefs; and |
| · | appropriateness of the planned mining methods. |
The Group estimates and reports reserves and resources principally in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards for Mineral Resources and Mineral Reserves. Complying with the CIM code, NI 43-101 requires the use of reasonable assumptions to calculate the recoverable resources. These assumptions include:
| · | the gold price based on current market price and the Group’s assessment of future prices; |
| · | estimated future on-mine costs, sustaining and non-sustaining capital expenditures; |
| · | cut-off grade; |
| · | dimensions and extent, determined both from drilling and mine development, of ore bodies; and |
| · | planned future production from measured, indicated and inferred resources. |
Changes in reported reserves and resources may affect the Group’s financial results and position in several ways, including the following:
| · | asset carrying values may be affected due to changes in the estimated cash flows; |
| · | depreciation and amortisation charges to profit or loss may change as these are calculated on the unit-of-production method or where useful lives of an asset change; and |
| · | decommissioning, site restoration and environmental provisions may change in ore reserves and resources which may affect expectations about the timing or cost of these activities. |
| 13. | FINANCIAL INSTRUMENTS |
| i) | Commodity risk |
Caledonia is exposed to fluctuations in the price of gold because Blanket produces and sells gold doré and receives the prevailing spot price for the gold contained therein. On February 17, 2022 the Company entered into a cap and collar hedging arrangement hedging contract for 20,000 ounces of gold over a period of 5 months from March to July 2022. The hedging contract has a cap of $1,940 and a collar of $1,825, meaning that, for the 4,000 ounces of gold per month for the period, Caledonia will receive an effective gold price per ounce of not less than $1,825 or greater than $1,940 and will receive an effective spot gold price between these two levels. On March 9, 2022 in response to a very volatile gold price, the Company purchased a matching quantity of call options at a strike price above the cap in order to limit margin exposure and reinstate gold price upside above the strike price. Refer to note 11 of the Interim Financial Statements for more detail on the hedging agreements.
| ii) | Credit risk |
The carrying amount of financial assets as disclosed in the statements of financial position and related notes represents the maximum credit exposure. The trade receivable relates to gold bullion sold before the end of the Quarter and VAT receivables. The amount due in respect of bullion sales was settled in April 2022 as it fell due. The RTGS$ component of the VAT receivable was in arrears at the end of the Quarter. Management continues to engage with the necessary authority to recover the amount due either by cash payment and/or by offset against other tax amounts payable by Blanket.
Included in Cash and cash equivalents is a restricted cash amount of US$2,3 million (denominated in RTGS$) held by Blanket Mine. The amount represents cash earmarked by Stanbic Bank Zimbabwe as a letter of credit in favour of CMSA. The letter of credit was issued by Stanbic Bank Zimbabwe on March 25, 2022 and has a 90-day tenure to settlement. The cash will be transferred to CMSA, denominated in South African Rand.
| iii) | Impairment losses |
None of the trade and other receivables is past due at the period-end date other than a portion of the RTGS$ component of the VAT receivable. Management continues its efforts to recover the RTGS$ component of the VAT receivable either by cash payment and/or offset against other tax amounts payable by Blanket.
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| iv) | Liquidity risk |
All trade payables and the bank overdraft have maturity dates that are expected to mature in under 6 months. The term loans are repayable as set out in section 7.
| v) | Currency risk |
A proportion of Caledonia’s assets, financial instruments and transactions are denominated in currencies other than the US Dollar. The financial results and financial position of Caledonia are reported in US Dollars in the Interim Financial Statements.
The fluctuation of the US Dollar in relation to other currencies will consequently have an impact upon the profitability of Caledonia and may also affect the value of Caledonia’s assets and liabilities and the amount of shareholders’ equity.
As discussed in section 4.9 of this MD&A, the RTGS$ is subject to variations in the exchange rate against the US Dollar. This may result in Blanket’s assets, liabilities and transactions that are denominated in RTGS$ being subject to further fluctuations in the exchange rate between RTGS$ and US Dollars. In addition, the Company may be subject to fluctuations in the exchange rate between the South African Rand and the US Dollar in respect of cash that is held in Rands in South Africa.
| vi) | Interest rate risk |
Interest rate risk is the risk borne by an interest-bearing asset or liability due to fluctuations in interest rates. Unless otherwise noted, it is the opinion of management that Caledonia is not exposed to significant interest rate risk as it has limited debt financing. Caledonia’s cash and cash equivalents include highly liquid investments that earn interest at market rates. Caledonia manages its interest rate risk by endeavouring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. Caledonia’s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.
| 14. | DIVIDEND POLICY |
Following the share consolidation on June 26, 2017, the Company announced on July 4, 2017 an increased quarterly dividend of 6.875 United States cents which has been paid at the end of July, October, January and April thereafter. The dividend of 6.875 US cents per share effectively maintained the dividend at the previous level of 1.375 United States cents per share, after adjusting for the effect of the consolidation.
On January 3, 2020, the Company announced a 9.1% increase in the quarterly dividend from 6.875 cents to 7.5 cents per share.
On April 1, 2020, the Company announced the deferral of the quarterly dividend that would ordinarily have been declared and paid in April 2020 due to the uncertainty surrounding the COVID-19 pandemic. On April 29, 2020, the Company announced this dividend would be paid at the end of May 2020 at a rate of 7.5 cents per share.
On June 29, 2020, the Company announced a 13% increase in the quarterly dividend from 7.5 cents to 8.5 cents per share.
On October 1, 2020, the Company announced an 18% increase in the quarterly dividend from 8.5 cents to 10 cents per share.
On January 4, 2021, the Company announced a 10% increase in the quarterly dividend from 10 cents to 11 cents per share.
On April 6, 2021 the Company announced a 9% increase in the quarterly dividend from 11 cents to 12 cents per share.
On July 6, 2021 the company announced an 8% increase in the quarterly dividend from 12 cents to 13 cents per share.
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On October 4, 2021 the company announced an 8% increase in the quarterly dividend from 13 cents to 14 cents per share. This seventh increase represents a cumulative 104% increase in the quarterly dividend since October 2019.
On January 4, 2022, the Company announced a dividend of 14 cents per share payable on January 28, 2022.
On April 4, 2022 the Company announced a dividend of 14 cents per share payable on April 29, 2022.
The board will consider the continuation of the dividend and any future increases in the dividend as appropriate in line with other investment opportunities and its prudent approach to risk management including: Blanket maintaining a reasonable level of production; receiving payment in full and on-time for all gold sales; being able to make the necessary local and international payments and being able to replenish its supplies of consumables and other items.
| 15. | MANAGEMENT AND BOARD |
On January 20, 2022, Mr Dana Roets, Chief Operating Officer, was appointed to the board as an executive director.
On February 28, 2022, Mr John McGloin resigned from the board as a non-executive director of the Company.
On May 4, 2022 Mr Gordon Wylie was appointed to the board as a non-executive director with effect from May 5, 2022. Mr Wylie holds a bachelor’s degree with Honours in Geology from the University of Glasgow, a Management Diploma from UNISA South Africa and a Postgraduate Diploma in Mining Engineering and Mineral Economics from Wits University, South Africa. He has over 46 years’ experience in the mining industry in both mining and exploration geology. Between 1997 and 2005, Mr Wylie was part of AngloGold Ashanti Limited’s senior management team where he was responsible for the Company’s global exploration programs, mining geology and associated technical services, covering around 40 countries and 5 continents. Since leaving AngloGold Ashanti, Gordon has accumulated 16 years’ board experience as a non- executive director, of which 12 were as Chairman at Lydian International Limited. He is currently a non-executive director of Chaarat Gold Holdings Limited, which is listed on AIM and a non-executive director of Silverton Metals Corp., which is listed on TSX-V.
| 16. | SECURITIES OUTSTANDING |
At May 11, 2022, being the last day practicable prior to the publication of this MD&A, Caledonia had 12,833,126 common shares issued and outstanding options to purchase common shares (“Options”) as follows:
| Number of Options | Exercise Price | Expiry Date | |||
| Canadian $ | |||||
| 10,000 | 9.3 | 25-Aug-24 | |||
The Plan allows that the number of shares reserved for issuance to participants under the Plan, together with shares reserved for issue under any other share compensation arrangements of the Company, shall not exceed the number which represents 10% of the issued and outstanding shares from time to time.
Awards under the Plan made to executives and certain other senior members of management on January 24, 2022, consisting of a target of 130,380 PUs, are only to be settled in shares. The PUs that vest will be subject to a performance multiplier and a maximum amount of 150% of target PUs could vest. Accordingly, providing for such a maximum amount, Caledonia could grant Options on a further 1,077,742 shares at May 12, 2022 on the assumption that all other outstanding LTIPs are settled in cash at the request of the LTIP holders.
| 17. | RISK ANALYSIS |
The business of Caledonia contains significant risk due to the nature of mining, exploration and development activities. Caledonia’s business contains significant additional risks due to the jurisdictions in which it operates and the nature of mining, exploration and development. Included in the risk factors below are details of how management seeks to mitigate the risks where this is possible.
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| · | COVID-19 pandemic: The COVID-19 pandemic had no discernable effect on the Company or its operations during the period under review. COVID-19 pandemic, and measures that may be taken by governments and other parties to counter the spread of the virus may, inter alia, have the following effects on the Company: its workforce may fall ill which could affect operations; restrictions on transport and travel may impede the Company’s ability to procure consumables, equipment and services which may affect operations and progress on capital projects; the banking system may not operate effectively which may impede the Company’s ability to effect domestic and international payments; it may be difficult to secure a route to market for the gold ore produced by Blanket. In response to these risks, management has introduced measures to safeguard its employees from the virus; engaged closely with its customer, Fidelity, regarding access to refiners and the eventual route to market for Blanket’s production; and management regularly reviews its financial status and projections. However, it must be recognised that the duration and effects of the COVID-19 pandemic are uncertain and therefore not capable of accurate forecasting. |
| · | Liquidity risk: The Company aims to generate capital to be able to continue to invest in properties and projects without raising further third-party financing. Caledonia currently has sufficient cash resources and continues to generate sufficient cash to cover all its anticipated investment needs. The primary reason for the secondary listing on the VFEX was to obtain a greater proportion of Blanket’s revenues in US Dollars, as discussed in section 4.9. |
| · | Availability of foreign currency: The Company needs access to foreign currency in Zimbabwe so that it can pay for imported goods and equipment and remit funds to Group companies outside Zimbabwe. At prevailing gold prices and the current rate of production the Company has access to sufficient foreign currency to continue normal mining operations and to fully implement the investment plan as scheduled. The Company has established mechanisms to increase the proportion of its revenues it can access in US Dollars. No assurance can be given that sufficient foreign currency will continue to be available. |
| · | Exploration risk: The Company needs to identify new resources to replace ore which has been depleted by mining activities and to commence new projects. No assurance can be given that exploration will be successful in identifying sufficient mineral resources of an adequate grade and suitable metallurgical characteristics that are suitable for further development or production. |
| · | Development risk: The Company is engaged in the implementation of the Central Shaft project as set out in section 4.7 of this MD&A. Construction and development of projects are subject to numerous risks including: obtaining equipment, permits and services; changes in regulations; currency rate changes; labour shortages; fluctuations in metal prices and the loss of community support. There can be no assurance that construction will commence or continue in accordance with the current expectations or at all. |
| · | Production estimates: Estimates for future production are based on mining plans and are subject to change. Production estimates are subject to risk and no assurance can be given that future production estimates will be achieved. Actual production may vary from estimated production for a variety of reasons including un-anticipated variations in grades, mined tonnages and geological conditions, accident and equipment breakdown, changes in metal prices and the cost and supply of inputs and changes to government regulations. |
| · | Mineral rights: The Company’s existing mining lease, claims, licences and permits are in good standing. The Company must pay fees etc. to maintain its lease, claims and licences. The Company may not make payments by the required date or meet development and production schedules that are required to protect its lease, claims and licences. |
| · | Metal prices: The Company’s operations and exploration and development projects are heavily influenced by the price of gold, which is particularly subject to fluctuation. The Company currently has a hedging arrangement in place for a portion of production for the period from March to July 2022. Management regularly reviews future cash flow forecasts in the context of the prevailing gold price and likely downside scenarios for future gold prices. |
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| · | Increasing input costs: Mining companies generally have experienced higher costs of steel, reagents, labour and electricity and from local and national government for levies, fees, royalties and other direct and indirect taxes. Blanket’s planned growth should allow the fixed cost component to be absorbed over increased production, thereby helping to alleviate somewhat the effect of any further price increases. |
| · | Illegal mining: In previous years there were incidences of illegal mining activities on properties controlled by Blanket which resulted in increased security costs and an increased risk of theft and damage to equipment. Blanket has received adequate support and assistance from the Zimbabwean police in investigating such cases. Those properties most at risk from such activity have been sold. |
| · | Electricity supply: Zimbabwe produces and imports less electricity than it requires and has insufficient funds to adequately maintain or upgrade its distribution infrastructure. This has resulted in frequent interruptions to the power supply at Blanket. Blanket has addressed the issue of interrupted power supply by installing stand-by generators. Production at Blanket has also been adversely affected by the instability of the incoming electricity supply. The Company has installed a further auto-tap changer to increase the protection against power surges and it has further increased its diesel generating capacity. The Company is installing a solar plant which will provide some of Blanket’s power requirements. |
| · | Water supply: Blanket uses water in the metallurgical process, most of which is obtained from a nearby dam. Blanket is situated in a semi-arid area and rainfall typically occurs only in the period November to February. The most recent rainy season has been better than average and management believes there is enough water in the Blanket dam to maintain normal operations until the next rainy season. |
| · | Succession planning: The limited availability of mining and other technical skills and experience in Zimbabwe and the difficulty of attracting appropriately skilled employees to Zimbabwe creates a risk that appropriate skills may not be available if, for whatever reason, the current skills base at Blanket is depleted. The Caledonia and Blanket management teams have been augmented so that, if required, it could provide appropriate support to Blanket if this is required. |
| · | Country risk: The commercial environment in which the Company operates is unpredictable. Potential risks may arise from: unforeseen changes in the legal and regulatory framework which means that laws may change, may not be enforced, or judgements may not be upheld; restrictions on the movement of currency and the availability of foreign currency at a realistic exchange rate to make payments from Zimbabwe; risks relating to possible corruption, bribery, civil disorder, expropriation or nationalisation; risks relating to restrictions on access to assets and the risk that the Zimbabwe Government is unable to pay its liabilities to Blanket. Management believes that it has minimised such risks by complying fully with all relevant legislation, by obtaining all relevant regulatory permissions and approvals and by regular and proactive engagement with the relevant authorities. |
| · | Gold marketing arrangements: In terms of regulations introduced by the Zimbabwean Ministry of Finance in January 2014, all gold produced in Zimbabwe must be sold to Fidelity, a company which is owned by the RBZ. In 2021, the Ministry of Finance announced a modification to the regulations that theoretically allows gold producers who are listed on the VFEX to export their incremental gold production. However, the mechanisms whereby this revised policy may be effected have not yet been clarified. The requirement to sell to the Zimbabwe government increases Blanket’s credit risk because it failed to pay Blanket in 2008. The responsibility for making payments to gold producers was transferred from the RBZ to Fidelity in early 2020 following which Blanket has received payments more promptly. |
| 18. | FORWARD LOOKING STATEMENTS |
Information and statements contained in this MD&A that are not historical facts are “forward-looking information” within the meaning of applicable securities legislation that involve risks and uncertainties relating, but not limited to, Caledonia’s current expectations, intentions, plans, and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “target”, “intend”, “estimate”, “could”, “should”, “may” and “will” or the negative of these terms or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Examples of forward-looking information in this MD&A include: implementation schedules for, and other uncertainties inherent in, the Central Shaft project; production guidance; estimates of future/targeted production rates; planned mill capacity increases; estimates of future metallurgical recovery rates and the ability to maintain high metallurgical recovery rates; timing of commencement of operations; plans and timing regarding further exploration, drilling and development; the prospective nature of exploration and development targets; the ability to upgrade and convert mineral resources to mineral reserves; capital and operating costs; our intentions with respect to financial position and third party financing; and future dividend payments. This forward-looking information is based, in part, on assumptions and factors that may change or prove to be incorrect, thus causing actual results, performance or achievements to be materially different from those expressed or implied by forward-looking information. Such factors and assumptions include, but are not limited to: failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, success of future exploration and drilling programs, reliability of drilling, sampling and assay data, assumptions regarding the representativeness of mineralization being inaccurate, success of planned metallurgical test-work, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, changes in government regulations, legislation and rates of taxation, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors.
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Security holders, potential security holders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Such factors include, but are not limited to: risks relating to estimates of mineral reserves and mineral resources proving to be inaccurate, fluctuations in gold price and payment terms for gold sold to Fidelity, risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, power outages, fire, explosions, landslides, cave-ins and flooding), risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business, inadequate insurance, or inability to obtain insurance, to cover these risks and hazards, employee relations, relationships with and claims by local communities and indigenous populations, political risk, risks related to natural disasters, terrorism, civil unrest, public health concerns (including health epidemics or outbreaks of communicable diseases such as the coronavirus (COVID-19)), availability and increasing costs associated with mining inputs and labour, the speculative nature of mineral exploration and development, including the risks of obtaining or maintaining necessary licenses and permits, diminishing quantities or grades of mineral reserves as mining occurs, global financial condition, the actual results of current exploration activities, changes to conclusions of economic evaluations, and changes in project parameters to deal with un-anticipated economic or other factors, risks of increased capital and operating costs, environmental, safety or regulatory risks, expropriation, the Company’s title to properties including ownership thereof, increased competition in the mining industry for properties, equipment, qualified personnel and their costs, risks relating to the uncertainty of timing of events including targeted production rate increase and currency fluctuations. Security holders, potential security holders and prospective investors are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia reviews forward-looking information for the purposes of preparing each MD&A; however, Caledonia undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.
| 19. | CONTROLS |
The Company has established and maintains disclosure controls and procedures (“DC&P”) designed to provide reasonable assurance that material information relating to the Company is made known to the Chief Executive Officer and the Chief Financial Officer by others, particularly during the period in which annual filings are being prepared, and that information required to be disclosed in the Company’s annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified by such securities legislation.
| 34 |
The Company’s management, along with the participation of the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the Company’s DC&P as of March 31, 2022. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, at March 31, 2022, the Company’s DC&P were effective.
The Company also maintains a system of internal controls over financial reporting (“ICFR”) designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS; however, due to inherent limitations, ICFR may not prevent or detect all misstatements and fraud. The board of directors approves the financial statements and ensures that management discharges its financial responsibilities. The Audit Committee, which is composed of independent directors, meets periodically with management and auditors to review financial reporting and control matters and reviews the financial statements and recommends them for approval to the board of directors.
The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate ICFR and evaluating the effectiveness of the Company’s ICFR as at each fiscal year end. Management has used the 2013 Internal Control–Integrated Framework from the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO”) to evaluate the effectiveness of the Company’s ICFR at March 31, 2022. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that at March 31, 2022, the Company’s ICFR was effective.
There have been no changes in the Company’s ICFR during the period ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.
| 20. | QUALIFIED PERSON |
Mr. Dana Roets (B Eng (Min), MBA, Pr..Eng, FSAIMM, AMMSA) is the Company’s qualified person as defined by Canada’s National Instrument 43-101. Mr. Roets is responsible for the technical information provided in this MD&A except where otherwise stated. Mr. Roets has reviewed the scientific and technical information included in this document and has approved the disclosure of this information for the purposes of this MD&A.
35
Exhibit 99.3
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Steven Roy Curtis, Chief Executive Officer of Caledonia Mining Corporation, certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Caledonia Mining Corporation (the “issuer”) for the quarter ended March 31, 2022. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework – published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | N/A |
| 5.3 | N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 12, 2022
“Steven Roy Curtis”
_______________________
Steven Roy Curtis
Chief Executive Officer
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Mark Learmonth, Chief Financial Officer of Caledonia Mining Corporation, certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Caledonia Mining Corporation (the “issuer”) for the quarter ended March 31, 2022. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework – published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | N/A |
| 5.3 | N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 12, 2022
“Mark Learmonth”
_______________________
Mark Learmonth
Chief Financial Officer