UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549

FORM 20-F
ANNUAL REPORT

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ……………………………………………

For the transition period from ……………………………… to ………………………………

Commission file number   000-13345

CALEDONIA MINING CORPORATION Plc
(Exact name of Registrant as specified in its charter)

Jersey Channel Islands
(Jurisdiction of incorporation or organization)

Caledonia Mining Corporation Plc
("Previously Caledonia Mining Corporation")
43-45 La Motte Street, Jersey, JE4 8SD
(Address of principal executive offices)

Mark Learmonth, +44 1534 702 800, mlearmonth@caledoniamining.com , 43-45 La Motte Street, Jersey Channel Islands, JE4 8SD.

(Name, telephone, email and/or facsimile number and address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

Securities registered or to be registered pursuant to Section 12(g) of the Act
 

Common Shares, without par value 52,173,908
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the closing of the period covered by the annual report: 52,078,908

Indicate by check mark if the registration is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[  ] Yes   [X] No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

[  ] Yes   [X] No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days

[X] Yes  [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [   ]   Accelerated filer [   ]   Non-accelerated filer [X]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP [   ]
International Financial Reporting Standards as issued by the International Accounting Standards Board [X]

Other [  ]
 

 
2
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow

Item 17 [  ]   Item 18 [  ]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[   ] Yes   [X] No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court: N/A
 
 
 
 

3


 
TABLE OF CONTENTS
ITEM 1 - Identity of Directors, Senior Management and Advisers
9
ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE
9
ITEM 3 - KEY INFORMATION
9
A.
Selected Financial Data
9
B.
Capitalization and Indebtedness
10
C.
Reasons for the Offer and Use of Proceeds
10
D.
Risk Factors
10
ITEM 4 - INFORMATION ON THE COMPANY
18
A.
History and Development of the Company
18
B.
Business Overview
20
C.
Organizational Structure
29
D.
Property, Plant and Equipment
29
ITEM 4A - UNRESOLVED STAFF COMMENTS
30
ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS
30
A.
Operational Results
30
B.
Liquidity and Capital Resources
35
C.
Research and development, patents and licences
36
D.
Trend Information
36
E.
Off-Balance Sheet Arrangements
36
F.
Tabular Disclosure of Contractual Obligations
36
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
37
A.
Directors and Senior Management
37
B.
Compensation
40
C.
Board Practices
40
D.
Employees
41
E.
Share Ownership
42
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
44
A.
Major Shareholders
44
B.
Related Party Transactions
44
C.
Interests of Experts and Counsel
45
ITEM 8 - FINANCIAL INFORMATION
45
A.
Consolidated Statements and Other Financial Information
45
B.
Significant Changes
46
ITEM 9 - THE OFFERING AND LISTING
46
A.
Offering and Listing Details
46
ITEM 10 - ADDITIONAL INFORMATION
49
A.
Share Capital
49
B.
Articles of Association
49
C.
Material Contracts
50
D.
Exchange Controls
50
E.
Taxation
50
F.
Dividends and Paying Agents
55
G.
Statement by Experts
55
H.
Documents on Display
55
I.
Subsidiary Information
56
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
56
A.
Currency Risk
56
B.
Interest Rate Risk
57
4
 
 
C.
Concentration of Credit Risk
57
D.
Liquidity Risk
57
E.
Commodity Price Risk
57
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
58
ITEM 13 - DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES
58
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
58
ITEM 15 - CONTROLS AND PROCEDURES
58
ITEM 16A - AUDIT COMMITTEE FINANCIAL EXPERT
60
ITEM 16B - CODE OF ETHICS
60
ITEM 16C - PRINCIPAL ACCOUNTANT FEES AND SERVICES
60
ITEM 16D - EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
60
ITEM 16E - PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
61
ITEM 16F - CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
61
ITEM 16G - CORPORATE GOVERNANCE
61
ITEM 16H - MINE SAFETY DISCLOSURE
61
ITEM 17 - FINANCIAL STATEMENTS
61
ITEM 18 - FINANCIAL STATEMENTS
61
ITEM 19 – EXHIBITS
62
 

 

5


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F (" Annual Report ") and the exhibits attached hereto contain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian 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 Annual Report include: 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, Caledonia's 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 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 and the availability of foreign exchange, fluctuations in commodity prices, delays in the development of projects and other factors.

Potential shareholders 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, 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, 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; availability and increasing costs associated with mining inputs and labor; 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, we are affected by 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.  Shareholders 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 Annual Report, 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.  For the reasons set forth above, investors should not place undue reliance on forward-looking statements .

STATUS AS AN EMERGING GROWTH COMPANY
We are an "emerging growth company" as defined in Section 3(a) of the Securities Exchange Act of 1934, as amended (the " Exchange Act ") by the Jumpstart Our Business Startups Act of 2012 (the " JOBS Act "), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We will continue to qualify as an "emerging growth company" until the earliest to occur of: (a) the last day of the fiscal year during which we had total annual gross revenues of US$1,000,000,000 (as such amount is indexed for inflation every 5 years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer", as defined in Exchange Act Rule 12b-2. We expect to continue to be an emerging growth company for the foreseeable future.
 
6
Generally, a registrant that registers any class of its securities under section 12 of the Exchange Act is required to include in the second and all subsequent annual reports filed by it under the Exchange Act, a management report on internal control over financial reporting and, subject to an exemption available to registrants that are neither an "accelerated filer" or a "larger accelerated filer" (as those terms are defined in Exchange Act Rule 12b-2), an auditor attestation report on management's assessment of internal control over financial reporting. However, for so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report on management's assessment of internal controls over financial reporting in its annual reports filed under the Exchange Act, even if we were to qualify as an "accelerated filer" or a "larger accelerated filer". In addition, Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (the " Sarbanes-Oxley Act ") has been amended by the JOBS Act to provide that, among other things, auditors of an emerging growth company are exempt from any rules of the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the company.
CURRENCY
All references to dollar amounts are expressed in the lawful currency of the United States of America, unless indicated otherwise.  Per share amounts are expressed in United States dollars. On December 16, 2015 Caledonia advised that the reporting currency for all future financial reporting commencing with the financial results for the quarter and year ended December 31, 2015 will be the United States dollar instead of the Canadian dollar.  This change is made in order to better report the true performance of its business because all of the revenues and operating costs at the Blanket Mine in Zimbabwe are denominated in US dollars and only a small proportion of Caledonia's costs are denominated in South African rands and Canadian dollars.  Accordingly, this is our first Annual Report in which financial information for the year to December 31, 2015 and for all preceding periods is stated in United States dollars.
CHANGE OF DOMICILE
On February 18, 2016 a Special Meeting of Caledonia's shareholders voted to approve the re-domicile of the Company from Canada to Jersey, Channel Islands by a process called continuance (the "Continuance"). Caledonia's Board of Directors subsequently resolved to proceed with the Continuance which became effective on March 21, 2016 whereupon the Company also adopted new charter documents and changed its name to Caledonia Mining Corporation Plc.  Following the Continuance, Caledonia is domiciled in Jersey, Channel Islands, for legal and tax purposes; Caledonia's shares (and depository interests, which are listed on the Alternative Investment Market ("AIM") of the London Stock Exchange) continue to be listed and traded on the Toronto Stock Exchange and on AIM and they continue to be traded on the OTCQX in the United States of America.
NON-IFRS FINANCIAL INFORMATION
This Annual Report contains financial statements of the Company prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.  In addition, this Annual Report also contains non-IFRS financial measures ("Non-IFRS Measures") including "on-mine cash cost per ounce", "all-in sustaining cost per ounce", "all-in cost per ounce", "average realized gold price" and "adjusted earnings per share" as we believe these are useful metrics for measuring our performance. However, these Non-IFRS Measures do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS.
 
7

FOREIGN PRIVATE ISSUER FILINGS
We are considered a "foreign private issuer" pursuant to Rule 405 promulgated under the Securities Act of 1933, as amended (the " Securities Act "). In our capacity as a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our common shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.

For as long as we are a "foreign private issuer" we intend to file our annual financial statements on Form 20-F and furnish our quarterly financial statements on Form 6-K to the SEC for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information we file or furnish may not be the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a domestic issuer.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by United States residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are United States citizens or residents; (2) more than 50% of our assets are located in the United States; or (3) our business is administered principally in the United States. If we lose our "foreign private issuer status" we would be required to comply with Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirement for "foreign private issuers".

CAUTIONARY NOTE TO U.S. INVESTORS REGARDING RESOURCE AND RESERVE ESTIMATES

This Annual Report has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws. The terms "mineral reserve", "proven mineral reserve" and "probable mineral reserve" are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") - CIM Definition Standards on Mineral Resources and Mineral Reserves , adopted by the CIM Council, as amended. These definitions differ from the definitions in United States Securities and Exchange Commission (" SEC ") Industry Guide 7 under the United States Securities Act of 1933, as amended (the "Securities Act"). Under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.

In addition, the terms "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource" are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.

Accordingly, information contained in this Annual Report and the documents incorporated by reference herein contain descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder . All references in this Annual Report to the terms "we", "our", "us", "the Company" and "Caledonia" refer to Caledonia Mining Corporation Plc.
 
8

ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3 - KEY INFORMATION
A.
Selected Financial Data
The following tables present our selected consolidated financial data. You should read these tables in conjunction with our audited consolidated financial statements and accompanying notes included in Item 18 of this Annual Report and "Operating and Financial Review and Prospects" included in Item 5 of this Annual Report.

The selected consolidated financial information set forth below has been derived from our audited consolidated financial statements that are prepared in accordance with IFRS, which differ in certain respects from the principles we would have followed had its consolidated financial statements been prepared in accordance with U.S. GAAP. The selected consolidated financial information should be read in conjunction with our audited consolidated financial statements and related notes thereto.

Financial – All in USD'000's unless indicated otherwise
2015
2014 (2)
2013 (2)
2012 (2)
2011 (2)
Revenue
48,977
53,313
63,217
75,236
56,306
Gross Profit
13,181
18,543
29,010
40,923
29,430
Expense - (General and administration,  interest and foreign exchange including  provisions and impairments)
(5,221)
(6,615)
(19,878)
(20,980)
(8,613)
Net Income /(Loss) – after tax from operations
5,590
5,946
(477)
7,122
12,261
Net Income /(Loss) – after income taxes from continuing operations
5,590
5,946
(477)
7,122
12,261
Profit attributable to owners of the Company
4,779
4,435
(2.967)
8,515
12,261
Net cash and cash equivalent
10,880
23,082
21,901
28,125
9,075
Current Assets
23,562
31,743
33,800
35,525
17,800
Total Assets
72,838
66,479
65,072
72,297
51,380
Current Liabilities
8,397
4,972
7,044
9,341
4,477
Long Term Liabilities
14,080
11,164
9,437
6,973
7,669
Working Capital
15,165
26,771
26,756
26,184
13,323
Net Assets
50,361
50,343
48,591
55,983
39,233
Total Capital Expenditures including Mineral Properties (Cash)
16,567
6,150
11,396
7,910
8,620
Dividend per share – cents 1
4.8
5.4
9.8
-
-
Earnings per share – cents 1
8.9
8.4
(5.4)
17.2
24.0
Diluted earnings per share – cents 1
8.9
8.4
(5.4)
17.2
24.0
 

 
9

Share Information
 
 
2015
2014
2013
2012
2011
Market Capitalization (USD Thousands) at December 31
32,209
31,791
39,088
46,301
55,060
Shares Outstanding (Thousands) (1)
52,078
52,117
52,117
51,446
50,549
Options  Outstanding (Thousands) (1)
2,241
2,565
2,848
3,330
4,254

(1) All dividend per share, earnings per share, diluted earnings per share and option numbers are stated on the basis of the 1:10 reverse split that took place in 2013.
(2) All amounts before January 1, 2015 have been restated to United States Dollar, refer item 18.

B.
Capitalization and Indebtedness
Not Applicable.

C.
Reasons for the Offer and Use of Proceeds
Not Applicable.

D.
Risk Factors
An investment in our common shares involves a high degree of risk and should be considered speculative. You should carefully consider the following risks set out below and other information before investing in our common shares.  If any event arising from these risks occurs, our business, prospects, financial condition, results of operations or cash flows could be adversely affected, the trading price of our common shares could decline and all or part of any investment may be lost.

Our operations are highly speculative due to the high-risk nature of our business, which include the acquisition, financing, exploration, development of mineral properties and operation of mines.  The risks and uncertainties set out below are not the only ones we face.  Additional risks and uncertainties not currently known to us or that we currently deem immaterial, may also impair our operations.  If any of the risks actually occur, our business, financial condition and operating results could be adversely affected.  As a result, the trading price of our common shares could decline and investors could lose part or all of their investment.  Our business is subject to significant risks and past performance is no guarantee of future performance.

The mining industry is highly competitive and there is no guarantee we will always be able to compete effectively.

The mining industry is a highly diverse and competitive international business.  The selection of geographic areas of interest are only limited by the degree of risk a company is willing to accept by the acquisition of  properties in emerging or developed markets and/or prospecting in explored or virgin territory.  Mining, by its nature, is a competitive business with the search for fresh ground with good exploration potential and the raising of the requisite capital to move projects forward to production. There is aggressive competition within the mining industry for the discovery and acquisition of properties considered to have commercial potential. We will compete with other interests, many of which have greater financial resources than we will have, for the opportunity to participate in promising projects. Such competition may have better access to potential resources, more developed infrastructure, more available capital, have better access to necessary financing, and more knowledgeable and available employees than us. We may encounter competition in acquiring mineral properties, hiring mining professionals, obtaining mining resources, such as manpower, drill rigs, and other mining equipment. Such competitors could outbid us for potential projects or produce gold at lower costs. Increased competition could also affect our ability to attract necessary capital funding or acquire suitable properties or prospects for gold exploration or production in the future. Significant capital investment is required to achieve commercial production from successful exploration and development efforts.  Globally the mining industry is prone to cyclical variations in the price of the commodities produced by it, as dictated by supply and demand factors, speculative factors and industry-controlled marketing cartels.  Nature provides the ultimate uncertainty with geological and occasionally climatic surprises. Commensurate with the acceptance of this risk profile is the potential for high rewards.   If we are unable to successfully compete for properties, capital, customers or employees it could have a materially adverse effect on our results of operations.

10

We do business in countries and jurisdictions outside of the United States where different economic, cultural, regulatory and political environments could adversely impact our business, results of operations and financial condition.

The jurisdictions in which we operate are unpredictable.  Assets and investments in these foreign jurisdictions are subject to risks that are usually associated with operating in a foreign country and, any of these could result in a material adverse effect on our business, results of operations or financial performance.  These risks include, but are not limited to, access to assets, labor disputes and unrest; arbitrary revocation of government orders, approvals, licenses and permits; corruption; uncertain political and economic environments; bribery; war; civil disturbances and terrorist actions; sudden and arbitrary changes to laws and regulations; delays in obtaining government permits; limitations on foreign ownership; more onerous foreign exchange controls; currency devaluations; import and export regulations; inadequate, damaged or poorly maintained infrastructure; and endemic illnesses.  There can be no guarantee that governments in these jurisdictions will not unilaterally expropriate the property of companies that are involved in mining.

Caledonia's mining operations are conducted in Zimbabwe and, as such, these operations are exposed to various levels of political, economic and other risks and uncertainties in addition to those set out above.  These risks and uncertainties include, but are not limited to, expropriation and nationalization, or mandatory levels of Zimbabwean ownership beyond currently mandated levels; renegotiation or nullification of existing concessions, licences, permits and contracts; illegal mining; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political conditions, currency controls and governmental regulations that favor or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.

In 2009, the government of Zimbabwe made foreign currencies legal tender in Zimbabwe and abolished the Zimbabwe dollar. However, there is no guarantee that the Zimbabwe government will not reintroduce the local currency.  The approval of the Reserve Bank of Zimbabwe ("RBZ") is required for all flows of money into and out of Zimbabwe.  Caledonia and its subsidiaries have not encountered difficulty in obtaining the necessary approval from the RBZ.   Zimbabwe is experiencing a shortage of foreign currency which means that foreign payments from Zimbabwe may encounter delays in execution.

If one of more of these risks occur, it could have a material and adverse effect on our business, results of operations or financial performance.

Furthermore, the royalty rate in Zimbabwe is subject to change. Effective January 1, 2012, Zimbabwe increased the gross royalty payable to the Zimbabwe Government from 4.5% to 7% of the gross revenues received by mining companies operating in Zimbabwe from gold sales. Effective January 1, 2014, there was a change in the regulations which means that the royalty payable to the Zimbabwe government was no longer allowable as a deduction for the purposes of calculating income tax.  With effect from October 1, 2014 the royalty rate was reduced to 5%.  Changes to Zimbabwean legislation in January 2014 required all Zimbabwean gold producers to sell their production to Fidelity Printers and Refiners Limited ("Fidelity") for a sale value which represents 98.5% of the value of the gold contained.  Prior to this change, Blanket Mine (1983) (Private) Limited ("Blanket" or "Blanket Mine") sold its gold to a non-Zimbabwean refiner and received 100% of the value of the gold contained. With effect from February 3, 2015, Blanket receives 98.75% of the value of the gold it delivers to Fidelity.


We face risks related to mining, exploration and mine construction, if warranted, on potential properties.

Our level of profitability, if any, in future years will depend on whether the Blanket Mine produces at forecasted rates and whether any exploration stage properties can be brought into production. The mining, exploration and development of mineral deposits involves significant risks. It is impossible to ensure that any current and future exploration programs will establish reserves. Whether a mineral ore body will be commercially viable depends on a number of factors, and the exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us receiving an adequate return on invested capital. The exploration, development and production activities are subject to political, economic and other risks, including:
 
-
cancellation or renegotiation of contracts;
-
changes in local and foreign laws and regulations;
-
changes in tax laws;
-
delays or refusal in granting prospecting permissions, mining authorizations and work permits for foreign management staff;
-
environmental controls and permitting;
-
expropriation or nationalization of property or assets;
-
foreign exchange controls;
-
government mandated social expenditures;
-
import and export regulation, including restrictions on the sale of their production in foreign currencies;
-
industrial relations and the associated stability thereof;
-
inflation of cost that is not compensated for by a currency devaluation;
-
requirement that a foreign subsidiary or operating unit have a domestic joint venture partner, which, possibly, the foreign company must subsidize;
-
restrictions on the ability of local operating companies to sell their production for foreign currencies, and on the ability of such companies to hold these foreign currencies in offshore and/or local bank accounts;
-
restrictions on the ability of a foreign company to have management control of exploration and/or development and/or mining operations;
-
restrictions on the remittance of dividend and interest payments offshore;
-
retroactive tax or royalty claims;
-
risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism;
-
royalties and tax increases or claims by governmental entities;
-
unreliable local infrastructure and services such as power, water, communications and transport links;
-
demands or actions by native or indigenous groups;
-
other risks arising out of foreign sovereignty over the areas in which operations are conducted; and
-
lack of investment funding;
Such risks could potentially arise in any country in which we operate.

As a result of the foregoing, our exploration, development and production activities in Zimbabwe may be substantially affected by factors beyond our control, any of which could materially adversely affect our financial position or results from operations. Furthermore, in the event of a dispute arising from such activities, we may be subject to exclusive jurisdiction of courts outside North America or may not be successful in subjecting persons to the jurisdiction of the courts in North America, which could adversely affect the outcome of a dispute.

We will need 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 activities by us will be successful in identifying sufficient mineral resources of an adequate grade and suitable metallurgical characteristics suitable for further development or production.

Blanket Mine is our principle mining asset. In addition, Blanket Mine has title to numerous but smaller satellite properties in the surrounding greenstone terrain. These satellite properties are in the exploration stage and are without any known bodies of commercial ore. Further development of the properties will only proceed upon obtaining satisfactory exploration results. There is no assurance that our mineral exploration activities will result in any discoveries of commercial bodies of mineral reserves.  The long-term profitability of our operations will, in part, be directly related to the costs and success of its exploration programs, which may be affected by a number of factors.

There can be no assurance, even when an economic deposit of minerals is located, that any of our property interests can be commercially mined. The exploration and development of mineral deposits involve a high degree of financial risk over a significant period of time which a combination of careful evaluation, experience and knowledge of management may not eliminate. While discovery of additional ore-bearing structures may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish reserves by drilling and to construct mining and processing facilities at a particular site. It is impossible to ensure that our current exploration programs will result in profitable commercial mining operations. The profitability of our operations will be, in part, directly related to the cost and success of its exploration and development programs which may be affected by a number of factors. Additional expenditures are required to establish reserves which are sufficient to commercially mine and to construct, complete and install mining and processing facilities in those properties that are actually mined and developed.
 
11

Our operations are subject to various Government approvals, permits,  licenses and legal regulation for which no assurance can be provided that if such approvals, permits or licenses will be obtained or if obtained will not be revoked or suspended or any continued compliance with applicable laws or regulations thereunder.

Government approvals, permits and licenses are required in connection with a number of our activities and additional approvals, permits and licenses may be required in the future.  The duration and success of our efforts to obtain approvals, permits and licenses are contingent upon many variables outside of our control.  Obtaining governmental approvals, permits and licenses can increase costs and cause delays depending on the nature of the activity and the interpretation of applicable requirements implemented by the relevant authority.  While we and our affiliates currently hold the necessary licenses to conduct operations there can be no assurance that all necessary approvals, permits and licenses will be maintained or obtained or that the costs involved will not exceed our estimates or that we will be able to maintain such permits or licenses.  To the extent such approvals, permits and licenses are not obtained or maintained, we may be prohibited from proceeding with planned drilling, exploration, development or operation of properties which could have a material adverse effect on our business, results of operations and financial performance.

In addition, failure to comply with applicable laws, regulations and requirements in the countries in which we operate may result in enforcement action, including orders calling for the curtailment or termination of operations on our property, or calling for corrective or remedial measures requiring considerable capital investment.  Although we believe that our activities are currently carried out in all material respects in accordance with applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of our properties or otherwise have a material adverse effect on our business, results of operations and financial performance.

Further development and commercial production at Blanket Mine and the other surrounding properties cannot be assured.

We are engaged in further development activities at Blanket Mine and its surrounding properties. Estimates for future production, at Blanket Mine, 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. Construction and development of projects are subject to numerous risks including, but not limited to: obtaining equipment, permits and services; changes in regulations; currency rate changes; labor shortages; fluctuations in metal prices; and the loss of community support.

Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract gold from ore and to develop the mining, processing facilities and infrastructure at any site chosen for mining.  Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be capable of economic extraction by metallurgical process, or discovered in sufficient quantities or grades, or the estimated operating costs of the mining venture are sufficient, to justify development of the deposit, or that the funds required for development can be obtained on a timely and economically acceptable basis.

The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be predicted, such as metal price and market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection.  Depending on the price of minerals produced, the Company may determine that it is not commercially feasible to commence or continue commercial production.

The price of gold is subject to volatility and may have a significant effect on our future activities and profitability.

Our revenues, operations and exploration and development projects are, and are expected to be, heavily derived from and influenced by the price of gold, which is particularly subject to fluctuation and has fluctuated significantly in recent years.  The price of gold is affected by numerous factors beyond our control including, but not limited to: international economic and political conditions; expectations of inflation; international currency exchange rates; interest rates; global or regional consumption patterns; speculative activities; levels of supply and demand; increased production due to new mine developments and improved mining and production methods; availability and costs of metal substitutes and; inventory carrying costs.  The effect of these factors on the price of gold, and therefore the economic viability of our operations cannot be accurately predicted.  In February 2016 Caledonia entered into a hedge agreement in respect of 15,000 ounces of gold over a period of 6 months.  The hedge protects Caledonia if the gold price falls below $1,050 per ounce but gives us full participation if the price of gold exceeds $1,079 per ounce.  Blanket continues to sell all of its gold production to Fidelity Printers and Refiners Ltd ("Fidelity"), as required by Zimbabwean legislation, and receives the spot price of gold less an early settlement discount of 1.25%.  The maximum cost of the hedge to Caledonia is $435,000, being 15,000 ounces at $29 per ounce.
 
12

We face credit risk exposure from counterparties to certain contractual obligations and there is no assurance that any such counterparty may not default in such obligation causing us to incur a financial loss.

Credit risk is the risk that a party with a contractual obligation with us will default causing a loss.  New regulations introduced by the Zimbabwean Ministry of Finance in January 2014 require that all gold produced in Zimbabwe must be sold to Fidelity, a company which is controlled by the Zimbabwean authorities.  Accordingly, all of our production from Blanket Mine is sold to Fidelity.  To date, Blanket has received all payments due from Fidelity in full and on time.  This arrangement introduces a new credit risk, beyond our control, that receivables and contractual performance due from Fidelity will not be paid or performed in a timely manner, or at all.

In 2009, gold bonds were issued by the Reserve Bank of Zimbabwe to Blanket Mine as a result of non-payment for gold previously sold by Blanket Mine to the Reserve Bank of Zimbabwe since 2008.  The Reserve Bank of Zimbabwe has failed to redeem the gold bonds and also failed to give any reliable verification of when Blanket Mine would be paid.  As a result of this failure, we were required to write off the gold bonds to $nil value. During fiscal 2015 the gold bonds were converted into treasury bills. Further, if Fidelity or the Zimbabwean government were unable or unwilling to conduct business with us, or satisfy obligations to us, we could experience a material adverse effect upon our operations and financial performance.

We are required to facilitate the economic participation of certain indigenous  groups in our business and there can be no assurance that such required participation will be at fair market value.

The government of Zimbabwe has introduced legislation (typically referred to as indigenisation) requiring companies to facilitate participation in their shareholdings and business enterprises by the indigenous population.  It is not assured that such interests will be paid for at full fair value, which may result in increased political and economic risks of operating in that area. As reported the Blanket Mine in Zimbabwe has complied with the requirements of the Indigenisation Act in Zimbabwe whereby indigenous shareholders legally own 51% ownership of Blanket Mine (1983) (Pvt) Ltd since September 2012. Refer to note 5 of the Consolidated Financial Statements for additional information on the indigenisation transaction.

We currently do not depend on our ability to successfully access the capital and financial markets. However, should our financial position change any inability to access the capital or financial markets may limit our ability to execute our business plan or pursue investments that we may rely on for future growth.

We expect that for at least fiscal years 2016 through to 2019, we can fund all of its exploration, development and production operations from cash on hand, overdraft facilitates and cash generated from operating activities.

Depending on our ability to generate income from our operations, we may require further financing for current and future exploration and development.  Should our projections for fiscal years 2016 through to 2019 prove incorrect, in order to finance our working capital needs, we may have to raise funds through the issuance of additional equity or debt securities. Depending on the type and the terms of any financing we pursue, shareholders' rights and the value of their investment in our common shares could be reduced. Any additional equity financing will dilute shareholdings, and new or additional debt financing, if available, may involve restrictions on financing and operating activities. In addition, if we issue secured debt securities, the holders of the debt would have a claim to our assets that would be prior to the rights of shareholders until the debt is paid. Interest on these debt securities would increase costs and negatively impact operating results.

If we are unable to obtain additional financing, as needed, at competitive rates, our ability to implement our business plan and strategy may be affected, and we may be required to reduce the scope of our operations and scale back our exploration and development programs as the case may be. There is, however, no guarantee that we will be able to secure any additional funding or be able to secure funding which will provide us with sufficient funds to meet our objectives, which may adversely affect our business and financial position.
 
13

We are dependent on key management employees.

Our success depends (i) on the continued contributions of our directors, executive officers, management and consultants, and (ii) on our ability to attract new personnel whenever we seek to implement our business strategy.   The loss of the services of any of these persons could have a materially adverse effect on our business, prospects results of operations and financial performance. 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 the Blanket Mine is depleted. There is no assurance that we will always be able to locate and hire all of the personnel that it may require.  Where appropriate, we engage with consulting and service companies to undertake some of the work functions.


Our share price has been and is likely to continue to be volatile and an investment in our common shares could suffer a decline in value .

Market prices for mining company securities, by their nature, are volatile. Factors, such as rapidly changing commodity prices, political unrest globally and in countries where we operate, speculative interest in mining stocks etc. are but a few factors affecting the volatility of the share price.   Our shares are listed on the Toronto Stock Exchange and on the London Stock Exchange's Alternative Investment Market ("AIM"). Our shares are also quoted in the U.S. on the OTCQX.

You should consider an investment in our common shares as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. The market price of our common shares may be highly volatile and subject to wide fluctuations. In addition, the trading volume of our common shares may fluctuate and cause significant price variations to occur. If the market price of our common shares declines significantly, you may be unable to resell your common shares at or above the purchase price, if at all. We cannot assure you that the market price of our common shares will not fluctuate or significantly decline in the future. Factors affecting our common share price include but are not limited to:

·
actual or expected fluctuations in our operating results;
·
actual or expected changes in our growth rates or our competitors' growth rates;
·
changes in the market price of gold;
·
changes in the demand for gold;
·
high extraction costs;
·
accidents;
·
changes in market valuations of similar companies;
·
additions to or departures of our key personnel;
·
actual or anticipated fluctuations in our quarterly operating results or those of our competitors;
·
publication of research reports by securities analysts about us or our competitors in the industry;
·
our failure or the failure of our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;
·
fluctuations of exchange rates between the U.S. dollar and the South African rand;
·
changes or proposed changes in laws and regulations affecting the gold mining industry;
·
changes in trading volume of our common shares on the TSX, the AIM or the OTCQX;
·
sales or perceived potential sales of our common shares by us, our directors, senior management or our shareholders in the future;
·
short selling or other market manipulation activities;
·
announcement or expectation of additional financing efforts;
·
terrorist acts, acts of war or periods of widespread civil unrest;
·
natural disasters and other calamities;
·
litigation involving us, including: shareholder litigation, investigations or audits by regulators into our  operations; or proceedings initiated by our competitors or clients;
·
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
·
the passage of legislation or other regulatory developments affecting us or our industry;
·
fluctuations in the valuation of companies perceived by investors to be comparable to us; and
·
conditions in the U.S., Canadian and United Kingdom financial markets or changes in general economic conditions.
 
 
14
Our mineral properties may be subject to defects in title .
We are not currently aware of any significant competing ownership claims or encumbrances respecting title to our properties.  However, the ownership and validity or title of unpatented mining claims and concessions are often uncertain and may be contested. We also may not have, or may not be able to obtain, all necessary surface rights to develop a property. Although we have taken reasonable measures to ensure proper title to our properties, there is no guarantee that title to our properties, competing ownership claims or encumbrances respecting our properties not be made in the future. Title insurance is generally not available for mineral properties and our ability to ensure that we have obtained secure claim to individual mineral properties or mining concessions may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. We may incur significant costs related to defending the title to our properties. A successful claim contesting our title to a property may cause us to compensate other persons or perhaps reduce our interest in the affected property or lose our rights to explore and, if warranted, develop that property. This could result in us not being compensated for our prior expenditures relating to the property. Also, in any such case, the investigation and resolution of title issues would divert our management's time from ongoing exploration and, if warranted, development programs. Any impairment or defect in title could have a negative impact on us.

We cannot guarantee that there will not be an increase in input costs affecting our results of operations and financial performance.

Mining companies generally have experienced higher costs of steel, reagents, labor and electricity and from local and national government for levies, fees, royalties and other direct and indirect taxes. Our planned growth at Blanket Mine should allow the fixed cost component to be absorbed over increased production, thereby helping to alleviate somewhat the effect of any further price increases. However, there can be no assurance that we will be able to control such input costs and any increase in input costs above our expectations may have a negative result on our results of operations and financial performance.

Our operations may be subject to increased costs or even suspended or terminated as a result of any loss of required infrastructure in our operations.

Infrastructure, including electricity supplies, that is currently available and used by us may, as result of natural disaster, incorrect or inadequate maintenance, sabotage or for other reasons, be destroyed or made unavailable or available in a reduced capacity.  Were this to occur, operations at our properties may become more costly or have to be curtailed or even terminated, potentially having serious adverse consequences to our financial condition and viability that could, in turn, have a material adverse effect on our business, results of operations or financial performance. Blanket also has 10MW of installed stand-by diesel generating capacity which is sufficient to allow all mining and processing activities and work at the central shaft to continue if there are any interruptions to the ZESA supply.

We are subject to operational hazards and risks that could have a material adverse effect on our business, results of operations and financial performance.

We are subject to risks typical in the mining business.  These include, but are not limited to, operational issues such as unexpected geological conditions or earthquakes causing unanticipated increases in the costs of extraction or leading to falls of ground and rock bursts, particularly as mining moves into deeper levels.  Major cave-ins, flooding or fires could also occur under extreme conditions.  Although equipment is monitored and maintained and all staff receives safety training, accidents caused by equipment failure or human error could occur.  Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability.  As a result, we may incur significant liabilities and costs that could have a material adverse effect upon its business, results of operations and financial performance.

Lawsuits may be filed against us and an adverse ruling in any such lawsuit could have a material adverse effect on our business, results of operations and financial performance.

We may become party to legal claims arising in the ordinary course of business.  There can be no assurance that unforeseen circumstances resulting in legal claims will not result in significant costs or losses. The outcome of outstanding, pending or future proceedings cannot be predicted with certainty and may be determined adversely to us and as a result, could have a material adverse effect on our assets, liabilities, business, financial condition and results of operations. Even if we prevail in any such legal proceeding, the proceedings could be costly and time-consuming and may divert the attention of management and key personnel from our business operations, which could adversely affect our financial condition. In the event of a dispute arising in respect of our foreign operations, we may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada, the United Kingdom, Jersey or international arbitration.  The legal and political environments in which we operate may make it more likely that laws will not be enforced and that judgments will not be upheld.  If we are unsuccessful in enforcing our rights under the agreements to which we are party to or judgments that have been granted, or if laws are not appropriately enforced, it could have a material adverse effect on our business, results of operations and financial performance.
 
15

We face risks related to illegal mining at Blanket Mine and no assurance can be provided that such illegal mining will not have a material adverse effect our business, results of operations and financial performance.

There has been an increase in illegal mining activities on properties controlled by Blanket.  This gives rise to 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.

Most of our employees are members of the Associated Mine Workers Union of Zimbabwe and any work stoppage or industrial action implemented by the union may affect our business, results of operations and financial performance.

Most of the employees are members of the Associated Mine Workers Union of Zimbabwe.  Pay rates for all wage-earning staff are negotiated on a Zimbabwe industry-wide basis between the union and representatives of the mine owners.  Any industrial action called by the workers union may affect our operations even though our operations may not be at the root cause of the action. Strikes, lockouts or other work stoppages could have a material adverse effect on our business, results of operations and financial performance.  In addition, any work stoppage or labor disruption at key customers or service providers could impede our ability to supply products, to receive critical equipment and supplies for our operations or to collect payment from customers encountering labor disruptions.  Work stoppages or other labor disruptions could increase our costs or impede our ability to operate.

There can be no assurance that changes to any environmental, health and safety laws to which we are currently subject would not adversely affect our exploration and development programs.

Our exploration, development and operations are subject to environment, health and safety laws and regulations ("EH&S") in the countries in which the relevant activity is being conducted.  There is no assurance that future changes in EH&S, if any, will not adversely affect our exploration and development programs or our operations.  There is no assurance that regulatory and environmental approvals required under EH&S will be obtained or, if at all on a timely basis. A breach of EH&S may result in the temporary suspension of operations, the imposition of fines, other penalties (including administrative penalties and regulatory prosecution), and government orders, which could potentially have a material adverse effect on operations.

We may enter into acquisitions or other material transactions at any time.

We continually seek to replace and expand our reserves through the exploration of our existing properties and may expand through acquisitions of interests in new properties or of interests in companies which own such properties.  Acquisitions involve a number of risks, including: the possibility that we, as a successor owner, may be legally and financially responsible for liabilities of prior owners; the possibility that we may pay more than the acquired company or assets are worth; the additional expenses associated with completing an acquisition and amortizing any acquired intangible assets; the difficulty of integrating the operations and personnel of an acquired business; the challenge of implementing uniform standards, controls, procedures and policies throughout an acquired business; the inability to integrate, train, retain and motivate key personnel of an acquired business; and the potential disruption of the our ongoing business and the distraction of management from its day-to-day operations.  These risks and difficulties, if they materialize, could disrupt our ongoing business, distract management, result in the loss of key personnel, increase expenses and may have a material adverse effect on our business, results of operations and financial performance.
 
16

As a foreign private issuer, we are permitted to file less information with the SEC than a company that is not a foreign private issuer or that files as a domestic issuer.
As a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose disclosure requirements as well as procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as a company that files as a domestic issuer whose securities are registered under the Exchange Act, nor are we generally required to comply with the SEC's Regulation FD, which restricts the selective disclosure of material non-public information. For as long as we are a "foreign private issuer" we intend to file our annual financial statements on Form 20-F and furnish our quarterly financial statements on Form 6-K to the SEC for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information we file or furnish is not the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a domestic issuer.
We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act's domestic reporting regime and cause us to incur additional legal, accounting and other expenses.
We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. In order to maintain our current status as a foreign private issuer, either (1) a majority of our ordinary shares must be either directly or indirectly owned of record by non-residents of the United States or (2) (a) a majority of our executive officers or directors must not be U.S. citizens or residents, (b) more than 50 percent of our assets cannot be located in the United States and (c) our business must be administered principally outside the United States. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We would also be subject to additional restrictions on offers and sales of securities outside the United States and would have to comply with the generally more restrictive Regulation S under requirements under the Securities Act that apply to U.S. domestic companies, which could limit our ability to access the capital markets in the future. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies may make our common shares less attractive to investors and, as a result, adversely affect the price of our common shares and result in a less active trading market for our common shares.
We are an emerging growth company as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. For example, we have elected to rely on an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act relating to internal control over financial reporting, and we will not provide such an attestation from our auditors.
We may avail ourselves of these disclosure exemptions until we are no longer an emerging growth company. We cannot predict whether investors will find our common shares less attractive because of our reliance on some or all of these exemptions. If investors find our common shares less attractive, it may adversely impact the price of our common shares and there may be a less active trading market for our common shares
We will cease to be an emerging growth company upon the earliest of:
·
the last day of the fiscal year during which we have total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every five years by the SEC or more;

·
the last day of our fiscal year following the fifth anniversary of the completion of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act;

·
the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non- convertible debt; or
17
·
the date on which we are deemed to be a "large accelerated filer", as defined in Rule 12b–2 of the Exchange Act, which would occur if the market value of our common shares that are held by non-affiliates exceeds $700,000,000 as of the last day of our most recently-completed second fiscal quarter.

If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
Section 404(a) of the Sarbanes-Oxley Act requires that our management assess and report annually on the effectiveness of our internal controls over financial reporting and identify any material weaknesses in our internal controls over financial reporting. Although Section 404(b) of the Sarbanes-Oxley Act requires our independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal controls over financial reporting, we have opted to rely on the exemptions provided to us by virtue of being a foreign private issuer and an emerging growth company, and consequently will not be required to comply with SEC rules that implement Section 404(b) of the Sarbanes-Oxley Act until we lose our emerging growth company status.
If either we are unable to conclude that we have effective internal controls over financial reporting or, at the appropriate time, our independent auditors are unwilling or unable to provide us with an unqualified report on the effectiveness of our internal controls over financial reporting as required by Section 404(b) of the Sarbanes-Oxley Act, investors may lose confidence in our operating results, the price of our common shares could decline and we may be subject to litigation or regulatory enforcement actions.
ITEM 4 - INFORMATION ON THE COMPANY
A.
History and Development of the Company
Caledonia Mining Corporation Plc (previously Caledonia Mining Corporation) was incorporated, effective February 5, 1992, by the amalgamation of three predecessor companies, it was registered at the time under the Canada Business Corporations Act.

Following the creation of Caledonia its shares were listed for trading on the Toronto Stock Exchange and quoted on the NASDAQ small caps market.   On October 16, 1998, Caledonia announced that NASDAQ would no longer quote its securities for trading.  Caledonia's common stock then commenced trading on NASDAQ's OTC Bulletin Board system.  In June 2005 Caledonia was admitted to the London Stock Exchange's AIM market under the ticker symbol "CMCL".  Our Toronto Stock Exchange trading symbol is "CAL".  Effective October 10, 2011 the shares commenced trading in the U.S. on the OTCQX under the ticker symbol CALVF. On December 21, 2015 the Company sought shareholder approval to re-domicile from Canada to Jersey using a legal process called "Continuance".

The reasons for the Continuance included:

·
the Company has no commercial operations in Canada, hence there is no reason for it to be domiciled in Canada and subject to Canadian taxes and the compliance costs associated with being a Canadian tax entity;
·
Jersey is more conveniently located in relation to the Company's operations in Southern Africa and the majority of its shareholder base which ranges from continental Europe to South Africa and North America; and
·
Canadian withholding tax, which is currently applicable to dividends paid to the Company's shareholders outside Canada, will be eliminated.

On February 18, 2016, shareholder approval was obtained and the Continuance became effective March 21, 2016.

The Continuance had no effect on the Company's listings in Toronto and on AIM in London, or the trading facility on the OTCQX in the USA .


The addresses and telephone numbers of Caledonia's principal offices are:

African Office - South Africa Registered Office

Caledonia Mining South Africa Proprietary Limited 43-45 La Motte Street
4 th Floor, 1 Quadrum office park Jersey Channel Islands
Johannesburg, Gauteng, 2198 JE4 8SD
South Africa (44) 1534 702 800
(27) 11 447 2499

18

Background
Effective April 1, 2006 the Company purchased 100% of the issued shares of the Zimbabwean company, Caledonia Holdings Zimbabwe (Private) Ltd., which held the shares of Blanket Mine (1983) (Private) Limited, the owner of the operating Blanket Mine.  The purchase consideration was $1,000,000 (U.S.) and the issuance to the vendor of 20,000,000 shares in the capital of Caledonia.  Because the Company bought the shares of the company owning the Blanket Mine it thereby acquired all of the assets of that company and assumed all of its liabilities.

Description of Our Business
Caledonia's activities are focused on Blanket Mine in Zimbabwe.  The Company's business during the past three completed fiscal years has been focused primarily on the operation of the Blanket Mine and increasing gold production at Blanket Mine.

The Company has, during the past three completed fiscal years, conducted exploration activities in Zimbabwe and Zambia.  The Company's exploration efforts in Zimbabwe have been focused on gold exploration in the vicinity of the Blanket Mine. The Company's exploration efforts in Zambia were focused on exploration for base metals, including copper and cobalt. In 2015 the Group surrendered all exploration rights relating to the Zambian operations for a nominal value. The Zambia operations were closed down during 2015 and the companies in Zambia were struck of the companies register on September 2, 2015.

Generally, gold mining, development and exploration in Southern Africa is not seasonal, except where heavy seasonal rainfall can affect surface mining or exploration.

Total gold production at Blanket Mine for 2015 was 42,804 ounces ( 2014: 41,771oz; 2013 : 45,530oz).  The aggregate production at Blanket Mine from January 1, 2016 to February 25, 2016 was 6,814 ounces.

Indigenisation of Blanket Mine (1983) (Private) Limited

During 2012, to comply with Zimbabwean law that requires indigenous Zimbabweans own at least 51% of the Blanket Mine, the Company entered into agreements to transfer a 51% ownership interest in Blanket Mine as follows:
·
Sold a 16% interest to the National Indigenisation and Economic Empowerment Fund ("NIEEF") for $11.74 million.
·
Sold a 15% interest to 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.

Caledonia 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.

Outstanding balances on the facilitation loans attract interest at a rate of 10% over the 12-month LIBOR. The timing of the repayment of the loans depends on the future financial performance of Blanket Mine and the extent of future dividends declared by Blanket Mine.

Blanket Mine suspended dividend payments in 2015 and they will remain suspended into 2016 in order to fund the capital projects provided under the Revised Plan as a result of which the repayment of facilitation loans by Blanket Mine's indigenous shareholders will also be suspended.  During this period, there will be a moratorium on the interest roll-up on the outstanding facilitation loans.   The interest moratorium will have no effect on either Caledonia's cash receipts or its reported earnings as interest on the facilitation loans is not recognized in Caledonia's financial statements. 
 
19

The facilitation loans were declared by Caledonia Holdings Zimbabwe (Private) Limited ("CHZ") (Blanket Mine's parent company) to a wholly-owned subsidiary of Caledonia as a dividend in specie on February 14, 2013 and withholding tax amounting to $1.504 million was paid and expensed on March 5, 2013. (refer to note 5 of the Consolidated Financial Statements for additional information)

Employees

As of December 31, 2015, the Company's employees comprised of 1,172 permanent employees and 402 contractors. Of this number, Blanket Mine has 1,157 permanent employees and 402 contractors.

Significant Acquisitions or Developments

Caledonia did not complete any significant dispositions or significant acquisitions for which disclosure is required since the end of the most recently completed financial year.


Recapitalisation of Blanket Mine (1983) (Private) Limited ("Blanket")

On February 26, 2016 Blanket entered into an agreement to recapitalise its cash resources by issuing shares to current shareholders as follows:

·
Caledonia Holdings Zimbabwe (Private) Limited subscribed for 4,755,556 Founder shares with a par value of $0.012 at $1.051;
·
A-class shareholders (NIEEF, BETS and Fremiro) subscribed for 3,979,140 A-class shares with a par value of $0.005 at $0.57; and
·
GCSOT subscribed for 970,522 B class shares with a par value of $0.005 for a nominal amount of $4,852

Founder shares will be paid for in a cash consideration of $5 million funded through Greenstone Management Services Limited (United Kingdom). A class shares will be funded by increasing the Facilitation loans (described in note 5 of the Consolidated Financial Statements) by $2.27 million on the same terms and conditions as the previous facilitation loan agreements. The B class shares were donated by Blanket. The transaction would not affect the current shareholding structure of the Company and the entity will continue to consolidate Blanket after the transaction.

Reserve Bank of Zimbabwe approval for these share transactions was obtained on March 1, 2016. The transaction was further dependant on the approval by the Zimbabwe Reserve Bank of the $5 million loan from Greenstone Management Services Limited (United Kingdom) to Caledonia Holdings Zimbabwe (Private) Limited, which was received on March 14, 2016.

B.
Business Overview
Mining and On-Mine Exploration Activities:

Gold Production

Blanket Mine (1983) Private Limited ("Blanket")

Blanket currently sells its gold production to Fidelity Printers and Refiners in Harare Zimbabwe and in 2015 received 98.75% of the value of the gold contained in US dollars within 7 days of sale in full settlement.

Background

The mine is located approximately 560 km south of Harare, the capital city of Zimbabwe and 150 km south of Bulawayo, the country's second largest city.  The town of Gwanda, the provincial capital of Matabeleland South, is located 16 km southeast of the mine and is approximately 197 km north north-west of the South African border post of Beit Bridge.  The mine is situated in the Gwanda Greenstone Belt from which gold was first produced in the 1800's.  Blanket holds extensive exploration properties throughout this belt. The Blanket property was first staked in 1904 with mining and metallurgical plant operations starting in 1906 and has since produced over a million ounces of gold.
 
20

Geological Setting
Like most of the gold mines in Zimbabwe, Blanket is situated in a typical greenstone terrain, the 70 km long by 15 km wide Gwanda Greenstone belt.  This terrain comprises supra crustal metavolcanic rocks similar to those found in the Barberton area of South Africa and the Abitibi area of Canada.  The Blanket property is the largest of the three remaining large gold producers, from a gold resource area that has given rise to no less than 268 gold mines.

Property Geology
Blanket is part of the group of mines that makes up the North Western Mining camp also called the Sabiwa group of mines. Blanket's deposits extending from Sabiwa and Jethro in the south, through Blanket itself to the Feudal, AR South, AR Main, Sheet, Eroica and Lima ore bodies.   The geological sequence strikes north-south, dips vertically and consists, from east to west, of a basal felsic unit which is not known to be mineralized.  It is generally on this lithology type that the various mine tailings disposal sites have been located.  Above this basal felsic unit is the ultramafic unit that includes the banded iron formations hosting the eastern 'dormant' cluster of mines and the mineralized bodies of the adjacent Vubachikwe Mine complex.   The active Blanket bodies (sections) are found on the overlying unit, the mafics and an andesitic unit which lies to the west, caps this whole stratigraphy.  A regional dolerite sill cuts the entire sequence from Vubachikwe through Blanket to the Smiler prospect.  Ore bodies at Blanket are epigenetic and are associated with a syn-metamorphic regionally developed deformation zone characterized by areas of high strain, wrapping around relatively un-deformed remnants of the original basaltic lava flows.  It is within the higher strain regime (highly sheared rocks) that the majority of the ore bodies are located.

Production Operations
Mining Operations
Following the completion of the No. 4 Shaft Expansion Project in late 2010, the underground mining areas can produce up to 1,200 tons of ore daily using predominately long-hole open stoping methods. Blanket Mine now produces approximately 42,000 ounces of gold per year.  In November 2014 Blanket embarked on a Revised Investment Plan ("Revised Investment Plan"), the objectives of which are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up. The infrastructure improvements include the development of a "Tramming Loop" (completed in June 2015) deepening the No.6 Winze (completed in July 2015) and sinking a new 6-meter diameter Central Shaft from surface to 1,080 meters. Implementation of the Revised Investment Plan is proceeding on schedule.

The increased investment pursuant to the Revised Investment Plan is expected to give rise to production from inferred resources of approximately 70-75,000 ounces in 2021.  The Revised Investment Plan is also expected to improve Blanket's long term operational efficiency, flexibility and sustainability.

A preliminary economic assessment (the "PEA") has been prepared in respect of the inferred resources which is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be classified as mineral reserves.  There is no certainty that the PEA will be realised. The PEA was published on December 2, 2014 and is available on the System for Electronic Data Analysis and Retrieval at www.sedar.com and Caledonia's website ( www.caledoniamining.com).

Metallurgical Process
In terms of Blanket's Revised Investment Plan the crushing and milling circuits will be expanded to handle 3,000 tons of ore per day capacity by additions and improvements to them. Their throughput capacity is more than sufficient to handle the planned increases in mine production from the No. 6 Winze Project and the Central Shaft.

All run of mine ore is crushed  underground to minus 150mm, hoisted to surface and crushed to minus 12mm in the surface 2-stage crushing circuit.  This material is then currently fed into two 1.8m by 3.6m rod mills where it is milled down to approximately 70% passing 75 microns, after which the milled slurry is pumped through two 30 inch Knelson Gravity Gold Concentrators where approximately 49% of total mill gold production is recovered as 'gravity' concentrate.  The Knelson Concentrator tails are pumped through cyclones whose underflow reports to the open-circuit regrind ball mill.  The product from the Knelson tails cyclone overflow and the regrind mill discharge are pumped into a carbon-in-leach ("CIL") plant consisting of eight, 600 cubic meter leach tanks where alkaline-cyanide leaching and simultaneous absorption of dissolved gold onto granular activated carbon takes place.  During 2014 the Pressure Swing Absorption ("PSA") plant which produces oxygen was re-commissioned and produces oxygen at approximately half of the cost of purchased liquid oxygen.  During electro winning the gold is deposited on steel wool cathodes, the loaded cathodes are acid-digested and the resultant gold solids from this acid digestion together with the re-dressed gold concentrate from Knelson Concentrators are smelted into Dore bars. The granular activated carbon is kiln regenerated before it is re-circulated back to the CIL section. The CIL plant has an overall design capacity of 3,800 tons of milled ore per day.  The Dore bars are delivered and sold, as required by Zimbabwean law, to Zimbabwe Government-operated Fidelity.
 
21

Mineral Resource and Mineral Reserve Calculations

The Technical Report dated December 1, 2014 relating to the Blanket Mine was prepared by Minxcon, in compliance with National Instrument 43-101, the standard of disclosure of mineral projects in Canada. Minxcon is a mining industry consulting company based in South Africa.  Minxcon reviewed the mineral reserve and mineral resource calculation procedures for the Blanket Mine as at August 31, 2014.  Minxcon's mineral resource and mineral reserve estimates are set out in the following tables.

From 2015 Blanket changed its mineral reserve and mineral resource reporting structure to report mineral resources inclusive of all mineral reserves. Accordingly the mineral resource table below includes Blanket Mine's economic proven and probable mineral reserves.

MINERAL RESOURCES – (August 2014)
Mineral Resource Category
Tonnes
(metric)
Grade
(Au g/t)
Gold Content (ounces)
Measured Resources
1,572,733
3.91
197,606
Indicated Resources
2,478,902
3.77
300,288
Total Measured and Indicated
4,051,635
3.82
497,895
Inferred Resources*
3,344,831
5.11
549,963

Notes:
Mineral Resources are reported inclusive of Mineral Reserves. Prior to the preparation of the Technical Report, Blanket Mine reported resources exclusive of reserves. However, as the mine matured, an increasing proportion of the "reserve" accumulated in pillars which are unlikely to be mined in the immediate future. In order to distinguish between the currently available reserves and pillar blocks which are not immediately available, Blanket Mine's Technical Department has elected to report pillar blocks under the Measured Resource category until they are scheduled in the mine plan.
Resource estimate is based on a gold price of US$1,300/oz
Mineral Resources are stated at a 1.96 g/t cut-off.
Tonnages are stated at an in-situ relative density of 2.86 t/m 3 .
Inferred Resources are expressed separately from the Measured and Indicated category.
* Inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically or legally. It cannot be assumed that all or any part of the inferred resource will be upgraded to a higher resource or reserve category.

MINERAL RESERVES – (October, 2014)
Mineral Reserve Category
Tonnes
(metric)
Grade
(Au g/t)
Gold Content (ounces)
Proven Reserves
856,005
3.40
93,638
Probable Reserves
2,077,828
3.78
252,758
Total Proven & Probable Reserves
2,933,833
3.67
346,396
Notes:
As noted above, Mineral Reserves are also included in the above table of Mineral Resources.
Reserve estimate is based on a gold price of US$1,250/oz and a cash cost of US$71/tonne milled.
Blanket pay limit (cut-off grade) is 2.03 g/t.
Reserve tonnages have been diluted by 7.5% at zero grade to yield RoM tonnages (delivered to mill).

Cautionary note to U.S. Investors concerning estimates of Inferred and Indicated Resources .
The above tables use the terms "inferred resources" and "indicated resources."  While these terms are recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize them.  They have a great amount of uncertainty as to their existence, and great uncertainty as to their economic feasibility.  It cannot be assumed that all or any part of an Inferred or Indicated Mineral Resource will ever be upgraded to a higher category.  Investors are cautioned not to assume that part or all of an inferred or indicated resource exists or is economically mineable.
 
22

The full Technical Report can be viewed on the Company's website – www.caledoniamining.com or under the Company's profile on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com .

Since the calculation of the above resource estimates as at August 31, 2014, the Company has mined 571,580 tonnes with an average recovered gold grade of 3.03 grams per tonne, the majority of which has been from within the reserve blocks to produce 56,162 ounces of gold at a recovery of 93.0%.   An updated internal estimate of Blanket's mineral reserves and resources as at December 31, 2015 has been prepared by Blanket Mine's Technical Department following the standards and procedures required by NI 43‑101. In preparing the Mineral Resource and Mineral Reserve estimates, the following assumptions and modifying factors were applied:
·
a cut-off grade (pay limit) of 2.11 g/t based on a gold price of US$1200/oz was applied for the Mineral Resources;
·
a pay limit of 2.30 g/t based on a gold price of US$1100/oz was applied for Mineral Reserves;
·
tonnages were increased by 7.5% to allow for dilution at zero grade and the grade adjusted accordingly; and
·
a metallurgical recovery of 93% was applied, marginally less than the 4 year historical 93.2% recovered grade.

The Mineral Reserve and Mineral Resource estimates included in this report have been reviewed and approved by Dr. Trevor Pearton, Caledonia's Qualified Person and the results are presented in the following tables:

MINERAL RESOURCES – December 31, 2015
Mineral Resource Category
Tonnes
(metric)
Grade
(Au g/t)
Gold Content (ounces)
Measured Resources
1,412,100
3.91
177,700
Indicated Resources
3,334,800
4.30
460,700
Total Measured and Indicated
4,746,900
4.18
638,400
Inferred Resources*
2,591,000
5.03
419,000
Notes:
Mineral Resources are reported inclusive of Mineral Reserves (See Note to table of Mineral Resources (August 2014).
Resource estimate is based on a gold price of US$1,200/oz
Mineral Resources are stated at a 2.11 g/t cut-off.
Tonnages are rounded to the nearest 100 and ounces to the nearest 50.
Tonnages are stated at an in-situ relative density of 2.86 t/m 3 .
Inferred Resources are expressed separately from the Measured and Indicated category.
* Inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically or legally. It cannot be assumed that all or any part of the inferred resource will be upgraded to a higher resource or reserve category.

MINERAL RESERVES – December 31, 2015
Mineral Reserve Category
Tonnnes
(metric)
Grade
(Au g/t)
Gold Content (ounces)
Proven Reserves
717,700
3.41
78,640
Probable Reserves
1,912,200
3.56
218,860
Total Proven & Probable Reserves
2,629,900
3.52
297,500
Notes:
Mineral Resources are reported inclusive of Mineral Reserves**.
Reserve estimate is based on a gold price of US$1,100/oz and a cash cost of US$70.30/ tonne milled.
Blanket pay limit (cut-off) is 2.30 g/t.
Reserve tonnages have been diluted by 7.5% at zero grade to yield RoM tonnages (delivered to mill).
Tonnages are rounded to the nearest 100 and ounces to the nearest 50.
Relative to the independent estimate of mineral resources and mineral reserves as at August 31, 2014, the Reserves have decreased by 10% in terms of tonnage.  Resources expressed in terms of tonnage have increased by 17% over the same period.
 
23
While Blanket Mine has generally recorded 100% conversion of resources to reserves (past 10 years), this high rate of conversion cannot be assumed to occur in future. Blanket Mine is situated in a country which is widely considered to be politically unstable, and this may impact on the reserve life of the mine which at present is estimated at between 8 and 9 years based on the Revised Investment Plan. However, Blanket Mine is fully indigenized and compliant with all legislation within Zimbabwe and as such is expected to be able to operate within normal business parameters for the foreseeable future.
 
Dr. Trevor Pearton, B.Sc. Eng. (Mining Geology), Ph.D. (Geology), Pr.Sci.Nat., F.G.S.S.A., VP Exploration is the Company's Qualified Person as defined by NI 43-101.  Dr. Pearton has reviewed the scientific and technical information included in this document and has approved the disclosure of this information for the purposes of the Form 20-F to be filed with the SEC.

MINE UNDER CARE AND MAINTENANCE

Eersteling Gold Mining Company Limited

This mine remains under care and maintenance. Interested parties continue to investigate the merits of purchasing the mine and the Company continues to seek a suitable purchaser.

KEY PERFORMANCE FACTORS
Following completion of the No. 4 Shaft Expansion Project in late 2010, the underground mining areas could produce up to 1,200 tons of ore daily using predominately long-hole open stoping methods. The Revised Investment Plan provides for proposed investment of approximately US$50 million between 2015 and 2017 and a further US$20 million in the period 2018 to 2020.  The increased investment pursuant to the Revised Investment Plan is expected to give rise to an increasing production profile that is expected to result in additional production of approximately 1,900 tons of ore daily, which is expected tom result in gold production of 70-75,000 ounces in 2021, this being in addition to projected gold production in 2021 from current mineral reserves of approximately 6,000 ounces.  The Revised Investment Plan is also expected to improve Blanket's long term operational efficiency, flexibility and sustainability.
A Preliminary Economic Analysis ("PEA") has been prepared in respect of the inferred resources which is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be classified as mineral reserves.  There is no certainty that the PEA will be realized.   The PEA was published on December 2, 2014 and is available on the System for Electronic Data Analysis and Retrieval at www.sedar.com and Caledonia's website ( www.caledoniamining.com).
OPERATIONAL REVIEW AND RESULTS OF OPERATIONS
Safety, Health and Environment ("SHE")
The following safety statistics have been recorded for the year and preceding two years.
 
 
Classification
2013
2014
2015
Fatal
1
-
1
Lost time injury
12
6
8
Restricted work activity
21
31
31
First aid
8
8
15
Medical aid
10
8
5
Occupational illness
-
-
-
Total
52
53
60
Incidents
52
39
47
Near misses
17
9
14
Disability Injury Frequency Rate
0.745
0.69
0.508
Total Injury Frequency Rate
3.135
3.415
3.403
Man-hours worked (thousands)
3,233
3,201
3,532


24

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 royalties, taxation and other non-taxation charges to the Government of Zimbabwe and its agencies are set out in the table below. Payments to the Zimbabwe Government in 2015 were lower than in previous years due to the lower income tax and royalty payments.

Payments to the Community and the Zimbabwe Government
(US$'000's)
 
   
Community and Social Investment
Payments to GCSOT
Payments to Zimbabwe Government
Total
Year 2013
 
2,147
2,000
15,354
19,501
Year 2014
 
35
-
12,319
12,354
Year 2015
 
58
-
7,376
7,376

Gold Production
Tonnes milled, average grades, recoveries and gold produced during the year and preceding 2 years as well as January 2016 are shown in the table below.
Blanket Mine Production Statistics
 
   
Tonnes Milled
(t)
Gold Head (Feed) Grade (g/t Au)
Gold Recovery
(%)
Gold Produced
(oz)
Year 2013
 
392,320
3.88
93.3
45,530
Year 2014
 
390,735
3.55
93.4
41,771
Year 2015
 
440,079
3.25
93.0
42,804
January 2016
 
40,905
3.20
93.0
3,915

Gold production in fiscal 2015 was 203 ounces above target.

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 Year and preceding 2 years 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 , which shows the on-mine cash costs of producing an ounce of gold;
ii.
All-in Sustaining Cost per ounce , which shows the On-mine Cost per ounce plus additional costs incurred outside the mine (i.e. at offices in Harare, Johannesburg and Toronto) and the costs associated with maintaining the operating infrastructure and resource base  that are required to maintain production at the current levels; and
iii.
All-in Cost per ounce , which shows the All-in Sustaining Cost per ounce plus the additional costs associated with activities that are undertaken with a view to increasing production.
 
25
Reconciliation of IFRS Production Costs to Non-IFRS cost per Ounce
($'000's unless otherwise indicated)
 
             
   
2013
   
2014
   
2015
 
Production costs (IFRS)
   
26,614
     
27,908
     
30,019
 
Less site restoration costs
   
(147
)
   
(29
)
   
-
 
Less exploration costs
   
(280
)
   
(343
)
   
(380
)
Less safety costs
   
(578
)
   
(473
)
   
(551
)
Other
   
1,432
     
433
     
1,011
 
On-mine production costs
   
27,619
     
27,969
     
30,099
 
Gold Sales (oz)
   
45,048
     
42,927
     
42,943
 
On-mine cash cost (US$/oz)
   
613
     
652
     
701
 
Royalties
   
4,412
     
3,521
     
2,455
 
Permitting costs
   
135
     
110
     
102
 
Administrative expenses
   
7,546
     
7,387
     
7,622
 
Less Zambian costs
   
-
     
-
     
(716
)
Community costs
   
(2,000
)
               
Reclamation and remediation of operating sites
   
107
     
75
     
108
 
Exploration and study costs
   
85
     
120
     
189
 
Sustaining capital investment
   
5,653
     
2,348
     
4,707
 
Other
   
287
     
54
     
718
 
All-in Sustaining cost
   
43,844
     
41,584
     
44,564
 
Gold sales (oz)
   
45,048
     
42,927
     
42,943
 
All-in sustaining cost per ounce (US$/oz)
   
973
     
969
     
1,038
 
Costs not related to current production
                       
Community costs
   
2,100
     
-
     
-
 
Permitting
   
106
     
55
     
43
 
Exploration
   
120
     
106
     
95
 
Capital investment
   
3,530
     
3,833
     
13,486
 
All-in Costs
   
49,701
     
45,578
     
58,188
 
Gold Sold (oz)
   
45,048
     
42,927
     
42,943
 
All-in Costs per ounce (US$/oz)
   
1,103
     
1,062
     
1,355
 
Per-ounce costs are calculated on the basis of sales and not production, so that an accurate value can be ascribed to the royalty.
On-mine costs comprise labour, electricity, consumables and other costs which include security and insurance. Blanket did not experience significant inflationary pressure on input costs and the cost per tonne milled in fiscal 2015 was slightly lower than in the comparative years as the fixed cost component of on-mine costs was spread across the increased tonnes milled.  However, the average grade in 2015 was lower than in 2014 which meant that the average on-mine cost per ounce of gold sold increased by 7.5%.
All-in sustaining costs increased by 7.1 per cent in 2015 compared to 2014 due to the increased on-mine costs and a $2,359,000 increase in sustaining capital investment, which added approximately $55 per ounce.
All-in costs include investment in expansion projects which was higher in the year due to the continued investment in Blanket's capital projects.  Investment in expansion projects in 2015 was $13,486,000 (2014: 5,658,000), representing a cost of $305 per ounce of gold sold.
Underground
Caledonia announced the Revised Investment Plan for Blanket Mine on November 3, 2014.  The objectives of the Revised Investment Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up.  The infrastructure improvements include the development of a "Tramming Loop" (which was completed in June 2015), the sinking and equipping of the No.6 Winze (which commenced production at the end of Q1 2016) and the sinking of a new 6-meter diameter Central Shaft from surface to 1,080 meters (which is scheduled to commence production in mid-2018).

Ore production in the year was approximately 3% higher than target; the head grade in 2015 was very close to target. Following completion of the Tramming Loop in July 2015, the amount of material that could be transported underground increased and is reflected in the increased tonnes milled in the last two quarters of 2015.  The AR Main and AR south ore bodies provided most of the ore delivered to the plant during 2015.  In December 2015 production commenced from a new section at the Eroica ore body above 750 meters; this area will replace production from the AR South ore body which, as anticipated in the Life of Mine Plan, is expected to be mined out towards the middle of 2016.
 
26

Metallurgical Plant
 
Gold recovery in 2015 was slightly below the target of 93.5% due to the reduced level of free gold in the ores and the lower oxygen concentration in the Carbon-in-Leach tanks which reflects the inefficiency of the oxygen-producing Pressure Swing Absorption ("PSA") plant which is now somewhat old . Management continues to evaluate options to address this matter either by purchasing a replacement PSA plant or adopting an alternative technology.
Work on a Fine Ore bin resumed in the 4 th quarter of 2015 and was completed in Quarter 1 of 2016.  The Fine Ore Bin will allow the metallurgical plant to sustain the higher projected throughput with an un-interrupted flow of material from the crushers.
Outlook

Revised Investment Plan to Increase Production
On November 3, 2014 Caledonia announced its Revised Investment Plan and production projections for the Blanket Mine. The objectives of the Revised Investment Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up.  The infrastructure improvements include the development of a "Tramming Loop" (completed in June 2015) deepening the No.6 Winze (completed in July 2015) and sinking a new 6-meter diameter Central Shaft from surface to 1,080 meters.  Implementation of the Revised Investment Plan is proceeding on schedule and the Tramming Loop and the sinking of the No. 6 Winze were both completed slightly ahead of target.
 
The Revised Investment Plan provides for proposed investment of approximately US$50 million between 2015 and 2017 and a further US$20 million in the period 2018 to 2020.  The Revised Investment Plan includes a revised life of mine plan for the Blanket Mine (the "LOM Plan") in terms of which it is anticipated that the approximate production from existing proven and probable mineral reserves above 750 m Level will be as set out below.
 
 
Approximate production from proven and probable mineral reserves above 750m (per LOM Plan)
 
 
 
2015
 
 
2016
 
 
2017
 
 
2018
 
 
2019
 
 
2020
 
 
2021
 
 
Tonnes milled ('000)
 
 
430
 
 
460
 
 
430
 
 
380
 
 
230
 
 
100
 
 
50
 
 
Gold production (koz)
 
 
42
 
 
45
 
 
43
 
 
39
 
 
23
 
 
10
 
 
6
 
 
The new Central Shaft and the deepening of No 6 Winze will provide access to the current inferred mineral resources below 750 meters and allow for further exploration, development and mining in these sections along the known Blanket strike, which is approximately 3 kilometers in length.  In October 2014, Caledonia commissioned Minxcon (Pty) Ltd. ("Minxcon") to complete a scoping level study on the Blanket Mine which comprises an initial extension from below 750 m Level to 1,080 m Level, in the form of a Preliminary Economic Assessment ("PEA"). The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.  Based on the PEA, additional approximate production from current inferred mineral resources (excluding the projected production set out above) may be achieved in the following indicative ranges:
 
 
Possible production from inferred mineral resources below 750m (as per PEA)
 
 
 
2015
 
 
2016
 
 
2017
 
 
2018
 
 
2019
 
 
2020
 
 
2021
 
 
Tonnes milled ('000)
 
 
0
 
 
35
 
 
160
 
 
215
 
 
390
 
 
550
 
 
600
 
 
Gold production (koz)
 
 
0
 
 
4-5
 
 
20-22
 
 
27-30
 
 
46-50
 
 
63-67
 
 
70-75
 
 
Canadian regulations do not allow planned production from inferred resources to be added to those from proven and probable reserves for disclosure purposes.
 
On July 17, 2015 at the request of the Ontario Securities Commission Caledonia filed an updated Technical Report containing a summary of the revised PEA.  The revised PEA considers the expansion project below 750 m as a stand-alone project. The revised PEA thus reflects the Project economics on a stand-alone basis, and the economic analysis is based on an assumed requirement to raise money for the expansion capital expenditures, despite the fact that Caledonia expects to fund those capital expenditures from existing cash and overdraft facilities and cash flow from the existing mine operations.  
 
27
There is no certainty that the PEA will be realised. The updated Technical Report was authored by Daan van Heerden, Uwe Englemann, Dario Clemente, Johan Odendaal and Jaco Burger of Minxcon (Pty) Ltd., each of whom is a qualified person who is independent of Caledonia for the purposes of National Instrument 43-101.  

EXPLORATION AND PROJECT DEVELOPMENT
Caledonia's primary exploration activities are focused on the growth and development of Blanket Mine and its satellite properties.
Blanket Exploration
 
Exploration and evaluation activities on Blanket Mine are targeting the depth extensions of all the known Blanket Mine ore bodies, viz. Blanket 1 Ore Body, Blanket 2 Ore Body, Blanket 4 Ore Body, Blanket Quartz Reef, AR Main, AR South, Eroica and Lima sections. This involves drilling downholes from chambers on 18 and 22 Levels to intersect the depth continuation of these ore bodies.  Drilling re-commenced in November 2015 after a brief stoppage due to the old machines breaking down and to allow for the commissioning of new machines.  3,211 meters were drilled in the 4 th Quarter of 2015 compared to 3,790 meters drilled in the previous quarter and a plan of 4,780 meters.   The new drills are performing well: over 2,000 meters were drilled in January 2016 compared to the average monthly rate of less than 700 meters per month in the whole of 2015.
 
Caledonia has a conservative approach to accruing new resources: only resource blocks with an estimated grade in excess of the current pay limit are taken into inventory.  Resources that are below the pay limit are reviewed on an annual basis.
 
Blanket Satellite Prospects
 
Blanket Mine has exploration title holdings in the form of registered mining claims in the Gwanda Greenstone Belt totalling 78 claims, including a small number under option, covering properties with a total area of about 2,500 hectares. Included within these claim areas are 18 previously operated small gold workings which warrant further exploration, i.e. the Satellite Projects.  Blanket's main exploration efforts on these satellite properties are focused at this stage on the GG Project and the Mascot Project Area which, based on past production records, are likely to have the greatest potential.
 
GG Project
 
The GG Project is located approximately seven kilometers southeast of Blanket Mine.  Surface drilling programs have been carried out at the GG Project over the past eight years consisting of 24 diamond-cored holes totalling 6,360m of drilling.  Two zones of gold mineralization have been established down to a depth of at least 300m, each with a potential strike length of up to 150m. Current activities involve the definition of the extent and characteristics of this mineralization by way of a prospect shaft and level development.

Exploration activities in 2013 and 2014 have resulted in the definition of resource blocks between 90 and 120 m levels as follows.
 
 
Resource Category
 
 
Tonnage
 
 
Width
 
 
Au
 
 
Au Content
 
 
Ounces
 
 
 
T
 
 
m
 
 
g/t
 
 
kg
 
 
oz.
 
 
Measured & Indicated Resource
 
 
182,301
 
 
3.90
 
 
4.41
 
 
805
 
 
25,872
 
 
Inferred Resource
 
 
110,242
 
 
2.73
 
 
2.87
 
 
316
 
 
10,173
 
 
In Q1 of 2015 the shaft was deepened to 210 metres, which is planned to be the main production level.  In Q3 of 2015 the shaft was completed to the planned shaft bottom of 245 metres and haulage development resumed on the 210 metre level towards the North Main zone.  Development in the 4 th quarter of 2015 exposed 60 meters of payable ore.  It is planned to expose the various mineralized zones between 210 metre Level and 90 metre Level above in order to fully evaluate these resources.  It is intended to construct a pilot plant to treat material from GG in order to develop a commercial treatment process.
 
Mascot Project Area
 
The Mascot Project Area includes three sections, viz. the Mascot prospect, the Penzance prospect and the Eagle Vulture prospect.  Mascot was previously mined to a depth of approximately 250 meters, exploiting an east-west trending mineralised body the strike extent of which decreased at depth but which was accompanied by a doubling in width.  Previous surface drilling undertaken by Blanket has indicated the existence of two further mineralised zones, one to the north and one to the south of the mined out area.
 
Underground development on Levels 1 and 2 (60 meters and 90 meters below surface respectively) has confirmed the existence of potentially payable mineralisation on the North Parallel.  Exploration activities in 2013 and 2014 have resulted in the definition of resource blocks on the North Parallel between 60 and 150 m levels and on Mascot Main below 8 Level as follows.
 
28
 
Resource Category
 
 
Tonnage
 
 
Width
 
 
Au
 
 
Au Content
 
 
Ounces
 
 
 
t
 
 
m
 
 
g/t
 
 
kg
 
 
oz.
 
 
Measured & Indicated Resource (North P.)
 
 
135,538
 
 
2.48
 
 
3.74
 
 
507
 
 
16,288
 
 
Inferred Resource (Mascot Main)
 
 
69,587
 
 
2.53
 
 
8.23
 
 
573
 
 
18,416
 
 
During Q1 2015 the mine was completely de-watered and the bottom of the shaft was cleaned to expose the shaft bottom which allows the possibility to deepen the shaft and allow access to the Main Shear at depth which, based on old mine records, has a substantially higher grade than the associated North Parallel and South Shear.
 
In Q2 of 2015 work started on excavating a cross-cut on the lowest level (8 Level) to create room to drill angled holes into the footwall to explore for downward continuation of the higher grade Mascot Main Reef mineralisation.  This drive was completed in Q3 of 2015 and diamond drilling of four holes was completed, all of which intersected the mineralised zone.  Based on the results of the drilling in the 3 rd   quarter of 2015, the development drive was extended by 65 meters so that further drilling can commence in Q1 of 2016 which will target a further extension of the mineralised zone between 12 and 14 Levels. Pending a review of these results and the metallurgical amenability of the ore, the shaft will be deepened a further 150 meters where an extraction level will be established.
 
GG and Mascot are not covered by the un-interruptible power agreement between Blanket Mine and ZESA.  Accordingly, during the 4 th Quarter of 2015 work at GG and Mascot was adversely affected by load-shedding due to the reduced power generation at the Kariba hydro-power plant due to abnormally low water levels in the Kariba Dam.

General Comments

Caledonia's activities are centered on Zimbabwe. Caledonia is not dependent, to any material extent, on patents, licenses, contracts, specialized equipment or new manufacturing processes at this time.  However, there may be occasions that Caledonia may wish to adopt such patents, licenses, specialized equipment, etc. if these are economically beneficial to its operations. All mining and exploration activities are conducted under the various Economic, Mining and Environmental Regulations of the country where the operations are being carried out.  It is always Caledonia's standard that these regulations are complied with by Blanket Mine, otherwise its activities risk being suspended.

C.
Organizational Structure
The Company has the following subsidiaries, all of which are wholly-owned by the Company, (unless otherwise indicated) and whose assets or revenues exceed 10% of the consolidated assets or revenues of the Company:
 
Subsidiaries of the Company
Country of Incorporation
Percentage held by Company
Caledonia Mining South Africa Proprietary Limited
South Africa
100
Greenstone Management Services Limited
United Kingdom
100
Blanket Mine (1983) (Private) Limited (1)
Zimbabwe
49
(1) Blanket Mine (1983) (Private) Limited does not have any subsidiary companies.
 
D.
Property, Plant and Equipment
(a)   South Africa:

The Eersteling gold mine is indirectly owned by the Company through its ownership of 100% of the shares of Eersteling Gold Mining Company Limited.  Eersteling has been under care and maintenance since September 1997.  Due to the lengthy period of care and maintenance at Eersteling there has been some deterioration in the facilities which will require rehabilitation work before operations could be recommenced.  The underground workings at Eersteling were allowed to flood and will require dewatering before mining access can be resumed.  The Company has no plans to expend further amounts on plant or equipment or to in any way expand or improve the facilities.
 
29

(b)   Zimbabwe:

The Blanket Mine, in Zimbabwe, which the Company indirectly owns 49% of through its ownership of 49% of the shares of Blanket Mine (1983) (Private) Limited. It is a fully equipped mine with all of the necessary plant and equipment to conduct mining operations and the production of gold from the ore mined from the Mine.

For a detailed breakdown of the property, plant and equipment refer to note 12 of the Consolidated Financial Statements. The property, plant and equipment of the Group is predominantly held in Zimbabwe and has no encumbrances thereon. As described in item 4B, the implementation of the Revised Investment Plan is expected to increase the Property, plant and equipment of the Group. The Revised Investment Plan is expected to be funded with existing cash and overdraft facilities as well as cash generated from operating activities. The project is expected to be completed in 2021.

ITEM 4A - UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5- OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A.
Operational Results
Annual Operational Highlights
2015-2014
 
 
Year 2014
 
 
Year 2015
 
 
Comment
 
 
Gold produced (oz)
 
 
41,771
 
 
42,804
 
 
Gold production increased 2015 due to higher tonnes milled, offset by a lower grade.
 
 
On-mine cost (US$/oz) (1 )
 
 
652
 
 
701
 
 
On-mine costs increased in 2015 due to the lower average grade which outweighed the overall reduction in cost per tonne milled.
 
 
All-in Sustaining Cost (US$/oz) (1) ("AISC")
 
 
969
 
 
1,038
 
 
All-in sustaining costs increased in 2015 due to the increased sustaining capital investment in the revised investment plan.
 
(1) Non-IFRS measures such as "On-Mine Cost per ounce", "All-in Sustaining Cost per ounce" and "average realised gold price" are used throughout this document. For a reconciliation of production cost as calculated in accordance with IFRS to On-mine cost and AISC for fiscal 2015, 2014 and 2013, refer to Item 4B.
2014– 2013
 
 
Year 2013
 
 
Year 2014
 
 
Comment
 
 
Gold produced (oz)
 
 
45,530
 
 
41,771
 
 
Gold production in 2014 was adversely affected by the lower head grade.
 
 
On-mine cost (US$/oz) (1)
 
 
613
 
 
652
 
 
On-mine costs for 2014 were higher than 2013 due to lower sales which means that on-mine fixed costs are spread over fewer ounces.
 
All-in Sustaining Cost (US$/oz) (1) ("AISC")
 
973
 
 
969
 
 
AISC decreased due to lower royalties, lower refining charges, lower community costs and lower sustaining capital investment the combined effects of which were reduced by higher administrative costs.
 

(1) Non-IFRS measures such as "On-Mine Cost per ounce", "All-in Sustaining Cost per ounce" and "average realised gold price" are used throughout this document. For a reconciliation of production cost as calculated in accordance with IFRS to On-mine cost and AISC for fiscal 2015, 2014 and 2013, refer to Item 4B.
30
2013 – 2012
 
 
Year 2012
 
 
Year 2013
 
 
Comment
 
 
Gold produced (oz)
 
 
45,465
 
 
45,530
 
 
Gold production in 2013 was similar to 2012 despite lower head grades and recovery which were offset by higher tonnage throughput.   The head grade in 2013 was 3.88 grams per tonne, compared to 4.16 grams per tonne in 2012 and the gold recovery in 2013 was 93.3 per cent compared to 93.7 per cent in 2012.  Tonnage throughput in 2013 was 392,320 tonnes compared to 363,315 tonnes in 2012
 
 
On Mine cash cost (US$/oz) (1)
 
 
570
 
 
613
 
 
On-mine costs in 2013 were adversely affected by higher labour and electricity costs in 2013 compared to 2012 and also by the higher level of work-in-progress at December 31, 2013.
 
All-in sustaining cost (US$/oz) (1)
("AISC")
 
759
 
 
973
 
 
All-in sustaining costs were adversely affected in Q4 2013 by higher administrative expenses and sustaining capital investment
 
(1) Non-IFRS measures such as "On-Mine Cost per ounce", "All-in Sustaining Cost per ounce" and "average realised gold price" are used throughout this document. For a reconciliation of production cost as calculated in accordance with IFRS to On-mine cost and AISC for fiscal 2015, 2014 and 2013, refer to Item 4B.
Financial Highlights
2015-2014
 
 
Year 2014
 
 
Year 2015
 
 
Comment
 
 
Gold Sales (oz)
 
 
42,927
 
 
42,943
 
 
Sales in 2015 were little changed from 2014 and reflect a 2.5% increase in production which was offset by increased work in progress.
 
 
Average realised gold price (US$/oz) (1)
 
 
1,245
 
 
1,140
 
 
Lower realised gold prices in 2015 primarily due to the lower quoted gold price.
 
 
Gross profit ($'m)
 
 
18,5
 
 
13,1
 
 
Gross profit was lower in 2015 due to the lower realised gold price, the effect of which was offset in Q4 of 2015 by higher production and sales, and increased production costs.
 
 
Net profit attributable to  shareholders ($'m)
 
 
4,4
 
 
4,7
 
 
The effect of lower revenues was outweighed by a foreign exchange gain arising from the devaluation of the South Africa rand against the US dollar and lower taxation.
 
 
Adjusted basic earnings per share   (cents) (1)
 
10.4
8.1
Adjusted basic earnings per share   excludes impairment charges, foreign exchange profits or losses, indigenisation expenses, deferred taxation and tax adjustments in respect of prior years and the costs of the Zambian operation.
 
Cash and cash equivalents ($'m)
 
 
23,1
 
 
10,9
 
 
Caledonia's cash is held in Canadian, UK, Zimbabwean and South African banks.
 
 
Net cash from operating activities ($'m)
 
 
 
10,9
 
 
 
 
6,8
 
 
 
Cash flow in 2015 was lower due to the lower realised gold price.
 
(1) Non-IFRS measures such as "average realised gold price" and "adjusted earnings per share" are used throughout this document. For a reconciliation of Revenue  and Profit/(loss) attributable to owners of the Company, as calculated in accordance with IFRS to average realised gold price and adjusted earnings per share for fiscal 2015, 2014 and 2013, refer below.
31
2014-2013
 
 
Year 2013
 
 
Year 2014
 
 
Comment
 
 
Gold Sales (oz)
 
 
45,048
 
 
42,927
 
 
Sales in 2014 were lower than 2013 due to lower production gold ounces.
 
 
Average realised gold price (US$/oz) (1)
 
 
1,402
 
 
1,245
 
 
Lower realised gold prices in 2014 primarily due to the lower quoted gold price.
 
 
Gross profit ($'m)
 
 
29,0
 
 
18,5
 
 
Lower gross profit in 2014 compared to 2013 mainly due to the lower realised gold prices and lower production and sales.
 
 
Net (loss)/profit attributable to  shareholders ($'m)
 
 
(3,0)
 
 
4,4
 
 
Net loss in 2013 was after an impairment charge in respect of the Nama project in Zambia. Profit for 2014 was adversely affected by lower gold production and the lower realised gold price.
 
 
Adjusted basic earnings per share   (cents) (1)
 
 
27.4
 
10.4
Adjusted basic earnings per share   excludes impairment charges, foreign exchange profits or losses, indigenisation expenses, deferred taxation and tax adjustments in respect of prior years and the costs of the Zambian operation.
 
Cash and cash equivalents ($'m)
 
 
21.9
 
 
23,1
 
 
Caledonia's cash is held in Canadian, UK, Zimbabwean and South African banks.
 
 
Net cash from operating activities ($'m)
 
 
12,6
 
 
 
10,9
 
 
 
Cash flow 2014 was lower due to the lower realised gold price and, for the year, the lower number of ounces sold.
 
(1) Non-IFRS measures such as "average realised gold price" and "adjusted earnings per share" are used throughout this document. For a reconciliation of Revenue  and Profit/(loss) attributable to owners of the Company, as calculated in accordance with IFRS to average realised gold price and adjusted earnings per share for fiscal 2015, 2014 and 2013, refer below.

32
 
2013 – 2012
 
 
Year 2012
 
 
Year 2013
 
 
Comment
 
 
Gold Sales (oz)
 
 
45,181
 
 
45,048
 
 
Lower sales in 2013, despite higher production, due to the higher level of work in progress at December 31, 2013 of 1,978 oz.
 
 
Average realised gold price (US$/oz) (1)
 
 
1,666
 
 
1,402
 
 
Lower realised gold prices in 2013 were due to the lower quoted gold price.
 
 
Gross profit ($'m)
 
 
40,9
 
 
29,0
 
 
Lower gross profit mainly due to the lower realised gold prices.
 
 
Net (loss)/profit attributable to  shareholders ($'m)
 
 
8,7
 
 
(3,0)
 
 
Net loss in 2013 is after an impairment charge mainly in respect of the Nama Project.
 
 
Adjusted basic earnings per share (cents) (1)
 
 
49.9
 
 
27.4
 
 
Adjusted basic earnings per share   exclude the impairment charge, foreign exchange profits or losses, indigenisation expenses and deferred taxation.
 
 
Cash and cash equivalents ($'m)
 
 
28,1
 
 
21,9
 
 
Caledonia's cash is held in Canadian, UK, Zimbabwean and South African banks.
 
 
Net cash from operating activities ($'m)
 
 
29,7
 
 
 
12,6
 
 
Cash flow 2013 was lower due to the lower realised gold price and, for the year, the lower number of ounces sold the effect of which was reduced by lower tax payments.
 

(1) Non-IFRS measures such as "average realised gold price" and "adjusted earnings per share" are used throughout this document. For a reconciliation of Revenue  and Profit/(loss) attributable to owners of the Company, as calculated in accordance with IFRS to average realised gold price and adjusted earnings per share for fiscal 2015, 2014 and 2013, refer below.


33

Average realised gold price per ounce
 
"Average realised price per ounce" is a non-IFRS measure which, in conjunction with the cost per ounce measures described above, allows stakeholders to assess our performance.  The table below reconciles "Average realised price per ounce" to the Revenue shown in the financial statements which have been prepared under IFRS.
 
Reconciliation of Average Realised Gold Price to IFRS
($'000's)
 
     
   
2013
2014
2015
Revenue  (IFRS)
 
63,217
53,513
48,977
Revenues from sales of silver
 
(78)
(61)
(48)
Revenues from sales of gold
 
63,139
53,452
48,929
Gold ounces sold (oz)
 
45,048
42,927
42,943
Average realised gold price per ounce (US$/oz)
 
1,402
1,245
1,139

Adjusted earnings per share
 
"Adjusted earnings per share" is a non-IFRS measure   which management believes assists investors in understanding 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.
 
Reconciliation of Adjusted Earnings per Share to IFRS Profit/(Loss) Attributable to Owners of the Company
($'000's unless otherwise indicated)
 
     
   
2013
2014
2015
Profit /(loss) attributable to owners of the Company (IFRS)
 
(2,967)
4,435
4,779
Blanket Mine Employee Trust adjustment (refer note 18 to the Audited Consolidated Financial Statements) Add back/(deduct) amounts attributable to owners of the company in respect of:
 
158
(48)
(100)
Foreign exchange gain
 
(2,865)
(1,065)
(2,850)
Indigenisation expenses
 
2,586
-
-
Asset impairment
 
13,789
178
-
Deferred tax
 
2,121
706
2,567
Reversal of withholding tax on dividend in specie
 
1,486
-
-
Reversal of Zambian G&A office cost
 
-
896
716
Over-accrual for prior year GMS UK tax
 
-
-
(871)
Prior year adjustment in respect of South African tax
 
-
306
(765)
South African tax penalties and interest
 
-
-
744
Adjusted profit
 
14,308
5,405
4,220
Weighted average shares in issue (m)
 
52,117
52,117
52,095
Adjusted EPS (cents)
 
27.4
10.4
8.1

Indigenisation
 
Transactions that implemented the Indigenisation of Blanket were completed on September 5 th 2012.  Following completion of these transactions Caledonia now owns 49% of Blanket. Caledonia has received the Certificate of Compliance from the Government of Zimbabwe which confirms that Blanket is fully compliant with the Indigenisation and Economic Empowerment Act.
 
34

Investing
 
During 2015 Caledonia had $18,193,000 (2014: $7,166,000; 2013: $11,396,000) of additions to property, plant and equipment including mineral properties.  Of the amount $18,193,000 (2014: $7,018,000; 2013: $8,801,000) at Blanket, and its satellite properties . The balance of the investment in 2014 and 2013 was spent on the Nama project in Zambia.

Financing
 
Caledonia financed all its operations using funds and overdraft facilities available and cash generated by its operations.  No equity financing took place in the year and none is currently planned.  Blanket has an unsecured $5 million loan facility in Zimbabwe which is repayable on demand.  At December 31, 2015 $1,688,000 of this facility was used.
Cash and cash equivalents
   
2015
2014
2013
         
Bank balances
 
12,568
23,082
23,580
Cash and cash equivalents in the statement of financial position
 
12,568
23,082
23,580
Bank overdraft used for cash management purposes
 
(1,688)
-
(1,679)
Cash and cash equivalents in the statement of cash flows
 
10,880
23,082
21.901
The bank overdraft facility of $5 million bears interest at 6.5% below the bank's base rate of 13%. The facility has no covenant requirements. The facility is repayable on demand.
Cash generated from operating activities is analysed in Note 23 to the Consolidated Financial Statements, and was lower in 2015 than in previous years primarily due to the lower average gold price received.
At December 31, 2015, Caledonia's cash was held with banks primarily in the United Kingdom, Canada and in South African accounts.
B.
Liquidity and Capital Resources
An analysis of the sources and uses of Caledonia's cash is set out in the Consolidated Statement of Cash Flows in the Consolidated Financial Statements.  As of December 31, 2015, Caledonia had a working capital surplus of $15,165,000 ($26,771,000-2014; $26,756,000 – 2013).  As of December 31, 2015, Caledonia had potential liabilities for rehabilitation work on the Blanket and Eersteling Mines - if and when those Mines are permanently closed - at an estimated present value cost of $2,762,000 ($2,484,000 – 2014, $1,470,000 – 2013).  The South African rehabilitation trust held $59,196 on cash deposit as at December 31, 2015.
The Company's objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue its mining operations and exploration potential of its mineral properties.
The Company's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its ongoing operations, to provide returns for shareholders, accommodate any asset retirement obligation and to pursue growth opportunities.  Refer to note 24 of the Consolidated Financial Statements for information on the type of financial instruments used and the maturity profiles thereof.
Caledonia paid its inaugural dividend of Cdn$0.05 per share in February 2013 following a capital re-structure which was approved by shareholders in January 2013 which allowed it to make dividend payments.  The inaugural dividend did not relate to any specific accounting period.  Caledonia paid a further dividend of Cdn$0.05 per share in April 2013 in respect of the earnings for the year to December 31, 2012.
On November 25, 2013 Caledonia announced a revised dividend policy pursuant to which it intended to pay a dividend of Cdn$0.06 per share in 2014, split into 4 equal quarterly payments of Cdn$0.015 per share.  The first quarterly dividend was paid on January 31, 2014; further payments were made quarterly thereafter.
 
35
Following the announcement on December 16, 2015 that henceforth Caledonia will report its financial results in United States Dollars, the quarterly dividend that was paid at the end of January 2016 was declared and denominated in United States Dollars as $0.01125 per share. A quarterly dividend of $0.01125 per share, or $0.045 per annum per share, represents Caledonia's revised dividend policy.
 
It is currently envisaged that the existing dividend policy of $0.045 per annum per share will be maintained in 2016.
 
It is intended that all of the capital investment which will be required to fund the planned growth and development at Blanket Mine over the next 7 years will be funded by Blanket's internal cash flows and debt facilities.
Approval from the Reserve Bank of Zimbabwe is required for the  remittance of dividends declared, repayment of loans and advances from subsidiary companies such as Blanket Mine (1983)(Private) Limited to the Group.   Caledonia has not experienced difficulty in securing the necessary approvals.

C.
Research and development, patents and licences
Not applicable.
D.
Trend Information
Following the completion of the No. 4 Shaft Expansion Project in late 2014, the underground mining areas could produce up to 1,200 tonnes of ore daily using predominately long-hole open stoping methods.  Following the completion of the tramming loop in June 2015, the underground materials handling capacity increased by 200 tonnes per day. As a result of the increased haulage capacity, the tonnes milled in the 3 rd and 4 th quarters of 2015 were higher than in previous quarters of 2015. Blanket Mine produced 42,804 ounces (41,771: 2014; 45,530: 2013); year-on-year changes in production were due to fluctuation in the realized grade and, in quarters 3 and 4 of 2015, the increased tonnes mined and milled following completion of the Tramming Loop. Blanket Mine is implementing a 7 year Expansion Program to progressively increase gold production from inferred resources to approximately 70-75,000 ounces in 2021, this being in addition to projected production in 2021 from proven and probable mineral reserves of approximately 6,000 ounces. Production in 2014 was lower than in 2014 mainly due to the lower realised grade which fell from 3.88 g/t to 3.55g/t.  Production in 2015 was 2.5% higher than in 2014 due to a 12.6% increase in tonnes milled, following the completion of underground infrastructure work in June 2015, which outweighed a further decline in the realised grade from 3.55g/t to 3.25g/t.

The surplus capacity of the Blanket leach section and crushing and milling plant enables it to immediately treat additional feed material when compatible.  The inflationary environment is subdued and the regulatory environment is subject to unexpected adverse changes.  Nevertheless, Blanket Mine has surplus metallurgical plant capacity and is sufficiently cash flow positive that if the investment climate is acceptable, it could invest in projects with a view to further increase production, thereby helping to maintain downward pressure on the cost per ounce of gold produced at Blanket Mine.

Blanket's ability to meet production targets could be impacted by, amongst other factors, failure to achieve the production targets set, unforeseen changes in ore grades and recoveries, unexpected changes in the quality or quantity of reserves, technical production issues, environmental and industrial accidents and environmental factors.

E.
Off-Balance Sheet Arrangements
As at December 31, 2015, we had not entered into any off-balance sheet arrangements.

F.
Tabular Disclosure of Contractual Obligations
 
Payments due by Period – in thousands of US Dollars
 
Within 1
Year
1-3 years
3-5 years
More than
5 years
Total
Trade and other payables
6,656
-
-
-
6,656
Asset retirement obligations
-
-
-
2,762
2,762
Capital expenditure commitments (refer note 12 of the Consolidated Financial Statements)
1,376
-
-
-
1,376



36

 
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
The following is a list of our current directors and officers as of December 31, 2015. There are no family relationships between the directors and officers.


Name, Office Held and Municipality of Residence
Principal Occupations During Past Five Years
 
Positions held Since
Number of Shares Beneficially Owned, Controlled or Directed as of March 30, 2016
 
James Johnstone   (2)(4)(6)(7)
Director
Gibsons, British Columbia, Canada
 
Retired.  Formerly Chief Operating Officer of the Company and Director of several of its subsidiary companies.
 
 
1997
 
28,000
 
Steven Curtis   (5)(7)
President, Chief Executive Officer  & Director
Johannesburg, South Africa
 
Financial Director Avery Dennison SA (Pty) Ltd. until March 2006.  Since then, VP Finance, Chief Financial Officer and Director of the Company and Director of certain of its subsidiary companies.
 
Director since 2008
President and Chief Executive since 2014
 
365,000
 
Leigh Wilson (1)(2)(3)(4)(7)
Director
Stuart, Florida, USA
 
Chairman of the Victory Portfolios
Winston Maritime LLC
FundVantage Trust
Stella and Hack Wilson Family Foundation
 
 
2012
 
72,500
 
John Kelly (1)(2)(3)(7)
Director
New Canaan, Connecticut
 
Partner at Endgate Commodities LLC, Member of CrossRoad LLC, Director of Liquidnet Europe Ltd, Officer of Liquidnet Holdings, Inc.
 
 
2012
 
57,465
 
Johan Holtzhausen (1)(2)(4)(5)(6)(7)
Director,
Cape Town, South Africa
 
Business consultant and ex Audit partner of KPMG Inc. Director of DRDGOLD Limited and First Food Brands Limited. Strategic Partners In Tourism NPC and Tourism Micro Enterprises Support Fund NPC
 
 
2013
 
Nil
 
 
 
Name, Office Held and Municipality of Residence
Principal Occupations During Past Five Years
  Positions held Since
Number of Shares Beneficially Owned, Controlled or Directed as of March 30, 2016
 
Dana Roets (6)(7)
Chief Operating Officer
Johannesburg, South Africa
 
VP and Head of Operations at Kloof Gold Mine. More recently, Dana was the COO at Great Basin Gold which had gold mining operations in the United States of America and South Africa.
 
 
2013
 
Nil
 
Mark Learmonth (5)(7)
VP Finance, Chief Financial Officer & Director Johannesburg, South Africa
 
Vice-President of the Company focused on financial reporting, investor and shareholder relations and corporate development. Former Vice-President Business Development, of the Company
 
 
Director since 2015
Vice-President, Business Development since 2008
 
224,230
 
Trevor Pearton (5) (6)(7)
Vice-President Exploration Johannesburg, South Africa
 
Vice-President of the Company acting as Exploration Manager of the Company and its subsidiaries
 
 
2004
 
Nil
 
David Henderson (6)
Director
Oakville, Ontario, Canada
A principal of Dyad Corporation providing project management services to various mining clients
 
 
2015
 
17,200
 

A brief profile of each of the Directors and the senior management is given below:

James Johnstone, B.Sc ., ARCST, Director

A graduate-mining engineer Mr. Johnstone has 40 years experience in mine operations in North America, Africa and Europe. He has experience in both underground and open pit operations.  For the 20 years prior to his retirement he was employed as General Manager or Vice-President Operations for mining companies producing gold, base metals and industrial minerals. Mr. Johnstone has been responsible for the construction, start up and commissioning of two major mines in addition to the commissioning of Caledonia's Filon Sur operation. He has also been involved in the orderly closure of three operations. He has operated successfully in environmentally sensitive areas and has a good understanding of the permitting process in Canada and the United States. Mr. Johnstone joined Caledonia in April 1997 as Vice President Operations and was responsible for Caledonia's operations in Zambia and South Africa and for all activities in Canada. He was elected a Director of Caledonia in June 1997. He retired from active employment with Caledonia in September, 2006.

Steven Curtis, CA(SA)   – Director,  President and Chief Executive Officer

Mr. Curtis is a Chartered Accountant with over 24 years of experience and has held a number of senior financial positions in the manufacturing industry.  Before joining Caledonia in April 2006, he was Director Finance and Supply Chain for Avery Dennison SA and prior to this, Financial Director and then Managing Director of Jackstadt GmbH South African operation.  Mr. Curtis is a member of the South African Institute of Chartered Accountants and graduated from the University of Cape Town.
 
37

Mr. Curtis was appointed Vice-President Finance and Chief Financial Officer of the Company in April, 2006 and served in the position until Dec 2014 when he was appointed as President and Chief Executive Officer.

Leigh Wilson - Director
 
Mr. Leigh Alan Wilson has an international business and financial services background having served in senior executive and management positions with Union Bank of Switzerland (Securities) Ltd. in London and with the Paribas Group in Paris and New York where he served as CEO of Paribas North America between 1984 and 1990.

Mr. Wilson has served on the Victory Fund Board since 1993. He currently serves as Independent Chairman of the Board of Trustees of the Victory fund and of the Munder Fund. The Victory and Munder Funds have assets aggregating to US $40 billion.

Mr Wilson is also the Chief Executive Officer of New Century Home Health Care Inc., a role he has held since 1995. In March 2006, Mr. Wilson received the Mutual Fund Trustee of the Year Award from Institutional Investor Magazine.

Between March 2008 and October 2008, Mr. Wilson was an Independent Non-Executive Director of Caledonia.
John Kelly - Director
Mr. John Lawson Kelly has over 35 years of experience in the financial services industry in the U.S.A and international markets including emerging markets in Asia.  Mr. Kelly is currently partner at EndGate Commodities LLC, CrossRoad LLC, and is an Independent Trustee of the Victory Funds.
Within the last five years Mr. Kelly has been an officer of Liquidnet Holdings, Inc. and a director of Liquidnet Europe Ltd.  Mr. Kelly is a graduate of Yale University and the Yale School of Management.   
Johan Holtzhausen - Director
Mr. Johan Andries Holtzhausen is a retired partner of KPMG South Africa with 42 years of audit experience, of which 36 years were as a partner focused on the mining sector. Mr Holtzhausen chaired the Mining Interest Group at KPMG South Africa and his clients included major listed mining companies operating in Africa and elsewhere, which operated across a broad range of commodities. In addition to his professional qualifications, Mr Holtzhausen holds a B.Sc. from the University of Stellenbosch, majoring in chemistry and geology.

Mr Holtzhausen is chairman of the Finance, Audit and Risk Committees of Strategic Partners in Tourism and its related party the Tourism Micro Enterprises Support Fund, both of which are not-for-profit organizations. Until 28 February 2011, Mr Holtzhausen served as a director of KPMG Inc. and KPMG Services (Pty) Ltd, both of which are private companies registered in South Africa and which provided audit, taxation and advisory services.

Dana Roets – Chief Operating Officer

Dana Roets is a qualified Mining Engineer and holds a B.Sc. Mining Engineering degree from Pretoria University (1986) and an MBA from the University of Cape Town (1995). Dana is a South African national with over 24 years of operational and managerial experience in the South African gold and platinum industry. He started his career with Gold Fields at the St Helena Gold Mine as a graduate trainee and progressed via various operational roles from being an underground shift boss to become Vice President and Head of Operations at Kloof Gold Mine in January 1999 at which time Kloof produced over 1,000,000 ounces of gold per annum. More recently, Dana was the COO at Great Basin Gold which had gold mining operations in the United States of America and South Africa. Dana Roets is located at Caledonia's Africa office in Johannesburg, South Africa.

Dr. Trevor Pearton - B.Sc. Eng. (Mining Geology), Ph.D. (Geology), Pr.Sci.Nat., F.G.S.S.A – Vice President Exploration

Dr. Pearton has worked for Caledonia since 2001.  During the time, he was responsible for the establishment and management of the resource bases at the Blanket Mine (operating) and the Barbrook and Eersteling Mines (now under care and maintenance) and the assessment of the Nama project in Zambia. This work resulted in the identification of the Nama copper target and was followed up by the 2009 to 2012 exploration program which identified a large low-grade copper deposit (uneconomic in the current market).  Prior to joining Caledonia, Dr. Pearton worked for a number of financial institutions in South Africa as a highly rated gold analyst, as well as consulting to a number of mining companies.  He graduated from the University of the Witwatersrand with a BSc Eng. (Mining Geology) and was awarded a PhD in Geology for research into Archaean gold and antimony deposits (Witwatersrand University). He is a registered professional with the South African Council for Natural Scientific Professions and is Caledonia's Qualified Person (QP) for all technical disclosures. He is a member of the Geological Society of South Africa; elected a Fellow of the Society in 2004, a member of the South African Institute for Mining and Metallurgy and a member of the Witwatersrand University Mining Engineers Association.
 
38

Mark Learmonth – Vice-President Finance and Chief Financial Officer

Mr Learmonth joined Caledonia in July 2008. Prior to this, he was a Division Director of Investment Banking at Macquarie First South in South Africa, and has over 17 years of experience in corporate finance and investment banking, predominantly in the resources sector. Mr. Learmonth graduated from Oxford University and is a chartered accountant.  He is a member of the Executive Committee of the Chamber of Mines, Zimbabwe and is also a member of the Gold Producers Sub-Committee.

Mr. Learmonth was appointed Vice-President Finance and Chief Financial Officer of the Company in Dec 2014.

David Henderson – Director

Mr. David Henderson is a senior mining specialist with a B.Sc.(Eng.) and an MBA from Queen's University in Kingston, Ontario.  He has over 40 years of solid background in all aspects of the industry including project management, consulting, operations management and corporate planning, with particular emphasis on the preparation of mine feasibility studies as well as mine construction and operation in remote locations.  A project manager, with hands-on technical expertise, whose engineering background includes the planning, development and operation of gold and base metal operations in Canada, U.S.A., South America, Europe, Africa and Eastern Russia.

Arrangements, Understandings, etc.

Caledonia has no arrangements or understanding with any major shareholders, customers, suppliers or others, pursuant to which any person referred to above, was selected as a director or member of senior management.
 
39

B.
Compensation
Summary Compensation Table
Name and principal position
Year
Salary ($)
Share based awards ($)
Option-based awards
Non‑equity incentive plan compensation
($)
Pension value
($)
All other
compensation
Total compensation $
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
         
Annual incentive plans
(f1)
Long‑term incentive plans
(f2)
     
Steve Curtis
Chief
Executive Officer
2015
2014
2013
 
 
428,637
410,085
319,117
 
-
-
-
 
-
-
-
 
-
60,012
51,990
 
-
-
-
 
-
-
-
 
(1) 180,255
40,758
33,980
 
608,892
510,855
405,087
 
Dana Roets
Chief Operating Officer
2015
2014
2013
 
418,182
400,083
115,859
 
-
-
-
-
-
-
-
60,012
10,004
 
-
-
-
-
-
-
(1) 138,000
-
-
556,182
460,095
125,863
Mark Learmonth
Chief Financial Officer
2015
2014
2013
 
360,000
275,057
174,687
 
-
-
-
 
-
-
-
 
-
60,012
24,955
 
-
-
-
 
-
-
-
 
(1) 154,000
-
-
 
514,000
335,069
199,642
 
Caxton Mangezi
General Manager and Director of the Blanket Mine
2015
2014
2013
 
348,400
335,069
295,457
 
-
-
-
 
-
-
-
 
-
27,922
43,400
 
-
-
-
 
-
-
-
 
(1) 190,002
10,002
10,833
 
538,402
372,993
349,690
 
Trevor Pearton
VP Exploration
2015
2014
2013
 
224,773
215,045
156,994
-
-
-
-
-
-
-
17,921
13,475
-
-
-
-
-
-
(1) 18,656
-
-
243,429
232,966
170,469

(1)
Bonuses paid to Directors and key management (Refer note 27 of the Consolidated Financial Statements)

A director fee of $45,000 is paid to each non-executive director per annum from January 1, 2016. The fee was revised from Cdn$45,000 paid annually to each non-executive Director.

The Company has a Stock Option Plan pursuant to which it grants options to directors, offices and key employees from time to time.  The numbers of shares covered by the various options granted are determined by the Company's Compensation Committee subject to approval by the Board of Directors.  The share option plan was revised during 2015 as detailed in note 27 of the Consolidated Financial Statements.

Caledonia does not have a pension, retirement or similar benefits scheme for Directors.
 
C.
Board Practices
The directors all hold their positions for an indefinite term, subject to re-election at each annual general meeting of the shareholders.  The officers hold their positions subject to being removed by resolution of the Board of Directors.   The term of office of each Director expires as of the date that an Annual General Meeting of the shareholders is held - subject to the re-election of the Directors at such Annual General Meeting.
 
40

The following persons comprise the following committees:

Audit
Compensation
Governance
Nominating
Disclosure
J Holtzhausen
L Wilson
L Wilson
L Wilson
M Learmonth
L Wilson
J Kelly
J Kelly
J Holtzhausen
S R Curtis
J Kelly
J Holtzhausen
 
J Johnstone
J Holtzhausen
 
J Johnstone
   
T Pearton
         
         
Technical
Strategic
Life of Mine
   
J Johnstone
L Wilson
L Wilson
   
J Holtzhausen
J Kelly
J Johnstone
   
D Roets
S R Curtis
J Holtzhausen
   
T Pearton
M Learmonth
     
D Henderson
D Roets
     
 
T Pearton
     
 
J Holtzhausen
J Johnstone
     
         
Terms of reference of the Audit Committee are given in the Charter of the Audit Committee.  The Charters of Company Committees are available on the Company's website or, on request, from the Company's offices listed in this report.

The Company's Audit Committee is comprised of the following Directors (i) Johan Holtzhausen (Chair), (ii) Leigh Alan Wilson, and (iii) John Lawson Kelly.  Each member of the Audit Committee is considered independent as defined under NI 52-110 and as defined pursuant to Section 803 of the NYSE MKT Company Guide (as such definition may be modified or supplemented) and considered to be financially literate as such terms are defined under National Instrument 52-110 Audit Committees.  The SEC has indicated that the designation of an audit committee financial expert does not make that person an "expert" for any purpose, impose any duties, obligations, or liability on that person that are greater than those imposed on members of the audit committee and board of directors who do not carry this designation, or affect the duties, obligations, or liabilities of any other member of the audit committee.
 
D.
Employees
The average, approximate number of employees, their categories and geographic location for each of the last 5 years are summarized in the table below:

Geographic Location and Number of Employees:
Employee Location
2011
2012
2013
2014
2015
Total Employees
         
South Africa (African Office)
10
10
13
14
14
Zimbabwe – approx. (i)
856
860
1,028
1,007
1,157
South Africa (Mine Security and Operations and Exploration)
1
1
1
1
1
Zambia (Head Office and Security)
8
8
8
6
-
Total Employees at all Locations
875
879
1,050
1,028
1,172
           
(i) the number of employees in Zimbabwe varies slightly from month-to-month.
 
41

Management and Administration:
         
Employee Locations:
2011
2012
2013
2014
2015
Zimbabwe
30
32
32
36
37
South Africa (African Office)
7
7
12
12
12
South Africa (Exploration and Operations)
2
2
1
1
1
Zambia (Head Office and Security)
4
4
4
4
-
Total Management and Administration
43
45
49
53
50

E.
Share Ownership
(a)   The direct and indirect shareholdings of the Company's Directors and Officers as at March 30, 2016 were as follows:
 
 
Number of shares
Percentage share holding
L Wilson
72,500
0.14%
J Johnstone
28,000
0.05%
S Curtis
365,000
0.70%
M Learmonth
224,230
0.43%
J. Kelly
57,465
0.11%
D Roets
Nil
-
J Holtzhausen
Nil
-
T. Pearton
Nil
-
D. Henderson
17,200
0.03%
Total
764,895
1.46%

All of the shares held by the Directors are voting common shares and do not have any different voting or other rights than the other outstanding common shares of the Company.

As at March 30, 2016, the Directors and Officers, collectively, owned 764,895 Common Shares, being approximately 1.46% of the issued Common Shares.

The information as to shares beneficially owned or controlled or directed, not being within the knowledge of the Company, has been furnished by the respective directors and officers individually.

(b)
Share purchase options outstanding as of March 30, 2016:

Name
Exercise Price Cdn
 
Expiry Date
 
Number of Options
J Johnstone
0.90
 
September 10, 2017
 
40,000
J Johnstone
1.30
 
January 31, 2016
 
160,000
L Wilson
0.90
 
September 10, 2017
 
90,000
C Jonsson
0.90
 
September 10, 2017
 
40,000
C Jonsson
1.30
 
January 31, 2016
 
160,000
J Liswaniso
0.90
 
September 10, 2017
 
7,500
J Liswaniso
1.30
 
January 31, 2016
 
10,000
M Learmonth
0.90
 
September 10, 2017
 
89,020
M Learmonth
1.30
 
January 31, 2016
 
150,000
A Lawson
0.90
 
September 10, 2017
 
3,000
A Lawson
1.30
 
January 31, 2016
 
7,500
T Pearton
0.90
 
September 10, 2017
 
25,000
T Pearton
1.30
 
January 31, 2016
 
25,000
SR Curtis
0.90
 
September 10, 2017
 
55,000
42
 
 
SR Curtis
1.30
 
January 31, 2016
 
250,000
R Babensee
0.90
 
September 10, 2017
 
40,000
R Babensee
1.30
 
January 31, 2016
 
175,000
C Mangezi
0.90
 
September 10, 2017
 
100,000
C Mangezi
1.30
 
January 31, 2016
 
200,000
P Dell
0.90
 
September 10, 2017
 
3,000
P Dell
1.30
 
January 31, 2016
 
7,500
P Human
0.90
 
September 10, 2017
 
5,000
P Human
1.30
 
January 31, 2016
 
10,000
S Smith
0.90
 
September 10, 2017
 
2,400
S Smith
1.30
 
January 31, 2016
 
6,000
J Kelly
0.90
 
September 10, 2017
 
90,000
R Patricio
0.90
 
September 10, 2017
 
90,000
D Roets
0.72
 
November 21, 2018
 
100,000
J Holtzhausen
0.72
 
November 21, 2018
 
90,000
D Henderson
0.74
 
December 21, 2020
 
90,000
DSA Corporate Services
0.80
 
October 7, 2020
 
25,000
TOTAL
       
2,145,920

In terms of the approved plan, the expiry of the options that expire in a closed period will be extended by 10 days from the cessation of the closed period. The options with an expiry date of January 31, 2016 will expire on April 2, 2016.
 
 
43
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
To the best of Caledonia's knowledge, as of December 31, 2015 there was one shareholder that beneficially owned, directly or indirectly, or exercises control or direction over more than 5% of the voting shares of Caledonia, Allan Gray, a South African investment trust/fund manager, which owns 7,039,500 ordinary shares of the Company, representing 13.5% of the current issued share capital of the Company.

The only shares issued by Caledonia are common shares.  All shareholders have the same voting rights as all other shareholders of Caledonia.

To the best of the knowledge of Caledonia, based on information in its Share Register on March 4, 2016, the portion of the common shares of Caledonia is held in the following geographic locations:

Geographic Area
Number of Shares Held
Percentage of Issued Shares
USA
21,309,828
40.92%
Canada
17,639,280
33.87%
United Kingdom
13,098,711
25.15%
Other
31,089
0.06%
 
52,078,908
100%

Caledonia is not, to the best of its knowledge, directly or indirectly owned or controlled by another corporation or corporations, by any other natural or legal person or persons severally or jointly or by any foreign government.

Caledonia is not aware of any arrangement, the operation of which may at some subsequent date result in a change of control of Caledonia.

The foregoing information in this paragraph is based exclusively on information with respect to recorded shareholders in the Company's shareholders register.  The Company does not have actual information available as to who may be the beneficial owners of the Company's issued shares and, specifically, does not know the identity of the beneficial owners of the shares who are registered in two large intermediaries.

B.
Related Party Transactions
The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows presented in $'000:
 
 
2015
2014
2013
Key management salaries and bonuses
(1) 2,452
1,781
1,482
Share-based payments
24
-
35
 
2,476
1,781
1,517
 
(1) Of this amount $482,000 was outstanding at December 31, 2015.

Employees, officers, directors, consultants and other service providers also participate in the Caledonia's share option program (see note 20 of the Consolidated Financial Statements). Group entities of Caledonia are set out in note 28 of the Consolidated Financial Statements. As at year end 1,739,020 (2014:1,584,520; 2013 2,114,520) share options related to directors and key management. The share option plan is filed as exhibit 4.1 to the Form 20F.
 
44

     
    
Transactions during the year
 
 
Note
2015
2014
2013
Management contract fees, allowances and bonus paid or accrued to a company for management services provided by the Company's former President and Chief Executive Officer.
(i)
-
850
715
Rent for office premises paid to a company owned by members of the former Chief Executive Officer's family.
(ii)
40
129
37
Legal fees and disbursements
 
-
-
85
Directors fees
 
191
298
280

(i) On July 15, 2014 Caledonia served a six month notice to Epicure Overseas S.A. for the termination of the contract between Caledonia and Epicure for the provision of the services of Mr. Stefan Hayden, who was at that time Caledonia's President and Chief Executive Officer ("CEO").  Negotiations for alternative arrangements to secure the continued services of Mr. Hayden as President and CEO failed to reach agreement.  Accordingly, on November 18, 2014 Mr. Hayden stepped down as President and CEO and on December 6, 2014, Mr. Hayden resigned as a director of Caledonia.  No payments other than the contractual payments that were due to Epicure Overseas SA for the provision of the services of Mr. Hayden during the notice period were made.
 
(ii) The contract expired on September 2015.
 
As at December 31, 2016 employee contracts between Caledonia Mining South Africa Proprietary Limited and key management, include an option for respective key management to terminate such employee contract in the event of a change in control of the Company and to receive a severance payment equal to two years' compensation.  If this was triggered as at December 31, 2015 the severance payment would have amounted to $3,578,000 (2014: $3,611,000; 2013: Nil). A change in control would constitute:
 
·
the acquisition of more than 50% of the common shares; or
·
the acquisition of right to exercise the majority of the voting rights of common shares; or
·
the acquisition of the right to appoint the majority of the board of directors; or
·
the acquisition of more than 50% of the assets; of
Caledonia Mining South Africa Proprietary Limited or Caledonia Mining Corporation .

C.
Interests of Experts and Counsel
Not Applicable.
 
ITEM 8 - FINANCIAL INFORMATION
A.
Consolidated Statements and Other Financial Information
This Annual Report contains the audited Consolidated Financial Statements which comprise the consolidated statements of financial position as at December 31, 2015, December 31, 2014 and January 1, 2014, the consolidated statements of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the years ended December 31, 2015, December 31, 2014 and December 31, 2013.
Reference is made to page 63 where the financial statements are filed as part of this annual report on pages F1 – F63

45


Dividend Policy

On November 25, 2013 Caledonia announced a revised dividend policy in terms of which it paid a dividend of Cdn$0.06 per share in 2014, split into 4 equal quarterly payments of Cdn$0.015 per share.  The first quarterly dividend was paid on January 31, 2014 and subsequent quarterly dividends were paid thereafter.
Following the announcement on December 16, 2015 that henceforth Caledonia will report its financial results in United States Dollars, the quarterly dividend that was paid at the end of January 2016 was declared and denominated in United States Dollars as $0.01125 per share. A quarterly dividend of $0.01125 per share, or $0.045 per annum per share, represents Caledonia's revised dividend policy. It is currently envisaged that the existing dividend policy of Cdn$0.045 per annum per share, will be maintained in 2016.

There are currently no restrictions on the Company which would prevent it from paying dividends.

Legal Proceedings and Regulatory Actions

To our knowledge, there are no legal proceedings material to us to which we are or were a party to or of which any of our properties are or were the subject of, during the financial year ended December 31, 2015 nor are there any such proceedings known to us to be contemplated, which would materially impact our financial position or ability to continue as a going concern.

During the twelve-month period ended December 31, 2015, there were no (i) penalties or sanctions imposed against  us by a court relating to securities legislation or by a securities regulatory authority; (ii) penalties or sanctions imposed by a court or regulatory body against us  that would likely be considered important to a reasonable investor in making an investment decision, or (iii) settlement agreements  we entered into before a court relating to securities legislation or with a securities regulatory authority.

B.
Significant Changes
We have not experienced any significant changes since the date of the financial statements included with this Annual Report except as disclosed in this Annual Report.

ITEM 9 - THE OFFERING AND LISTING
A.
Offering and Listing Details
The Common Shares of the Company have been quoted for trading in the U.S. on the OTCQX under "CALVF" since October 2011, and on the AIM Market in London under "CMCL" since June 27, 2005.  The principal marketplace for the Company is the listing of the Common Shares on the Toronto Stock Exchange under symbol "CAL".  During the year ended December 31, 2015, 5,164,800 Common Shares were traded on the Toronto Stock Exchange at prices that ranged between a high of Cdn$0.96 and a low of Cdn$0.62 per Common Share.

The high and low market prices expressed in Canadian dollar on the Toronto Stock Exchange for our Common Shares for the last five financial years, for the last six months, and each quarter for the last three fiscal years:
 
TSX Exchange
(Canadian Dollars)
Last Six Months
High
Low
March 2016 (up to 17 March)
0.91
0.86
February 2016
0.94
0.84
January 2016
0.85
0.79
December 2015
0.81
0.66
November 2015
0.82
0.74
October 2015
0.84
0.72
September 2015
0.77
0.70
46
 
2015
High
Low
Fourth Quarter ended December 31, 2015
0.84
0.67
Third Quarter ended September 31, 2015
0.96
0.70
Second Quarter ended June 30, 2015
0.95
0.66
First Quarter ended March 31, 2015
0.75
0.62
     
2014
High
Low
Fourth Quarter ended December 31, 2014
0.81
0.77
Third Quarter ended September 31, 2014
1.10
1.07
Second Quarter ended June 30, 2014
0.87
0.85
First Quarter ended March 31, 2014
0.80
0.77
     
2013
High
Low
Fourth Quarter ended December 31, 2013
0.82
0.67
Third Quarter ended September 31, 2013
0.98
0.74
Second Quarter ended June 30, 2013
1.20
1.15
First Quarter ended March 31, 2013
1.40
0.95
     
Last Five Fiscal Years
High
Low
2015
0.96
0.62
2014
0.90
0.86
2013
1.40
0.67
2012
1.25
0.60
2011
1.45
0.65

The high and low market prices expressed in United States dollar on the OTCQX for our Common Shares for the last five financial years, for the last six months, and each quarter for the last three fiscal years

 
OTCQX
(United States Dollar)
Last Six Months
High
Low
March 2016 (up to 29 March)
0.72
0.65
February 2016
0.69
0.60
January 2016
0.61
0.54
December 2015
0.60
0.49
November 2015
0.62
0.56
October 2015
0.66
0.56
September 2015
0.59
0.53
     
2015
High
Low
Fourth Quarter ended December 31, 2015
0.66
0.49
Third Quarter ended September 31, 2015
0.76
0.53
Second Quarter ended June 30, 2015
0.79
0.52
First Quarter ended March 31, 2015
0.63
0.51
     
2014
High
Low
Fourth Quarter ended December 31, 2014
0.71
0.56
Third Quarter ended September 31, 2014
1.01
0.98
Second Quarter ended June 30, 2014
0.80
0.78
First Quarter ended March 31, 2014
0.73
0.70
     
2013
High
Low
Fourth Quarter ended December 31, 2013
0.85
0.65
Third Quarter ended September 31, 2013
0.94
0.68
47
 
Second Quarter ended June 30, 2013
1.21
1.20
First Quarter ended March 31, 2013
1.35
0.95
     
Last Five Fiscal Years
High
Low
2015
0.79
0.49
2014
0.81
0.78
2013
1.45
0.65
2012
1.25
0.65
2011
1.58
0.63

The high and low market prices expressed in Pounds Sterling on the AIM for our Common Shares for the last five financial years, for the last six months, and each quarter for the last three fiscal years.

 
AIM
(Pound Sterling)
Last Six Months
High
Low
March 2016 (up to 29 March)
0.49
0.47
February 2016
0.47
0.41
January 2016
0.52
0.37
December 2015
0.42
0.37
November 2015
0.41
0.40
October 2015
0.44
0.37
September 2015
0.38
0.37
     
2015
High
Low
Fourth Quarter ended December 31, 2015
0.44
0.37
Third Quarter ended September 31, 2015
0.49
0.36
Second Quarter ended June 30, 2015
0.48
0.34
First Quarter ended March 31, 2015
0.38
0.33
     
2014
High
Low
Fourth Quarter ended December 31, 2014
0.49
0.30
Third Quarter ended September 31, 2014
0.50
0.42
Second Quarter ended June 30, 2014
0.42
0.35
First Quarter ended March 31, 2014
0.38
0.27
     
2013
High
Low
Fourth Quarter ended December 31, 2013
0.38
0.34
Third Quarter ended September 31, 2013
0.47
0.38
Second Quarter ended June 30, 2013
0.70
0.47
First Quarter ended March 31, 2013
0.66
0.45
     
Last Five Fiscal Years
High
Low
2015
0.49
0.33
2014
0.50
0.27
2013
0.70
0.34
2012
0.63
0.33
2011
0.69
0.35


48
ITEM 10 - ADDITIONAL INFORMATION
A.
Share Capital
Not Applicable.
B.
Articles of Association
Securities Registrar
Computershare Investor Services Inc. is the transfer agent and registrar for the common shares at its principal office in the City of Toronto, with branch registrars of transfers at Computershare Trust Company, N.A office in the City of Golden, Colorado. Computershare Investor Services at its principal office in Bristol, United Kingdom is the Transfer Agent for the Depositary Interests.

Place of Incorporation and Purpose
The Company was incorporated, effective February 5, 1992, by the amalgamation of three predecessor companies.  It was registered in terms of the Canada Business Corporations Act (the "CBCA"). The company re-domiciled to Jersey effective March 21, 2016 through a process called continuance. The Continuance has no effect on the Company's existing listings in Toronto and on AIM in London, or the trading facility on the OTCQX in the USA and the company's shares will continue to be traded on these listing and trading platforms after the continuance is completed.

Articles of Association
At a special Meeting of Shareholders held on February 18, 2016, Caledonia's shareholders voted in favor of a resolution to approve the continuance of the company from Canada to Jersey Channel Islands. This resolution, inter alia, included provisions to replace Caledonia's by-laws with a new Articles of Association. The Company's Articles of Association do not place any restrictions on the Company's business. The authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited number of preference shares. As of March 30, 2016 52,173,908 Common Shares were issued and outstanding and there were no preference shares issued or outstanding.

The holders of the Common Shares are entitled to one vote per share at all meetings of the shareholders of the Company. The holders of Common Shares are also entitled to dividends, if and when declared by the directors of the Company and the distribution of the residual assets of the Company in the event of a liquidation, dissolution or winding up of the Company. The Company's Common Shares do not have pre-emptive rights to purchase additional shares.

No preference shares are currently issued and outstanding. Preference shares may be issued from time to time in one or more series composed of such number of shares with such preference, deferred or other special rights, privileges, restrictions and conditions as fixed before such issuance by a resolution passed by the directors and confirmed and declared by articles of amendment.  The preference shares shall be entitled to preference over Common Shares in respect of the payment of dividends and shall have priority over the Common Shares in the event of a distribution of residual assets of the Company in the event of a liquidation, dissolution or windup of the Company. Please see Exhibit 1.1 for details in respect of the rights, privileges, restrictions and conditions attaching to the Common Shares and Preferred Shares. The rights attaching to the Common Shares and the Preferred Shares can only be modified by the affirmative vote of at least two-thirds of the votes cast at a meeting of shareholders called for that purpose.

Meetings of Shareholders
The Articles of Association requires the Company to call an annual shareholders' meeting within 13 months after holding the last preceding annual meeting and permits the Company to call a special shareholders' meeting at any time. The Company is required to mail a notice of meeting and management information circular to registered shareholders not less than 21 days and not more than 60 days prior to the date of any annual or special shareholders' meeting. These materials also are filed with Canadian securities regulatory authorities. The Company's Articles of Association provide that a quorum of two shareholders in person or represented by proxy holding or representing by proxy not less than 5% of the Company's issued shares carrying the right to vote at the meeting is required to transact business at a shareholders' meeting. Shareholders, and their duly appointed proxies and corporate representatives, as well as the Company's auditors, are entitled to be admitted to the Company's annual and special shareholders' meetings.
 
49

Limitations on the Right to Own Securities
There are no limitations on the rights to own securities.
Limitations on Restructuring
There is no provision in our Articles of Association that would have the effect of placing any limitations on any corporate restructuring in addition to what would otherwise be required by applicable law.

Disclosure of Share Ownership
The Articles of Association that were adopted pursuant to the continuance permits the company to give a disclosure notice to any person that the Company has reasonable cause to believe is/was interested in the Company's shares within the preceding three years; such notice may require the person to inform the Company whether that person holds/has held an interest in the Company's shares. The Articles of Association also incorporates by reference certain of the disclosure and transparency rules ("DTR ") published by the UK's Financial Conduct Authority ("FCA"). The DTR include, inter alia, a requir ement that a shareholder must notify the Company of the percentage of its voting rights (held directly and indirectly) if the percentage of those voting rights reaches, exceeds or falls below 3%, of the Company's issued voting securities and each 1% threshold above 3%.

C.
Material Contracts
We enter into various contracts in the normal course of business.  However, there are no material contracts outside of the normal course of business to report here.

D.
Exchange Controls
There are no governmental laws, decrees or regulations existing in Jersey (where Caledonia is incorporated), which restrict the export or import of capital, or the remittance of dividends, interest or other payments to non-resident holders of Caledonia's securities.  Nor does Jersey have foreign exchange currency controls.  Exchange control approvals from the Reserve Bank of Zimbabwe are required on the flow of funds in and out of Zimbabwe; Caledonia has not encountered difficulty in obtaining all of its required approvals.

E.
Taxation
Certain United States Federal Income Tax Considerations

The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of Common Shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of Common Shares.  In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including without limitation specific tax consequences to a U.S. Holder under an applicable tax treaty.  Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder.  This summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares.  In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements.  Each prospective U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax consequences relating to the acquisition, ownership, and disposition of Common Shares.
No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the "IRS") has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.  This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary.  In addition, because the authorities on which this summary are based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary.
 
50

Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this document.  Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary.  This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

U.S. Holders
For purposes of this summary, the term "U.S. Holder" means a beneficial owner of Common Shares that is for U.S. federal income tax purposes:
·
an individual who is a citizen or resident of the U.S.;
·
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the U.S., any state thereof or the District of Columbia;
·
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
·
a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following U.S. Holders that:  (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a "functional currency" other than the U.S. dollar; (e) own Common Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) acquired Common Shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) hold Common Shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); or (h) own, have owned or will own  (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the outstanding shares of the Company.  This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are:  (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada) (the "Tax Act"); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold Common Shares in connection with carrying on a business in Canada; (d) persons whose Common Shares constitute "taxable Canadian property" under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention.  U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax consequences relating to the acquisition, ownership and disposition of Common Shares.
If an entity or arrangement that is classified as a partnership (or other "pass-through" entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such entity and the partners (or other owners) of such entity generally will depend on the activities of the entity and the status of such partners (or owners).  This summary does not address the tax consequences to any such owner.  Partners (or other owners) of entities or arrangements that are classified as partnerships or as "pass-through" entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of Common Shares.
 
51
Ownership and Disposition of Common Shares
The following discussion is subject to the rules described below under the heading "Passive Foreign Investment Company Rules."
Taxation of Distributions
A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a Common Share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent of the current or accumulated "earnings and profits" of the Company, as computed for U.S. federal income tax purposes.  To the extent that a distribution exceeds the current and accumulated "earnings and profits" of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the Common Shares and thereafter as gain from the sale or exchange of such Common Shares (see "Sale or Other Taxable Disposition of Common Shares" below).  However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution by the Company with respect to the Common Shares will constitute ordinary dividend income.  Dividends received on Common Shares by corporate U.S. Holders generally will not be eligible for the "dividends received deduction".  Subject to applicable limitations   and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention, or the Common Shares are readily tradable on a United States securities market dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC (as defined below) in the tax year of distribution or in the preceding tax year.  The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of Common Shares in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holder's tax basis in such Common Shares sold or otherwise disposed of.  Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if, at the time of the sale or other disposition, such Common Shares are held for more than one year.
Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust.  There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation.  Deductions for capital losses are subject to significant limitations under the Code.

52
Passive Foreign Investment Company Rules
If the Company were to constitute a PFIC for any year during a U.S. Holder's holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of Common Shares.  The Company believes that it was not a PFIC for the tax year ended December 31, 2015. No opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or is currently planned to be requested. However, PFIC classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in question, and is determined annually.  Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations.  Consequently, there can be no assurance that the Company has never been and will not become a PFIC for any tax year during which U.S. Holders hold Common Shares.
In addition, in any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require.  A failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax.  U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621.
The Company generally will be a PFIC under Section 1297 of the Code if, after the application of certain "look-through" rules with respect to subsidiaries in which the Company holds at least 25% of the value of such subsidiary, for a tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income (the "income test") or (b) 50% or more of the value of the Company's assets either produce passive income or are held for the production of passive income (the "asset test"), based on the quarterly average of the fair market value of such assets.  "Gross income" generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and "passive income" generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.  Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation's commodities are stock in trade or inventory, depreciable property used in a trade or business or supplies regularly used or consumed in the ordinary course of its trade or business, and certain other requirements are satisfied.
If the Company were a PFIC in any tax year during which a U.S. Holder held Common Shares, such holder generally would be subject to special rules with respect to "excess distributions" made by the Company on the Common Shares and with respect to gain from the disposition of Common Shares. An "excess distribution" generally is defined as the excess of distributions with respect to the Common Shares received by a U.S Holder in any tax year over 125% of the average annual distributions such U.S. Holder has received from the Company during the shorter of the three preceding tax years, or such U.S. Holder's holding period for the Common Shares. Generally, a U.S. Holder would be required to allocate any excess distribution or gain from the disposition of the Common Shares ratably over its holding period for the Common Shares. Such amounts allocated to the year of the disposition or excess distribution would be taxed as ordinary income, and amounts allocated to prior tax years would be taxed as ordinary income at the highest tax rate in effect for each such year and an interest charge at a rate applicable to underpayments of tax would apply.
While there are U.S. federal income tax elections that sometimes can be made to mitigate these adverse tax consequences (including the "QEF Election" under Section 1295 of the Code and the "Mark-to-Market Election" under Section 1296 of the Code), such elections are available in limited circumstances and must be made in a timely manner.
U.S. Holders should be aware that, for each tax year, if any, that the Company is a PFIC, the Company can provide no assurances that it will satisfy the record keeping requirements of a PFIC, or that it will make available to U.S. Holders the information such U.S. Holders require to make a QEF Election with respect to the Company or any subsidiary that also is classified as a PFIC.  U.S. Holders should consult their own tax advisors regarding the potential application of the PFIC rules to the ownership and disposition of Common Shares, and the availability of certain U.S. tax elections under the PFIC rules.

53

Additional Considerations
Additional Tax on Passive Income

Certain individuals, estates and trusts whose income exceeds certain thresholds will be required to pay a 3.8% surtax on "net investment income" including, among other things, dividends and net gain from disposition of property (other than property held in certain trades or businesses). Special rules apply to PFICs. U.S. Holders should consult their own tax advisors regarding the effect, if any, of this tax on their ownership and disposition of Common Shares.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of Common Shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time).  A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt.  Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes.  Different rules apply to U.S. Holders who use the accrual method with respect to foreign currency received upon the sale, exchange or other taxable disposition of the Common Shares. Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax.  Generally, a credit will reduce a U.S. Holder's U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder's income subject to U.S. federal income tax.  This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder's U.S. federal income tax liability that such U.S. Holder's "foreign source" taxable income bears to such U.S. Holder's worldwide taxable income.  In applying this limitation, a U.S. Holder's various items of income and deduction must be classified, under complex rules, as either "foreign source" or "U.S. source."  Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election is properly made under the Code.  However, the amount of a distribution with respect to the Common Shares that is treated as a "dividend" may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder.  In addition, this limitation is calculated separately with respect to specific categories of income.  The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.

Backup Withholding and Information Reporting

Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation.  For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts.  The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity.  U. S. Holders may be subject to these reporting requirements unless their Common Shares are held in an account at certain financial institutions.  Penalties for failure to file certain of these information returns are substantial.  U.S. Holders should consult their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.
 
54

Payments made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, Common Shares will generally be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holder's correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax.  However, certain exempt persons generally are excluded from these information reporting and backup withholding rules.  Backup withholding is not an additional tax.  Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder's U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.

The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder.  A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement.  Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules.

F.
Dividends and Paying Agents
Not Applicable.

G.
Statement by Experts
Not Applicable.

H.
Documents on Display
Any statement in this Annual Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this Annual Report, the contract or document is deemed to modify the description contained in this Annual Report. Readers must review the exhibits themselves for a complete description of the contract or document.

Readers may review a copy of our filings with the SEC, including exhibits and schedules filed with it, at the SEC's public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. Readers may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC maintains a Web site (http://www.sec.gov) that contains reports, submissions and other information regarding registrants that file electronically with the SEC. We have only recently become subject to the requirement to file electronically through the EDGAR system most of its securities documents, including registration statements under the Securities Act of 1933, as amended and registration statements, reports and other documents under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

We also file certain reports with the Canadian Securities Administrators that you may obtain through access of the SEDAR website, www.sedar.com .

Readers may read and copy any reports, statements or other information that we file with the SEC at the address indicated above and may also access them electronically at the Web site set forth above. These SEC filings are also available to the public from commercial document retrieval services.

We are required to file reports and other information with the SEC under the Exchange Act. Reports and other information filed by us with the SEC may be inspected and copied at the SEC's public reference facilities described above. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in section 16 of the Exchange Act. Under the Exchange Act, as a foreign private issuer, we are not required to publish financial statements as frequently or as promptly as United States companies.

Copies of our material contracts are kept at our principal executive office.
 
55

I.
Subsidiary Information
Not Applicable.

ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on preservation of capital, and protecting current and future Company assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.

The Board of Directors has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Company's Audit Committee oversees management's compliance with the Company's financial risk management policy.

The fair value of the Company's financial instruments approximates their carrying value unless otherwise noted.  The types of risk exposure and the way in which such exposures are managed are as follows:

A.
Currency Risk
As the Company operates in an international environment, some of the Company's financial instruments and transactions are denominated in currencies other than the US dollar. The results of the Company's operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Company are reported in US dollar in the Consolidated Financial Statements.
The fluctuation of the US dollar in relation to other functional currencies of entities within the Company will consequently have an impact upon the profitability of the Company and may also affect the value of the Company's assets and liabilities and the amount of shareholders' equity.
As noted below, the Company has certain financial assets and liabilities denominated in currencies other than the reporting currency. The Company does not use any derivative instruments to reduce its foreign currency risk.
To reduce exposure to currency transaction risk, the Company maintains cash and cash equivalents in the currencies used by the Company to meet short ‐ term liquidity requirements.
Below is a summary of the assets and liabilities denominated in a currency other than the US dollar that would be affected by changes in exchange rates relative to the US dollar for reporting purposes. The values are the US dollar equivalent of the respective asset or liability that is denominated in Canadian dollars or South African rands.


   
December 31,
2015
   
December 31,
2014
   
January 1,
2014
 
                   
Cash and cash equivalents
   
132
     
470
     
416
 
Trade and other receivables
   
566
     
83
     
1
 
Trade and other payables
   
510
     
575
     
648
 


Sensitivity analysis
 
As a result of the Company 's monetary assets and liabilities denominated in foreign currencies which is different to the functional currency of the underlying entities, the profit or loss in the underlying entities could be affected by movements between the functional currency and the foreign currency. The table below indicates net monetary assets/(liabilities) in the Company that have a different functional currency and foreign currency. Amounts are indicated before elimination of intergroup balances.
 
56
 
   
2015
USD'000
   
2014
USD'000
   
2013
USD'000
 
   
Functional currency
   
Functional currency
   
Functional currency
 
   
ZAR
   
CAD
   
ZAR
   
CAD
   
ZAR
   
CAD
 
Cash and cash equivalents
   
3,874
     
5,483
     
10,514
     
553
     
8,197
     
1,594
 
Trade and other payables
   
-
     
-
     
-
     
-
     
-
     
-
 
Intercompany balances *
   
(27,650
)
   
44,390
     
(30,320
)
   
48,484
     
(31,079
)
   
57,207
 
     
(23,776
)
   
49,873
     
(19,806
)
   
49,037
     
(22,882
)
   
58,801
 

A reasonably possible strengthening or weakening of 5% of the various functional currencies against the foreign currencies, would have the following equal or opposite effect on profit or loss before tax for the Company:

   
2015
USD'000
   
2014
USD'000
   
2013
USD'000
 
   
Functional currency
   
Functional currency
   
Functional currency
 
   
ZAR
   
CAD
   
ZAR
   
CAD
   
ZAR
   
CAD
 
Cash and cash equivalents
   
194
     
274
     
526
     
28
     
410
     
80
 
Trade and other payables
   
-
     
-
             
-
     
-
     
-
 
Intercompany balances *
   
(1,382
)
   
2,219
     
(1,516
)
   
2,424
     
(1,554
)
   
2,860
 

* These intercompany balances represent the exposure to foreign currency risk between functional currencies and foreign currencies at a subsidiary level. These balances eliminates on consolidation.
 
B.
Interest Rate Risk
The Company has no significant exposure to interest rate risk.

C.
Concentration of Credit Risk
Credit risk is the risk of a financial loss to the Company if a gold sales customer fails to meet its contractual obligation. From 2014, gold sales were made to Fidelity in Zimbabwe and the payment terms stipulated in the service delivery contract have been adhered to in all instances. No funds were outstanding at December 31, 2015, for bullion delivered. VAT receivables from the South African Revenue Services and Zimbabwe Revenue Authority was received after December 31, 2015.

D.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.

The Company manages its liquidity by ensuring that there is always sufficient capital to meet its estimated cash requirements, after taking into account cash flows from operations and the Company's holdings of cash and cash equivalents. The Company believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities.

E.
Commodity Price Risk
The value of the Company's mineral resource properties is related to the price of gold and the outlook for these minerals. In addition, adverse changes in the price of certain key or high cost operating consumables can significantly impair the Company's cash flows.
 
57

Gold prices historically have fluctuated widely and are affected by numerous factors outside of the Company's control, including, but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand because of speculative hedging activities, and macro-economic variables, and certain other factors related specifically to gold.

In February 2016, the Company announced it had entered into a hedge in respect of 15,000 ounces of gold over a period of 6 months.  The hedge protects the Company if the gold price falls below $1,050 per ounce but gives Caledonia full participation if the price of gold exceeds $1,079 per ounce.  Blanket continues to sell all of its gold production to Fidelity Printers and Refiners Ltd ("Fidelity"), as required by Zimbabwean legislation, and receives the spot price of gold less an early settlement discount of 1.25%.  The maximum cost of the hedge to Caledonia is $435,000..
 
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not Applicable.

ITEM 13 - DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES
Not Applicable.

ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not Applicable.

ITEM 15 - CONTROLS AND PROCEDURES
A.   Disclosure Controls and Procedures
The Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures, and assessed the design of the Company's internal control over financial reporting as of December 31, 2015.  As required by Rule 13(a)-15 under the Exchange Act, in connection with this Annual Report on Form 20-F, under the direction of our Chief Executive Officer, we have evaluated our disclosure controls and procedures as of December 31, 2015, and we have concluded our disclosure controls and procedures were effective as at December 31, 2015.

B.   Management's annual report on internal control over financial reporting ("ICOFR")
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting has been designed to provide reasonable assurance with respect to the reliability of financial reporting and the presentation of financial statements for external purposes in accordance with IFRS. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
As of the date of this filing, we have in place controls and procedures to maintain appropriate segregation of duties in our manual and computer based business processes that we believe are appropriate for a company of our size and extent of business transactions. Under the supervision and with the participation of the CEO and CFO, Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2015. In making their assessment, Management used the control objectives established in the 1992 Committee of Sponsoring Organizations of the Treadway Commission ("COSO") framework over Financial Reporting. Based upon that assessment, Management concluded that the Company's internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2015.
 
58
C.   Attestation Report of registered public accounting firm
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which permits us to provide only management's report in this Annual Report; the Dodd-Frank Act permits a "non-accelerated filer" to provide only management's report on internal control over financial reporting in an Annual Report and omit an attestation report of the issuer's registered public accounting firm regarding management's report on internal control over financial reporting and (ii) as we qualify as an "emerging growth company" under section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and are therefore exempt from the attestation requirement.

D.   Changes in internal controls over financial reporting.
There were no changes in the Company's internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of 17 CFR 240.13a-15 or 240.15d-15 that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting.

 
59

ITEM 16A - AUDIT COMMITTEE FINANCIAL EXPERT
Caledonia's Board of Directors has determined, as at March 30, 2016 that the three members of its Audit Committee are considered independent as defined under NI 52-110 and as defined pursuant to Section 803 of the NYSE MKT Company Guide (as such definition may be modified or supplemented) and considered to be financially literate as such terms are defined under National Instrument 52-110 Audit Committees and one of the members can be considered to be an expert.  The financial expert serving on the audit committee is Mr. Johan Holtzhausen.  Mr. Holtzhausen and Messrs., J. Kelly and L. Wilson are all independent directors under the applicable rules.

The SEC has indicated that the designation of an audit committee financial expert does not make that person an "expert" for any purpose, impose any duties, obligations, or liability on that person that are greater than those imposed on members of the audit committee and board of directors who do not carry this designation, or affect the duties, obligations, or liabilities of any other member of the audit committee.

ITEM 16B - CODE OF ETHICS
On April 8, 2004 the registrant's Board of Directors adopted a code of ethics that applies to the registrant's Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, or persons performing similar functions.

The registrant has filed a copy of this code of ethics that applies to the registrant's Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, or persons performing similar functions.  The code of ethics has not been amended.

The text of this code of ethics has been posted on the Company website. ( www.caledoniamining.com )

ITEM 16C - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the audit service fees billed by our current external auditors, unless stated otherwise, for the years indicated:


   
2015 (1)
   
2014 (1)
   
2013 (1)
 
Audit fees
   
181,652
     
276,824
     
266,990
 
Audit – related fees
   
-
     
-
     
31,068
 
Tax fees (2)
   
181950
     
56,414
     
1,456
 
All other fees
   
-
     
-
     
-
 
TOTAL
   
363,602
     
333,238
     
299,514
 

Notes:
(1)
Prior to the start of the audit process, Caledonia's Audit Committee receives an estimate of the costs, from its auditors and reviews such costs for their reasonableness. After their review and pre-approval of the fees, the Audit Committee recommend to the board of directors to accept the estimated audit fees given by the auditors.
(2)
Tax fees were for assistance provided regarding international tax matters relating to a possible permanent establishment tax exposure and a tax transfer pricing review.

ITEM 16D - EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not Applicable.

60


ITEM 16E - PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not Applicable.

ITEM 16F - CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.

ITEM 16G - CORPORATE GOVERNANCE
Not Applicable.

ITEM 16H - MINE SAFETY DISCLOSURE
Not Applicable.

ITEM 17 - FINANCIAL STATEMENTS
See Item 18.
ITEM 18 - FINANCIAL STATEMENTS
The financial statements and schedules appear on pages F-1 through F-63 of this Annual Report and are incorporated herein by reference. Our audited financial statements as prepared by our management and approved by the Board of Directors include:

Consolidated Statements of Profit and loss and other Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements

All the above statements are available on the Company's website – www.caledoniamining.com or under the Company's profile on the System for Electronic Document Analysis and Retrieval (" SEDAR ") at www.sedar.com
 
61

ITEM 19 – EXHIBITS
Financial Statements

Description
 
Page
     
Financial Statements and Notes
 
F1- F63

Exhibit List

Exhibit No.
Name
Articles of Association (incorporated herein by reference to Exhibit 1.1 to the Registrant's Annual Report on Form 20-F filed with the SEC on March 31, 2015)
Stock Option Plan (revised 2015) (incorporated herein by reference to Exhibit 4.1 to the Registrant's Annual Report on Form 20-F filed with the SEC on March 31, 2015)
Employment contracts/executive employment agreements
List of  Caledonia Mining Corporation Plc group entities
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Independent Technical Report and PEA on the Blanket Mine Property in Zimbabwe(incorporated herein by reference to Exhibit 15.1 to the Registrant's Annual Report on Form 20-F filed with the SEC on March 31, 2015)
Property and Claims Information Blanket (incorporated herein by reference to Exhibit 15.2 to the Registrant's Annual Report on Form 20-F filed with the SEC on March 31, 2015)
Shareholder Rights Plan (incorporated herein by reference to Exhibit 15.3 to the Registrant's Annual Report on Form 20-F filed with the SEC on March 31, 2015)
Share Subscription Agreements – Blanket Mine (incorporated herein by reference to Exhibit 15.4 to the Registrant's Annual Report on Form 20-F filed with the SEC on March 31, 2015)
 


62

Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders Shareholders
Caledonia Mining Corporation Plc

We have audited the accompanying consolidated statements of financial position of Caledonia Mining Corporation Plc ("the Company") as of December 31, 2015 and December 31, 2014 and the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for each of the years in the three‑year period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Caledonia Mining Corporation Plc as of December 31, 2015 and December 31, 2014, and its consolidated financial performance and its consolidated cash flows for each of the years in the three‑year period ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
As discussed in Note 2(iii) to the consolidated financial statements, the Company has retrospectively changed its presentation currency in the consolidated financial statements from the Canadian dollar to the United States dollar, which included the presentation of the consolidated statement of financial position as of January 1, 2014.

(Signed) KPMG Inc.



85 Empire Road
Parktown
Johannesburg
South Africa
March 30, 2016

 





F1


Caledonia Mining Corporation Plc

 
Consolidated statements of profit or loss and other comprehensive income
(In thousands of United States Dollars, unless indicated otherwise)
 
 
 For the years ended  December 31
 
Note
 
2015
   
* 2014
   
* 2013
 
                       
Revenue
       
48,977
     
53,513
     
63,217
 
Less: Royalties
       
(2,455
)
   
(3,522
)
   
(4,412
)
          Production costs
 
8
   
(30,019
)
   
(27,908
)
   
(26,614
)
          Depreciation
       
(3,322
)
   
(3,540
)
   
(3,181
)
Gross profit
       
13,181
     
18,543
     
29,010
 
Other income
       
110
     
25
     
-
 
Administrative expenses
 
9
   
(7,622
)
   
(7,387
)
   
(7,546
)
Share-based payment expense
 
20
   
(24
)
   
-
     
(66
)
Net foreign exchange gain
       
2,850
     
1,065
     
1,628
 
Impairment
 
12
   
-
     
(178
)
   
(13,789
)
Operating profit
       
8,495
     
12,068
     
9,237
 
Finance income
 
10
   
1
     
14
     
23
 
Finance cost
 
10
   
(536
)
   
(154
)
   
(128
)
Net finance costs
       
(535
)
   
(140
)
   
(105
)
Profit before tax
       
7,960
     
11,928
     
9,132
 
Tax expense
 
11
   
(2,370
)
   
(5,982
)
   
(9,609
)
Profit for the year
       
5,590
     
5,946
     
(477
)
Other comprehensive income
                           
Items that are or may be reclassified to profit or loss
                           
Foreign currency translation differences of foreign operations
       
(3,291
)
   
(685
)
   
(1,567
)
Tax on other comprehensive income
 
11
   
199
     
111
     
-
 
Total comprehensive income for the year
       
2,498
     
5,372
     
(2,044
)
                             
Profit attributable to:
                           
Owners of the Company
       
4,779
     
4,435
     
(2,967
)
Non-controlling interests
       
811
     
1,511
     
2,490
 
Profit for the year
       
5,590
     
5,946
     
(477
)
Total comprehensive income attributable to:
                           
Owners of the Company
       
1,687
     
3,861
     
(4,534
)
Non-controlling interests
       
811
     
1,511
     
2,490
 
Total comprehensive income for the year
       
2,498
     
5,372
     
(2,044
)
                             
Earnings per share
                           
Basic earnings -  per share ($)
 
18
   
0.09
     
0.08
     
(0.05
)
Diluted earnings - per share ($)
 
18
   
0.09
     
0.08
     
(0.05
)
                             
                             
* Re-presented, refer note 2 (iii)
 
F2
Caledonia Mining Corporation Plc
 
 
Consolidated statements of financial position
(In thousands of United States Dollars, unless indicated otherwise)
 
   
Note
 
December 31
   
* December 31
   
* January 1
 
As at
     
2015
   
2014
   
2014
 
Assets
                     
Property, plant and equipment
 
12
   
49,218
     
34,736
     
31,272
 
Deferred tax asset
 
11
   
58
     
-
     
-
 
Total non-current assets
       
49,276
     
34,736
     
31,272
 
                             
Inventories
 
13
   
6,091
     
6,512
     
6,419
 
Prepayments
       
667
     
299
     
165
 
Trade and other receivables
 
14
   
3,839
     
1,755
     
3,636
 
Income tax receivable
       
397
     
95
     
-
 
Cash and cash equivalents
 
15
   
12,568
     
23,082
     
23,580
 
Total current assets
       
23,562
     
31,743
     
33,800
 
Total assets
       
72,838
     
66,479
     
65,072
 
                             
Equity and liabilities
                           
Share capital
 
16
   
54,569
     
54,569
     
54,569
 
Reserves
 
17
   
141,942
     
145,209
     
145,894
 
Retained loss
       
(147,654
)
   
(150,128
)
   
(151,824
)
Equity attributable to shareholders
       
48,857
     
49,650
     
48,639
 
Non-controlling interests
 
30
   
1,504
     
693
     
(48
)
Total equity
       
50,361
     
50,343
     
48,591
 
                             
Liabilities
                           
Provisions
 
21
   
2,762
     
2,484
     
1,470
 
Deferred tax liability
 
11
   
11,318
     
8,680
     
7,967
 
Total non-current liabilities
       
14,080
     
11,164
     
9,437
 
                             
Trade and other payables
 
22
   
6,656
     
3,260
     
4,301
 
Income tax payable
       
53
     
1,712
     
1,064
 
Bank overdraft
 
15
   
1,688
     
-
     
1,679
 
Total current liabilities
       
8,397
     
4,972
     
7,044
 
Total liabilities
       
22,477
     
16,136
     
16,481
 
Total equity and liabilities
       
72,838
     
66,479
     
65,072
 
 
 
 
The accompanying notes on page F7 to F63 are an integral part of these consolidated financial statements.

On behalf of the Board:  "S.R. Curtis"- Chief Executive Officer and "M. Learmonth"- Chief Financial Officer.
F3
Caledonia Mining Corporation Plc
 
Consolidated statements of changes in equity
(In thousands of United States Dollars, unless indicated otherwise)
 
   
Share capital
   
Foreign Currency Translation Reserve
   
Contributed Surplus
   
Share- based payment reserve
   
Retained Loss
   
Total
   
Non- controlling interests ("NCI")
   
Total Equity
 
Balance at December 31, 2012 *
   
186,704
     
(977
)
   
-
     
15,781
     
(143,718
)
   
57,790
     
(1,807
)
   
55,983
 
Transactions with owners:
                                                               
Reduction in stated capital
   
(132,591
)
   
-
     
132,591
     
-
     
-
     
-
     
-
     
-
 
Share-based payment transaction
   
-
     
-
     
-
     
66
     
-
     
66
     
-
     
66
 
Dividends paid
   
-
     
-
     
-
     
-
     
(5,139
)
   
(5,139
)
   
(731
)
   
(5,870
)
Shares issued
   
456
     
-
     
-
     
-
     
-
     
456
     
-
     
456
 
Total comprehensive income:
                                                               
Profit for the year
   
-
     
-
     
-
     
-
     
(2,967
)
   
(2,966
)
   
2,490
     
(477
)
Other comprehensive income for the year
   
-
     
(1,567
)
   
-
     
-
     
-
     
(1,567
)
   
-
     
(1,567
)
Balance at December 31, 2013 *
   
54,569
     
(2,544
)
   
132,591
     
15,847
     
(151,824
)
   
48,639
     
(48
)
   
48,591
 
Transactions with owners:
                                                               
Dividends paid
   
-
     
-
     
-
     
-
     
(2,850
)
   
(2,850
)
   
(770
)
   
(3,620
)
Total comprehensive income:
           
-
                                                 
Profit for the year
   
-
     
-
     
-
     
-
     
4,435
     
4,435
     
1,511
     
5,946
 
Other comprehensive income for the year
   
-
     
(685
)
   
-
     
-
     
111
     
(574
)
   
-
     
(574
)
Balance at December 31, 2014 *
   
54,569
     
(3,229
)
   
132,591
     
15,847
     
(150,128
)
   
49,650
     
693
     
50,343
 
Transactions with owners:
                                                               
Share-based payment transaction
   
-
     
-
     
-
     
24
     
-
     
24
     
-
     
24
 
Dividends paid
   
-
     
-
     
-
     
-
     
(2,504
)
   
(2,504
)
   
-
     
(2,504
)
Total comprehensive income:
                                                               
Profit for the year
   
-
     
-
     
-
     
-
     
4,779
     
4,779
     
811
     
5,590
 
Other comprehensive income for the year
   
-
     
(3,291
)
   
-
     
-
     
199
     
(3,092
)
   
-
     
(3,092
)
Balance at December 31, 2015
   
54,569
     
(6,520
)
   
132,591
     
15,871
     
(147,654
)
   
48,857
     
1,504
     
50,361
 
 

* Re-presented, refer note 2 (iii)

F4
Caledonia Mining Corporation Plc
 
 
Consolidated Statements of cash flows
                       
For the years ended  December 31
                       
(In thousands of United States Dollars, unless indicated otherwise)
 
Note
   
2015
   
* 2014
   
* 2013
 
                         
Cash flows from operating activities
   
23
     
8,823
     
15,584
     
20,433
 
Interest received
           
1
     
14
     
23
 
Interest paid
           
(493
)
   
(121
)
   
(128
)
Tax paid
   
11
     
(1,462
)
   
(4,526
)
   
(7,742
)
Net cash from operating activities
           
6,869
     
10,951
     
12,586
 
                                 
Cash flows from investing activities
                               
Acquisition of property, plant and equipment
           
(16,567
)
   
(6,150
)
   
(11,396
)
Net cash used in investing activities
           
(16,567
)
   
(6,150
)
   
(11,396
)
                                 
Cash flows from financing activities
                               
Dividends paid
           
(2,504
)
   
(3,620
)
   
(5,870
)
Advance dividend paid
           
-
     
-
     
(2,000
)
Proceeds from the exercise of share options
           
-
     
-
     
456
 
Net cash used in financing activities
           
(2,504
)
   
(3,620
)
   
(7,414
)
                                 
Net (decrease)/increase in cash and cash equivalents
           
(12,202
)
   
1,181
     
(6,224
)
Cash and cash equivalents at beginning of year
           
23,082
     
21,901
     
28,125
 
Net cash and cash equivalents at year end
   
15
     
10,880
     
23,082
     
21,901
 

* Re-presented, refer note 2 (iii)


F5
 
 
 
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
1   Reporting entity
Caledonia Mining Corporation (the "Company") was a company domiciled in Canada as at December 31, 2015. The Company re-domiciled to Jersey Channel Islands on March 21, 2016 and changed its name to Caledonia Mining Corporation Plc (refer to note 31). The new address of the Company's registered office is 43-45 La Motte Street, Jersey Channel Islands, JE4 8SD. The address for the year ending December 31, 2015 was Suite 4009, 1 King Street West, Toronto, Ontario, M5H 1A1, Canada. These consolidated financial statements of the Group a s at December 31, 2015, December 31, 2014 and January 1, 2014; and for the years ended December 31, 2015, December 31, 2014 and December 31, 2013 comprise the Company and its subsidiaries (together referred to as the "Group" and individually as "Group entities"). The Group is primarily involved in the operation of a gold mine and the exploration and development of mineral properties for precious metals.
2   Basis for preparation
(i) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The consolidated financial statements were authorised for issue by the Board of Directors on March 30, 2016.
(ii) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for equity-settled share-based payment arrangements measured at fair value on grant date.
(iii) Functional and change in presentation currency
Effective December 31, 2015, Caledonia Mining Corporation Plc changed its presentation currency in the consolidated financial statements from the Canadian dollar to the United States dollar ("US dollar"). The change in presentation currency was made to better reflect the Group's business activities and to improve investor ability to compare the Group's financial results with other publicly traded businesses in the industry. In making the change to a US dollar presentation currency, the Group applied the change retrospectively   as if the new presentation currency had always been the Group's presentation currency. The change in presentation currency was applied retrospectively up to January 1, 2010, which was the date of initial adoption of IFRS by the Group. Equity was translated at the exchange rate at January 1, 2010, except for the foreign currency translation reserve which was reset to zero and with the balance recognised in retained earnings, in accordance with IFRS 1: First-time Adoption of International Financial Reporting Standards . The financial statements for all the years presented have been translated to a US dollar presentation currency. For comparative balances, assets and liabilities were translated into the presentation currency at the rate of exchange prevailing at the reporting date for those financial years, income and expenses were translated into the presentation currency using the exchange rate at the date of transaction or using a reasonable average exchange rate that approximates the exchange rates at the dates of the transactions in accordance with IAS 21: The Effects of Changes in Foreign Exchange Rates . Exchange rate differences arising on translation to the presentation currency were recognised in the foreign currency translation reserve in shareholders' equity.
 
F6
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
2   Basis for preparation (continued)
 (iv) Going concern
These consolidated financial statements have been prepared on a going concern basis.
3   Use of estimates and judgements
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions in estimates are recognised prospectively.
(a)
Judgements, assumptions and estimation uncertainties
i)
Indigenisation transaction
The indigenisation transaction of the Blanket Mine (1983) (Private) Limited ("Blanket Mine") required management to make significant judgements and assumptions which are explained in Note 5.
 
ii)
Site restoration provisions
The site restoration provision has been calculated for the Blanket Mine based on an independent analysis of the rehabilitation costs as performed in 2015 and based on the internal assessment for Eersteling Gold Mining Company Limited. 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 where the time value of money effect is significant. Assumptions, based on the current economic environment, have been made that management believes are a reasonable basis upon which to estimate the future liability. These estimates take into account 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 conditions at the time the rehabilitation costs are actually incurred.  The final cost of the currently recognized site rehabilitation provisions may be higher or lower than currently provided for.

F7
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
3   Use of estimates and judgements - (continued)
iii)
Exploration and evaluation ("E&E") expenditure
The application of the Group's accounting policy for exploration and evaluation expenditures requires judgements when determining which expenditures are recognised as exploration and evaluation assets ("E&E properties"), disclosed under Property, plant and equipment as mineral properties not depreciated. The Group also 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 amount of the South African mineral properties (if not impaired) is dependent upon the availability of sufficient funding to bring the properties into commercial production, the price of the products to be recovered, the exchange rate of the local currency relative to the currency of funding and the undertaking of profitable mining operations. As a result of these uncertainties, the actual amount recovered may vary significantly from the carrying amount.
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. The Group records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.In addition, the Group 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 may be utilized or sufficient estimated taxable income against which the losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.
v)
Share based payment transactions
The Group measures the cost of equity-settled, share based payment transactions with employees, directors as well as with Indigenous Shareholders (refer note 5 and 20) by reference to the fair value of the equity instruments on the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the appropriate valuation model, considering the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield. Additional information about significant judgements and estimates and assumptions for estimating fair value for share-based payment transactions are disclosed in note 20.

F8
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
Use of estimates and judgements - (continued)
Option pricing models require the input of highly subjective assumptions including the expected price volatility.  Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Group's share options .
vi)
Impairment
At each reporting date, the Group determines if impairment indicators exist, and if present, performs an impairment review of the non-financial assets held in the Group. The exercise is subject to various judgemental decisions and estimates. Financial assets are also reviewed regularly for impairment. Further details of the judgements and estimates made for these reviews are set out in Note 4(g).
vii)
Functional currency
The functional currency of each entity in the Group is determined after considering various primary and secondary indicators which require management to make numerous judgement decisions. The determination of the functional currency has a bearing on the translation process and ultimately the foreign currency translation reserve.
viii)
Measurement of fair values
Some of the Group's accounting policies and disclosure require the measurement of fair values, for both financial and non-financial assets and liabilities.
The Group has established a control framework with respect to the measurement of fair values. This includes a valuation team member who has overall responsibility for overseeing all significant fair value measurements.
Significant valuation issues are reported to the Group's Audit Committee.  No such issues were identified during the reporting period.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Where applicable, fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation technique as follows:
·
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
·
Level 2: inputs other than quoted prices included in Level 1 that are observable for the assets and liabilities, either directly (i.e. as price) or indirectly (i.e. derives from prices).
·
Level 3: inputs for the assets or liabilities that are not based for identical assets or observable market data (unobservable inputs).
F9
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
4   Significant accounting policies
Except as stated in note 4(p), the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The accounting policies have been applied consistently by the Group entities.
 (a) Basis of consolidation
i)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variability in returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
ii)
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related Non-controlling interests ("NCI") and other components of equity. Any gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
iii)
Non-controlling interests
NCI are measured at their proportionate share of the carrying amounts of the acquiree's identifiable net assets at fair value at the acquisition date. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
iv)
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
 (a) Foreign currency
i)
Foreign operations
As stated in note 2(iii) the presentation currency of the Group is the US dollar. The functional currency of Caledonia Mining Corporation Plc is the Canadian dollar, and for its subsidiaries it is US dollar, Zambian Kwacha and South African Rand ("ZAR"). Subsidiary financial statements have been translated to US dollars as follows:
 
·
Assets and liabilities are translated using the exchange rate at period end; and
·
Income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions.
 
F10
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
4   Significant accounting policies – (continued)

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized in Other Comprehensive Income ("OCI"). If settlement is planned or likely in the foreseeable future, foreign exchange gains and losses are included in profit or loss. When settlement occurs, settlement will not be regarded as a partial disposal and accordingly the foreign exchange gain or loss previously recognised in OCI is not reclassified to profit or loss/reallocated to NCI.

When the Group disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in OCI related to the foreign operation are recognized in profit or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in OCI related to the subsidiary are reallocated between controlling and non-controlling interests.

All resulting translation differences are reported in OCI.
ii)
Foreign currency translation
In preparing the financial statements of the Group entities, transactions in currencies other than the Group entities' functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities are translated using the current foreign exchange rate. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All gains and losses on translation of these foreign currency transactions are included in profit or loss for the year.
Financial instruments
i)
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
 
F11
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
4   Significant accounting policies - (continued)
The Group has the following non-derivative financial assets: trade and other receivables as well as cash and cash equivalents.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. The impairment loss on receivables is based on a review of all outstanding amounts at period end. Bad debts are written off during the year in which they are identified. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial .

Loans and receivables include trade and other receivables.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts are repayable on demand and form an integral part of the Group's cash management process. The bank overdraft is included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
ii)
Non-derivative financial liabilities
Financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Non-derivative financial liabilities consist of bank overdrafts and trade and other payables.
Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.
(d) Share capital
Share capital is classified as equity. Incremental costs directly attributable to the issue of common shares and share options are recognised as a deduction from equity, net of any tax effects.
F12
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
4
Significant accounting policies – (continued)
(e) Property, plant and equipment
i)
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised within other income in profit or loss.
ii)
Exploration and evaluation expenditure
Exploration costs are expensed as incurred, unless there is a high degree of confidence in the project's viability and it is probable that the project will return future economic benefits to the group when all further pre-production expenditure is capitalised. These costs include evaluation costs.
Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation expenditures ("E&E") are capitalized in addition to the acquisition costs and disclosed under Property, plant and equipment as mineral properties not depreciated . These direct expenditures include such costs as materials used, surveying costs, drilling costs, payments made to contractors, direct administrative costs and depreciation on plant and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year in which they occur.
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development. Exploration and evaluation assets are tested for impairment before the assets are transferred to mine under development. All direct costs related to the acquisition, exploration and development of mineral properties are capitalized until the properties to which they relate are ready for their intended use, sold, abandoned or management has determined there to be impairment. If economically recoverable ore reserves are developed, capitalized costs of the related property are reclassified as mineral properties being depleted.
F13
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
4   Significant accounting policies – (continued)
iii)
Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
iv)
Depreciation
Depreciation is calculated to write off the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, except for mineral properties, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. On commencement of commercial production, depreciation of each mineral property development and certain mine specific plant and equipment is provided for on the unit-of-production basis using estimated proven and probable reserves. Where orebodies are not yet determinable because ore bearing structures are open at depth or are open laterally, the straight-line method of depreciation is applied over the estimated life of the mine. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
·
buildings 10 to 15 years
·
plant and equipment 10 years
·
fixtures and fittings including computers 4 to 10 years
·
motor vehicles 4 years
·
mineral properties 11 years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
(f) Inventories
Consumable stores are measured at the lower of cost and net realisable value. The cost of consumable stores is based on the weighted average cost principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of gold in process, cost includes an appropriate share of production overheads based on normal operating capacity and is valued on the weighted average cost principle. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
 
F14
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
4   Significant accounting policies – (continued)
(g) Impairment
(i) Financial assets (including receivables)
A financial asset not classified as fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost provides objective evidence of impairment.
The Group considers evidence of impairment for receivables at both the specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
(ii)   Non-financial assets
The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit, or CGU").
 
F15
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
4   Significant accounting policies – (continued)
The Group's corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of a CGU exceeds its estimated recoverable amount. The estimated recoverable amount is the greater of its fair value less cost to of disposal and its estimated value in use. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amount of other assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been an indication of reversal and a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
iii)   Impairment of exploration and evaluation assets
The test for impairment of E&E assets can combine several CGUs as long as the combination is not larger than a segment. The definition of a CGU does, however, change once development activities have begun. There are special impairment triggers for E&E assets. Despite certain relief in respect of impairment triggers and the level of aggregation, the impairment standard is applied in measuring the impairment of E&E assets. Reversals of impairment losses are permitted in the event that the circumstances that resulted in impairment have changed.
E&E assets are only assessed for impairment when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount and upon transfer to development assets (therefore there is no requirement to assess for indication at each reporting date until the entity has sufficient information to reach a conclusion about the commercial viability and technical feasibility of extraction). Indicators of impairment include the following:
·
The entity's right to explore in the specific area has expired or will expire in the near future and is not expected to be renewed.
·
Substantive expenditure on further E&E activities in the specific area is neither budgeted nor planned.
·
The entity has not discovered commercially viable quantities of mineral resources as a result of E&E activities in the area to date and has decided to discontinue such activities in the specific area.
·
Even if development is likely to proceed, the entity has sufficient data indicating that the carrying amount of the asset is unlikely to be recovered in full from successful development or by sale.
 
F16
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
4   Significant accounting policies – (continued)
(h) Employee benefits
(i) Short-term employee benefits
Short-term employee benefits are expensed when the related services are provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
 
(ii)   Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.
(I) Share-based payment transactions
(i) Share-based payment relating to employees and directors
The grant date fair value of share-based payment awards granted to employees and directors is recognised as an expense, with a corresponding increase in equity, over the vesting period of the award. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market vesting conditions at the vesting date.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period or immediately for awards already vested.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in profit or loss.
F17
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
4   Significant accounting policies – (continued)
(ii) Share-based payment relating to the indigenisation transaction
The grant date fair value of equity-settled share-based payment transactions with Indigenisation Shareholders (note 5) was recognised immediately as an expense in 2012 in profit or loss, with a corresponding increase in equity, when the transaction became effective.
(j) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
(k)        Site restoration
The Group recognises liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets.  The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to mineral properties along with a corresponding increase in the rehabilitation provision in the period incurred.  Discount rates using a pre-tax rate that reflects the time value of money and are related to the provision are used to calculate the net present value. The Group's estimates of rehabilitation costs, which are reviewed annually, could change as a result of changes in regulatory requirements, discount rates, effects of inflation and assumptions regarding the amount and timing of the future expenditures.  These changes are recorded directly to mineral properties with a corresponding entry to the rehabilitation provision.  Changes resulting from production are charged to profit or loss for the year.  The costs of rehabilitation projects that were included in the rehabilitation provision are recorded against the provision as incurred.  The cost of on-going current programs to prevent and control pollution is charged against profit or loss as incurred.
(l) Revenue
Revenue from the sale of precious metals is recognized when the metal is accepted at the refinery, risk and benefits of ownership are transferred and the receipt of proceeds is substantially assured. Revenue is measured at the fair value of the gold price receivable at the date of the transaction.
(m)       Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on the rehabilitation provisions and impairment losses recognised on financial assets, interest on bank overdraft balances and also include commitment costs on overdraft facilities. Finance income and finance costs further include foreign exchange differences on financial assets and financial liabilities.

F18
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
4   Significant accounting policies – (continued)
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
(n) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax expense are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
(i)
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
(ii)
Deferred tax
Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
(o) Earnings per share
The Group presents basic and diluted earnings per share ("EPS") data for its common shares. Basic EPS is calculated by dividing the adjusted profit or loss attributable to common shareholders of the Group (see note 18) by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding, adjusted for own shares held, for the effects of all dilutive potential common shares, which comprise share options granted to employees and directors as well as any dilution in Group earnings originating from dilutive partially recognised non-controlling interests at a subsidiary level.

F19
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
4   Significant accounting policies – (continued)
(p) T he following standards, amendments to standards and interpretations to existing standards may possibly have an impact on the Group:
Standard/Interpretation
Effective date and expected adoption date*
IAS 1 (Amendments)
Presentation of Financial Statements
There is an emphasis on materiality. Specific single disclosures that are not material do not have to be presented – even if they are a minimum requirement of a standard. The order of notes to the financial statements is not prescribed. Instead, companies can choose their own order, and can also combine, for example, accounting policies with notes on related subjects. Specific criteria are provided for presenting subtotals on the balance sheet and in the statement of profit or loss and OCI, with additional reconciliation requirements for the statement of profit or loss and OCI.
The amendment is not expected to result in significant changes
to the level of aggregation in the financial statements.
December 31, 2016

* Annual periods ending on or after
 

F20
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
4   Significant accounting policies – (continued)
(q)   Standards, amendments and interpretations issued but not yet effective – (continued)
 
IFRS 15
This standard replaces IAS 11 Construction Contracts , IAS 18 Revenue , IFRIC 13 Customer Loyalty Programmes , IFRIC 15 Agreements for the Construction of Real Estate , IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services .
The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. This new standard is not expected to have a significant impact on the Group since it is not expected to change the timing of when revenue is recognized and the amount of revenue recognized
 
The Group has performed a preliminary assessment and expects no impact to the results or disclosures and is currently in the process of performing a more detailed assessment of the impact of this standard on the Group and will provide more information in financial statements for the year ending December 31, 2016.
December 31, 2018
IFRS 9
IFRS 9 Financial Instruments
On July 24, 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB's project to replace IAS 39 Financial Instruments: Recognition and Measurement . This standard is not expected to have a significant impact on the Group as measurement categories are similar to IAS 39 even though the criteria for classification into these categories are significantly different. The IFRS 9 impairment model has also been changed from an "incurred loss" model from IAS 39 to an "expected credit loss" model. The change is not expected to increase the provision for bad debts recognized in the Group because of the short gold sales collection period.
 
The Group will adopt the standard in the first annual period beginning on or after January 1, 2018.
December 31, 2018
IFRS 16 Leases
IFRS 16 was published in January 2016. It sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ('lessee') and the supplier ('lessor'). IFRS 16 replaces the previous leases Standard, IAS 17 Leases , and related Interpretations. IFRS 16 has one model for lessees which will result in almost all leases being included on the Statement of Financial position. No significant changes have been included for lessors.
The group and company are assessing the potential impact on the financial statements resulting from the application of IFRS 16.
December 31, 2019

* Annual periods ending on or after
 
 
F21
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
5 Blanket Zimbabwe Indigenisation Transaction

During 2012 the Group, to comply with Zimbabwean law that requires indigenous Zimbabweans own at least 51% of the Blanket Mine, entered into agreements to transfer a 51% ownership interest in Blanket Mine as follows:
 
·
Sold a 16% interest to the National Indigenisation and Economic Empowerment Fund ("NIEEF") for $11.74 million.
·
Sold a 15% interest to 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.

Outstanding balances on the facilitation loans attract interest at a rate of 10% over the 12-month LIBOR. The timing of the repayment of the loans depends on the future financial performance of Blanket Mine and the extent of future dividends declared by Blanket Mine.

The facilitation loans relating to the Group were declared by Caledonia Holdings Zimbabwe (Private) Limited ("CHZ") (Blanket Mine's parent company) to a wholly-owned subsidiary of Caledonia Mining Corporation Plc as a dividend in specie on February 14, 2013 and withholding tax amounting to $1.504 million was paid and expensed on March 5, 2013.

Accounting treatment
 
The directors of CHZ, a wholly owned subsidiary of the Company, performed an assessment, using the requirements of IFRS 10: Consolidated Financial Statements (IFRS 10), and concluded that CHZ should continue to consolidate Blanket Mine and accounted for the transaction as follows:
 
·
Non-controlling interests (NCI) are recognised on the portion of shareholding upon which dividends declared by Blanket Mine accrue unconditionally to equity holders as follows:
-
20% of the 16%  shareholding of NIEEF;
-
20% of the 15%  shareholding of Fremiro;
-
100% of the 10% shareholding of the Community Trust.
 
F22
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
5   Blanket Zimbabwe Indigenisation Transaction – (continued)

·
This effectively means that NCI is recognised at Blanket Mine level at 16.2% of the net assets.
·
The remaining 80% of the shareholding of NIEEF and Fremiro is recognised as non-controlling interests 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 December 31, 2015 the attributable net asset value did not exceed the balance on the respective loan accounts and thus no additional NCI was recognised.
·
The transaction with the 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 exceed the balance on the BETS facilitation loan they will accrue to the employees at the date of such declaration.
·
The Employee Trust and BETS are structured entities which are 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.
 
Indigenisation shareholding percentages and facilitation loan balances
 
       
Balance of facilitation
 
 
 
 
USD 000's
Shareholding
NCI Recognised
NCI subject to facilitation  loan
Dec, 31 2015
 
Dec, 31 2014
Jan, 1 2014
NIEEF
16%
3.2%
12.8%
11,907
11,907
11,742
Fremiro
15%
3.0%
12.0%
11,657
11,657
11,402
Community Trust
10%
10.0%
-
-
-
-
BETS ~
10%
-*
-*
  7,772
  7,772
7,573
 
51%
16.2%
24.8%
31,336
31,336
30,675

 
F23
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
5   Blanket Zimbabwe Indigenisation Transaction – (continued)

The balance on the facilitation loans is reconciled as follows:
Balance at January 1, 2014
 
30,675
Interest accrued
 
2,407
Dividends used to repay loans
 
(1,746)
Balance at December 31, 2014
 
31,336
Interest accrued &
 
-
Dividends used to repay loans &
 
-
Balance at December 31, 2015
 
31,336

*The shares held by BETS are effectively treated as treasury shares (see above).
& A moratorium has been placed on interest until dividend payments resume at Blanket mine.
~ Accounted for under IAS19 Employee Benefits.
# Facilitation loans are accounted for as equity instruments and are accordingly not recognised as loans receivable.

Advance dividends

In anticipation of completion of the underlying subscription agreements, Blanket Mine agreed to an advance dividend arrangements with NIEEF and the Community Trust as follows:

(a)
Advances to the Community Trust against their right to receive dividends declared by Blanket Mine on their shareholding 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 of 10% over the 12-month LIBOR.  The loan is repayable by way of set off of future dividends on the Blanket Mine shares owed by the Community Trust.

(b)
An advance payment of $1.8 million to NIEEF against their right to receive dividends declared by Blanket Mine on their shareholding.  The advance payment was debited to an interest-free loan account and was repayable by way of set off of future dividends on the Blanket Mine shares owned by NIEEF. Whilst any amount remained outstanding on the NIEEF dividend loan account, a moratorium was placed on the NIEEF facilitation loan interest until dividends resume.

 
F24
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
5   Blanket Zimbabwe Indigenisation Transaction – (continued)

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 receivable, because repayment is by way of uncertain future dividends to be declared.

Blanket has suspended dividend payments from January 1, 2015 until early 2016 as a result of which the repayment of facilitation loans by Blanket's indigenous shareholders were also suspended. During this period, there was a moratorium on the interest on the outstanding facilitation loans. This is considered a modification and was not beneficial to the indigenous shareholders.

The movement in the advance dividend loans are reconciled as follows:

     
NIEEF
Community Trust
Total
           
Balance at January 1, 2014
   
358
3,507
3,865
Interest accrued
   
-
334
334
Dividends used to repay advance dividends
   
(358)
(604)
(962)
Balance at December 31, 2014
   
-
3,237
3,237
Interest accrued &
   
-
-
-
Dividends used to repay advance dividends
   
-
-
-
Balance at December 31, 2015
   
-
3,237
3,237

& A moratorium has been placed on interest until dividend payments resume at Blanket mine.

6   Financial risk management
Overview
The Group has exposure to the following risks from its use of financial instruments:
·
Currency risk (refer note 24)
·
Interest rate risk (refer note 24)
·
Credit risk (refer note 24)
·
Liquidity risk (refer note 24)
This note and note 24 presents information about the Group's exposure to each of the above risks and the Group's objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these consolidated financial statements. The Group is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on preservation of capital, and protecting current and future Group assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.
F25
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
6   Financial risk management – (continued)
The Board of Directors has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Group's Audit Committee oversees management's compliance with the Group's financial risk management policy.  On February 10, 2016, a gold price hedge was entered into to manage the possible effect of gold price fluctuations (refer note 31). As at December 31, 2015 no financial instruments were in place to manage the gold price risk. The fair value of the Group's financial instruments approximates their carrying value unless otherwise noted. The types of risk exposure and the way in which such exposures are managed are as follows:
(a)
Currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. The Group does not use financial instruments to hedge its exposure to currency risk. Currency risk on the repayment of the sales and purchases are managed by regular repayments of the outstanding amounts.
(b)
Interest rate risk
The Group is exposed to interest rate risk arising from its cash and cash equivalents invested with financial institutions as well as its overdraft facility. Management's policy is to invest cash in financial institutions with an investment grade credit-rating.
 (c) Credit risk
Credit risk includes the risk of a financial loss to the Group if a gold sales customer fails to meet its contractual obligation. Gold sales were made to Fidelity Printers and Refiners in Zimbabwe during the year.  The payment terms stipulated in the service delivery contract were adhered to in all circumstances. Cash is deposited only with banks with investment grade credit-rating.
(d) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group manages its liquidity risk by ensuring that there is sufficient capital and cash to meet its likely cash requirements, after taking into account cash flows from operations and the Group's holdings of cash and cash equivalents. The Group believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities.

Since the inception of dollarization in Zimbabwe in 2009, all appropriate insurance cover has been reinstated. The Zimbabwean operations are now covered for public liability risk, assets all risk and comprehensive cover on all motor vehicles.
 
F26
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

7   Capital Management
The Group's objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue the mining operations and exploration potential of the mineral properties. The Group's capital includes shareholders' equity, comprising issued share capital, reserves, accumulated other comprehensive income, accumulated deficit, bank loans and non-controlling interests.

 
December 31, 2015
December 31, 2014
January 1, 2014
       
Total equity
50,361
50,343
48,591

The Group's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its on-going operations, to provide returns for shareholders, accommodate any rehabilitation provisions and to pursue growth opportunities. As at December 31, 2015, the Group is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy. Management is of the opinion that the capital is sufficient to safeguard its ability to continue as a going concern and maintain operations and exploration potential of the mineral properties.

8   Production costs
 
2015
2014
2013
 
         
Salaries and wages
11,908
10,014
9,811
 
Consumable materials
14,479
14,565
14,049
 
Site restoration
-
29
147
 
Exploration
380
343
(280)
 
Safety
551
473
578
 
On mine administration
2,701
2,484
2,309
 
 
30,019
27,908
26,614
 
F27
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
9   Administrative expense
 
2015
2014
2013
       
Investor  relations
513
514
702
Audit fee
240
356
323
Legal fee and disbursements
452
722
426
Advisory services fee
355
24
27
Listing fees
206
318
330
Directors fees company
191
298
280
Directors fees Blanket
60
38
73
Employee costs
3,106
3,152
2,586
Office costs  - Zambia *
716
896
-
Other office administration costs
547
16
-
Unrecoverable VAT expenses and penalties
298
-
-
Employee benefits relating to indigenisation
-
140
210
Travel costs
325
303
308
Donation to scholarship fund
-
-
2,035
Donation to community
58
-
-
Eersteling Gold Mine administration costs
111
120
246
Professional consulting fees
444
490
-
 
7,622
7,387
7,546
* The Zambian operations were closed down during 2015 and the companies in Zambia were struck off the companies register on September 2, 2015.
10   Finance income and finance costs
Finance income
2015
2014
2013
       
Interest received – Bank
1
14
23
       
Finance cost
     
       
Interest paid – Bank
49
20
29
Unwinding of rehabilitation provision
43
33
-
Interest – South African Revenue Service
344
-
-
Finance charges – Overdraft
100
101
99
 
536
154
128
 

 
F28
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
11   Tax expense
 
   
2015
   
2014
   
2013
 
Tax recognised in profit or loss
                 
                   
Current tax
   
(197
)
   
5,276
     
7,488
 
Income tax– current year
   
506
     
4,582
     
4,991
 
Income tax – Prior year overprovision
   
(1,636
)
   
(194
)
   
-
 
Withholding tax expense
   
933
     
888
     
2,497
 
 
Deferred tax expense
   
2,567
     
706
     
2,121
 
Origination and reversal of temporary differences
   
2,567
     
468
     
2,121
 
Change in effective tax rate
   
-
     
238
     
-
 
                         
Tax expense – recognised in profit or loss
   
2,370
     
5,982
     
9,609
 
 
Tax recognised in other comprehensive income
 
Income tax - current year
   
(199
)
   
(111
)
   
-
 
Tax expense
   
2,171
     
5,871
     
9,609
 
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
 
2015
   
2014
   
2013
 
                   
Tax losses carried forward
   
11,150
     
*19,957
     
14,319
 
     
11,150
     
19,957
     
14,319
 
*   Tax losses carried forward included an amount of $9,357 relating to the Zambia operations which were shut down during the year.
 
F29
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
1 1   Tax expense - (continued)
Taxable losses expire as set out below for the entities incurring taxable losses within the group. Deferred tax assets have not been recognised for these items because future taxable income is not deemed probable to utilise these benefits against.
Year
Amount *
2026
2,451
2027
2,854
2028
2,139
2029
1,461
2030
1,567
2031
2,262
2032
2,667
2033
2,812
2034
3,710
2035
1,643
No expiry
17,553
 
41,119
* Tax losses carried forward with no expiry, arose in the South African tax jurisdiction. The remainder arose in Canada.
 
Tax paid
 
2015
   
2014
   
2013
 
                   
Net income tax payable at January 1
   
(1,617
)
   
(1,064
)
   
(1,528
)
Current and withholding tax credit/(expense)
   
197
     
(5,276
)
   
(7,488
)
Income tax expense recognised through other comprehensive income
   
199
     
111
     
-
 
Foreign currency movement
   
103
     
86
     
208
 
Tax paid
   
1,462
     
4,526
     
7,742
 
Net income tax receivable/(payable) at December 31
   
344
     
(1,617
)
   
(1,064
)
Net income tax
 
December 31, 2015
   
December 31, 2014
   
January 1, 2014
 
                   
Income tax receivable *
   
397
     
95
     
-
 
Income tax payable
   
(53
)
   
(1,712
)
   
(1,064
)
Net income tax receivable/(payable)
   
344
     
(1,617
)
   
(1,064
)
* Receivable is due to an overpayment made to Her Majesty's Revenue and Customs during quarter 1 of 2015 as well as an overpayment to the Zimbabwe Revenue Authority during Quarter 4 of 2014. These overpayments cannot be offset against other tax jurisdictions.
 
F30
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
11   Tax expense - (continued)

Reconciliation of tax rate
   
2015
   
2015
   
2014
   
2014
   
2013
   
2013
 
   
%
         
%
         
%
       
Profit for the year
         
5,590
           
5,946
           
(477
)
Total tax expense
         
2,370
           
5,982
           
9,609
 
Profit before tax
         
7,960
           
11,928
           
9,132
 
                                           
Income tax at Company's domestic tax rate
   
26.5
%
   
2,109
     
26.5
%
   
3,161
     
26.5
%
   
2,420
 
Tax rate differences in foreign jurisdictions
           
(63
)
           
(349
)
           
(1,272
)
Change in tax rate
           
-
             
238
             
-
 
Foreign currency difference
           
(12
)
           
34
             
(147
)
Withholding tax – not offsetable
           
317
             
185
             
1,784
 
Permanent differences
           
1,105
             
1,584
             
1,186
 
Deemed interest on loans
           
31
             
636
             
-
 
Share based payments
           
6
             
-
             
17
 
Impairment
           
-
             
37
             
-
 
Non-deductible South African tax transactions
           
470
             
-
             
-
 
Royalties
           
632
             
881
             
-
 
Establishment fees
           
-
             
-
             
25
 
Donations
           
15
             
3
             
58
 
Unrealised foreign exchange
           
-
             
-
             
522
 
Other
           
(49
)
           
27
             
564
 
Over provision of taxes in prior years
           
(1,636
)
           
(194
)
           
-
 
Change in unrecognized deferred tax assets
           
550
             
1,323
             
5,638
 
Tax expense - recognised in profit or loss
           
2,370
             
5,982
             
9,609
 
 
 
 
F31
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
11   Tax expense - (continued)

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

   
Assets
   
Liabilities
   
Net
 
   
2015
   
2014
   
2015
   
2014
   
* 2015
   
2014
 
                                     
Property, plant and equipment
   
-
     
-
     
(12,988
)
   
(9,223
)
   
(12,988
)
   
(9,223
)
Prepayments
   
-
     
-
     
(3
)
   
(22
)
   
(3
)
   
(22
)
Provisions
   
733
     
565
     
-
     
-
     
733
     
565
 
Assessed losses recognised
   
998
     
-
     
-
     
-
     
998
     
-
 
Tax assets/ (liabilities)
   
1,731
     
565
     
(12,991
)
   
(9,245
)
   
(11,260
)
   
(8,680
)

* The deferred tax liability consists of a deferred tax asset of $58 from the South African operations and a deferred tax liability of $11,318 due to the Zimbabwean operations. The amounts are in different tax jurisdictions and therefore not offsetable and presented separately in the Statement of financial position as a Non-current asset and a Non-current liability.

Movement in recognised deferred tax assets and liabilities
 
   
Balance January 1, 2015
   
Recognised in profit or loss
   
Foreign exchange movement
   
Balance December 31, 2015
 
Property, plant and equipment
   
(9,223
)
   
(3,765
)
   
-
     
(12,988
)
Prepayments
   
(22
)
   
16
     
3
     
(3
)
Provisions
   
565
     
184
     
(16
)
   
733
 
Assessed loss recognised
   
-
     
998
     
-
     
998
 
Total
   
(8,680
)
   
(2,567
)
   
(13
)
   
(11,260
)
                                 
 
F32
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
11   Tax expense - (continued)
 
   
Balance January 1, 2014
   
Recognised in profit or loss
   
Foreign exchange movement
   
Balance December 31, 2014
 
Property, plant and equipment
   
(8,058
)
   
(835
)
   
(330
)
   
(9,223
)
Prepayments
   
-
     
-
     
(22
)
   
(22
)
Provisions
   
207
     
108
     
250
     
565
 
Inventory
   
(80
)
   
-
     
80
     
-
 
Other
   
(36
)
   
21
     
15
     
-
 
Total
   
(7,967
)
   
(706
)
   
(7
)
   
(8,680
)
 
   
Balance January 1, 2013
   
Recognised in profit or loss
   
Foreign exchange movement
   
Balance December 31, 2013
 
Property, plant and equipment
   
(6,196
)
   
(2,280
)
   
418
     
(8,058
)
Provisions
   
182
     
39
     
(14
)
   
207
 
Inventory
   
66
     
153
     
(299
)
   
(80
)
Other
   
59
     
(33
)
   
(62
)
   
(36
)
Total
   
(5,889
)
   
(2,121
)
   
43
     
(7,967
)
 

F33
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 12   Property, plant and equipment
   
Land and buildings
   
Mineral properties depreciated
   
Mineral properties not depreciated
   
Plant and equipment
   
Fixtures and fittings
   
Motor vehicles
   
Total
 
                                           
Cost
                                         
Balance at January 1, 2013
   
4,563
     
11,399
     
10,909
     
19,473
     
1,204
     
1,794
     
49,342
 
Additions
   
3,145
     
2,617
     
4,321
     
950
     
83
     
280
     
11,396
 
Foreign exchange movement
   
(88
)
   
-
     
28
     
(344
)
   
(67
)
   
1
     
(470
)
Balance at December 31, 2013
   
7,622
     
14,016
     
15,258
     
20,079
     
1,220
     
2,075
     
60,270
 
                                                         
Balance at January 1, 2014
   
7,622
     
14,016
     
15,258
     
20,079
     
1,220
     
2,075
     
60,270
 
Additions
   
536
     
*3,070
     
1,688
     
1,740
     
114
     
18
     
7,166
 
Disposals
   
-
     
-
     
-
     
(275
)
   
-
     
(8
)
   
(283
)
Reallocations between asset classes
   
(580
)
   
1,661
     
-
     
(1,084
)
   
3
     
-
     
-
 
Foreign exchange movement
   
30
     
92
     
(3,684
)
   
508
     
(145
)
   
(114
)
   
(3,313
)
Balance at December 31, 2014
   
7,608
     
18,839
     
13,262
     
20,968
     
1,192
     
1,971
     
63,840
 
 
F34
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
12   Property, plant and equipment - (continued)

Cost
 
Land and buildings
   
Mineral properties depreciated
   
Mineral properties not depreciated
   
Plant and equipment
   
Fixtures and fittings
   
Motor vehicles
   
Total
 
Balance at January 1, 2015
   
7,608
     
18,839
     
13,262
     
20,968
     
1,192
     
1,971
     
63,840
 
Additions **
   
681
     
*14,359
     
1,595
     
1,144
     
149
     
265
     
18,193
 
Surrender of Zambian assets ***
   
-
     
-
     
(11,527
)
   
-
     
-
     
-
     
(11,527
)
Reallocations between asset classes
   
(256
)
   
-
     
1,012
     
(756
)
   
-
     
-
     
-
 
Disposals
   
-
     
-
     
-
     
(124
)
   
-
     
(77
)
   
(201
)
Foreign exchange movement
   
(44
)
   
(89
)
   
(69
)
   
(606
)
   
(64
)
   
(90
)
   
(962
)
Balance at December 31, 2015
   
7,989
     
33,109
     
4,273
     
20,626
     
1,277
     
2,069
     
69,343
 
  
*     Included in mineral properties depreciated is an amount of $391 (2014: $1,016; 2013:$394) relating to rehabilitation asset capitalised refer note 21.
**   Included in additions is an amount of $26,192 (2014:$11,295; 2013:$3,625) relating to capital work in progress.
*** The Group surrendered all exploration rights relating to the Zambian operations for a nominal value. The Zambian assets were fully impaired in previous years.
 
There are commitments to purchase plant and equipment totalling $1,376 (2014:$552, 2013:$166) at year end.

F35
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

12   Property, plant and equipment - (continued)
 
   
Land and buildings
   
Mineral properties depreciated
   
Mineral properties not depreciated
   
Plant and equipment
   
Fixtures and fittings
   
Motor vehicles
   
Total
 
Accumulated depreciation and Impairment losses
                                         
Balance at January 1, 2013
   
985
     
2,041
     
-
     
7,810
     
988
     
808
     
12,632
 
Depreciation for the year
   
264
     
602
     
-
     
1,957
     
69
     
289
     
3,181
 
Impairment ****
 
(a) 387
     
-
   
(b) 13,314
     
88
     
-
     
-
     
13,789
 
Foreign exchange movement
   
(15
)
   
(1
)
   
86
     
(612
)
   
(63
)
   
1
     
(604
)
Balance at December 31, 2013
   
1,621
     
2,642
     
13,400
     
9,243
     
994
     
1,098
     
28,998
 
                                                         
Balance at January 1, 2014
   
1,621
     
2,642
     
13,400
     
9,243
     
994
     
1,098
     
28,998
 
Depreciation for the year
   
514
     
734
     
-
     
1,891
     
78
     
323
     
3,540
 
Impairment
   
-
     
-
       
-  
   
164
     
14
     
-
     
178
 
Disposals
   
-
     
-
     
-
     
(214
)
   
-
     
(8
)
   
(222
)
Foreign exchange movement
   
(372
)
   
59
     
(1,873
)
   
(954
)
   
(140
)
   
(110
)
   
(3,390
)
Balance at December 31, 2014
   
1,763
     
3,435
     
11,527
     
10,130
     
946
     
1,303
     
29,104
 
                                                         
Balance at January 1, 2015
   
1,763
     
3,435
     
11,527
     
10,130
     
946
     
1,303
     
29,104
 
Depreciation for the year
   
559
     
451
     
-
     
1,894
     
98
     
320
     
3,322
 
Surrender of Zambian assets
   
-
     
-
     
(11,527
)
   
-
     
-
     
-
     
(11,527
)
Disposals ***
   
-
     
-
     
-
     
(117
)
   
-
     
(51
)
   
(168
)
Foreign exchange movement
   
(1
)
   
(105
)
   
-
     
(383
)
   
(48
)
   
(69
)
   
(606
)
Balance at December 31, 2015
   
2,321
     
3,781
     
-
     
11,524
     
996
     
1,503
     
20,125
 
 
 
F36
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
12 Property, plant and equipment - (continued)
                         
Carrying amounts
                                                       
                                                         
At December 31, 2013
   
6,001
     
11,374
     
1,858
     
10,836
     
226
     
977
     
31,272
 
At December 31, 2014
   
5,845
     
15,404
     
1,735
     
10,838
     
246
     
668
     
34,736
 
At December 31, 2015
   
5,668
     
29,328
     
4,273
     
9,102
     
281
     
566
     
49,218
 
 
*** The Group surrendered all exploration rights relating to the Zambian operations for a nominal value. The Zambian assets were fully impaired in previous years.
 
**** The impairments during fiscal 2013 relate to:
 
  (a)
the cost of the mineral rights held by Eersteling Gold Mine.
  (b)
exploration expenditure incurred at Caledonia Nama Limited in Zambia. The full carrying value of costs previously incurred and capitalised were impaired in 2013 for the following reasons:
  ·
Substantive expenditure on further E&E activities in the specific area is neither budgeted nor planned, and
  ·
The Group has not discovered commercially viable quantities of mineral resources as a result of E&E activities in the area to date and has decided to discontinue such activities in the specific area.
 
 
 
F37
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
13   Inventories
   
December 31, 2015
   
December 31, 2014
   
January 1, 2014
 
                   
Consumable stores
   
5,739
     
5,962
     
5,605
 
Gold in process
   
352
     
550
     
814
 
     
6,091
     
6,512
     
6,419
 
Inventory comprises gold in progress at the Blanket Mine and consumable stores utilised by Blanket Mine. Consumables stores are disclosed net of any write downs or provisions for obsolete items, which amounted to $46 (2014: Nil; 2013:$53).
14   Trade and other receivables
   
December 31, 2015
   
December 31, 2014
   
January 1, 2014
 
                   
Bullion revenue receivable
   
-
     
-
     
1,554
 
VAT receivables
   
2,997
     
1,006
     
1,244
 
Deposits for stores and equipment and other receivables
   
842
     
749
     
838
 
     
3,839
     
1,755
     
3,636
 
The Group's exposure to credit and currency risks, and impairment losses related to trade and other receivables is disclosed in notes 6 and 24.
F38
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
15   Cash and cash equivalents
   
December 31, 2015
   
December 31, 2014
   
January 1,
2014
 
                   
Bank balances
   
12,568
     
23,082
     
23,580
 
Cash and cash equivalents in the statement of financial position
   
12,568
     
23,082
     
23,580
 
Bank overdrafts used for cash management purposes
   
(1,688
)
   
-
     
(1,679
)
Net cash and cash equivalents at year end
   
10,880
     
23,082
     
21,901
 
The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed in note 24.
The bank overdraft facility of $5 million bears interest at 6.5% below the bank's base rate of 13%. The facility is unsecured, with no covenant requirements. The facility is repayable on demand.
16   Share capital
Authorised
 
Unlimited number of common shares of no par value.
 
Unlimited number of preference shares of no par value.
 
   
 
Issued
 
 
Number of fully paid common shares
   
Amount
 
January 1, 2014
   
52,117,908
     
54,569
 
December 31, 2014
   
52,117,908
     
54,569
 
Cancelled *
   
39,000
     
-
 
December 31, 2015
   
52,078,908
     
54,569
 
* 39,000 treasury shares issued to Caledonia Mining Corporation Plc was cancelled during the year.
The holders of common share capital are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Group.


F39
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

17   Reserves
Foreign currency translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations with functional currencies that differ from the presentation currency.
Share-based payment reserve
The share-based payment reserve comprises the fair value of equity instruments granted to employees, directors and service providers under share option plans and equity instruments issued to Zimbabwe indigenisation shareholders under the Indigenisation Transaction (refer Note 5).
Contributed surplus
The contributed surplus reserve comprises the reduction in stated capital as approved by shareholders at the special general meeting on January 24, 2013 so as to be able to commence dividend payments.
Reserves
 
December 31,
   
December 31,
   
January 1,
 
   
2015
   
2014
   
2014
 
Foreign currency translation reserve
   
(6,520
)
   
(3,229
)
   
(2,544
)
Share-based payment reserve
   
15,871
     
15,847
     
15,847
 
Contributed surplus
   
132,591
     
132,591
     
132,591
 
Total
   
141,942
     
145,209
     
145,894
 
18   Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the year ended December 31, 2015 was based on the adjusted profit/(loss) attributable to shareholders of $4,679 (2014: $4,387; 2013: ($2,809)), and a weighted average number of shares outstanding of 52,095,087 (2014: 52,117,908; 2013: 51,986,466 ).



F40
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

18   Earnings per share – (continued)
Weighted average number of shares
(In number of shares)
 
Note
   
2015
   
2014
   
2013
 
                         
Issued share capital at beginning of year
 
16
     
52,117,908
     
52,117,908
     
51,446,178
 
Weighted average cancellation during the year
         
(22,821
)
   
-
     
540,288
 
Weighted average number of shares at December 31
         
52,095,087
     
52,117,908
     
51,986,466
 

 
2015
    2014    
2013
 
Profit attributable to shareholders
   
4,779
     
4,435
     
(2,967
)
Blanket Mine Employee Trust Adjustment
   
(100
)
   
(48
)
   
158
 
Adjusted profit attributable to shareholders
   
4,679
     
4,387
     
(2,809
)
Basic earnings/(loss) per share -$
   
0.09
     
0.08
     
(0.05
)

·
Basic earnings are adjusted for the amounts that accrue to other equity holders of subsidiaries upon the full distribution of post-acquisition earnings to shareholders.
·
Diluted earnings is calculated on the basis that the unpaid ownership interests of Blanket Mine's Indigenisation shareholders are effectively treated as options whereby the weighted average fair value for the period of the Blanket Mine shares issued to Indigenous Zimbabweans and which are subject to settlement of the loan accounts is compared to the balance of the loan accounts and any excess portion is regarded as dilutive.  The difference between the number of Blanket Mine shares subject to the settlement of the loan accounts and the number of Blanket Mine shares that would have been issued at the average fair value is treated as the issue of shares for no consideration and regarded as dilutive shares.  The calculated dilution is taken into account with additional earnings attributable to the dilutive shares in Blanket Mine, if any.

The interest of NIEEF and Fremiro shareholding were anti-dilutive in the current year (i.e. the value of the options was less than the outstanding loan balance) and accordingly there was no adjustment to fully diluted earnings attributable to common shareholders.
 
F41
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
18   Earnings per share – (continued)
The calculation of diluted earnings per share at December 31, 2015 was based on the adjusted profit/(loss) attributable to shareholders of $4,679 (2014: $4,387; 2013: ($2,809)), and a weighted average number of shares and potentially dilutive shares outstanding of 52,203,255 (2014: 52,145,469; 2013: 52,007,646), calculated as follows:
Weighted average number of shares
(In number of shares)
 
2015
   
2014
   
2013
 
                   
Weighted average number of shares at December 31
   
52,095,087
     
52,117,908
     
51,986,466
 
Effect of dilutive options
   
108,169
     
27,561
     
21,180
 
Weighted average number of  shares (diluted) at December 31
   
52,203,255
     
52,145,469
     
52,007,646
 
Diluted earnings/(loss) per share - $
   
0.09
     
0.08
     
(0.05
)
The average market value of the Company's shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the year during which the options were outstanding. The potential dilutive effect of 2,132,751 (2014: 2,538,359; 2013: 2,576,920) for these options on common shares, were excluded from the above calculations because these options were anti-dilutive.
19   Defined Contribution Plan
Under the terms of the Mining Industry Pension Fund ("Fund") in Zimbabwe, eligible employees contribute a fixed percentage of their eligible earnings to the Fund. Blanket Mine makes a matching contribution plus an inflation levy as a fixed percentage of eligible earnings of these employees. The total contribution by Blanket Mine for the year ended December 31, 2015 was $473 (2014: $443; 2013:$432).
 
F42
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
20   Share-based payments
At December 31, 2015 the Group has the following share-based payment arrangements:
(a) Share option programme
The Group has established a new Omnibus Equity Incentive Compensation Plan ("OEICP") for grants after May 2015. Share options issued before May 2015 were issued in terms of the rolling stock option plan, which was superseded by the OEICP.  In accordance with both plans, options are granted at an exercise price equal to the market price of the shares at the date of grant and vest according to dates set at the discretion of the Compensation Committee of the board of directors at the date of grant.  All outstanding option awards that have been granted pursuant to the plans vest immediately.
Terms and conditions of share option programmes
The maximum term of the options under the OEICP is 10 years and under the rolling stock option plan 5 years. The terms and conditions relating to the grant of options under the rolling stock option plan are that all options are to be settled by physical delivery of shares.  Under both plans the aggregate number of shares that may be issued pursuant to the grant of options, or under any other share compensation arrangements of the Company, will not exceed 10% of the aggregate issued and outstanding shares issued of the Company. Refer to note 31 for share based payment awards made after December 31, 2015.
At December 31, 2015, the Company has the following options outstanding:
 
Number of Options
 
Exercise Price
 
Expiry Date (1)
 
     
Canadian $
     
 
1,161,000
 
1.30
 
Jan 31, 2016
 
 
30,000
 
0.70
 
May 11, 2016
 
 
744,920
 
0.90
 
Sept 10, 2018
 
 
190,000
 
0.72
 
Nov 21,2018
 
 
25,000
 
0.80
 
Oct 8, 2025
 
 
90,000
 
0.74
 
Dec 22, 2025
 
 
2,240,920
         
 
(1)
In terms of the approved Plan, the expiry date of options that expire in a closed period will be extended by 10 days from the cessation of the close period. The options with an expiry date of January 31, 2016 will therefore expire 10 days after the publication of these financial statements.

F43
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

20   Share-based payments – (continued)
The continuity of the options granted, exercised, cancelled and expired under the Plan during fiscal 2015, 2014 and 2013 are as follows:
   
Number of Options
   
Weighted Avg. Exercise Price
 
          Canadian $  
Options outstanding and exercisable at December 31, 2012
   
3,329,650
     
1.05
 
Exercised
   
(671,730
)
   
0.70
 
Granted
   
190,000
     
0.72
 
Options outstanding and exercisable at December 31, 2013
   
2,847,920
     
1.11
 
Expired or forfeited
   
(282,000
)
   
1.13
 
Options outstanding and exercisable at December 31, 2014
   
2,565,920
     
1.11
 
Expired or forfeited
   
(440,000
)
   
1.11
 
Granted
   
115,000
     
0.73
 
Options outstanding and exercisable at December 31, 2015
   
2,240,920
     
1.08
 
 
The weighted average remaining contractual life of the outstanding options is 2.46 years (2014: 1.81 years; 2013: 2.26 years). No share options were exercised during fiscal 2015 and 2014. Future vesting of options is determined at the discretion of the Compensation Committee of the Board of Directors, at the time the options are granted.
Inputs for measurement of grant date fair values
The fair value of share based payments noted above was estimated using the Black-Scholes Option Pricing Model with the following assumptions.
Options granted
190,000
 
25,000
 
90,000
Grant date
November 21,
2013
 
October 7,
2015
 
December 21,
2015
Risk-free interest rate
0.95%
 
0.53%
 
0.53%
Expected dividend yield
6.8%
 
6.8%
 
6.8%
Expected stock price volatility (based on historical volatility)
57.88%
 
39.6%
 
41.2%
Expected option life in years
5
 
5
 
5
Exercise price (Canadian $)
0.72
 
0.80
 
0.74
Share price at grant date (Canadian $)
0.72
 
0.79
 
0.74
Fair value at grant date
0.356
 
0.27
 
0.27
Expected forfeiture rate
0%
 
0%
   0%

During 2015 two share based payments were granted in grants of 25,000 and 90,000 share equity options (2014:Nil; 2013:190,000). The expense relating to share based payments granted amounted to $24 (2014: nil; 2013: $66).
 
 
F44
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
20   Share-based payments – (continued)

Expected volatility has been based on an evaluation of the historical volatility of the company's share price. The expected term has been based on historical experience.

(b) Equity instruments granted under the Blanket Mine Zimbabwe Indigenisation Transaction

The equity instruments granted under the Blanket Mine Zimbabwe Indigenisation Transaction (refer note 5), excluding Blanket Mine Employee Trust Services (Private) Limited (BETS), were accounted for as share-based payments under IFRS 2 Share Based Payment , whilst the equity instruments granted to BETS have been accounted for under IAS 19 Employee benefits . The fair value of the equity instruments on the grant date of September 5, 2012 was determined for each transaction as being the sum of the present value of the following components:
 
·
The value of the shares at the point that any loans provided to purchase the shares or fund advance dividends are paid off;
·
The value of any advance dividends paid to participants;
·
The value of any "trickle dividends", being the 20% entitlements, paid to participants while the loans to purchase the shares are outstanding.
To determine the fair value of the equity-settled share-based payment and take into account the unique features of each transaction, the Monte Carlo Simulation technique was used as the valuation model to allow for the uncertainty around the potential scenarios that affect the value of each arrangement. Projected market values were estimated using a stochastic modelling methodology based on Geometric Brownian Motion model. Additional equity instruments will vest to the Non-controlling interest to the extent that their attributable share of the net asset value of Blanket Mine exceeds the balance on the facilitation loans including interest. Refer to note 5 for the accounting treatment of the Non-controlling interests.

Assumptions used based on the grant date of September 5, 2012 were as follows:
 
Fair value of Blanket Mine
$45,065
Expected volatility (based on historical volatility)
65%
Risk free rates
USD swap curve with country specific adjustments
Country specific adjustment
17.3%
Dividend yield
14.8%
Withholding tax
5% of dividends
Interest on loans
10%


F45
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

21 Provisions
Site restoration
Site restoration relates to the net present value of the estimated cost of closing down a mine and site and environmental restoration costs, estimated to be paid in 2026 for Blanket Mine based on the estimated life of mine. Site restoration costs at Blanket mine are capitalised to mineral properties depreciated at initial recognition and amortised systematically over the estimated life of the mine for costs relating to the decommissioning of property, plant and equipment.
Reconciliation of site restoration provision
 
 
 
Balance at January 1, 2013
1,022
Foreign exchange movement
(92)
Unwinding of discount
(1)
Change in estimate during the year
 
-   adjusted through profit or loss
147
-   adjustment capitalised in Property, plant and equipment
394
Balance at December 31, 2013
1,470
   
Balance at January 1, 2014
1,470
Foreign exchange movement
(64)
Unwinding of discount
33
Change in estimate during the year
 
-   adjusted through profit or loss
29
-   adjustment capitalised in Property, plant and equipment
1016
Balance at December 31, 2014
2,484
   
Balance at January 1, 2015
2,484
Foreign exchange movement
 
(156)
Unwinding of discount
43
Change in estimate during the year
 
-   adjusted through profit or loss
-
-   adjustment capitalised in Property, plant and equipment
391
Balance at December 31, 2015
2,762
 
F46
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
21
Provisions – (continued)
The discount rates currently applied in the calculation of the net present value of the Blanket mine provision is 2.76% (2014: 2.32%; 2013: 2.75%), based on a nominal rate and cash flows estimated at 0% inflation. The Eersteling mine is under care and maintenance and the provision   is not discounted. The gross rehabilitation costs before discounting amounted to $3,006 (2014: $2,486; 2013: $1,645) for Blanket mine and $459 (2014: $616; 2013: $652) for Eersteling mine.
22   Trade and other payables
   
December 31, 2015
 
December 31, 2014
 
January 1, 2014
             
Trade payables
 
1,257
 
866
 
959
Audit fee
 
240
 
294
 
210
Other payables and accrued expenses
 
1,599
 
507
 
789
Financial liabilities
 
3,096
 
1,667
 
1,958
VAT payable and other taxes
 
329
 
357
 
331
Production and management bonus accrual
 
 
 
1,792
 
-
 
1,031
Other employee benefits
 
114
 
102
 
163
Leave pay
 
1,325
 
1,134
 
818
Non-financial liabilities
 
3,560
 
1,593
 
2,343
Total
 
6,656
 
3,260
 
4,301
The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in note 6 and note 24.  Of the production and management bonus accrual at December 31, 2015, $1,289 relates to production bonuses payable to the employees at Blanket and the balance relates to bonuses payable to employees at Caledonia Mining South Africa Proprietary Limited. The Directors consider the carrying amounts of trade and other payables as a reasonable approximation of their fair values.
 
F47
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
23       Cash flow information
Non-cash items and information presented separately on the cash flow statement:
 
2015
2014
2013
 
Operating profit
8,495
12,068
9,237
 
Adjustments for:
       
Loss on scrapping of Property, plant and equipment
33
62
-
 
Unrealised foreign exchange gains on cash held
(2,865)
(423)
(1,624)
 
Site restoration
-
29
(147)
 
Share-based payment expense
24
-
66
 
Depreciation
3,322
3,540
3,181
 
Write off of inventory
46
-
53
 
Impairment
-
178
13,789
 
Cash generated by operations before working capital changes
9,055
15,454
24,555
 
Inventories
375
(94)
(875)
 
Prepayments
(321)
(46)
(55)
 
Trade and other receivables
(1,472)
566
(1,865)
 
Trade and other payables
1,186
(296)
(1,327)
 
 
Cash flows from operating activities
8,823
15,584
20,433
 
24   Financial instruments
i)   Credit risk
Exposure to 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 maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
Carrying amount
December 31, 2015
 
December 31, 2014
 
January 1, 2014
           
Canada
-
 
84
 
-
Zimbabwe
842
 
665
 
2,392
 
842
 
749
 
2,392

Impairment losses
None of the trade and other receivables are past due at year-end. Trade and other receivables have a past history of payment shortly after year end and management identified no factors at year end that could cause doubt about the credit quality or recoverability of the trade and other receivables.
F48
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
24   Financial instruments (continued)
ii)   Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.
 
Non-derivative financial liabilities
Carrying amount
6 months or less
December 31, 2015
   
Trade and other payables
3,096
3,096
Bank overdraft
1,688
1,688
 
4,784
4,784
 
 
December 31, 2014
Carrying amount
6 months or less
Trade and other payables
1,667
1,667
 
1,667
1,667
 
 
January 1, 2014
Carrying amount
6 months or less
Non-derivative financial liabilities
   
Trade and other payables
1,958
1,958
Bank overdraft
1,679
1,679
 
3,637
3,637
iii)
Currency risk
As the Group operates in an international environment, some of the Group's financial instruments and transactions are denominated in currencies other than the US Dollar. The results of the Group's operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Group are reported in US dollar in the Group's consolidated financial statements.
The fluctuation of the US dollar in relation to other functional currencies of entities within the Group will consequently have an impact upon the profitability of the Group and may also affect the value of the Group's assets and liabilities and the amount of shareholders' equity.
As noted below, the Group has certain financial assets and liabilities denominated in currencies other than the reporting currency. The Group does not use any derivative instruments to reduce its foreign currency
 
F49
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
24   Financial instruments (continued)
risks. To reduce exposure to currency transaction risk, the Group maintains cash and cash equivalents in the currencies used by the Group to meet short ‐ term liquidity requirements.
Below is a summary of the assets and liabilities denominated in a currency other than the US dollar that would be affected by changes in exchange rates relative to the US dollar for reporting purposes. The values are the US dollar equivalent of the respective asset or liability that is denominated in Canadian dollars or South African rands.
 
 
December 31, 2015
December 31, 2014
January 1, 2014 
       
Cash and cash equivalents
132
470
416
Trade and other receivables
566
83
1
Trade and other payables
510
575
648

The following exchange rates applied during the year:
 
Average rate during the year
Spot rate
 
2015
2014
2013
December 31, 2015
December 31, 2014
January 1,2014
(In US dollars)
           
CAD 1
0.7823
0.9057
0.9709
0.7210
0.8601
0.9349
Rand (ZAR) 1
0.0784
0.0923
0.1038
0.0644
0.0871
0.0967

 
F50
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
24   Financial instruments – (continued)
Sensitivity analysis
 
As a result of the group's monetary assets and liabilities denominated in foreign currencies which is different to the functional currency of the underlying entities, the profit or loss and equity in the underlying entities could be affected by movements between the functional currency and the foreign currency. The table below indicates net monetary assets/(liabilities) in the group that have a different functional currency and foreign currency. Amounts are indicated before elimination of intergroup balances.

   
2015
USD'000
   
2014
USD'000
   
2013
USD'000
 
   
Functional currency
   
Functional currency
   
Functional currency
 
   
ZAR
   
CAD
   
ZAR
   
CAD
   
ZAR
   
CAD
 
Cash and cash equivalents
   
3,874
     
5,483
     
10,514
     
553
     
8,197
     
1,594
 
Trade and other payables
   
-
     
-
     
-
     
-
     
-
     
-
 
Intercompany balances *
   
(27,650
)
   
44,390
     
(30,320
)
   
48,484
     
(31,079
)
   
57,207
 
     
(23,776
)
   
49,873
     
(19,806
)
   
49,037
     
(22,882
)
   
58,801
 

A reasonably possible strengthening or weakening of 5% of the various functional currencies against the foreign currencies, would have the following equal or opposite effect on profit or loss before tax for the group:
 
   
2015
USD'000
   
2014
USD'000
   
2013
USD'000
 
   
Functional currency
   
Functional currency
   
Functional currency
 
   
ZAR
   
CAD
   
ZAR
   
CAD
   
ZAR
   
CAD
 
Cash and cash equivalents
   
194
     
274
     
526
     
28
     
410
     
80
 
Trade and other payables
   
-
     
-
             
-
     
-
     
-
 
Intercompany balances *
   
(1,382
)
   
2,219
     
(1,516
)
   
2,424
     
(1,554
)
   
2,860
 
                                                 

* These intercompany balances represent the exposure to foreign currency risk between functional currencies and foreign currencies at a subsidiary level. These balances eliminates on consolidation.



iv)
Interest rate risk

The Group has no significant exposure to interest rate risk.
 
F51
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

24 Financial instruments – (continued)

v)
Gold price risk
On February 10, 2016, a gold price hedge was entered into to manage the possible effect of gold price fluctuations (refer note 31). As at December 31, 2015 no financial instruments were in place to manage the gold price risk.
25   Dividends
The following dividends were declared and paid by the Company (excluding NCI):
 
2015
2014
2013
       
$0.048 per qualifying share (2014: $0.054; 2013:$0.098)
2,504
2,850
5,140

From the start of fiscal 2014 to October 6, 2015, the Company paid an annual aggregate dividend of six Canadian cents ($0.060) per share.
26   Contingencies
The Group may be subject to various claims that arise in the normal course of business. Management believes there are no contingent liabilities of the Group arising from claims.

27   Related parties

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity. Directors of the company, as well as certain mine managers are considered key management.
 
 
F52
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

27   Related parties – (continued)

Employee contracts between Caledonia Mining South Africa Proprietary Limited and key management, include an option for respective key management to terminate such employee contract in the event of a change in control of the Company and to receive a severance payment equal to two years' compensation.  If this was triggered as at December 31, 2015 the severance payment would have amounted to $3,578 (2014: $3,611; 2013: $Nil). A change in control would constitute:
 
·
the acquisition of more than 50% of the common shares; or
·
the acquisition of right to exercise the majority of the voting rights of common shares; or
·
the acquisition of the right to appoint the majority of the board of directors; or
·
the acquisition of more than 50% of the assets; of
Caledonia Mining South Africa Proprietary Limited or Caledonia Mining Corporation Plc.

Key management personnel and director transactions:

A number of related parties transacted with the Group in the reporting period. The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows:
 
 
2015
2014
2013
Key management salaries and bonuses
2,452
1,781
1,482
Share-based payments
24
-
35
 
2,476
1,781
1,517
 
Employees, officers, directors, consultants and other service providers also participate in the Group's share option program (see note 20). Group entities are set out in note 28. As at year end 1,739,020 (2014:1,584,520; 2013:2,114,520) share options related to directors and key management.
 
F53
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
27   Related parties – (continued)
 
   
     
Transactions during the year
   
Note
2015
2014
2013
Management contract fees, allowances and bonus paid or accrued to a company for management services provided by the Group's former President and Chief Executive Officer.
 
(i)
-
850
715
Rent for office premises paid to a company owned by members of the former Chief Executive Officer's family.
 
(ii)
40
129
37
Legal fees and disbursements
   
-
-
85
Directors fees
   
191
298
280

(iii) On July 15, 2014 Caledonia served a six month notice to Epicure Overseas S.A. for the termination of the contract between Caledonia and Epicure for the provision of the services of Mr. Stefan Hayden, who was at that time Caledonia's President and Chief Executive Officer ("CEO").  Negotiations for alternative arrangements to secure the continued services of Mr. Hayden as President and CEO failed to reach agreement.  Accordingly, on November 18, 2014 Mr. Hayden stepped down as President and CEO and on December 6, 2014, Mr. Hayden resigned as a director of Caledonia.  No payments other than the contractual payments that were due to Epicure Overseas SA for the provision of the services of Mr. Hayden during the notice period were made.
 
(iv) The contract expired on September 2015.

 
Refer to note 5 and note 30 for transactions with Non-controlling interests. Refer to note 29 for management fees between Caledonia Mining South Africa Proprietary Limited and Blanket Mine (1983) (Private) Limited.
 
 
F54
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
28   Group entities
   
Country of incorporation
 
Legal    shareholding
      
Intercompany balances with Holding company
       
2015
2014
2013
 
2015
2014
2013
Subsidiaries of the Company
     
           %
%
%
       
Caledonia Holdings Zimbabwe (Private) Limited
 
Zimbabwe
 
100
100
100
 
-
-
-
Caledonia Mining Services Limited
 
Zimbabwe
 
100
100
100
 
-
-
-
Caledonia Kadola Limited (4)
 
Zambia
 
-
100
100
 
-
-
-
Caledonia Mining (Zambia) Limited (4)
 
Zambia
 
-
100
100
 
-
(15,499)
(15,499)
Caledonia Nama Limited (4)
 
Zambia
 
-
100
100
 
-
(12,435)
(6,419)
Caledonia Western Limited (4)
 
Zambia
 
-
100
100
 
-
-
-
Mulonga Mining Limited (4)
 
Zambia
 
-
100
100
 
-
-
-
Eersteling Gold Mining Corporation Limited
 
South Africa
 
100
100
100
 
(12,585)
(12,575)
(12,509)
Fintona Investments Proprietary Limited
 
South Africa
 
100
100
100
 
(14,859)
(14,859)
(14,859)
Caledonia Mining South Africa Proprietary Limited
 
South Africa
 
100
100
100
 
(3,806)
(3,806)
(5,839)
Greenstone Management Services Limited
 
United Kingdom
 
100
100
100
 
7,846
7,846
1,850
Maid O' Mist Proprietary Limited
 
South Africa
 
100
100
100
 
-
-
-
Mapochs Exploration Proprietary Limited
 
South Africa
 
100
100
100
 
-
-
-
Caledonia Holdings (Africa) Limited
 
Barbados
 
100
100
100
 
-
-
-
Blanket (Barbados) Holdings Limited
 
Barbados
 
100
100
100
 
-
-
-
Blanket Mine (1983) (Private) Limited (3)
 
Zimbabwe
 
(2) 49
49
49
 
-
-
-
Blanket Employee Trust Services (Private) Limited (BETS) (1)
 
Zimbabwe
 
-
-
-
 
-
-
-
 
(1) BETS and the Employee Trust are consolidated as structured entities.
(2) Refer to Note 5, for the effective shareholding. NCI has a 16.2% interest in cash flows of Blanket only.
(3) Blanket has no subsidiary companies.
(4) The Zambia operations were closed down during 2015 and the Companies in Zambia were struck of the Companies register on September 2, 2015.
 
 
F55
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
 
29   Operating Segments

The Group's operating segments have been identified based on geographic areas.

The Group has four reportable segments as described below, which are the Group's strategic business units. 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. The following geographical areas describe the operations of the Group's reportable segments: Corporate, Zimbabwe, South Africa and Zambia. The accounting policies of the reportable segments are the same as described in note 4.

The Corporate segment comprise the holding company and Greenstone Management Services Limited (UK) responsible for administrative functions within the group. The Zimbabwe operating segments comprise of Caledonia Holdings Zimbabwe Limited and subsidiaries. The Zambia segments consist of Nama copper project and cobalt project. The South Africa geographical segment comprise a gold mine as well as sales made by Caledonia Mining South Africa Proprietary Limited to the Blanket Mine.

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.
Information about reportable segments
2015
 
Corporate
   
Zimbabwe
   
South Africa
   
Zambia
   
Inter-group eliminations adjustments
   
Total
 
                                     
External Revenue
   
9,497
     
48,978
     
17,016
     
-
     
(26,514
)
   
48,977
 
Royalties    
-
     
(2,455
)
   
-
     
-
     
-
     
(2,455
)
Production costs
   
-
     
(30,955
)
   
(12,174
)
   
-
     
13,110
     
(30,019
)
Management fee
   
-
     
(4,140
)
   
4,140
     
-
     
-
     
-
 
Share based payment expense
   
(24
)
   
-
     
-
     
-
     
-
     
(24
)
Other income
   
9
     
55
     
46
     
-
     
-
     
110
 
Administrative expenses
   
(5,802
)
   
(118
)
   
(8,135
)
   
(750
)
   
7,183
     
(7,622
)
Depreciation
   
-
     
(3,559
)
   
(42
)
   
-
     
279
     
(3,322
)
Finance income
   
-
     
-
     
1
     
-
     
-
     
1
 
Finance expense
 
   
(344
)
   
(190
)
   
(2
)
   
-
     
-
     
(536
)
Foreign exchange gain/(loss)
   
431
     
-
     
2,419
     
-
     
-
     
2,850
 
Profit before income tax
   
3,767
     
7,616
     
3,269
     
(750
)
   
(5,942
)
   
7,960
 
Tax expense
   
522
     
(2,616
)
   
(276
)
   
-
     
-
     
(2,370
)
Profit after income tax
   
4,289
     
5,000
     
2,993
     
(750
)
   
(5,942
)
   
5,590
 
 
 
F56
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

 
29 Operating Segments – (continued)
       
2015
 
Corporate
   
Zimbabwe
   
South Africa
   
Zambia
   
Inter-group eliminations adjustments
   
Total
 
                                     
Geographic segment assets:
 
                                   
Current (excluding intercompany)
   
8,857
     
10,386
     
4,918
     
1
     
(600
)
   
23,562
 
Non-current (excluding intercompany)
   
40
     
50,613
     
370
     
-
     
(1,747
)
   
49,276
 
Additions to property, plant and equipment
   
-
     
18,385
     
143
     
-
     
(335
)
   
18,193
 
Intercompany balances
   
74,007
     
1,509
     
7,958
     
-
     
(83,474
)
   
-
 
                                                 
Geographic segment liabilities
 
                                               
Current (excluding intercompany)
   
(433
)
   
(6,497
)
   
(1,469
)
   
-
     
-
     
(8,397
)
Non-current (excluding intercompany)
   
-
     
(13,621
)
   
(459
)
   
-
     
-
     
(14,080
)
Intercompany balances
   
(16,734
)
   
(3,507
)
   
(37,290
)
   
(25,943
)
   
83,474
     
-
 
 
 
 
2014
 
Corporate
   
Zimbabwe
   
South Africa
   
Zambia
   
Inter-group eliminations adjustments
   
Total
 
                                     
External Revenue
   
3,719
     
53,513
     
7,167
     
-
     
(10,886
)
   
53,513
 
Royalties    
-
     
(3,522
)
   
-
     
-
     
-
     
(3,522
)
Production costs
   
-
     
(28,536
)
   
(6,256
)
   
-
     
6,884
     
(27,908
)
Management fee
   
-
     
(4,680
)
   
4,680
             
-
         
Other income/(expense)
   
-
     
16
     
9
     
-
     
-
     
25
 
Administrative expenses
   
(3,115
)
   
(436
)
   
(2,942
)
   
(894
)
   
-
     
(7,387
)
Depreciation
   
-
     
(3,522
)
   
(18
)
   
-
     
-
     
(3,540
)
Impairment
   
-
     
(81
)
   
-
     
(97
)
   
-
     
(178
)
Finance income
   
14
     
-
     
-
     
-
     
-
     
14
 
Finance expense
 
   
-
     
(154
)
   
-
     
-
     
-
     
(154
)
Foreign exchange gain/(loss)
   
49
     
-
     
1,016
     
-
     
-
     
1,065
 
Profit before income tax
   
667
     
12,598
     
3,656
     
(991
)
   
(4,002
)
   
11,928
 
Tax expense
   
(1,067
)
   
(3,594
)
   
(1,321
)
   
-
     
-
     
(5,982
)
Profit after income tax
 
   
(400
)
   
9,004
     
2,335
     
(991
)
   
(4,002
)
   
5,946
 
 
F57
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

29   Operating Segments – (continued)
 
 
2014
 
Corporate
   
Zimbabwe
   
South Africa
   
Zambia
   
Inter-group eliminations adjustments
   
Total
 
Geographic segment assets:
 
                                   
Current
   
10,768
     
10,448
     
11,783
     
44
     
(1,300
)
   
31,743
 
Non-current (excluding intercompany)
   
48
     
35,818
     
306
     
-
     
(1,436
)
   
34,736
 
Additions to property, plant and equipment
   
-
     
7,022
     
47
     
97
     
-
     
7,166
 
Intercompany balances
   
101,920
     
1,503
     
29,060
     
-
     
(132,483
)
   
-
 
                                                 
Geographic segment liabilities
 
                                               
 
Current
 
   
(994
)
   
(2,412
)
   
(1,566
)
   
-
     
-
     
(4,972
)
Non-current (excluding intercompany)
   
-
     
(10,571
)
   
(593
)
   
-
     
-
     
(11,164
)
Intercompany balances
   
(33,955
)
   
(902
)
   
(72,406
)
   
(25,220
)
   
132,438
     
-
 
 
 
 
2013
 
Corporate
   
Zimbabwe
   
South Africa
   
Zambia
   
Inter-group eliminations adjustments
   
Total
 
                                     
External Revenue
   
-
     
63,217
     
10,309
     
-
     
(10,309
)
   
63,217
 
Royalty    
-
     
(4,412
)
   
-
     
-
     
-
     
(4,412
)
Production costs
   
-
     
(27,748
)
   
(9,465
)
           
10,599
     
(26,614
)
Management fee
   
-
     
(4,680
)
   
4,680
     
-
     
-
     
-
 
Other income/(expense)
   
5,602
     
(5,602
)
   
-
     
-
     
-
     
-
 
Administrative expenses
   
(2,788
)
   
(2,311
)
   
(2,237
)
   
-
     
210
     
(7,546
)
Share-based payment expenses
   
(66
)
   
-
     
-
     
-
     
-
     
(66
)
Depreciation
   
-
     
(3,398
)
   
(15
)
   
-
     
223
     
(3,181
)
Impairment
   
-
     
(88
)
   
(387
)
   
(13,314
)
   
-
     
(13,789
)
Finance income
   
23
     
-
     
-
     
-
     
-
     
23
 
Finance expense
 
   
-
     
(128
)
   
-
     
-
     
-
     
(128
)
Foreign exchange gain/(loss)
   
108
     
1
     
2,268
     
-
     
(749
)
   
1,628
 
Profit before income tax
   
2,879
     
14,851
     
5,153
     
(13,314
)
   
(437
)
   
9,132
 
Tax expense
   
(1,788
)
   
(6,293
)
   
(1,528
)
   
-
     
-
     
(9,609
)
Profit after income tax
 
   
1,091
     
8,558
     
3,625
     
(13,314
)
   
(437
)
   
(477
)
F58
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
2 9   Operating Segments – (continued)
 
 
2013
 
Corporate
   
Zimbabwe
   
South Africa
   
Zambia
   
Inter-group eliminations adjustments
   
Total
 
Geographic segment assets:
 
                             
Current
   
14,084
     
9,909
     
9,766
     
41
     
-
     
33,800
 
Non-Current (excluding intercompany)
   
51
     
32,573
     
309
     
-
     
(1,661
)
   
31,272
 
Expenditure on property, plant and equipment
   
-
     
9,185
     
34
     
2,560
     
(383
)
   
11,396
 
Intercompany balances
   
56,931
     
1,658
     
5,878
     
-
     
(64,467
)
   
-
 
 
Geographic segment liabilities
 
                                   
 
Current
 
   
(150
)
   
(5,358
)
   
(1529
)
   
(7
)
   
-
     
(7,044
)
Non-current (excluding intercompany)
           
(8,751
)
   
(686
)
   
-
     
-
     
(9,437
)
Intercompany balances
   
(3,367
)
   
(732
)
   
(36,110
)
   
(24,258
)
   
64,467
     
-
 

Major customer
Revenues from Fidelity Printers in Zimbabwe amounted to approximately $48,977 (2014: $53,513; 2013:$Nil). Revenues from Rand Refinery in South Africa and Metalor Technologies in Switzerland amounted to $63,217 in 2013.
 
F59
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
30 Non-controlling interests
Blanket Mine (1983) (Private) Limited NCI % - 16.2%
       
   
2015
   
2014
   
2013
 
                   
Current assets
   
10,386
     
10,448
     
9,909
 
Non-current assets
   
50,613
     
37,322
     
32,573
 
Current liabilities
   
(6,497
)
   
(2,412
)
   
(5,358
)
Non-current liabilities
   
(13,621
)
   
(10,571
)
   
(8,751
)
Net assets
   
40,881
     
(34,787
)
   
(28,373
)
                         
Carrying amount of NCI
   
1,504
     
693
     
(48
)
                         
Revenue
   
48,977
     
53,515
     
63,217
 
Profit
   
5,000
     
8,860
     
15,372
 
Total comprehensive income
   
5,000
     
8,860
     
15,372
 
                         
Profit allocated to NCI
   
811
     
1,511
     
2,490
 
Dividend paid to NCI
   
-
     
770
     
731
 
31   Subsequent events
i)   Gold Hedge
In February 2016, the Company announced it had entered into a hedge in respect of 15,000 ounces of gold over a period of 6 months.  The hedge protects the Company if the gold price falls below $1,050 per ounce but gives Caledonia full participation if the price of gold exceeds $1,079 per ounce.  Blanket continues to sell all of its gold production to Fidelity Printers and Refiners Ltd ("Fidelity"), as required by Zimbabwean legislation, and receives the spot price of gold less an early settlement discount of 1.25%.  The maximum cost of the hedge to Caledonia is $435.   The full accounting impact has not been determined at the date of approval of these financial statements.

ii)
Recapitalisation of Blanket Mine (1983) (Private) Limited ("Blanket")
On February 26, 2016 Blanket entered into an agreement to recapitalise its cash resources by issuing shares to current shareholders as follows:
·
Caledonia Holdings Zimbabwe (Private) Limited subscribed for 4,755,556 Founder shares with a par value of $0.012 at $1.051;
·
A-class shareholders (NIEEF, BETS and Fremiro) subscribed for 3,979,140 A-class shares with a par value of $0.005 at $0.57; and
·
GCSOT subscribed for 970,522 B class shares with a par value of $0.005 for a nominal amount of $4.8

 
F60
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )
31   Subsequent events – (continued)
Founder shares will be paid for in a cash consideration of $5 million funded through Greenstone Management Services Limited (United Kingdom). A class shares will be funded by increasing the Facilitation loans (described in note 5) by $2.27 million on the same terms and conditions as the previous facilitation loan agreements. The B class shares were donated by Blanket. The transaction would not affect the current shareholding structure of the Company and the entity will continue to consolidate Blanket after the transaction.

Reserve Bank of Zimbabwe approval for these share transactions was obtained on March 1, 2016. The transaction is further dependant on the approval by the Zimbabwe Reserve Bank of the $5 million loan from Greenstone Management Services Limited (United Kingdom) to Caledonia Holdings Zimbabwe (Private) Limited, which was received on March 14, 2016. The cash was transferred on March 22, 2016 and the financial effect of the recapitalisation cannot be determined at the date of approval of these financial statements.

iii)
Re-domicile to Jersey

On December 21, 2015 the Company announced that it would seek shareholder approval to re-domicile from Canada to Jersey using a legal process called "Continuance".

The reasons for the proposed Continuance included:

·
the Company has no commercial operations in Canada, hence there is no reason for it to be domiciled in Canada and subject to Canadian taxes and the compliance costs associated with being a Canadian tax entity;
·
Jersey is more conveniently located in relation to the Company's operations in Southern Africa and the majority of its shareholder base which ranges from continental Europe to South Africa and North America; and
·
Canadian withholding tax, which is currently applicable to dividends paid to the Company's shareholders outside Canada, will be eliminated.

On February 18, 2016, shareholder approval was obtained and the Continuance became effective on March 21, 2016. The Continuance has no effect on the Company's existing listings in Toronto and on AIM in London, or the trading facility on the OTCQX in the USA and the company's shares will continue to be traded on these listing and trading platforms after the continuance is completed. The re-domicile to Jersey has no impact on these financial statements.

 

F61
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, December 31, 2014 and December 31, 2013
( in thousands of United States dollars , unless indicated otherwise )

31   Subsequent events – (continued)

iv)
Share based payment awards

On January 12, 2016, key management were granted Restricted Share Units ("RSU's") and Performance Share Units ("PSU's") pursuant to provisions of the 2015 Omnibus Equity Incentive Compensation Plan. 303,225 RSU's and 1,212,903 PSU's were granted and approved by the Compensation Committee of the board of directors on January 12, 2016. 27,419 of the RSU's will vest on December 31, 2016 and 275,806 on December 31, 2018 given that the service condition of the relevant employee(s) are fulfilled at these dates. The value of the vested RSU's will be the amount of RSU's vested multiplied by the Fair Market Value, as specified by the plan, on date of settlement.109,677 PSU's are expected to vest on December 31, 2016 and 1,103,226 on December 31, 2018, dependent on certain performance measures as vesting conditions.

On March 24, 2016 an additional 47,887 RSU's and 191,549 PSU's were granted to Mr. M Learmonth. The RSU's will vest on December 31, 2018 given that the service condition is fulfilled on the same valuation basis as the RSU's granted on January, 12, 2016. The PSU's are expected to vest on December 31, 2018 based on certain performance measures.

The performance measures for all the above grants are determined with reference to the stage of the completion of the central shaft project, gold production targets and production cost per ounce targets.  The vesting amounts of the PSU's are determined by the quantity granted multiplied by the performance multiplier at vesting date. The performance multiplier varies between zero and 70% of target, to a maximum multiplier of 200%, if 200% of the performance measure targets are met.  The settlement amounts of the PSU's are determined by the number of PSU's vested multiplied by the Fair Market Value, as specified by the Plan, on date of settlement.

Both RSU's holders are entitled to receive cash equivalent dividends on the common shares of the Company from and after the date of grant until the settlement date, and such dividends will be automatically reinvested in additional RSU's at the then applicable RSU's Share Price.  PSU's holders are entitled to receive cash equivalent dividends on the underlying common shares of the Company from and after the vesting date until the settlement date, and such dividends will be automatically reinvested in additional PSU's at the then applicable PSU's Share Price.

All RSU's and PSU's awards will be settled in cash.  No shares of the Company will be issued in connection with the RSU's and PSU's awards.   The total financial effect of the share based payment transaction has not been determined at the date of approval of these financial statements.

v)
Dividend Policy
On January 5, 2016 Caledonia announced that the revised dividend policy would amount to an annual dividend of 4.5 United States cents per annum, paid quarterly.
F62


SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
Date   April 4, 2016
 
CALEDONIA MINING CORPORATION
 
 
By:
/s/ Steven Curtis
   
Steven Curtis
Chief Executive Officer
 

 
 
 
Exhibit 1.1

 
 
 
 
 
Companies (Jersey) Law (1991)
 
 
Public Company Limited by Shares
 
 
 
 
ARTICLES OF ASSOCIATION
of
CALEDONIA MINING CORPORATION PLC
 

 
 
 
 
 


 







Table of Contents
DEFINITIONS AND INTERPRETATION
1
   
1. Definitions and interpretation
1
2. Standard Table excluded
4
3. Form of resolutions
4
   
SHARE CAPITAL
4
   
4. Issue of and rights attached to shares
4
5. Preference Shares
4
6. Common Shares
6
7. Payment of commissions
6
8. Trusts not recognised
6
9. Variation of rights
7
10. Matters not constituting a variation of rights
7
   
CERTIFICATES
7
   
11. Right to certificates
7
12. Execution of certificates
7
13. Replacement certificates
8
14. Uncertificated securities
8
   
UNTRACED SHAREHOLDERS
9
   
15. Power to sell shares of untraced shareholders
9
16. Manner of sale and creation of debt in respect of net proceeds
10
   
TRANSFER OF SHARES
10
   
17. Form and execution of transfer
10
18. No fee for registration
11
19. Retention of documents
11
20. Other Registers
11
   
TRANSMISSION OF SHARES
11
   
21. Transmission
11
22. Election by transmittee
11
23. Rights in respect of the share
11
   
ALTERATION OF CAPITAL
12
   
24. Fractions
12
   
PURCHASE OF OWN SHARES AND DISSENT RIGHTS
12
   
25. Purchase of own shares
12
26. Dissent Rights
12
   
DISCLOSURE OF INTERESTS
16
2
 
27. Notice and disclosure obligations
16
   
GENERAL MEETINGS
19
   
28. Convening general meetings
19
   
NOTICE OF GENERAL MEETINGS
19
   
29. Length of notice period
19
30. Contents of notices
19
31. Omission or non-receipt of notice
20
32. Change of date, time or place of meeting
20
33. Members' power to include other matters in business dealt with at an annual general meeting
20
34. Information rights
22
   
PROCEEDINGS AT GENERAL MEETINGS
22
   
35. Quorum
23
36. Procedure if quorum not present
23
37. Chairman of general meeting
23
38. Attendance and speaking at general meetings
23
39. Meeting at more than one place and/or in a series of rooms
24
40. Security arrangements
24
41. Adjournments
24
42. Notice of adjourned meeting
25
   
VOTES OF MEMBERS
25
   
43. Method of voting
25
44. Votes of members
25
45. Votes of joint holders
26
46. Votes of member suffering incapacity
26
47. Votes on a poll
26
48. Right to withdraw demand for a poll
26
49. Procedure if poll demanded
26
50. When poll to be taken
26
51. Continuance of other business after poll demanded
26
52. Proposal or amendment of resolution
27
53. Amendment of resolution ruled out of order
27
54. Objections or errors in voting
27
   
PROXIES
27
   
55. Execution of an appointment of proxy
27
56. Times for deposit of an appointment of proxy
28
57. Form of appointment of proxy
29
58. Validity of proxy
29
59. Maximum validity of proxy
29
   
DIRECTORS
30
   
60. Number of Directors
30
3
61. No shareholding qualification for Directors
30
   
REMUNERATION OF DIRECTORS
30
   
62. Ordinary remuneration
30
63. Expenses
30
64. Extra remuneration
30
   
EXECUTIVE DIRECTORS
30
   
65. Executive Directors
30
   
POWERS AND DUTIES OF DIRECTORS
31
   
66. General powers of the Company vested in the Board
31
   
DELEGATION OF DIRECTORS' POWERS
31
   
67. Agents
31
68. Delegation to individual Directors
31
69. Delegation to committees
31
   
SPECIFIC POWERS
32
   
70. Provision for employees
32
71. Borrowing Powers
32
   
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS
36
   
72. Retirement at annual general meetings
36
73. Position of Retiring Director
36
74. Eligibility for appointment as a Director
36
75. Power of the Company to appoint Directors
37
76. Power of the Board to appoint Directors
37
77. Company's power to remove a Director and appoint another in his place
37
78. Vacation of office by Directors
37
   
DIRECTORS' INTERESTS
38
   
79. Transactions, offices, employment and interests
38
   
DIRECTORS' GRATUITIES AND PENSIONS
40
   
80. Directors' gratuities and pensions
40
   
PROCEEDINGS OF THE BOARD
41
   
81. Board meetings
41
82. Notice of Board meetings
41
83. Voting
41
84. Quorum
41
85. Board vacancies below minimum number
41
86. Appointment of chairman
42
87. Competence of the Board
42
88. Participation in meetings by telephone
42
 
4
89. Written resolutions
42
90. Company books
42
91. Validity of acts of the Board or a committee
43
92. Liability of Directors for breach of Article 4.4
43
   
COMPANY SECRETARY
43
   
93. Appointment and removal of Company Secretary
43
   
THE SEAL
43
   
94. Use of seal
43
   
DIVIDENDS
43
   
95. Company may declare dividends
43
96. Board may pay interim dividends and fixed dividends
43
97. Currency of dividends
44
98. Waiver of dividends
44
99. Non-cash dividends
44
100. Scrip dividends
44
101. Enhanced scrip dividends
46
102. No interest on dividends
46
103. Payment procedure
46
104. Receipt by joint holders
47
105. Where payment of dividends need not be made
47
106. Unclaimed dividends
47
   
CAPITALISATION OF PROFITS
47
   
107. Capitalisation of profits
47
   
AUTHENTICATION OF DOCUMENTS
48
   
108. Authentication of documents
48
   
RECORD DATES
48
   
109. Power to choose record date
48
   
ACCOUNTS AND OTHER RECORDS
48
   
110. Accounts
48
111. Inspection of records
48
112. Destruction of documents
49
   
COMMUNICATIONS
49
   
113. Form of communications
49
114. Communication with joint holders
52
115. Communications after transmission
52
116. When notice deemed served
53
117. Record date for communications
53
118. Loss of entitlement to receive communications
53
 
5
119. Notice when post not available
54
   
WINDING UP AND SALE OF ASSETS
54
   
120. Distribution in specie on winding up
54
   
INDEMNITY
54
   
121. Indemnity
54
122. Power to insure
55
 
6




Companies (Jersey) Law (1991)
Public Company Limited by Shares
ARTICLES OF ASSOCIATION
of
CALEDONIA MINING CORPORATION PLC

1.   DEFINITIONS AND INTERPRETATION
1. Definitions and interpretation
1.1 In these Articles, the following words and expressions have the meanings indicated below:
"these Articles" :   these articles of association as originally adopted or as altered from time to time
" AIM ": the market known as AIM operated by the London Stock Exchange
" AIM Rules " the AIM Rules for Companies as published from time to time by the London Stock Exchange
"Auditors" :   the auditors of the Company for the time being or, in the case of joint auditors, any one of them
"Board" :   the board of Directors from time to time of the Company or those Directors present at a duly convened meeting of the Directors at which a quorum is present
"clear days" :  in relation to the period of a notice, that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect
"Director" :   a director for the time being of the Company
" Disclosure and Transparency Rules ": the UK Disclosure and Transparency Rules as amended from time to time relating to the disclosure of information in respect of financial instruments which have been admitted to trading on a regulated market or for which a request for admission to trading on such a market has been made, as published by the Financial Conduct Authority of the United Kingdom
" electronic copy ", " electronic form " and " electronic means ": the meanings given to them by section 1168 of the UK Companies Act 2006
" entitled by transmission ": in relation to a share in the capital of the Company, entitled as a consequence of the death or bankruptcy of the holder or otherwise by operation of law
" Handbook ": the Handbook as published by the Financial Conduct Authority of the United Kingdom
" hard copy " and " hard copy form ": the meanings given to them by section 1168 of the UK Companies Act 2006;
"holder" :   in relation to shares, the member whose name is entered in the Register as the holder of the shares (but, to the extent that these Articles would otherwise conflict with the Statutes, not including the Company itself in relation to shares held as treasury shares)
 
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" International Financial Reporting Standards ": accounting standards issued by the International Accounting Standards Board
"London Stock Exchange" :   the London Stock Exchange plc
"member" :   a member of the Company (but, to the extent that these Articles would otherwise conflict with the Statutes, not including the Company itself in relation to shares held as treasury shares)
" Memorandum ": the memorandum of association of the Company as altered from time to time
"Office" :   the registered office of the Company
" Operator ": the same meaning as "authorised operator" as provided for in the   Order
" ordinary resolution ": a resolution of the Company in general meeting adopted by a simple majority of the votes cast at that meeting
" Order ": the Uncertificated Securities (Jersey) Order 1999, as amended from time to time and any provisions of or under the Companies Law which supplement or replace such Order;
"paid up" :   paid up or credited as paid up
" participating class ": a class of shares title to which is permitted by an   Operator to be transferred by a relevant system
"Register" :   the register of members of the Company
" regulated market ": the meaning as given to it in the City Code on Takeovers and Mergers
"relevant system" :   the computer-based system, and procedures, which enable title to units of a security to be evidenced and transferred without a written instrument, and which facilitate supplementary and incidental matters in accordance with the Order
"Seal" :   the common seal of the Company or any official seal kept by the Company pursuant to the Statutes
"Secretary" :   the secretary of the Company or any other person appointed to perform the duties of the secretary of the Company, including a joint, assistant or deputy secretary and any person appointed to perform the duties of secretary temporarily or in any particular case
" share " : a Preference Share or a Common Share, as the context requires subject to the rights of such share set out in Articles 5 and 6
"special resolution ": a resolution passed by a majority of two-thirds of the holders who (being entitled to do so) vote in person, or by proxy, at a general meeting of the Company or at a separate meeting of a class of members of the Company
"Statutes" :   every statute (including any statutory instrument, order, regulation or subordinate legislation made under it) concerning companies that are incorporated in Jersey to the extent that it is for the time being in force or (where the context requires) was in force at a particular time, including but not limited to the Companies (Jersey) Law (1991) and the Order
"subsidiary" :   the meaning given to it in the Statutes and includes a corporation, partnership or other entity, the financial results of which, pursuant to International Financial Reporting Standards, may be consolidated with the financial results of the Company
"system's rules" :   the rules, regulations, procedures, facilities and requirements of the relevant system concerned
 
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"transfer instruction" :   a properly authenticated dematerialised instruction on a relevant system in accordance with the Order in such form, in such manner and from such person as the Board may determine
"transmittee" :   a person entitled to a share in consequence of the death or bankruptcy of a member or of any other event giving rise to its transmission by operation of law
"UK Companies Act 2006 ": the United Kingdom Companies Act 2006
" UK FSMA ": the United Kingdom Financial Services and Markets Act 2000
"UK Listing Authority" :   the Financial Conduct Authority acting in its capacity as the competent authority for the purposes of Part VI of the UK FSMA
"uncertificated share ": means a share of a class which is at the relevant time a participating class title to which is recorded on the Register as being held in uncertificated form and references in these Articles to a share being held in uncertificated form shall be construed accordingly
"United Kingdom" :   Great Britain and Northern Ireland
"working day ": the meaning given by section 1173 of the UK Companies Act 2006
1.2 The expressions "debenture" and "debenture holder" include "debenture stock" and "debenture stockholder".
1.3 References to writing include any method of reproducing or representing words, symbols or other information in such form (including in electronic form or by making it available on a website) that it can be read or seen with the naked eye and a copy of it can be retained.
1.4 References to the execution of a document (including where execution is implied, such as in the giving of a written consent) include references to its being executed under hand or under seal or by any other method, and, in relation to anything sent or supplied in electronic form, include references to its being executed by such means and incorporating such information as the Board may from time to time stipulate for the purpose of establishing its authenticity and integrity.
1.5 Unless the context otherwise requires, words or expressions used in these Articles that are defined in the Statutes bear those meanings in these Articles (but as if the definitions contemplated their use in these Articles as well as in the relevant legislation), except that the word "company" shall include any body corporate.
1.6 Except where the contrary is stated or the context otherwise requires, any reference to a statute or statutory provision includes any order, regulation, instrument or other subordinate legislation made under it for the time being in force, and any reference to a statute, statutory provision, order, regulation, instrument or other subordinate legislation includes any amendment, extension, consolidation, re-enactment or replacement of it for the time being in force.
1.7 Words importing the singular number only include the plural and vice versa.  Words importing the masculine gender include the feminine and neuter gender.  Words importing persons include corporations.
1.8 References to a meeting shall not be taken as requiring more than one person to be present if any quorum requirement can be satisfied by one person.
1.9 References to any security as being in certificated form or uncertificated form refer, respectively, to that security being a certificated unit of a security or an uncertificated unit of a security for the purposes of the Order.
 
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1.10 Headings are inserted for convenience only and shall not affect the construction of these Articles.
2. Standard Table excluded
2.1 The regulations constituting the Standard Table prescribed pursuant to the Companies (Jersey) Law 1991 shall not apply to the Company and hereby are expressly excluded in their entirety .
3. Form of resolutions
3.1 A special resolution shall be effective for any purpose for which an ordinary resolution is expressed to be required under the Statutes or these Articles.
SHARE CAPITAL
4. Issue of and rights attached to shares
4.1 Without prejudice to any special rights for the time being conferred on the holders of any class of shares (which special rights shall not be varied or abrogated except with such consent or sanction as is required by Article 9 and subject to the Statutes) (and, for the avoidance of doubt, without prejudice to Article 4.2) any share in the Company (including any share created on an increase or other alteration of share capital) may be issued with such preferred, deferred or other special rights, or such restrictions, whether in regard to dividends, return of capital, voting or otherwise, as the Company may from time to time, by special resolution, determine.
4.2 The unissued shares for the time being in the capital of the Company shall be at the disposal of the Directors, and they may (subject to the provisions of Article 9) allot, grant options over, or otherwise dispose of them to such persons at such times and on such terms as they think proper.
4.3 The Directors may issue shares in the Company to any person and without any obligation to offer such shares to the members (whether in proportion to the existing shares held by them or otherwise).  Shares issued by the Company are non-assessable and the holders are not liable to the Company or its creditors in respect thereof.
4.4 A share shall not be issued until the consideration for the share is fully paid in money or in property or past services that are not less in value than the fair equivalent of the money that the Company would have received if the share had been issued for money.  In determining whether property or past services are the fair equivalent of a money consideration, the Directors may take into account reasonable charges and expenses of organisation and reorganisation and payments for property and past services reasonably expected to benefit the Company.  For the purposes of this Article 4.4, "property" does not include a promissory note or a promise to pay that is made by a person to whom a share is issued, or a person who does not deal at arm's length with a person to whom a share is issued.
5. Preference Shares
5.1 Issuable in series
Preference Shares may be issued from time to time in one or more series composed of such number of shares and with such preference, deferred or other special rights, privileges, restrictions and conditions attached thereto as shall be fixed hereby or from time to time before issuance by any resolution or resolutions providing for the issue of the shares of any series which may be passed by the Directors and confirmed and declared by special resolution including, without limiting the generality of the foregoing:
 
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5.1.1 the rate, amount or method of calculation of any dividends, and whether such rate, amount or method of calculation shall be subject to change or adjustment in the future, the currency or currencies of payment, the date or dates and place or places of payment thereof and the date or dates from which any such dividends shall accrue;
5.1.2 any right of redemption and/or purchase and the redemption or purchase prices and terms and conditions of any such right;
5.1.3 any right of retraction vested in the holders of Preference Shares of such series and the prices and terms and conditions of any such rights;
5.1.4 any right upon dissolution, liquidation or winding-up of the Company;
5.1.5 any voting rights;
5.1.6 any rights of conversion; and
5.1.7 any other provisions attaching to any such series of Preference Shares.
5.2 Priority of dividends
The Preference Shares of each series shall, with respect to the payment of dividends, be entitled to a preference over the Common Shares and over any other shares of the Company ranking junior to the Preference Shares.
5.3 Liquidation, dissolution and winding-up
Subject to the rights, privileges, restrictions and conditions that may be attached to a particular series of Preference Shares by the Directors in accordance with Article 5.1 of the conditions attaching to the Preference Shares, in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or other distribution of assets of the Company among holders for the purpose of winding up its affairs, the holders of the Preference Shares shall be entitled to receive, before any distribution of any part of the assets of the Company among the holders of the Common Shares or any other shares of the Company ranking junior to the Preference Shares for each Preference Share, an amount equal to the price at which such Preference Share was issued together with, in the case of any Preference Share that is part of a series of Preference Shares entitled to cumulative dividends, all unpaid cumulative dividends (which for such purpose shall be calculated as if such cumulative dividends were accruing from day-to-day for the period from the expiration of the last period for which cumulative dividends have been paid up to and including the date of distribution) and, in the case of any Preference Share that is part of a series of Preference Shares entitled to non-cumulative dividends, any dividends declared thereon and unpaid. After payment to the holders of the Preference Shares of the amounts so payable to them, they shall not be entitled to share in any further distribution of the property or assets of the Company in connection with the events contemplated by this Article.
5.4 Parity of series
No rights, privileges, restrictions or conditions attached to any series of Preference Shares shall confer upon the shares of such series a priority in respect of dividends or distribution of assets or return of capital in the event of the liquidation, dissolution or winding up of the Company over the shares of any other series of Preference Shares. The Preference Shares of each series shall, with respect to the payment of dividends and the distribution of assets or return of capital in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, rank on a parity with the Preference Shares of every other series; provided however that in case such assets are insufficient to pay in full the amount due on all Preference Shares, then such assets shall be applied, firstly, to the payment equally and rateably of an amount equal to the price at which the Preference Shares of each series were issued and the premium payable thereon, if any, and secondly, rateably in payment of all accrued and unpaid cumulative dividends and declared but unpaid non-cumulative dividends.
 
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5.5 Notices and Voting
5.5.1 Subject to the rights, privileges, restrictions and conditions that may be attached to a particular series of Preference Shares by the Directors in accordance with Article 5.1   of the conditions attaching to the Preference Shares, the holders of a series of Preference Shares shall not, as such, be entitled to receive notice of or to attend any meeting of the members and, subject to Article 120.2, shall not be entitled to vote at any such meeting (except where the holders of a specified class or series of shares are entitled to vote separately as a class).
5.5.2 The holders of Preference Shares, or of any series of Preference Shares, shall not be entitled to vote separately as a class or series (and no rights, privileges, restrictions or conditions attached to the Preference Shares or any series of Preference Shares shall entitle any holder of Preference Shares or of any series of Preference Shares to vote separately as a class or series) upon any proposal to amend the Articles to:
(a) increase or decrease any maximum number of authorised Preference Shares or increase any maximum number of authorised shares of a class having rights or privileges equal or superior to the Preference Shares;
(b) effect an exchange, reclassification or cancellation of all or part of the Preference Shares; or
(c) create a new class of shares equal or superior to the Preference Shares.
5.5.3 Notwithstanding the aforesaid rights, privileges, restrictions and conditions on the right to vote, the holders of a series of Preference Shares are entitled to notice of meetings of members called for the purpose of authorising the dissolution of the Company or the sale, lease or exchange of all or substantially all the property of the Company other than in the ordinary course of business of the Company.
6. Common Shares
6.1 Dividends
Subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of the Company, the holders of the Common Shares shall be entitled to receive any dividends declared by the Company.
6.2 Liquidation, dissolution and winding-up
The holders of the Common Shares shall be entitled to receive the remaining property of the Company upon the liquidation, dissolution or winding-up of the Company, whether voluntary of involuntary.
6.3 Notices and voting
The holders of the Common Shares shall be entitled to one vote for each Common Share held at all meetings of holders, except meetings at which only holders of another specified class or series of shares are entitled to vote.
7. Payment of commissions
7.1 The Company may exercise the powers of paying commissions and brokerage conferred or permitted by the Statutes.  Subject to the Statutes, any such commission may be satisfied by the payment of cash or by the allotment (or an option to call for the allotment) of fully or partly paid shares or partly in one way and partly the other.
8. Trusts not recognised
8.1 Except as required by law, no person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or recognise (except as otherwise provided by these Articles or by law or under an order of a court of competent jurisdiction) any interest in any share except an absolute right to the whole of the share in the holder.
 
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9. Variation of rights
9.1 If at any time the share capital of the Company is divided into shares of different classes, any of the rights for the time being attached to any share or class of shares in the Company (and notwithstanding that the Company may be or be about to be in a winding up) may be varied or abrogated in such manner (if any) as may be provided by such rights or, in the absence of any such provision, either with the consent in writing of the holders of not less than two-thirds in number of the issued shares of the class or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of the class duly convened and held as hereinafter provided (but not otherwise).
9.2 All the provisions in these Articles as to general meetings shall mutatis mutandis apply to every meeting of the holders of any class of shares. The Board may convene a meeting of the holders of any class of shares whenever it thinks fit and whether or not the business to be transacted involves a variation or abrogation of class rights.
10. Matters not constituting a variation of rights
10.1 The rights attached to any share or class of shares shall not, unless otherwise expressly provided by its terms of issue, be deemed to be varied, abrogated or breached by:
10.1.1 the creation or issue of further shares ranking pari passu with it; or
10.1.2 the purchase or redemption by the Company of any of its own shares (whether of that or any other class) or the sale of any shares (of that class or any other class) held as treasury shares.
CERTIFICATES
11. Right to certificates
11.1 Except as otherwise provided in these Articles, every person whose name is entered in the Register as a holder of shares in the Company shall be entitled, within the time specified by the Statutes and without payment, to one certificate for all the shares of each class registered in his name.  Upon a transfer of part of the shares of any class registered in his name, every holder shall be entitled without payment to one certificate for the balance in certificated form of his holding.  Upon request and upon payment, for every certificate after the first, of such reasonable sum (if any) as the Board may determine, every holder shall be entitled to receive several certificates for certificated shares of one class registered in his name (subject to surrender for cancellation of any existing certificate representing such shares).  Every holder shall be entitled to receive one certificate in substitution for several certificates for certificated shares of one class registered in his name upon surrender to the Company of all the share certificates representing such shares.
11.2 Subject as provided in the preceding part of this Article, the Company shall not be bound to issue more than one certificate in respect of certificated shares registered in the names of two or more persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them.
12. Execution of certificates
12.1 Every certificate for share or loan capital or other securities of the Company (other than letters of allotment, scrip certificates or similar documents) shall be issued under the Seal (or in such other manner as the Board, having regard to the terms of issue, the Statutes and the requirements of the UK Listing Authority or the AIM Rules (as applicable), may authorise) and each share certificate shall specify the shares to which it relates, the distinguishing number (if any) of the shares and the amount paid up on the shares.  The Board may determine, either generally or in relation to any particular case, that any signature on any certificate need not be autographic but may be applied by some mechanical or other means, or printed on the certificate, or that certificates need not be signed.
 
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13.
Replacement certificates
13.1 If a share certificate for certificated shares is worn out, defaced or damaged then, upon its surrender to the Company, it shall be replaced free of charge.  If a share certificate for certificated shares is or is alleged to have been lost or destroyed it may be replaced without fee but on such terms (if any) as to evidence and indemnity and to payment of any exceptional out-of-pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board thinks fit.  The Company shall be entitled to treat an application for a replacement certificate made by one of joint holders as being made on behalf of all the holders concerned.
14. Uncertificated securities
14.1 Pursuant and subject to the Order, the Board may permit title to some or all of the shares of any class to be evidenced otherwise than by a certificate and title to such shares to be transferred in accordance with the rules of a relevant system and may make arrangements for that class of shares to become a participating class. Title to some or all of the shares of a particular class may only be evidenced otherwise than by a certificate where that class of shares is at the relevant time a participating class. The Board may also, subject to compliance with the Order and the rules of any relevant system, determine at any time that title to some or all of the shares of any class of shares may from a date specified by the Board no longer be evidenced otherwise than by a certificate or that title to such shares shall cease to be transferred by means of any particular relevant system. For the avoidance of doubt, shares which are uncertificated shares shall not be treated as forming a class which is separate from certificated shares with the same rights.
14.2 In relation to a class of shares which is a participating class and for so long as it remains a participating class, no provision of these Articles shall apply or have effect to the extent that it is inconsistent in any respect with:
14.2.1 the holding of shares of that class in uncertificated form;
14.2.2 the transfer of title to shares of that class by means of a relevant system;
14.2.3 the exercise of any powers or functions by the Company or the effecting by the Company of any actions by means of a relevant system; and
14.2.4 any provision of the Order.
14.3 Some or all of the shares of a class which is at the relevant time a participating class may be changed from uncertificated form to certificated form, and from certificated to uncertificated form, in accordance with and subject as provided for in the Order and the rules of any relevant system.
14.4 Unless the Board otherwise determines or the Order or the rules of the relevant system concerned otherwise require, any shares issued or created out of or in respect of any uncertificated shares shall be uncertificated shares and any shares issued or created out of or in respect of any certificated shares shall be certificated shares.
14.5 Subject to the Statutes, the Directors may lay down regulations not included in these Articles which (in addition to, or in substitution for, any provisions in these Articles):
14.5.1 apply to the issue, holding, exercise of rights in respect of or transfer of shares in uncertificated form;
14.5.2 set out (where appropriate) the procedures for conversion and/or redemption of shares in uncertificated form; and/or
14.5.3 which the Directors consider necessary or appropriate to ensure that these Articles are consistent with the Order and/or the Operator's rules and practices.
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14.6 Such regulations will apply instead of any relevant provisions in these Articles which relate to the issue, holding, transfer, conversion and redemption of shares in uncertificated form or which are not consistent with the Order, in all cases to the extent (if any) stated in such regulations. If the Directors make any such regulation, Article 14.8 of this Article will (for the avoidance of doubt) continue to apply, when read in conjunction with those regulations.
14.7 Any instruction given by means of a relevant system shall be a dematerialised instruction given in accordance with the Order, the facilities and requirements of a relevant system and the Operator's rules and practices.
14.8 Where the Company is entitled under the Statutes, the Operator's rules and practices, these Articles or otherwise to dispose of or sell or otherwise procure the sale of any shares, the Directors may, in the case of any shares in uncertificated form, take such steps (subject to the Statutes, the Operator's rules and practices and these Articles) as may be required or appropriate, by instruction by means of a relevant system or otherwise to effect such disposal or sale, including (without limitation) by:
14.8.1 requesting or requiring the deletion of any computer based entries in the relevant system relating to the holding of such shares;
14.8.2 altering such computer based entries so as to divest the holder of such shares of the power to transfer such shares other than to a person selected or approved by the Company for the purpose of such transfer;
14.8.3 requiring any holder of such shares to take such steps as may be necessary to sell or transfer such shares as directed by the Company;
14.8.4 (subject to any applicable law) otherwise rectify or change the Register in respect of any such shares in such manner as the Directors consider appropriate (including, without limitation, by entering the name of a transferee into the Register as the next holder of such shares); and/or
14.8.5 appointing any person to take any steps in the name of any holder of such shares as may be required to change such shares to certificated form and/or to effect the transfer of such shares (and such steps shall be effective as if they had been taken by such holder).
14.9 In relation to any share in uncertificated form:
14.9.1 the Company may utilise the relevant system to the fullest extent available from time to time in the exercise of any of its powers or functions under the Statutes or these Articles or otherwise in effecting any actions and the Company may from time to time determine the manner in which such powers, functions and actions shall be so exercised or effected;
14.9.2 the Company may, by notice to the holder of that share, require the holder to change the form of that share to certificated form within the period specified in the notice and to hold that share in certificated form for so long as required by the Company; and
14.9.3 the Company shall not issue a share certificate.
14.10 The Company may by notice to the holder of any share in certificated form, direct that the form of such share may not be changed to uncertificated form for a period specified in such notice.
UNTRACED SHAREHOLDERS
15. Power to sell shares of untraced shareholders
15.1 Subject to the Order, the Company shall be entitled to sell at the best price reasonably obtainable any shares of a holder or transmittee if in respect of those shares:
15.1.1 no cheque, warrant or other financial instrument or payment sent by the Company in the manner authorised by these Articles has been cashed for a period of at least 12 years (the "qualifying period") and in the qualifying period the Company has paid at least three dividends and no dividend has been claimed;
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15.1.2 the Company has at the expiration of the qualifying period given notice of its intention to sell such shares by two advertisements, one in a national newspaper published in the United Kingdom , Canada and Jersey and the other in a newspaper circulating in the area in which the last known address of the holder or the address at which service of notices may be effected in the manner authorised by these Articles is located; and
15.1.3 so far as the Board is aware, the Company has not during the qualifying period or the period of three months after the date of such advertisements (or the later of the two dates if they are published on different dates) and prior to the exercise of the power of sale received any communication from the holder or transmittee.
and where this power has arisen and at the time of its exercise that holder or transmittee holds, or is entitled by transmission to hold, any other shares issued in right of the shares to be sold, this power shall be deemed to have arisen also in relation to those other shares.
16. Manner of sale and creation of debt in respect of net proceeds
16.1 To give effect to any sale pursuant to the immediately preceding Article, the Board may:
16.1.1 in the case of shares held in certificated form, authorise and instruct some person (which may include the holder of shares concerned) to execute an instrument of transfer of the shares; and
16.1.2 in the case of shares held in uncertificated form, subject to the system's rules, require the Operator of a relevant system to convert any such share into certificated form in order to enable the Company to deal with the share in accordance with this Article, and after such conversion authorise and instruct some person to execute an instrument of transfer of the share (and to take such other steps as may be necessary to give effect to the sale or disposal)
and such instrument of transfer and the taking of such other steps as may be necessary shall be as effective as if they had been executed by the holder or transmittee of the shares.  The transfer will be valid even if in respect of any of the shares no certificate accompanies the instrument of transfer.  The transferee shall not be bound to see to the application of the purchase money and his title shall not be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.
16.2 The net proceeds of sale shall belong to the Company, which shall be indebted to the former holder or transmittee for an amount equal to such proceeds and shall enter the name of such former member or other person in the books of the Company as a creditor for such amount.  No trust shall be created in respect of the debt, no interest shall be payable in respect of it and the Company shall not be required to account for any monies earned on the net proceeds, which may be employed in the business of the Company or otherwise invested as the Board thinks fit.
TRANSFER OF SHARES
17. Form and execution of transfer
17.1 Subject to such of the restrictions of these Articles as may be applicable, a member may transfer all or any of his shares, in the case of shares held in certificated form, by an instrument of transfer executed by or on behalf of the transferor in any usual form or in any other form which the Board may approve or, in the case of shares held in uncertificated form, in accordance with the Order and the system's rules and otherwise in such manner as the Board in its absolute discretion shall determine.  Subject to the Statutes, the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect of it.
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17.2 Subject to the Statutes and notwithstanding any other provisions of these Articles, the Board shall have power to implement any arrangements it may think fit to enable:
17.2.1 title to any securities of the Company to be evidenced and transferred without a written instrument in accordance with the Order and the facilities and requirements of the relevant system concerned; and
17.2.2 rights attaching to such securities to be exercised notwithstanding that such securities are held in uncertificated form where, in the Board's opinion, these Articles do not otherwise allow or provide for such exercise.
18. No fee for registration
18.1 No fee shall be charged for the registration of any instrument of transfer or document relating to or affecting the title to any share.
19. Retention of documents
19.1 Any instrument of transfer which is registered may be retained by the Company, but any instrument of transfer which the Board refuses to register shall be returned to the person lodging it when notice of the refusal is given.
20. Other Registers
20.1 Subject to the Statutes, the Company may keep an overseas, local or other register in any place, and the Board may make and vary such regulations as it may think fit concerning the keeping of that register. The Company may appoint an agent to maintain any such registers, subject to the Companies (Jersey) Law 1991, as amended.
TRANSMISSION OF SHARES
21. Transmission
21.1 Where transmission occurs in relation to a share in consequence of the death or bankruptcy of a member or of any other event giving rise to its transmission by operation of law, the survivor or survivors (in the case of death) where he was a joint holder, and the transmittee where he was a sole holder or the only survivor of joint holders shall be the only person recognised by the Company as having any title to his shares; but nothing contained in this Article shall release the estate of a deceased member from any liability in respect of any share solely or jointly held by him.
22. Election by transmittee
22.1 A transmittee may, upon such evidence being produced as the Board may require and subject (where relevant) to the system's rules, elect either to become the holder of the share or to have some person nominated by him registered as the transferee.  If he elects to become the holder, he shall give notice to the Company to that effect.  If he elects to have another person registered, he shall, subject (where relevant) to the system's rules, effect or procure a transfer of the share in favour of that person.  Subject to the Statutes, all the provisions of these Articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if the death or bankruptcy of the member or other event giving rise to the transmission had not occurred and the notice or instrument of transfer was an instrument of transfer executed by the member.
23. Rights in respect of the share
23.1 A transmittee shall have the same rights to which he would be entitled if he were the holder of the share concerned, except that he shall not be entitled in respect of it to attend or vote at any general meeting of the Company or at any separate meeting of the holders of any class of shares in the Company until he is registered as the holder of the share.  The Board may at any time give notice to such person requiring him to elect either to become the holder of the share or to transfer the share and, if the notice is not complied with within 60 clear days from the date of the notice, the Board may withhold payment of all dividends and other monies payable in respect of the share until he complies with the notice.
 
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ALTERATION OF CAPITAL
24. Fractions
24.1 Whenever as a result of a consolidation, division or sub-division of shares any member would become entitled to fractions of a share, the Board may deal with the fractions as it thinks fit and, in particular, may sell the shares representing the fractions to any person (including, subject to the Statutes, the Company) and may distribute the net proceeds of sale in due proportion among those members except for amounts of £5.00 or less, which shall be retained for the benefit of the Company.  To give effect to any such sale, the Board may authorise and instruct a person to take such steps as may be necessary (subject, in the case of shares held in uncertificated form, to the system's rules) to transfer or deliver the shares to, or in accordance with the directions of, the purchaser. Subject to the Statutes, where a shareholder holds shares in both certificated and uncertificated form, the Board may for these purposes treat them as separate holdings, and may at its discretion arrange for any shares representing fractions to be entered in the Register as held in certificated or uncertificated form in order to facilitate their sale under this Article.  The transferee shall not be bound to see to the application of the purchase money and his title shall not be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.
PURCHASE OF OWN SHARES AND DISSENT RIGHTS
25. Purchase of own shares
25.1 Subject to and in accordance with the provisions of the Statutes and to any rights conferred on the holders of any class of shares, the Company may purchase any of its shares of any class (including without limitation redeemable shares) in any way and at any price (whether at par or above or below par) and may hold such shares as treasury shares .
25.2 On a purchase by the Company of its own shares, neither the Company nor the Board shall be required to select the shares to be purchased rateably or in any particular manner as between the holders of shares of the same class or as between them and the holders of shares of any other class or in accordance with the rights as to dividends or capital attached to any class of shares.
26. Dissent Rights
26.1 A holder of shares of any class of the Company entitled to vote with respect to the approval of a matter referred to below in this Article 26.1 may dissent if the Company resolves to:
26.1.1 amend these Articles to add, change or remove any provisions restricting or constraining the issue, transfer or ownership of shares of that class;
26.1.2 amend these Articles to add, change or remove any restriction on the business or businesses that the Company may carry on;
26.1.3 amalgamate or merge with another company other than a wholly-owned subsidiary;
26.1.4 be continued under the laws of another jurisdiction;
26.1.5 sell, lease or exchange all or substantially all its property under Article 120.2;
26.1.6 carry out a going-private transaction; or
26.1.7 amend these Articles to:
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(a) add, change or remove the rights, privileges, restrictions or conditions attached to the shares of such class pursuant to Article  9 including, without limiting the generality of the foregoing, to:
(i) remove or change prejudicially rights to accrued dividends or rights to cumulative dividends;
(ii) add, remove or change prejudicially redemption rights;
(iii) reduce or remove a dividend preference or a liquidation preference; or
(iv) add, remove or change prejudicially conversion privileges, options, voting, transfer or pre-emptive rights, or rights to acquire securities of a corporation, or sinking fund provisions;
(b) increase the rights or privileges of any class of shares having rights or privileges equal or superior to the shares of such class;
(c) make any class of shares having rights or privileges inferior to the shares of such class equal or superior to the shares of such class;
(d) effect an exchange or create a right of exchange of all or part of the shares of another class into the shares of such class; or
(e) constrain the issue, transfer or ownership of the shares of such class or change or remove such constraint,
and the Board shall take all reasonable steps to include as part of any special resolution, or together with any ordinary resolution, proposed and put before holders to approve such a matter, a special resolution, in accordance with the requirement set out in Article 26.26, to sanction the purchase by the Company of any dissenting holder's shares that the Company is obliged to make an offer to purchase in accordance with this Article 26.
26.2 The right to dissent applies even if there is only one class of shares.
26.3 In addition to any other right the holder may have, but subject to Article 26.26, a holder who complies with this Article is entitled, when the action approved by the resolution from which the holder dissents becomes effective, to be paid by the Company the fair value of the shares in respect of which the holder dissents, determined as of the close of business on the day before the resolution was adopted.
26.4 A dissenting holder may only claim under this Article with respect to all the shares of a class held on behalf of any one beneficial owner and registered in the name of the dissenting holder.
26.5 A dissenting holder shall send to the Company, at or before any meeting of holders at which a resolution referred to in Article 26.1 is to be voted on, a written objection to the resolution, unless the Company did not give notice to the holder of the purpose of the meeting and of their right to dissent.
26.6 The Company shall, within ten days after the holders adopt the resolution, send to each holder who has filed the objection referred to in Article 26.5 notice that the resolution has been adopted, but such notice is not required to be sent to any holder who voted for the resolution or who has withdrawn their objection.
26.7 A dissenting holder shall, within twenty days after receiving a notice under Article 26.6 or, if the holder does not receive such notice, within twenty days after learning that the resolution has been adopted, send to the Company a written notice containing
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26.7.1 the holder's name and address;
26.7.2 the number and class of shares in respect of which the holder dissents; and
26.7.3 a demand for payment of the fair value of such shares.
26.8 A dissenting holder shall, within thirty days after sending a notice under Article 26.7, send the certificates representing the shares in respect of which the holder dissents to the Company or its transfer agent.
26.9 A dissenting holder who fails to comply with Article 26.8 has no right to make a claim under this Article.
26.10 The Company or its transfer agent shall endorse on any share certificate received under Article 26.8 a notice that the holder is a dissenting holder and shall forthwith return the share certificates to the dissenting holder.
26.11 On sending a notice under Article 26.7, a dissenting holder ceases to have any rights as a holder other than to be paid the fair value of their shares as determined under this Article 26 except where:
26.11.1 the holder withdraws that notice before the Company makes an offer under Article 26.12;
26.11.2 the Company fails to make an offer in accordance with Article 26.12 and the holder withdraws the notice; or
26.11.3 the Directors revoke the resolution to amend the Articles, terminate an amalgamation agreement or an application for continuance, or abandon a sale, lease or exchange,
in which case the holder's rights are reinstated as of the date the notice was sent.
26.12 The Company shall, not later than seven days after the later of the day on which the action approved by the resolution is effective or the day the Company received the notice referred to in Article 26.7, send to each dissenting holder who has sent such notice:
26.12.1 a written offer to pay for their shares in an amount considered by the Directors to be the fair value, accompanied by a statement showing how the fair value was determined; or
26.12.2 if Article 26.26 applies, a notification that it is unable lawfully to pay dissenting holders for their shares.
26.13 Every offer made under Article 26.12 for shares of the same class or series shall be on the same terms.
26.14 Subject to Article 26.26, the Company shall pay for the shares of a dissenting holder within ten days after an offer made under Article 26.12 has been accepted, but any such offer lapses if the Company does not receive an acceptance thereof within thirty days after the offer has been made.
26.15 Where the Company fails to make an offer under Article 26.12, or if a dissenting holder fails to accept an offer, the Company may, within fifty days after the action approved by the resolution is effective or within such further period as the court may allow, apply to the court to fix a fair value for the shares of any dissenting holder.
26.16 If the Company fails to apply to the court under Article 26.15, a dissenting holder may apply to a court for the same purpose within a further period of twenty days or within such further period as a court may allow.
 
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26.17 An application under Article 26.15 or Article 26.16 shall be made to the Royal Court of Jersey.
26.18 A dissenting holder is not required to give security for costs in an application made under Article 26.15 or Article 26.16.
26.19 On an application to the court under Article 26.15 or Article 26.16:
26.19.1 all dissenting holders whose shares have not been purchased by the Company shall be joined as parties and are bound by the decision of the court; and
26.19.2 the Company shall notify each affected dissenting holder of the date, place and consequences of the application and of their right to appear and be heard in person or by counsel.
26.20 On an application to the court under Article 26.15 or Article 26.16, the court may determine whether any other person is a dissenting holder who should be joined as a party, and the court shall then fix a fair value for the shares of all dissenting holders.
26.21 The court may in its discretion appoint one or more appraisers to assist the court to fix a fair value for the shares of the dissenting holders.
26.22 The final order of the court shall be rendered against the Company in favour of each dissenting holder and for the amount of the shares as fixed by the court.
26.23 The court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting holder from the date the action approved by the resolution is effective until the date of payment.
26.24 If Article 26.26 applies, the Company shall, within ten days after the pronouncement of an order under Article 26.22, notify each dissenting holder that it is unable lawfully to pay dissenting holders for their shares.
26.25 If Article 26.26 applies, a dissenting holder, by written notice delivered to the Company within thirty days after receiving a notice under Article 26.24, may:
26.25.1 withdraw their notice of dissent, in which case the Company is deemed to consent to the withdrawal and the holder is reinstated to their full rights as a holder; or
26.25.2 retain a status as a claimant against the Company, to be paid as soon as the Company is lawfully able to do so or, in liquidation, to be ranked subordinate to the rights of creditors of the Company but in priority to its holders.
26.26 The Company shall not purchase or make a payment to a dissenting holder under this Article unless the Company complies with article 57 of the Companies (Jersey) Law 1991, as amended; in other words, that the purchase has been sanctioned by a special resolution and that the Directors authorising the payment are able to make a statement of solvency as set out in article 55(9) of the Companies (Jersey) Law 1991, as amended.
26.27 For the purposes of this Article 26, "going-private transaction" means an amalgamation, arrangement, consolidation or other transaction involving the Company other than an acquisition of shares under article 117 of the Companies (Jersey) Law 1991, as amended , that results in the interest of a holder of participating securities of the Company being terminated without the consent of the holder and without the substitution of an interest of equivalent value in participating securities of the Company or of a body corporate that succeeds to the business of the Company, which participating securities have rights and privileges that are equal to or greater than the affected participating securities.  For the purposes of the foregoing, "participating securities" means securities of a body corporate that give the holder of securities a right to share in the earnings of the body corporate and after the liquidation, dissolution or winding up of the body corporate, a right to share in its assets.
 
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DISCLOSURE OF INTERESTS
27. Notice and disclosure obligations
27.1 The Company may give a disclosure notice to any person whom the Company knows or has reasonable cause to believe:
27.1.1 is interested in the Company's shares, or
27.1.2 to have been so interested at any time during the three years immediately preceding the date on which the disclosure notice is issued (the " disclosure period ").
27.2 The disclosure notice may require the person:
27.2.1 to confirm that fact or (as the case may be) to state whether or not it is the case, and
27.2.2 if he holds, or has during the disclosure period held, any such interest, to give such further information including in respect of any other person who has received a disclosure notice as may be required in accordance with the disclosure notice.
27.3 The notice may require the person to whom it is addressed to give particulars of his own present or past interest in the Company's shares held by him at any time during the disclosure period.
27.4 The notice may require the person to whom it is addressed, where:
27.4.1 his interest is a present interest and another interest in the shares subsists, or
27.4.2 another interest in the shares subsisted during the disclosure period at a time when his interest subsisted,
to give, so far as lies within his knowledge, such particulars with respect to that other interest as may be required by the notice.
27.5 The particulars referred to in Article 27.4 above include without limitation:
27.5.1 the identity of persons interested in the shares in question; and
27.5.2 whether persons interested in the same shares are or were parties to:
(a) an agreement to acquire interests in a particular company; or
(b) an agreement or arrangement relating to the exercise of any rights conferred by the holding of the shares; or
(c) the nature and extent of any interest in the shares.
27.6 The notice may require the person to whom it is addressed, where his interest is a past interest, to give (so far as lies within his knowledge) particulars of the identity of the person who held that interest immediately upon his ceasing to hold it.
27.7 The information required by the notice must be given within such reasonable time as may be specified in the notice.
27.8 The Company will keep a register of information received pursuant to this Article 27. The Company will within three days of receipt of such information enter on the register:
27.8.1 the fact the requirement was imposed and the date it was imposed; and
27.8.2 the information received in pursuance of the requirement.
 
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27.9
If a disclosure notice is given by the Company to a person appearing to be interested in any share, a copy shall at the same time be given to the holder of the relevant share, but the accidental omission to do so or the non-receipt of the copy by the holder of the relevant share shall not prejudice the operation of the following provisions of this Article.
27.10 If the holder of, or any person appearing to be interested in, any share has been served with a disclosure notice and, in respect of that share (a " default share "), has been in default for the relevant period in supplying to the Company the information required by the disclosure notice, the restrictions referred to in Article 27.11 below shall apply. Those restrictions shall continue until:
27.10.1 the date seven days after the date on which the Board is satisfied that the default is remedied; or
27.10.2 the Company is notified that the default shares are the subject of an exempt transfer; or
27.10.3 the Board decides to waive those restrictions, in whole or in part.
27.11 The restrictions referred to in Article 27.10 above are as follows:
27.11.1 if the default shares in which any one person is interested or appears to the Company to be interested represent less than 0.25 per cent. of the issued shares of the class, the holders of the default shares shall not be entitled, in respect of those shares, to attend or to vote, either personally or by proxy, at any general meeting or at any separate general meeting of the holders of any class of shares in the Company, or to exercise any other right conferred by membership in relation to meetings of the Company; or
27.11.2 if the default shares in which any one person is interested or appears to the Company to be interested represent at least 0.25 per cent. of the issued shares of the class, the holders of the default shares shall not be entitled unless otherwise determined by the Board from time to time, in respect of those shares:
(a) to attend or to vote, either personally or by proxy, at any general meeting or at any separate general meeting of the holders of any class of shares in the Company, or to exercise any other right conferred by membership in relation to meetings of the Company; or
(b) to receive any payment by way of dividend and no share shall be allotted in lieu of payment of a dividend; or
(c) to transfer or agree to transfer any of those shares or any rights in them.
27.12 The restrictions in Articles 27.11.1 and 27.11.2 above shall not prejudice the right of either the member holding the default shares or, if different, any person having a power of sale over those shares to sell or agree to sell those shares under an exempt transfer.
27.13 Any disclosure notice shall cease to have effect in relation to any shares transferred by the holder of such shares in accordance with the provisions in Article 27.12 above.
27.14 If any dividend or other distribution is withheld under Article 27.11.2 above, the member shall be entitled to receive it as soon as practicable after the restrictions contained in Article 27.11.2 cease to apply.
27.15 If, while any of the restrictions referred to above apply to a share, another share is allotted or offered in right of it (or in right of any share to which this paragraph applies), the same restrictions shall apply to that other share as if it were a default share. For this purpose, shares which the Company allots, or procures to be offered, pro rata (disregarding fractional entitlements and shares not offered to certain members by reason of legal or practical problems associated with issuing or offering shares outside Jersey, Canada or the United Kingdom) to holders of shares of the same class as the default share shall be treated as shares allotted in right of existing shares from the date on which the allotment is unconditional or, in the case of shares so offered, the date of the acceptance of the offer.
 
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27.16 For the purposes of Articles 27.1 to 27.15:
27.16.1 an " exempt transfer " in relation to any share is a transfer pursuant to:
(a) a sale of the share on a regulated market or an exchange regulated market in the United Kingdom on which shares of that class are listed or normally traded; and/or
(b) a sale of the whole beneficial interest in the share to a person whom the Board is satisfied is unconnected with the existing holder or with any other person appearing to be interested in the share; or
(c) acceptance of a takeover offer;
27.16.2 the " relevant period " shall be, in a case falling within Article 27.11.1 above, 28 days and, in a case falling within paragraph 27.11.2 above, 14 days after the date of service of the disclosure notice;
27.16.3 the percentage of the issued shares of a class represented by a particular holding shall be calculated by reference to the shares in issue at the time when the disclosure notice is given; and
27.16.4 a person shall be treated as being interested or having an interest in shares where they have any direct or indirect interest whether contingent or otherwise in such shares whether by way of legal title or beneficial interest (whether by way of trust instrument, deed of otherwise) or arising by virtue of any contract, agreement, instrument, security, securities (in whatever form and whether publicly traded or not), trust, nominee or any other form of arrangement whatsoever (including, without limitation, by virtue of any warrant, option, derivative, conversion right or by virtue of any other instrument or agreement of a similar nature) and whether formal or informal in nature.
27.17 Without limiting Articles 27.1 to 27.16, each holder of shares shall be under an obligation to make notifications in accordance with the provisions of this Article.
27.18 The provisions of Chapter 5 of the Disclosure and Transparency Rules (" DTR5 ") shall be deemed to be incorporated by reference into these Articles and accordingly the vote holder and issuer notification rules set out in DTR5 shall apply to the Company and each holder of shares.
27.19 For the purposes of the incorporation by reference of DTR5 into these Articles and the application of DTR5 to the Company and each holder of shares, the Company shall (for the purposes of Article 27 only) be deemed to be an " issuer ", as such term is defined in DTR5 and not, for the avoidance of doubt, a " non-UK issuer " (as such terms in defined in DTR5).
27.20 For the purposes of Articles 27.17 to 27.20 only, defined terms in DTR5 shall bear the meaning set out in DTR5, and if the meaning of a defined term is not set out in DTR5, the defined term shall bear the meaning set out in the glossary to the Handbook (in such case, read as the definition applicable to DTR5).
27.21 If the Company determines that a holder of shares (a " Defaulting Shareholder ") has not complied with the provisions of DTR5, referred to above with respect to some or all of such shares held by such holder of shares (the " Default Shares "), the Company shall have the right by delivery of notice to the Defaulting Shareholder (a " Default Notice ") to:
 
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27.21.1 suspend the right of such Defaulting Shareholder to vote the Default Shares in person or by proxy at any meeting of the Company. Such a suspension shall have effect from the date on which the Default Notice is delivered by the Company to the Defaulting Shareholder until a date that is not more than 7 days after the Board has determined in its sole discretion that the Defaulting Shareholder has cured the non-compliance with the provisions of DTR5, provided however that the Company may at any time by subsequent written notice cancel or suspend the operation of a Default Notice; and/or
27.21.2 withhold, without any obligation to pay interest thereon, any dividend or other amount payable with respect to the Default Shares with such amount to be payable only after the Default Notice ceases to have effect with respect to the Default Shares; and/or
27.21.3 render ineffective any election to receive shares of the Company instead of cash in respect of any dividend or part thereof; and/or
27.21.4 prohibit the transfer of any shares of the Company held by the Defaulting Shareholder except with the consent of the Company or if the Defaulting Shareholder can provide satisfactory evidence to the Company to the effect that, after due inquiry, such Shareholder has determined that the Shares to be transferred are not Default Shares.
27.22 The Company shall use its reasonable endeavours to procure that persons discharging managerial responsibilities (as that term is defined in the Disclosure and Transparency Rules) comply with Chapter 3 of the Disclosure and Transparency Rules.

GENERAL MEETINGS
28. Convening general meetings
28.1 The Board may convene a general meeting whenever it thinks fit and shall do so on requisition in accordance with the Statutes except that a "members' requisition" in article 89 of the Companies (Jersey) Law 1991 shall be read as a requisition of members of the Company holding at the date of the deposit of the requisition not less than one-twentieth rather than one-tenth of the total voting rights of the members who have the right to vote at the meeting requisitioned.
28.2 The Company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year and shall specify the meeting as such in the notice calling it.  Not more than 13 months shall elapse between the date of one annual general meeting and the date of the next.
NOTICE OF GENERAL MEETINGS
29. Length of notice period
29.1 Any general meeting (including an annual general meeting) shall be convened by at least 21 clear days' notice.  Subject to these Articles and to any restrictions imposed on any shares, the notice shall be given to all the members, to all transmittees and to the Directors and Auditors.
29.2 Notwithstanding that a general meeting is called by shorter notice than that specified in Article 29.1, it is deemed to have been duly called if it is so agreed by all the members entitled to attend and vote thereat.
30. Contents of notices
30.1 Every notice calling a general meeting shall specify:
30.1.1 the place, the day and the time of the meeting and the general nature of the business to be transacted;
 
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30.1.2 (if such is the case) that the meeting is an annual general meeting and, if the notice is given more than six weeks before the annual general meeting, a statement of the right to require notice of a resolution to be moved or a matter to be included in the business of the meeting;
30.1.3 (if such is the case) that the meeting is convened to pass a special resolution;
30.1.4 with reasonable prominence that a member is entitled to appoint one or more proxies to exercise all or any of his rights to attend, speak and vote at the meeting, that a proxy need not be a member, and the address or addresses where appointments of proxy are to be deposited, delivered or received insofar as any such address is other than the postal address of the Office;
30.1.5 the address of the website on which relevant information (if any) has been published in advance of the meeting;
30.1.6 the procedures with which members must comply, and when,  in order to be able to attend and vote at the meeting.
30.1.7 a statement of the right of members to ask questions.
31. Omission or non-receipt of notice
31.1 No proceedings at any meeting shall be invalidated by any accidental omission to give notice of the meeting, or to send an instrument of proxy, to any person entitled to receive it or, in the case of notice in electronic form or made available by means of a website, to invite any such person to appoint a proxy, or by reason of any such person not receiving any such notice, instrument or invitation.
32. Change of date, time or place of meeting
32.1 If for any reason the Board considers it impractical or undesirable to hold a meeting on the day, at the time or in the place specified in the notice calling the meeting it can change the date, time and place of the meeting (or whichever it requires), and may do so more than once in relation to the same meeting. References in these Articles to the time of the holding of the meeting shall be construed accordingly. The Board will, insofar as it is practicable, announce by advertisement in at least one newspaper with a national circulation the date, time and place of the meeting as changed, but it shall not be necessary to restate the business of the meeting in that announcement.
33. Members' power to include other matters in business dealt with at an annual general meeting
33.1 Members representing at least five per cent. of the total voting rights of all members who have a right to vote on the resolution at the annual general meeting to which the request relates (excluding any voting rights attached to any shares in the Company held as treasury shares), or not less than 100 members who have a relevant right to vote and who hold shares in the Company on which there has been paid up an average sum, per member, of at least £100, may require the Company to circulate, to members of the Company entitled to receive notice of the next annual general meeting, notice of a resolution which may be properly moved and is intended to be moved at that meeting and if so required the Company shall, unless the resolution:
33.1.1 would, if passed, be ineffective (whether by reason of inconsistency with any enactment or the Company's constitution or otherwise);
33.1.2 is defamatory of any person; or
33.1.3 is frivolous or vexatious
 
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give such notice in the same manner as set out in the provisions of sections 339(1) to 339(2) of the UK Companies Act 2006 as if it were a company incorporated in the United Kingdom to which such provisions apply.
33.2 A request by the members under Article 33.1 may be in hard copy or in electronic form and must:
33.2.1 identify the resolution of which notice is to be given;
33.2.2 be authenticated (as defined in section 1146 of the UK Companies Act 2006) by the person or persons making it; and
33.2.3 be received by the Company at least 90 days before the one year anniversary of the previous year's annual general meeting.
33.3 The business which may be dealt with at an annual general meeting includes a resolution of which notice is given in accordance with Article 33.1.
33.4 Where so requested by members representing at least five per cent. of the total voting rights of all members who have a relevant right to vote (excluding any voting rights attached to any shares in the Company held as treasury shares), or by not less than 100 members who have a relevant right to vote and who hold shares in the Company on which there has been paid up an average sum, per member, of at least £100, the Company shall circulate, to members of the Company entitled to receive notice of a general meeting, a statement of not more than 1,000 words with respect to:
33.4.1 a matter referred to in a proposed resolution to be dealt with at that meeting; or
33.4.2 other business to be dealt with at that meeting.
33.5 A request by the members under Article 33.4 may be in hard copy or in electronic form and must:
33.5.1 identify the statement to be circulated;
33.5.2 be authenticated (as defined in section 1146 of the UK Companies Act 2006) by the person or persons making it; and
33.5.3 be received by the Company by the date referred to in Article 33.2.3.
33.6 Where the Company is required under Article 33.4 to circulate a statement it must send a copy of it to each member of the Company entitled to receive notice of the meeting:
33.6.1 in the same manner as the notice of the meeting; and
33.6.2 at the same time as, or as soon as reasonably practicable after, it gives notice of the meeting.
33.7 The expenses of the Company in complying with Article 33.4 need not be paid by the members who requested the circulation of the statement if:
33.7.1 the meeting to which the requests relate is the annual general meeting of the Company; and
33.7.2 requests sufficient to require the Company to circulate the statement are received before the end of the financial year preceding the meeting.
 
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33.8 Unless Article 33.7 applies:
33.8.1 the expenses of the Company in complying with Article 33.4 must be paid by the members who requested the circulation of the statement unless the Company resolves otherwise; and
33.8.2 unless the Company has previously so resolved, it is not bound to comply with this Article unless there is deposited with or tendered to it, not later than the date referred to in Article 33.2.3, a sum reasonably sufficient to meet its expenses in doing so.
33.9 The Company may apply to the Royal Court of Jersey to seek a ruling that it is not required to circulate a members' statement under Article 33.4 on the basis that the rights under such Article are being abused.
33.10 In Article 33.4 "relevant right to vote" means:
33.10.1 in relation to a statement with respect to a matter referred to in a proposed resolution, a right to vote on that resolution at a meeting to which the requests relate; and
33.10.2 in relation to any other statement a right to vote at the meeting to which the requests relate.
34. Information rights
34.1 A member shall have the right to nominate another person, on whose behalf he holds shares, to enjoy information rights (as such term is defined in section 146 of the UK Companies Act 2006). The nominated person shall have the same rights as those contained in the provisions of section 146 to 149 (other than section 147(4)) of the UK Companies Act 2006, and the Company shall comply with all its obligations in respect of such information rights granted to a nominated person as if it were a company incorporated in the United Kingdom to which such provisions of the UK Companies Act 2006 apply provided that:
34.1.1 references to accounts, reports or other documents shall be construed as references to the corresponding documents (if any) under the Companies (Jersey) Law 1991;
34.1.2 references to section 1145 of the UK Companies Act 2006 shall not include sections 1145(4) and 1145(5); and
34.1.3 section 147(4) shall be replaced by the provisions of Article 136.20 with the reference to "member" being replaced by "nominated person".
34.2 This Article 34.2 applies to accounts for financial years beginning on or after 6 April 2008 and to auditors appointed for financial years beginning on or after 6 April 2008. Where so requested in the manner set out in section 527(4) of the UK Companies Act 2006 by members representing at least five per cent. of the total voting rights (excluding treasury shares) of all the members who have a right to vote at the general meeting at which the Company's annual accounts are laid, or by at least 100 members who have such right to vote and hold shares in the Company on which there has been paid up an average sum, per member, of at least £100, the Company shall without prejudice to its obligations under the Companies (Jersey) Law 1991 publish on its website a statement setting out any matter relating to the audit of the Company's accounts or any circumstances connected with an auditor of the Company ceasing to hold office, and the Company shall comply with all the obligations relating to the publication of such statement contained in the provisions of sections 527 to 529 (other than sections 527(5) and 527(6)) of the UK Companies Act 2006 as if it were a company incorporated in the United Kingdom, provided always that the Company shall not be required to comply with the obligation set out in section 527(1) of the UK Companies Act 2006 where the Board believes in good faith that the rights conferred by this Article 34.2 are being abused.
 
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PROCEEDINGS AT GENERAL MEETINGS
35. Quorum
35.1 No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the choice or appointment of a chairman of the meeting.  Except as otherwise provided by these Articles, two members entitled to vote at the meeting present in person or by proxy together holding or representing by proxy not less than five per cent. of the issued shares shall be a quorum for all purposes.
36. Procedure if quorum not present
36.1 If within five minutes (or such longer time not exceeding one hour as the chairman of the meeting may decide to wait) after the time appointed for the commencement of the meeting a quorum is not present, the meeting shall (if requisitioned in accordance with the Statutes or these Articles) be dissolved or (in any other case) stand adjourned to such other day (not being less than ten clear days nor more than 28 days later) and at such time and place as the chairman of the meeting may decide and at such adjourned meeting one member present in person or by proxy (whatever the number of shares held by him) and entitled to vote shall be a quorum.
36.2 The Company shall give not less than seven clear days' notice of any meeting adjourned through want of a quorum and the notice shall specify that one member present in person or by proxy (whatever the number of shares held by him) and entitled to vote shall be a quorum.
37. Chairman of general meeting
37.1 The chairman (if any) of the Board or, in his absence, the deputy chairman (if any) shall preside as chairman at every general meeting.  If there is no such chairman or deputy chairman, or if at any meeting neither the chairman nor a deputy chairman is present within five minutes after the time appointed for the commencement of the meeting, or if neither of them is willing to act as chairman, the Directors present shall choose one of their number to act, or if one Director only is present he shall preside as chairman, if willing to act.  If no Director is present, or if each of the Directors present declines to take the chair, the persons present and entitled to vote shall elect one of their number to be chairman.
37.2 The chairman of the meeting may invite any person to attend and speak at any general meeting of the Company whom he considers to be equipped by knowledge or experience of the Company's business to assist in the deliberations of the meeting.
37.3 The decision of the chairman of the meeting as to points of order, matters of procedure or arising incidentally out of the business of a general meeting shall be conclusive, as shall be his decision, acting in good faith, on whether a point or matter is of this nature.
38. Attendance and speaking at general meetings
38.1 A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting.
38.2 A person is able to exercise the right to vote at a general meeting when:
38.2.1 that person is able to vote, during the meeting, on resolutions put to the vote at the meeting; and
38.2.2 that person's vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting.
38.3 The Directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it.
 
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38.4 Each Director shall be entitled to attend and to speak at any general meeting of the Company and at any separate general meeting of the holders of any class of shares or debentures in the Company.
39. Meeting at more than one place and/or in a series of rooms
39.1 A general meeting or adjourned meeting may be held at more than one place.  The notice of meeting will specify the place at which the chairman will be present (the "Principal Place") and a letter accompanying the notice will specify any other place(s) at which the meeting will be held simultaneously (but any failure to do this will not invalidate the notice of meeting).
39.2 A general meeting or adjourned meeting will be held in one room or a series of rooms at the place specified in the notice of meeting or any other place at which the meeting is to be held simultaneously.
39.3 If the meeting is held in more than one place and/or in a series of rooms, it will not be validly held unless all persons entitled to attend and speak at the meeting are able:
39.3.1 if excluded from the Principal Place or the room in which the chairman is present, to attend at one of the other places or rooms;  and
39.3.2 to communicate with one another audio-visually throughout the meeting.
39.4 The Board may make such arrangements as it thinks fit for simultaneous attendance and participation at the meeting and may vary any such arrangements or make new arrangements.  Arrangements may be notified in advance or at the meeting by whatever means the Board thinks appropriate to the circumstances.  Each person entitled to attend the meeting will be bound by the arrangements made by the Board.
39.5 Where a meeting is held in more than one place and/or a series of rooms, then for the purpose of these Articles the meeting shall consist of all those persons entitled to attend and participate in the meeting who attend at any of the places or rooms.
40. Security arrangements
40.1 The Board may direct that persons entitled to attend any general meeting should submit to such searches or other security arrangements or restrictions as the Board shall consider appropriate in the circumstances and the Board may in its absolute discretion refuse entry to such general meeting to any person who fails to submit to such searches or otherwise to comply with such security arrangements or restrictions.  If any person has gained entry to a general meeting and refuses to comply with any such security arrangements or restrictions or disrupts the proper and orderly conduct of the general meeting, the chairman of the meeting may at any time without the consent of the general meeting require such person to leave or be removed from the meeting.
41. Adjournments
41.1 The chairman of the meeting may at any time without the consent of the meeting adjourn any meeting (whether or not it has commenced or a quorum is present) either indefinitely or to such time and place as he may decide if it appears to him that:
41.1.1 the persons entitled to attend cannot be conveniently accommodated in the place appointed for the meeting;
41.1.2 the conduct of persons present prevents, or is likely to prevent, the orderly continuation of business; or
41.1.3 an adjournment is otherwise necessary so that the business of the meeting may be properly conducted.
 
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41.2 In addition, the chairman of the meeting may at any time with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting either indefinitely or to such time and place as he may decide.  When a meeting is adjourned indefinitely the time and place for the adjourned meeting shall be fixed by the Board.
41.3 No business shall be transacted at any adjourned meeting except business which might properly have been transacted at the meeting had the adjournment not taken place.
42. Notice of adjourned meeting
42.1 If a meeting is adjourned indefinitely or for 30 days or more or for lack of a quorum, at least seven clear days' notice specifying the place, the day and the time of the adjourned meeting shall be given, but it shall not be necessary to specify in the notice the nature of the business to be transacted at the adjourned meeting.  Otherwise, it shall not be necessary to give notice of an adjourned meeting.
VOTES OF MEMBERS
43. Method of voting
43.1 At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll a poll is duly demanded.  Subject to the Statutes, a poll may be demanded by:
43.1.1 the chairman of the meeting;
43.1.2 at least five members or proxies entitled to vote on the resolution;
43.1.3 any member or proxy alone or together with one or more others representing in aggregate at least one-tenth of the total voting rights of all the members having the right to attend and vote on the resolution (excluding any voting rights attached to any shares held as treasury shares); or
43.1.4 any member or proxy alone or together with one or more others holding or having been appointed in respect of shares conferring a right to vote on the resolution, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right (excluding any voting rights attached to any shares held as treasury shares).
43.2 Unless a poll is so demanded and the demand is not withdrawn, a declaration by the chairman of the meeting that a resolution has been carried or carried unanimously or by a particular majority or not carried by a particular majority or lost and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.
44. Votes of members
44.1 Subject to the Statutes, to any rights or restrictions attached to any shares and to any other provisions of these Articles, on a show of hands every member who is present in person shall have one vote and on a poll every member shall have one vote for every share of which he is the holder.  If the notice of the meeting has specified a time (which is not more than 48 hours, ignoring any part of a day that is not a working day, before the time fixed for the meeting) by which a person must be entered on the Register in order to have the right to attend and vote at the meeting, no person registered after that time shall be eligible to attend and vote at the meeting by right of that registration, even if present at the meeting.  References in these Articles to members present in person shall be construed accordingly.
 
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45. Votes of joint holders
45.1 In the case of joint holders of a share who are entitled to vote the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and seniority shall be determined by the order in which the names of the holders stand in the Register.
46. Votes of member suffering incapacity
46.1 A member in respect of whom an order has been made by any competent court or official on the ground that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs may vote, whether on a show of hands or on a poll, by any person authorised in such circumstances to do so on his behalf and that person may vote on a poll by proxy.  The vote of such member shall not be valid unless evidence to the satisfaction of the Board of the authority of the person claiming to exercise the right to vote is deposited at the Office, or at such other place as is specified in accordance with these Articles for the deposit of appointments of proxy in hard copy form, not later than the last time at which an appointment of proxy should have been delivered in order to be valid for use at that meeting or on the holding of that poll.
47. Votes on a poll
47.1 On a poll, a member entitled to more than one vote on a poll need not, if he votes, use all his votes or cast all the votes he uses in the same way.
48. Right to withdraw demand for a poll
48.1 The demand for a poll may, before the earlier of the close of the meeting and the taking of the poll, be withdrawn but only with the consent of the chairman of the meeting and, if a demand is withdrawn, any other persons entitled to demand a poll may do so.  If a demand is withdrawn, it shall not be taken to have invalidated the result of a show of hands declared before the demand was made.  If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the chairman of the meeting may give whatever directions he considers necessary to ensure that the business of the meeting proceeds as it would have if the demand had not been made.
49. Procedure if poll demanded
49.1 If a poll is duly demanded, it shall be taken in such manner as the chairman of the meeting directs and he may appoint scrutineers (who need not be persons entitled to vote) and fix a time and place for declaring the result of the poll.  The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.
50. When poll to be taken
50.1 A poll demanded on the election of a chairman of the meeting or on a question of adjournment shall be taken forthwith.  A poll demanded on any other question shall be taken either forthwith or on such date (being not more than 30 days after the poll is demanded) and at such time and place and in such manner or by such means as the chairman of the meeting directs.  No notice need be given of a poll not taken immediately if the time and place at which it is to be taken are announced at the meeting at which it is demanded.  In any other case, at least seven clear days' notice shall be given specifying the time and place at which the poll is to be taken.  The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.
51. Continuance of other business after poll demanded
51.1 The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll was demanded.
 
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52. Proposal or amendment of resolution
52.1 A resolution proposed by the chairman of the meeting does not need to be seconded.  In the case of a resolution duly proposed as a special resolution, no amendment to that resolution (other than an amendment to correct an obvious error) may be considered or voted upon.  In the case of a resolution duly proposed as an ordinary resolution, no amendment to that resolution (other than an amendment to correct an obvious error) may be considered or voted upon unless at least 48 hours prior to the time appointed for holding the meeting or adjourned meeting at which such ordinary resolution is to be proposed notice of the terms of the amendment and of the intention to move the amendment has been lodged in writing in hard copy form at the Office or received in electronic form at the electronic address at which the Company has or is deemed to have agreed to receive it, or the chairman of the meeting in his absolute discretion decides in good faith that it may be considered and voted upon.
53. Amendment of resolution ruled out of order
53.1 If an amendment is proposed to any resolution under consideration which the chairman of the meeting rules out of order, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling.
54. Objections or errors in voting
54.1 If:
54.1.1 any objection shall be raised to the qualification of any voter;
54.1.2 any votes have been counted which ought not to have been counted or which might have been rejected; or
54.1.3 any votes are not counted which ought to have been counted
the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless it is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs.  Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the chairman of the meeting decides that the same may have affected the decision of the meeting.  The decision of the chairman of the meeting on such matters shall be conclusive.
PROXIES
55. Execution of an appointment of proxy
55.1 If the appointment of a proxy is:
55.1.1 in hard copy form, it shall be executed under the hand of the appointor or of his attorney authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign it;
55.1.2 in electronic form, it shall be executed by or on behalf of the appointor.
55.2 Subject as provided in this Article, in the case of an appointment of proxy purporting to be executed on behalf of a corporation by an officer of that corporation it shall be assumed, unless the contrary is shown, that such officer was duly authorised to do so on behalf of that corporation without further evidence of that authorisation.
55.3 The Board may (but need not) allow proxy appointments to be made in electronic form, and if it does it may make such appointments subject to such stipulations, conditions or restrictions, and require such evidence of valid execution, as the Board thinks fit.
 
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55.4 A proxy need not be a member of the Company.
56. Times for deposit of an appointment of proxy
56.1 The appointment of a proxy shall:
56.1.1 if in hard copy form, be deposited at the Office or at any office of the Company's registrar or transfer agent as is specified for the purpose in the notice convening the meeting or in the instrument not less than 48 hours, ignoring any part of a day that is not a working day, before the time of the holding of the meeting or adjourned meeting at which the person named in the appointment proposes to vote, or by such later time as is specified in the notice or instrument; or
56.1.2 if in electronic form, where an address has been specified for the purpose of receiving documents or information by electronic means:
(a) in the notice convening the meeting, or
(b) in any instrument of proxy sent out by the Company in relation to the meeting, or
(c) in any invitation to appoint a proxy by electronic means issued by the Company in relation to the meeting,
be received at such address not less than 48 hours, ignoring any part of a day that is not a working day, before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote, or by such later time as is specified in the notice, instrument or invitation;
56.1.3 in the case of a poll taken more than 48 hours after it is demanded, be deposited or received in that manner after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll, or by such later time as may be specified for the purpose; or
56.1.4 where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman of the meeting or to any Director,
provided in each case that the power of attorney or other authority (if any) under which it is signed, or a copy of such authority certified notarially or in some other way approved by the Board, has been received in hard copy form (or, to the extent the Directors think fit, in electronic form) at the Office, or at such other address or place as is specified for the purpose in the notice convening the meeting or in the instrument, no later than the latest time for receipt of the appointment of proxy. An appointment of proxy that is not deposited, delivered or received in a manner so permitted shall be invalid unless the chairman of the meeting in his absolute discretion decides in good faith that it may be accepted.
56.2 Except as provided otherwise in any terms and conditions issued, endorsed or adopted by the Board to facilitate the appointment by members of more than one proxy to exercise all or any of the member's rights at a meeting, when two or more valid but differing appointments of proxy are deposited, delivered or received in respect of the same share for use at the same meeting, the one which is last deposited, delivered or received (regardless of its date or of the date of execution) shall be treated as replacing the others as regards that share; if the Company is unable to determine which was last deposited, delivered or received, none of them shall be treated as valid in respect of that share.  The deposit, delivery or receipt of an appointment of a proxy shall not preclude a member from attending and voting in person at the meeting or poll concerned.
 
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57. Form of appointment of proxy
57.1 The appointment of a proxy shall be in any usual form or any other form that the Board may approve and may relate to more than one meeting.  The Board may, if it thinks fit but subject to the Statutes, include with the notice of any meeting forms of appointment of proxy for use at the meeting.
57.2 Appointments of proxies may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions, but the Company shall not be obliged to ascertain that any proxy has complied with those or any other instructions given by the appointor and no decision on any resolution shall be vitiated by reason only that any proxy has not done so.
57.3 A member may appoint more than one proxy in relation to a meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him. The appointment of a proxy shall be deemed to include all the relevant member's rights to attend and speak at the meeting and vote in respect of the share or shares concerned (but so that each proxy appointed by that member may vote on a show of hands notwithstanding that the member would only have had one vote if voting in person, and may demand or join in demanding a poll as if the proxy held the share or shares concerned) and, except to the extent that the appointment comprises instructions to vote in a particular way, to permit the proxy to vote or abstain as the proxy thinks fit on any business properly dealt with at the meeting, including a vote on any amendment of a resolution put to the meeting or on any motion to adjourn.
57.4 On a vote on a resolution on a show of hands at a meeting, every proxy present who has been duly appointed by one or more members entitled to vote on the resolution has one vote, except that if the proxy has been duly appointed by more than one member entitled to vote on the resolution and:
57.4.1 has been instructed by one or more of those members to vote for the resolution and by one or more other of those members to vote against it, or
57.4.2 has been instructed to vote the same way (either for or against) on the resolution by all of those members except those who have given the proxy discretion as to how to vote on the resolution
the proxy is entitled to one vote for and one vote against the resolution.
57.5 The appointment shall, unless the contrary is stated in it, be as valid for any adjournment of the meeting as for the meeting to which it relates (regardless of any change of date, time or place effected in accordance with these Articles).
58. Validity of proxy
58.1 Subject to the Statutes, a vote given or poll demanded by proxy shall be valid, notwithstanding the previous determination of the proxy's authority unless notice of such determination was received by the Company at the Office (or at such other place at which the appointment of proxy was duly deposited or, where the appointment of the proxy was in electronic form, at the address at which such appointment was duly received) not later than the last time at which an appointment of proxy should have been deposited, delivered or received in order to be valid for use at the meeting or on the holding of the poll at which the vote was given or the poll demanded.
59. Maximum validity of proxy
59.1 A valid appointment of proxy shall cease to be valid after the expiration of 12 months from the date of its execution except that it will remain valid after that for the purposes of a poll or an adjourned meeting if the meeting at which the poll was demanded or the adjournment moved was held within the 12-month period.
 
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DIRECTORS
60. Number of Directors
60.1 Unless otherwise determined by ordinary resolution of the Company, the number of Directors shall not be less than two but shall not be subject to any maximum number.
61. No shareholding qualification for Directors
61.1 No shareholding qualification for Directors shall be required.
REMUNERATION OF DIRECTORS
62. Ordinary remuneration
62.1 Each of the Directors (other than any Director who for the time being holds an executive office or employment with the Company or a subsidiary of the Company) shall be paid a fee for his services at such rate as may from time to time be determined by the Board or by a committee authorised by the Board.  Such fee shall be deemed to accrue from day to day.
63. Expenses
63.1 The Directors may be paid all travelling, hotel and other expenses properly incurred by them in the conduct of the Company's business performing their duties as Directors including all such expenses incurred in connection with attending and returning from meetings of the Board or any committee of the Board or general meetings or separate meetings of the holders of any class of shares or debentures of the Company or otherwise in connection with the business of the Company.
64. Extra remuneration
64.1 Any Director who is appointed to any executive office or who serves on any committee or who devotes special attention to the business of the Company or goes or resides abroad for any purposes of the Company shall receive such remuneration or extra remuneration by way of salary, commission, participation in profits or otherwise as the Board or any committee authorised by the Board may determine in addition to or in lieu of any remuneration paid to, or provided for, such Director by or pursuant to any other of these Articles.
EXECUTIVE DIRECTORS
65. Executive Directors
65.1 The Board or any committee authorised by the Board may from time to time appoint one or more of its body to hold any employment or executive office with the Company for such period and on such other terms as the Board or any committee authorised by the Board may decide and may revoke or terminate any appointment so made.  Any revocation or termination of the appointment shall be without prejudice to any claim for damages that the Director may have against the Company or that the Company may have against the Director for any breach of any contract of service between him and the Company.  A Director so appointed may be paid such remuneration (whether by way of salary, commission, participation in profits or otherwise) in such manner as the Board or any committee authorised by the Board may decide.
65.2 The Board may from time to time appoint any person to any office or employment having a descriptive designation or title including the word "director" or attach to any existing office or employment with the Company such a designation or title and may at any time determine any such appointment or the use of any such designation or title.  The inclusion of the word "director" in the designation or title of any such office or employment with the Company shall not imply that the holder of the office is a director of the Company nor shall such holder thereby be empowered in any respect to act as a director of the Company or be deemed to be a Director for any of the purposes of the Statutes or these Articles.
 
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POWERS AND DUTIES OF DIRECTORS
66. General powers of the Company vested in the Board
66.1 The business of the Company shall be managed by the Board, which, subject to these Articles and any direction given by the Company by special resolution, may exercise all the powers of the Company.  No alteration of these Articles and no such direction shall invalidate any prior act of the Board which would have been valid if that alteration had not been made or that direction had not been given.
66.2 The powers given by this Article shall not be limited by any special power given to the Board by any other Article.
DELEGATION OF DIRECTORS' POWERS
67. Agents
67.1 The Board may, by power of attorney or otherwise, appoint any person to be the agent of the Company on such terms (including terms as to remuneration) and subject to such conditions as it may decide and may delegate to any person so appointed any of its powers, authorities and discretions (with power to sub-delegate).  The Board may remove any person so appointed and may revoke or vary the delegation but no person dealing in good faith and without notice of the revocation or variation shall be affected by it.
67.2 The power to delegate contained in this Article shall be effective in relation to the powers, authorities and discretions of the Board generally and shall not be limited by the fact that in certain Articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the Board or by committee authorised by the Board.
68. Delegation to individual Directors
68.1 The Board may entrust to and confer upon a Director any of its powers, authorities and discretions (with power to sub-delegate) upon such terms (subject to the Statutes) and subject to such conditions and with such restrictions as it may decide.  The Board may from time to time revoke or vary all or any of them but no person dealing in good faith and without notice of the revocation or variation shall be affected by it.
68.2 The power to delegate contained in this Article shall be effective in relation to the powers, authorities and discretions of the Board generally and shall not be limited by the fact that in certain Articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the Board or by a committee authorised by the Board.
69. Delegation to committees
69.1 The Board may delegate any of its powers, authorities and discretions (with power to sub-delegate) to any committee consisting of such person or persons as it thinks fit (whether a member or members of its body or not) provided that the majority of the members of the committee are Directors.  Subject to any restriction on sub-delegation imposed by the Board, any committee so formed may exercise its power to sub-delegate by sub-delegating to any person or persons (whether or not a member or members of the Board or of the committee).  Subject to any regulations imposed on it by the Board, the proceedings of any committee consisting of two or more members shall be governed by the provisions in these Articles for regulating proceedings of the Board so far as applicable except that no meeting of that committee shall be quorate for the purpose of exercising any of its powers, authorities or discretions unless a majority of the committee present at the meeting are Directors.  A member of a committee shall be paid such remuneration (if any) in such manner as the Board may decide, and, in the case of a Director, either in addition to or in place of his ordinary remuneration as a Director.
 
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69.2 The power to delegate contained in this Article shall be effective in relation to the powers, authorities and discretions of the Board generally and shall not be limited by the fact that in certain of these Articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the Board or by a committee authorised by the Board.
SPECIFIC POWERS
70. Provision for employees
70.1 The Board may make provision for the benefit of persons employed or formerly employed by the Company or any of its subsidiaries in connection with the cessation or the transfer to any person of the whole or part of the undertaking of the Company or that subsidiary.
71. Borrowing Powers
71.1 The Board may exercise all the powers of the Company to borrow money, to guarantee, to indemnify and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject to the Statutes, to issue debentures and other securities, whether outright or as collateral security, for any debt, liability or obligation of the Company or of any third party.
71.2 The Board shall restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings (if any) so as to secure (but as regards subsidiary undertakings only in so far as by the exercise of such rights or powers of control the Board can secure) that the aggregate principal amount from time to time outstanding of all borrowings by the Group (exclusive of borrowings owing by one member of the Group to another member of the Group) shall not at any time without the previous sanction of an ordinary resolution of the Company exceed an amount equal to three times the Adjusted Capital and Reserves.
71.3 For the purposes of this Article:
71.3.1 "the Adjusted Capital and Reserves" means the aggregate of:
(a) the amount paid up on the share capital of the Company;
(b) the amounts standing to the credit of the capital and revenue reserves of the Company and its subsidiary undertakings (including any capital redemption reserve, redenomination reserve, reserves arising on a revaluation of fixed assets or on consolidation and any credit balance on profit and loss account); and
(c) the amounts, so far as attributable to the Company or a subsidiary undertaking, standing to the credit of investment grants equalisation account, deferred regional development grants equalisation account or any other equalisation account of a similar nature;
as shown by the then latest audited balance sheet but after:
(d) excluding (so far as not already excluded) any sums set aside for taxation;
(e) making such adjustments as may be appropriate to reflect any variation in the amount of the paid up share capital or reserves since the date of the relevant audited balance sheet and any variation in the amounts attributable to the interest of the Company in the share capital of any subsidiary undertaking and so that for this purpose if any issue or proposed issue of shares by a member of the Group for cash has been underwritten then such shares shall be deemed to have been issued and the amount (including any premium) of the subscription monies payable in respect thereof (not being monies payable later than six months after the date of allotment) shall to the extent so underwritten be deemed to have been paid up on the date when the issue of such shares was underwritten (or, if such underwriting was conditional, on the date when it became unconditional); and
 
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(f) making such adjustments as may be appropriate in respect of any distribution declared, recommended or made by any member of the Group (otherwise than to a member of the Group) out of profits earned up to and including the date of the audited balance sheet of the Group to the extent that such distribution is not provided for in such balance sheet;
(g) deducting the amount of any debit balance on profit and loss account existing at the date of the relevant audited balance sheet to the extent that a deduction has not already been made on that account;
(h) deducting any amounts shown as attributable to minority interests;
(i) adding back, if it is a liability, or deducting, if it is an asset, the amount (net of any related deferred tax asset or liability, as the case may be) that relates to any defined benefit pension scheme;
(j) adding back sums equivalent to the amount of goodwill arising on acquisitions of companies and businesses remaining part of the Group at the date of calculation and which, at that date, had been written off against share capital and reserves in accordance with United Kingdom accounting practice; and
(k) making such other (if any) adjustments as the Auditors after consultation with the Board may consider appropriate.
71.3.2 "borrowings" include not only items referred to as borrowings in the audited balance sheet but also the following, except in so far as otherwise taken into account:
(a) the principal amount of any debentures or borrowed monies of any person, the beneficial interest in which is not for the time being owned by a member of the Group, and the payment or repayment of which is the subject of a guarantee or indemnity by a member of the Group or is secured on the assets of any member of the Group;
(b) the outstanding amount raised by acceptances by any bank or accepting house under any acceptance credit opened on behalf of and in favour of any member of the Group, not being acceptances of trade bills for the purchase of goods or services in the ordinary course of business;
(c) the principal amount of any debenture (whether secured or unsecured) of a member of the Group, which debenture is owned otherwise than by another member of the Group Provided that where the amount raised by the Company or any of its subsidiary undertakings by the issue of any debentures, debenture stocks, loan stocks, bonds, notes or other indebtedness is less than the nominal or principal amount thereof (including for these purposes any fixed or minimum premium payable on final redemption or repayment but disregarding the expenses of any such issue) the amount to be treated as monies borrowed for the purpose of this Article shall, so long as the nominal or principal amount of such monies borrowed is not presently due and payable, be the nominal or principal amount thereof (together with any fixed or minimum premium payable on final redemption or repayment) but after deducting therefrom the unexpired portion of any discount applied to such amount in the audited balance sheet of the Group.  Any references in this Article to debentures or monies borrowed or the nominal or principal amount thereof shall, accordingly, be read subject to this sub-paragraph;
 
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(d) the principal amount of any preference share capital of any subsidiary undertaking owned otherwise than by a member of the Group;
(e) any fixed or minimum premium payable on the repayment of any borrowing or deemed borrowing; and
(f) the capital value of any financial lease required to be capitalised and treated as a liability in the audited balance sheet by any applicable accounting standard from time to time in force,
but do not include:
(g) monies borrowed by a member of the Group for the purpose of repaying the whole or any part of any borrowings of such member of the Group or any other member of the Group for the time being outstanding and so to be applied within six months of being so borrowed, pending their application for such purpose within such period;
(h) monies borrowed by a member of the Group for the purpose of financing any contract in respect of which any part of the price receivable by that member or any other member of the Group is guaranteed or insured by the Export Credits Guarantee Department, or by any other governmental department or agency fulfilling a similar function, up to an amount equal to that part of the price receivable under the contract which is so guaranteed or insured;
(i) for a period of 12 months from the date upon which a company becomes a member of the Group, an amount equal to the monies borrowed by such company outstanding at the date when it becomes such a member provided always that monies borrowed by the Group (including monies otherwise excluded by the application of this sub-paragraph) must not exceed an amount equal to three times the Adjusted Capital and Reserves;
(j) an amount equal to the minority proportion of monies borrowed by a partly owned subsidiary of the Group (after excluding any monies borrowed owing between members of the Group) except to the extent that such monies borrowed are guaranteed by the Company or any wholly owned subsidiary undertaking of the Company.  For these purposes the minority proportion shall be the proportion of the issued equity share capital of such partly owned subsidiary which is not for the time being beneficially owned within the Group.  Monies borrowed by a member of the Group from a partly owned subsidiary of the Group which would fall to be excluded as being monies borrowed owing between members of the Group shall nevertheless be included to the extent of an amount equal to such minority proportion of such monies borrowed; and
(k) sums advanced or paid to any member of the Group (or its agents or nominee) by customers of any member of the Group as unexpended customer receipts or progress payments pursuant to any contract between such customer and a member of the Group in relation thereto;
provided that, in calculating borrowings under this Article there shall be credited (subject, in the case of any item held or deposited by a partly owned subsidiary undertaking, to the exclusion of a proportion thereof equal to the proportion of the issued equity share capital of the partly owned subsidiary undertaking which is not attributable to the Company or any subsidiary undertaking of the Company) against the amount of any monies borrowed the aggregate of:
 
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(i) cash in hand of the Group; and
(ii) cash deposits and the balance on each current account of the Group with banks in the United Kingdom and/or elsewhere if the remittance of the cash to the United Kingdom is not prohibited by any law, regulation, treaty or official directive; and
(iii) the amount of all assets ("short term assets") as might be included in "Investments - short term loans and deposits" in a consolidated balance sheet of the Group prepared as at the date of the relevant calculation in accordance with the principles with which the then latest audited balance sheet was produced; and
(iv) the amount of any cash or short term assets securing the repayment by the Group of any amount borrowed by the Group deposited or otherwise placed with the trustee, agent, lender or similar entity in respect of the relevant borrowing; and
71.3.3 where the aggregate principal amount of borrowings required to be taken into account for the purposes of this Article on any particular date is being ascertained:
(a) monies borrowed by the Company or any subsidiary undertaking expressed in or calculated by reference to a currency other than sterling shall be converted into sterling by reference to the rate of exchange used for the conversion of such currency in preparation of the audited balance sheet which forms the basis of the calculation of the Adjusted Capital and Reserves or, if such calculation did not involve the relevant currency, by reference to the rate of exchange or approximate rate of exchange ruling as at the date of the aforesaid audited balance sheet as the Auditors may consider appropriate for this purpose; and
(b) if under the terms of any borrowing or as the result of any exchange cover scheme, forward currency contract, option or other arrangement, the amount of money that would be required to discharge the principal amount of such borrowing in full if it fell to be repaid (at the option of the Company or by reason of default) on such date is less than the amount that would otherwise be taken into account in respect of such borrowing for the purpose of this Article, the amount of such borrowing to be taken into account for the purpose of this Article shall be such lesser amount;
71.3.4 "audited balance sheet" means the audited balance sheet of the Company prepared for the purposes of the Statutes or, if an audited consolidated balance sheet of the Company and its subsidiary undertakings (with such exceptions as may be permitted in the case of a consolidated balance sheet prepared for the purposes of the Statutes) has been prepared for those purposes for the same financial year, means that audited consolidated balance sheet in which event all references to reserves and profit and loss account shall be deemed to be references to consolidated reserves and consolidated profit and loss account respectively and there shall be excluded any amounts attributable to outside interests in subsidiary undertakings;
71.3.5 the Company may from time to time change the accounting convention on which the audited balance sheet is based, provided that any new convention adopted complies with the requirements of the Statutes;  if the Company should prepare its main audited balance sheet on the basis of one such convention, but a supplementary audited balance sheet or statement on the basis of another, the main audited balance sheet shall be taken as the audited balance sheet for the purposes of this Article;
71.3.6 no amount shall be taken into account more than once in the same calculation; and
 
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71.3.7 "the Group" means the Company and its subsidiary undertakings (if any) other than those subsidiary undertakings authorised or required to be excluded from consolidation in the Company's group accounts pursuant to the Statutes.
71.4 The report of a suitably qualified accountant, such suitability to be determined by the Board, as to the amount of the Adjusted Capital and Reserves or borrowings or that the limit imposed by this Article has not been or will not in any particular circumstances be exceeded shall be conclusive and binding on all concerned.  Nevertheless the Board may act in reliance on a bona fide estimate of the amount of the Adjusted Capital and Reserves at any time and if in consequence the limit contained in this Article is inadvertently exceeded an amount of borrowings equal to the excess may be disregarded until the expiration of three months after the date on which by reason of a report of a suitably qualified accountant, such suitability to be determined by the Board, or otherwise the Board became aware that such a situation has or may have arisen.
71.5 Notwithstanding the foregoing, no lender or other person dealing with the Company shall be concerned to see or inquire whether the limit imposed by this Article is observed and no borrowing incurred or security given in excess of such limit shall be invalid or ineffectual, except in the case of express notice to the lender or the recipient of the security at the time when the borrowing was incurred or the security given that the limit imposed by this Article had been or was thereby exceeded.
71.6 The Company shall keep or cause to be with the Register (or on any overseas branch register) a register of  debt securities issued by it, showing with respect to each class or series of such securities:
71.6.1 the names, alphabetically arranged, and the latest known address of each person who is or has been a debt security holder;
71.6.2 the number of debt securities held by each debt security holder; and
71.6.3 the date and particulars of the issue and transfer of each debt security.
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS
72. Retirement at annual general meetings
72.1 At each annual general meeting of the Company all the Directors shall retire.
73. Position of Retiring Director
73.1 Subject to these Articles, the Company at the meeting at which a Director retires may fill the vacated office and, in default, the retiring Director shall, if willing to act, be deemed to have been reappointed unless at the meeting it is resolved not to fill the vacancy or unless a resolution for the reappointment of the Director is put to the meeting and lost. If he is not reappointed or deemed to be reappointed, he shall retain office until the meeting appoints someone in his place or, if it does not do so, until the end of the meeting.
74. Eligibility for appointment as a Director
74.1 No person other than a Director retiring shall be appointed or reappointed a Director at any general meeting unless:
74.1.1 he is recommended by the Board; or
74.1.2 not less than seven nor more than 42 clear days before the day appointed for the meeting, notice executed by a member qualified to vote at the meeting (not being the person to be proposed) has been delivered to the Office (or received in electronic form at the electronic address at which the Company has or is deemed to have agreed to receive it) of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the Company's register of Directors together with notice executed by that person of his willingness to be appointed or reappointed.
 
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75. Power of the Company to appoint Directors
75.1 Subject to these Articles, the Company may by ordinary resolution appoint any person who is willing to act to be a Director, either to fill a vacancy on or as an addition to the existing Board, but so that the total number of Directors shall not at any time exceed any maximum number fixed by or in accordance with these Articles.  A resolution for the appointment of two or more persons as Directors by a single resolution shall be void unless a resolution that it shall be so proposed has first been agreed to by the meeting without any vote being given against it.
76. Power of the Board to appoint Directors
76.1 Without prejudice to the power of the Company in general meeting under these Articles to appoint any person to be a Director, the Board may appoint a person who is willing to act to be a Director, either to fill a vacancy or as an addition to the existing Board, but so that the total number of Directors shall not at any time exceed any maximum number fixed by or in accordance with these Articles .  Any Director so appointed shall hold office only until the conclusion of the next following annual general meeting and, if not reappointed at that meeting, shall vacate office at the conclusion of the meeting.
77. Company's power to remove a Director and appoint another in his place
77.1 The Company may by ordinary resolution remove any Director before the expiration of his period of office and may, subject to these Articles, by ordinary resolution appoint another person who is willing to act to be a Director in his place.  Any person so appointed shall be treated, for the purposes of determining the time at which he or any other Director is to retire, as if he had become a Director on the day on which the person in whose place he is appointed was last appointed or reappointed a Director.
78. Vacation of office by Directors
78.1 Without prejudice to the provisions for retirement or otherwise contained in these Articles, the office of a Director shall be vacated as soon as:
78.1.1 notification is received by the Company from the Director that he is resigning from office as Director, and such resignation has taken effect in accordance with its terms;
78.1.2 a bankruptcy order is made against him or he makes any arrangement or composition with his creditors generally in satisfaction of his debts;
78.1.3 a registered medical practitioner who is treating him gives a written opinion to the Company stating that the Director has become physically or mentally incapable of acting as a director and may remain so for more than three months or, by reason of his mental health, a court makes an order which wholly or partly prevents him from personally exercising any powers or rights that he would otherwise have;
78.1.4 without the permission of the Board, he is absent from meetings of the Board for six consecutive months and the Board resolves that his office is vacated;
78.1.5 he ceases to be a Director by virtue of the Statutes or is prohibited by law from being a Director or is removed from office under these Articles;
78.1.6 notice in writing that he is to vacate office executed by or on behalf of all the Directors other than him is delivered to the Office or tendered at a meeting of the Board, provided those Directors are not less than three in number.  Separate notices in substantially the same form each executed by or on behalf of one or more of those Directors shall together be as effective as a single notice signed by all of them; or
 
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78.1.7 his contract of service or letter of appointment as a Director expires or is terminated without being renewed within 14 days.
78.2 The provisions contained in sections 215 to 221 of the UK Companies Act 2006 in relation to payments made to directors (or a person connected to such directors) for loss of office (and the circumstances in which such payments would require the approval of members) shall apply to the Company, and the Company shall comply with such provisions as if it were a company incorporated in the United Kingdom, notwithstanding section 217(4)(a) and section 219(6)(a) of such provisions.
DIRECTORS' INTERESTS
79. Transactions, offices, employment and interests
79.1 Subject to the Statutes, a Director notwithstanding his office:
79.1.1 may hold any other office or place of profit with the Company (except that of Auditor) in conjunction with the office of Director and may act by himself or through his firm in a professional capacity for the Company (otherwise than as Auditor) and in either such case on such terms as to remuneration (whether by way of salary, commission, participation in profits or otherwise) and otherwise as the Board may determine, and  any such remuneration shall be either in addition to or in lieu of any remuneration provided for, by or pursuant to any other Article;
79.1.2 may be a party to, or otherwise interested in, any contract with the Company or in which the Company is otherwise interested;
79.1.3 may be a director or other officer of, or employed by, or a party to any contract with, or otherwise interested in, any undertaking in the same group as the Company or promoted by the Company or by any such undertaking, or in which the Company or any such undertaking is otherwise interested or as regards which the Company or any such undertaking has any powers of appointment;
79.1.4 shall not, by reason of his office, be accountable to the Company for any remuneration or benefit which he derives from any such office or employment or from any such contract or from any interest in such undertaking and no such office, employment or contract shall be liable to be avoided on the ground of any such interest or benefit;
79.1.5 shall not be in breach of his duties as a director by reason only of his excluding himself from  the receipt of information, or from participation in decision-making or discussion (whether at meetings of the directors or otherwise), that will or may relate to any such office, employment, contract or interest; and
79.1.6 shall not be required to disclose to the Company, or use in relation to the Company's affairs, any confidential information obtained by him in connection with any such office, employment, contract or interest if his doing so would result in a breach of a duty or an obligation of confidence owed by him in that connection
provided that he has disclosed to the Board the nature and extent of any material interest of his, but no such disclosure shall be necessary of any office or employment with any subsidiary undertaking of the Company or any interest in a transaction or arrangement that would not be required to be declared by the Director under the Statutes, and a general notice given to the Board that a Director is to be regarded as having an interest of the nature and extent specified in the notice in any transaction or arrangement in which a specified person or class of persons is interested shall be deemed to be a disclosure that the Director has an interest in any such transaction or arrangement of the nature and extent so specified, and for the purposes of this Article an interest of which a Director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his.
 
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79.2 The Board may cause any voting power conferred by the shares in any other company held or owned by the Company or any power of appointment to be exercised in such manner in all respects as it thinks fit, including the exercise of either of such powers in favour of a resolution appointing the Directors, or any of them, to be directors or officers of the other company, or in favour of the payment of remuneration to the directors or officers of the other company.
79.3 Except as otherwise provided by these Articles, a Director shall not vote on, or be counted in the quorum in relation to, any resolution of the Board or of a committee of the Board concerning any matter in which he has to his knowledge, directly or indirectly, an interest (other than his interest in shares or debentures or other securities of, or otherwise in or through, the Company) or duty which (together with any interest of a person connected with him) is material and, if he shall do so, his vote shall not be counted.  A Director shall be entitled to vote on and be counted in the quorum in respect of any resolution concerning any of the following matters:
79.3.1 the giving to him of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of or for the benefit of, the Company or any of its subsidiary undertakings;
79.3.2 the giving by the Company of any guarantee, security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security;
79.3.3 his subscribing or agreeing to subscribe for, or purchasing or agreeing to purchase, any shares, debentures or other securities of the Company or any of its subsidiary undertakings as a holder of securities, or his being, or intending to become, a participant in the underwriting or sub-underwriting of an offer of any such shares, debentures, or other securities by the Company or any of its subsidiary undertakings for subscription, purchase or exchange;
79.3.4 any contract concerning any company (not being a company in which the Director owns one per cent. or more (as defined in this Article)) in which he is interested, directly or indirectly, and whether as an officer, shareholder, creditor or otherwise;
79.3.5 any arrangement for the benefit of employees of the Company or any of its subsidiary undertakings under which he benefits in a similar manner as the employees and which does not accord to any Director as such any privilege or advantage not accorded to the employees to whom the arrangement relates;
79.3.6 any contract concerning any insurance which the Company is empowered to purchase or maintain for, or for the benefit of, any Directors or for persons who include Directors; or
79.3.7 any indemnity permitted by these Articles (whether in favour of the Director or others as well) against any costs, charges, expenses, losses and liabilities sustained or incurred by him as a director of the Company or of any of its subsidiary undertakings, or any proposal to provide funds to meet any expenditure incurred by him in defending himself in any criminal or civil proceeding in connection with any alleged negligence, default, breach of duty or breach of trust by him in relation to the Company or any of its subsidiary undertakings, or any investigation, or action taken, by a regulatory authority in that connection, or for the purposes of any application for relief under the Companies (Jersey) Law 1991.
79.4 A Director shall not vote on, or be counted in the quorum in relation to, any resolution of the Board concerning his own appointment, or the settlement or variation of the terms or the termination of his own appointment, as the holder of any office or place of profit with the Company or any company in which the Company is interested but, where proposals are under consideration concerning the appointment, or the settlement or variation of the terms or the termination of the appointment, of two or more Directors to offices or places of profit with the Company or any company in which the Company is interested, a separate resolution may be put in relation to each Director and in that case each of the Directors concerned shall be entitled to vote on and be counted in the quorum in relation to each resolution which does not concern either: (a) his own appointment or the settlement or variation of the terms or the termination of his own appointment; or (b) the appointment of another Director to an office or place of profit with a company in which the Company is interested and in which the Director seeking to vote or be counted in the quorum is interested by virtue of owning of one per cent. or more (as defined in this Article).
 
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79.5 A company shall be deemed to be a company in which a Director owns one per cent. or more if and so long as he is directly or indirectly the holder of or beneficially interested in one per cent. or more of any class of the equity share capital of such company or of the voting rights available to members of such company.  For this purpose, there shall be disregarded any shares held by a Director as bare or custodian trustee and in which he has no beneficial interest, any shares comprised in a trust in which the Director's interest is in reversion or remainder (if and so long as some other person is entitled to receive the income from such trust) and any shares comprised in an authorised unit trust scheme in which the Director is interested only as a unit holder.
79.6 Where a company in which a Director owns one per cent. or more is materially interested in a contract, he shall also be deemed to be materially interested in that contract.
79.7 For the purposes of this Article, an interest of a person who is for the purposes of the UK Companies Act 2006 connected with a Director shall be treated as an interest of the Director.
79.8 References in this Article to a contract include references to any proposed contract and to any transaction or arrangement whether or not constituting a contract.
79.9 If any question shall arise at any meeting of the Board as to the materiality of the interest of a Director (other than the chairman of the meeting) or as to the entitlement of any Director (other than the chairman of the meeting) to vote or be counted in the quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or not to be counted in the quorum, the question shall be referred to the chairman of the meeting and his ruling in relation to the Director concerned shall be conclusive except in a case where the nature or extent of his interest (so far as it is known to the Director) has not been fairly disclosed to the Board.  If any question shall arise in respect of the chairman of the meeting, the question shall be decided by resolution of the Board (for which purpose the chairman shall be counted in the quorum but shall not vote on the matter) and the resolution shall be conclusive except in a case where the nature or extent of the interest of the chairman of the meeting (so far as it is known to him) has not been fairly disclosed to the Board.
79.10 Subject to the Statutes, the Company may by ordinary resolution suspend or relax the provisions of this Article to any extent or ratify any contract not properly authorised by reason of a contravention of this Article.
DIRECTORS' GRATUITIES AND PENSIONS
80. Directors' gratuities and pensions
80.1 The Board or any committee authorised by the Board may exercise all the powers of the Company to provide benefits, whether by the payment of gratuities, pensions, annuities, allowances, bonuses or by insurance or otherwise, for any Director or former Director who holds or who has held but no longer holds any executive office, other office, place of profit or employment with the Company or with any body corporate which is or has been a subsidiary undertaking of the Company or a predecessor in business of the Company or of any such subsidiary undertaking, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office, place of profit or employment) establish, maintain, support, subscribe to and contribute to any scheme, trust or fund for the benefit of all or any such persons and pay premiums for the purchase or provision of any such benefits.  The Board or any committee authorised by the Board may procure any of these matters to be done by the Company either alone or in conjunction with any other person.
80.2 No Director or former Director shall be accountable to the Company or the members for any benefit provided pursuant to this Article and the receipt of any such benefit shall not disqualify any person from being or becoming a Director.
 
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PROCEEDINGS OF THE BOARD
81. Board meetings
81.1 The Board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit.  A Director may, and the Secretary on the requisition of a Director shall, convene a meeting of the Board.   Board meetings must be held in Jersey or such other place as the Directors may determine provided that holding the Board meeting in such place shall not adversely affect the tax residency of the Company being in Jersey.
82. Notice of Board meetings
82.1 Notice of a Board meeting shall be given to each Director at least 48 hours before the time fixed for the meeting or such lesser period as may be reasonable under the circumstances and be deemed to be properly given to a Director if it is given to him personally or by word of mouth or sent in writing or in electronic form to him at his last known address or any other address given by him to the Company for this purpose.  A Director absent or intending to be absent from his normal address may request the Board that notices of Board meetings shall during his absence be sent to him at an address given by him to the Company for this purpose, but such notices need not be given any earlier than notices given to Directors not so absent and in the absence of any such request it shall not be necessary to give notice of a Board meeting to any Director who is for the time being absent from his normal address .
82.2 Notice of a Board meeting need not be given to Directors who waive their entitlement to notice of that meeting by giving notice to that effect to the Company not more than seven days after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it.
83. Voting
83.1 Questions arising at a meeting shall be decided by a majority of votes.  In the case of an equality of votes, the chairman shall have a second or casting vote.
84. Quorum
84.1 The quorum necessary for the transaction of the business of the Board may be fixed by the Board and unless so fixed at any other number shall be a simple majority of the Directors provided always that Board meetings must be held in Jersey (or such other place as the Directors may determine provided that holding the Board meeting in such place shall not adversely affect the tax residency of the Company being in Jersey).
84.2 Subject to these Articles, any Director who ceases to be a Director at a Board meeting may continue to be present and to act as a Director and be counted in the quorum until the termination of the Board meeting if no other Director objects and if otherwise a quorum of Directors would not be present.
85. Board vacancies below minimum number
85.1 The continuing Directors or a sole continuing Director may act notwithstanding any vacancies on the Board, but, if the number of Directors is less than the minimum number fixed by or in accordance with these Articles, the continuing Directors or Director may act only for the purpose of filling vacancies on the Board or of convening a general meeting of the Company.  If there are no Directors or Director able or willing to act, any two members may call a general meeting of the Company for the purpose of appointing Directors.
 
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86. Appointment of chairman
86.1 The Board may appoint a Director to be the chairman of the Board and may at any time remove him from that office.  Unless he is unwilling to do so, the Director so appointed shall preside at every meeting of the Board at which he is present.  But if there is no Director holding that office, or if the Director holding it is unwilling to preside or is not present within five minutes after the time appointed for the meeting, the Directors present may appoint one of their number to be chairman of the meeting.
87. Competence of the Board
87.1 A meeting of the Board at which a quorum is present shall be competent to exercise all powers, authorities and discretions for the time being vested in or exercisable by the Board.
88. Participation in meetings by telephone
88.1 All or any of the members of the Board or of any committee of the Board may participate in a meeting of the Board or that committee by means of a conference telephone or any communication equipment that allows all persons participating in the meeting to hear and speak to each other.  A person so participating shall be deemed to be present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly. Such a meeting shall be deemed to take place where the largest group of those participating is assembled, or, if there is no such group, where the chairman of the meeting is and shall be deemed to be a meeting even if there is only one person physically present where it is deemed to take place.
89. Written resolutions
89.1 A resolution in writing signed by:
89.1.1 all the Directors then in office; or
89.1.2 by all the members of a committee of the Board
(but excluding any Director whose vote is not to be counted in respect of that particular matter) shall be as valid and effectual as if it had been passed at a meeting of the Board or that committee duly convened and held and may be contained in one document (or in several documents in all substantial respects in like form) each signed by one or more of the Directors or members of that committee.   Any such document may be constituted by letter or (provided it is in writing) in electronic form or otherwise as the Board may from time to time approve.
90. Company books
90.1 The Board shall cause minutes to be made in books kept for the purpose of recording:
90.1.1 all appointments of officers made by the Board;
90.1.2 all proceedings at meetings of the Company, of the holders of any class of shares in the Company and of the Board and of committees of the Board, including the names of the Directors or members of a committee of the Board present at each such meeting.
90.2 Any such minutes, if purporting to be signed by the chairman of the meeting at which the appointments were made or proceedings held or by the chairman of the next succeeding meeting, shall be sufficient evidence of the facts stated in them without any further proof.
 
 
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91. Validity of acts of the Board or a committee
91.1 All acts done by the Board or by a committee of the Board, or by a person acting as a Director or member of a committee of the Board shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any Director, member of a committee of the Board, or person acting as a Director, or that any of them were disqualified from holding office, or had vacated office, or were not entitled to vote, be as valid as if each such person had been duly appointed and was qualified and had continued to be a Director or member of the committee and had been entitled to vote.
92. Liability of Directors for breach of Article 4.4
92.1 Directors who vote for or consent to a resolution authorising the issue of a share under Article 4.4 for a consideration other than money are jointly and severally liable to the Company to make good any amount by which the consideration received is less than the fair equivalent of the money that the Company would have received if the share had been issued for money on the date of the resolution.
COMPANY SECRETARY
93. Appointment and removal of Company Secretary
93.1 Subject to the Statutes, the Secretary shall be appointed by the Board at such remuneration and upon such terms as it thinks fit.  If thought fit, two or more persons may be appointed as joint Secretaries with the power to act jointly and severally.  Any Secretary so appointed may be removed by the Board.
93.2 The Board may from time to time appoint an assistant or deputy secretary who, during such time as there may be no Secretary or no Secretary capable of acting, may act as Secretary and do any act authorised or required by these Articles or by law to be done by the Secretary.  The signature of any document as Secretary by such assistant or deputy secretary shall be conclusive evidence (without invalidating that signature for any purpose) that at the time of signature there was no Secretary or no Secretary capable of acting.
THE SEAL
94. Use of seal
94.1 The Seal shall only be used by the authority of the Board or of a committee authorised by the Board in that behalf and, unless otherwise decided by the Board or any such committee, any document to which the Seal is applied must also be signed by at least one authorised person in the presence of a witness who attests the signature. For the purposes of this Article, an authorised person is any Director, the Secretary or any person authorised by the Board or such committee for the purpose of signing documents to which the Seal is applied.
DIVIDENDS
95. Company may declare dividends
95.1 Subject to the Statutes, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Board.
96. Board may pay interim dividends and fixed dividends
96.1 Subject to the Statutes, the Board may pay such interim dividends as appear to the Directors to be justified.  If the share capital of the Company is divided into different classes, the Board may pay interim dividends on shares which confer deferred or non-preferred rights to dividends as well as on shares which confer preferential or special rights to dividends, but no interim dividend shall be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrears.  The Board may also pay at intervals settled by it any dividend payable at a fixed date if it appears to the Board that the financial position of the Company justifies the payment.  If the Board acts in good faith, it shall not incur any liability to the holders of shares conferring preferred rights for any loss which they may suffer by reason of the lawful payment of an interim dividend on any shares having deferred or non-preferred rights.
 
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97. Currency of dividends
97.1 Except in so far as the rights attaching to any share otherwise provide, any dividends or other monies payable on or in respect of any share may be declared in any currency or currencies, and paid in the same currency or currencies or in any other currency or currencies, and subject to such charges to cover the costs of conversion, as the Board may determine, using where required such basis of conversion (including the rate and timing of conversion) as the Board decides.
98. Waiver of dividends
98.1 The waiver in whole or in part of any dividend on any share by any document (whether or not under seal) shall be effective only if such document is signed by the relevant member or transmittee and delivered to the Company and if or to the extent that it is accepted as such or acted upon by the Company.
99. Non-cash dividends
99.1 A general meeting declaring a dividend may, upon the recommendation of the Board, by ordinary resolution direct that it shall be satisfied wholly or partly by the distribution of assets and, in particular, of paid-up shares or debentures of any other company and, where any difficulty arises concerning such distribution, the Board may settle it as the Board thinks expedient and in particular may issue fractional certificates or, subject to the Statutes and, in the case of shares held in uncertificated form, the system's rules, authorise and instruct any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution of  any assets and may determine that cash shall be paid to any member upon the basis of the value so fixed in order to secure equality of distribution and may vest any assets to be distributed in trustees as the Board may consider expedient.
100. Scrip dividends
100.1 Subject to the Statutes, the Board may, if authorised by an ordinary resolution of the Company, offer the holders of shares the right to elect to receive new shares, credited as fully paid, instead of cash for all or part (as determined by the Board) of any dividend.  The following provisions shall apply:
100.1.1 an ordinary resolution may specify a particular dividend or dividends, or may specify all or any dividends, declared or paid within a specified period, but such period may not end later than the fifth anniversary of the date of the meeting at which the ordinary resolution is passed;
100.1.2 the basis of allotment to each entitled holder of shares shall be such number of new shares credited as fully paid as have a value as nearly as possible equal to (but not greater than) the amount of the dividend (disregarding any tax credit) which he has elected to forego.  For this purpose, the "value" of an ordinary share shall be deemed to be the average of the middle market quotations for the Company's shares on the London Stock Exchange as derived from the Daily Official List on the day on which the shares are first quoted "ex" the relevant dividend and the four subsequent dealing days or in such other manner as may be determined by or in accordance with the ordinary resolution.  A certificate or report by a suitably qualified accountant, such suitability to be determined by the Board, as to the amount of the value in respect of any dividend shall be conclusive evidence of that amount;
 
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100.1.3 no fraction of an ordinary share shall be allotted and if any holder of shares would otherwise be entitled to fractions of a share, the Board may deal with the fractions as it thinks fit, including (without limitation) determining that the whole or part of the benefit of fractional entitlements will be disregarded or accrue to the Company or that the value of fractional entitlements will be accumulated on behalf of a member (without entitlement to interest) and applied in paying up new shares in connection with a subsequent offer by the Company of the right to receive shares instead of cash in respect of a future dividend;
100.1.4 the Board shall not proceed with any election unless the Company has sufficient reserves or funds which may be capitalised to give effect to the election following the Board's determination of the basis of allotment;
100.1.5 on or as soon as practicable after announcing that the Board is to recommend or pay any dividend, the Board, if it intends to offer an election for that dividend, shall also announce that intention and, having determined the basis of allotment, shall notify the entitled holders of shares (other than any in relation to whom an election mandate in accordance with this Article is subsisting) of the right of election offered to them, and shall send with, or following, such notification, forms of election and shall specify the procedure to be followed and place at which, and the latest date and time by which, duly completed forms of election must be received in order to be effective;
100.1.6 the dividend (or that part of the dividend in respect of which a right of election has been offered) shall not be payable in cash on shares in respect of which an election has been duly made (the "elected shares") and instead additional shares shall be allotted to the holders of the elected shares on the basis of allotment so determined.  For such purpose, the Board shall capitalise, out of any amount standing to the credit of any reserve or fund (including the profit and loss account), whether or not it is available for distribution, as the Board may determine, and apply it in paying up in full the appropriate number of shares for allotment and distribution to the holders of the elected shares on that basis;
100.1.7 the additional shares so allotted shall be allotted as of the record date for the dividend for which the right of election has been offered and shall rank pari passu in all respects with the shares then in issue except that they will not rank for the dividend or other distribution entitlement in respect of which they have been issued.  Unless the Board otherwise determines (and subject always to the Order and the system's rules), the shares so allotted shall be issued as shares in certificated form (where the shares in respect of which they have been allotted were in certificated form at the Scrip Record Time) or as shares in uncertificated form (where the shares in respect of which they have been allotted were in uncertificated form at the Scrip Record Time) provided that if the Company is unable under the system's rules to issue shares in uncertificated form to any person, such shares shall be issued as shares in certificated form.  For these purposes, the "Scrip Record Time" means such time on the record date for determining the entitlements of members to make elections as described in this Article, or on such other date as the Board may in its absolute discretion determine.
100.2 The Board may establish or vary a procedure for election mandates whereby a holder of shares may elect concerning future rights of election offered to that holder under this Article until the election mandate is revoked following that procedure.
100.3 The Board may exclude from any offer any holders of shares if it believes that it is necessary or expedient to do so in relation to any legal or practical problems under the laws of, or the requirements of any regulatory body or stock exchange or other authority in, any territory or that for any other reason the offer should not be made to them.
 
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101. Enhanced scrip dividends
101.1 Subject to the Statutes and without prejudice to the generality of Article 100, the Board may, in respect of any cash dividend or other distribution (or any part thereof) declared or payable in relation to any financial year or period of the Company, offer to each holder of shares the right to elect to receive new shares in respect of the whole or part of the shares held by them instead of such cash dividend, on any basis described in that Article but so that the entitlement of each holder of shares to such new shares shall be determined by the Board such that the value (determined on the basis decided on by the Board) of the new shares concerned may exceed the cash amount that such holders of shares would otherwise have received by way of dividend and, in respect of such offer, that Article shall take effect subject to this Article.  Any offer made under this Article shall be an alternative to any offer made under that Article in respect of a particular cash dividend (but shall form part of any plan which is in operation thereunder).
101.2 Any exercise by the Board of the powers granted to the Board by this Article shall be subject to a special resolution approving the exercise of such powers in respect of the dividend in question or in respect of any dividends or other distributions declared or payable in respect of a specified financial year or period of the Company which include the dividend in question but such year or period may not end later than the conclusion of the annual general meeting next following the date of the meeting at which such resolution is passed.  No further sanction shall be required under Article 100 in respect of an exercise of powers by the Board under this Article and any authority granted under this Article shall not preclude the granting to the Board of a separate authority under that Article.
102. No interest on dividends
102.1 No dividend or other monies payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share.
103. Payment procedure
103.1 All dividends and interest shall belong and be paid to those entitled members whose names shall be on the Register at the date at which such dividend shall be declared or at the date on which such interest shall be payable respectively, or at such other record date as the Company by ordinary resolution or the Board may determine notwithstanding any subsequent transfer or transmission of shares.
103.2 The Company may pay any dividend, interest or other monies payable in cash in respect of shares by direct debit, bank transfer, cheque, dividend warrant, money order or by any other method (including by electronic means) as the Board may consider appropriate.
103.3 Every such cheque, warrant or order shall be made payable to the person to whom it is sent, or to such other person as the holder or the joint holders may in writing direct, and may be sent by post or equivalent means of delivery directed to the registered address of the holder or, in the case of joint holders, to the registered address of the joint holder whose name stands first in the Register, or to such person and to such address as the holder or joint holders may in writing direct.
103.4 Every such payment made by direct debit or bank transfer shall be made to the holder or joint holders or to or through such other person as the holder or joint holders may in writing direct.
103.5 In respect of shares in uncertificated form, where the Company is authorised to do so by or on behalf of the holder or joint holders in such manner as the Board shall from time to time consider sufficient, the Company may pay any such dividend, interest or other monies by means of the relevant system. Every such payment shall be made in such manner as may be consistent with the system's rules and, without prejudice to the generality of the foregoing, may include the sending by the Company or by any person on its behalf of an instruction to the Operator to credit the cash memorandum account of the holder or joint holders or, if permitted by the Company, of such person as the holder or joint holders may in writing direct.
 
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103.6 The Company shall not be responsible for any loss of any such cheque, warrant or order and any payment made in any manner permitted by these Articles shall be at the sole risk of the holder or joint holders.  Without prejudice to the generality of the foregoing, if any such cheque, warrant or order has been, or is alleged to have been, lost, stolen or destroyed, the Board may, on request of the person entitled thereto, issue a replacement cheque, warrant or order subject to compliance with such conditions as to evidence and indemnity and the payment of out of pocket expenses of the Company in connection with the request as the Board may think fit.
103.7 The issue of such cheque, warrant or order, the collection of funds from or transfer of funds by a bank in accordance with such direct debit or bank transfer or, in respect of shares in uncertificated form, the making of payment in accordance with the system's rules, shall be a good discharge to the Company.
104. Receipt by joint holders
104.1 If several persons are registered as joint holders of any share, any one of them may give effectual receipts for any dividend or other monies payable in respect of the share.
105. Where payment of dividends need not be made
105.1 The Company may cease to send any cheque or warrant through the post or to effect payment by any other means for any dividend or other monies payable in respect of a share which is normally paid in that manner on that share if in respect of at least two consecutive dividends payable on that share payment, through no fault of the Company, has not been effected (or, following one such occasion, reasonable enquiries have failed to establish any new address of the holder) but, subject to these Articles, the Company shall recommence payments in respect of dividends or other monies payable on that share by that means if the holder or transmittee claims the arrears of dividend and does not instruct the Company to pay future dividends in some other way.
106. Unclaimed dividends
106.1 All dividends, interest or other sums payable unclaimed for one year after having become due for payment may be invested or otherwise made use of by the Board for the benefit of the Company until claimed.  The retention by the Company of, or payment into a separate account of, any unclaimed dividend or other monies payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect of it.  Any dividend, interest or other sum unclaimed after a period of 12 years from the date when it became due for payment shall be forfeited and shall revert to the Company.
CAPITALISATION OF PROFITS
107. Capitalisation of profits
107.1 Upon the recommendation of the Board, the Company may pass an ordinary resolution to the effect that it is desirable to capitalise all or any part of any undivided profits of the Company not required for paying any preferential dividend (whether or not they are available for distribution) or all or any part of any sum standing to the credit of any reserve or fund (whether or not available for distribution).
107.2 Subject as provided below, the Board may appropriate the sum resolved to be capitalised to the members who would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf (subject to approval by ordinary resolution and to any subsisting special rights previously conferred on any shares or class of shares) in paying up in full shares of any class or debentures of the Company and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions, or partly in one way and partly in the other provided that:
107.2.1 the Company shall for the purposes of this Article   be deemed to be such a member in relation to any shares held as treasury shares which, if not so held, would have ranked for any such distribution by way of dividend, but only insofar as the appropriated sum is to be applied in paying up in full shares of the Company; and
107.2.2 the capital redemption reserve, and any reserve or fund representing profits which are not available for distribution may only be applied in paying up in full shares of the Company.
 
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107.3 The Board may authorise any person to enter on behalf of all the members concerned into an agreement with the Company providing for the allotment to them respectively, credited as fully paid, of any shares or debentures to which they are entitled upon such capitalisation and any matters incidental thereto, any agreement made under such authority being binding on all such members.
107.4 If any difficulty arises concerning any distribution of any capitalised reserve or fund, the Board may subject to the Statutes and, in the case of shares held in uncertificated form, the system's rules, settle it as the Board considers expedient and in particular may issue fractional certificates, authorise any person to sell and transfer any fractions or resolve that the distribution should be made as nearly as practicable in the correct proportion or may ignore fractions altogether, and may determine that cash payments shall be made to any members in order to adjust the rights of all parties as the Board considers expedient.
AUTHENTICATION OF DOCUMENTS
108. Authentication of documents
108.1 Any Director or the Secretary or any person appointed by the Board for the purpose shall have power to authenticate any documents or other information affecting these Articles and any resolutions passed by the Company or the Board or any committee and any books, records, accounts, documents and other communications relating to the business of the Company and to certify copies or extracts as true copies or extracts.  Anything purporting to be a copy of a resolution, or an extract from the minutes of a meeting, of the Company, the Board or any committee which is certified as such in accordance with this Article shall be conclusive evidence in favour of all persons dealing with the Company upon the faith of such copy that such resolution has been duly passed or, as the case may be, that such minute or extract is a true and accurate record of proceedings at a duly constituted meeting.
RECORD DATES
109. Power to choose record date
109.1 Notwithstanding any other provision of these Articles, the Company or the Board may fix any date as the record date for any dividend, distribution, allotment or issue or for determining shareholders entitled to receive notice of and, subject to the Order, to vote at any meeting of shareholders.
ACCOUNTS AND OTHER RECORDS
110. Accounts
110.1 The Company shall keep accounting records and the Directors shall prepare accounts of the Company, made up to such date in each year as the Directors shall from time to time determine, in accordance with and subject to the Law.
111. Inspection of records
111.1 No member in his capacity as a member shall have any right of inspecting any record, book or document of any description belonging to the Company except as conferred by the Statutes or authorised by the Board or by ordinary resolution of the Company.
 
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112. Destruction of documents
112.1 Subject to compliance with the system's rules, the Company may destroy:
112.1.1 any instrument of transfer of shares and any other document on the basis of which an entry is made in the Register, at any time after the expiration of six years from the date of registration;
112.1.2 any instruction concerning the payment of dividends or other monies in respect of any share or any notification of change of name or address, at any time after the expiration of two years from the date the instruction or notification was recorded; and
112.1.3 any share certificate which has been cancelled, at any time after the expiration of one year from the date of cancellation;
provided that the Company may destroy any such type of document after such shorter period as the Board may determine if a copy of such document is retained on microfilm or by other similar means and is not destroyed earlier than the original might otherwise have been destroyed in accordance with this Article.
112.2 It shall conclusively be presumed in favour of the Company that every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and that every share certificate so destroyed was a valid and effective document duly and properly cancelled and that every other document so destroyed was a valid and effective document in accordance with its particulars recorded in the books or records of the Company provided that:
112.2.1 this Article shall apply only to the destruction of a document in good faith and without express notice that its retention was relevant to any claim (regardless of the parties to the claim);
112.2.2 nothing contained in this Article shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than the times referred to in this Article or in any case where the conditions of this Article are not fulfilled; and
112.2.3 references in this Article to the destruction of any document or thing include references to its disposal in any manner.
COMMUNICATIONS
113. Form of communications
113.1 Except to the extent that these Articles provide otherwise, and subject to compliance with the Statutes, anything sent or supplied by or to any person, including the Company, under these Articles may be sent or supplied, whether or not because the Statutes require it to be sent or supplied, in any way (including, except in the case of anything supplied to the Company, by making it available on a website) in which documents or information required to be sent or supplied may be sent or supplied by or to that person in accordance with the Statutes and these Articles.
113.2 Except insofar as the Statutes require otherwise, the Company shall not be obliged to accept any notice, document or other information sent or supplied to the Company in electronic form unless it satisfies such stipulations, conditions or restrictions (including for the purpose of authentication) as the Board thinks fit, and the Company shall be entitled to require any such notice, document or information to be sent or supplied in hard copy form instead.
113.3 Any notice, document or other communication (including copies of accounts or summary financial statements) to be given to or by any person pursuant to these Articles (other than a notice calling a meeting of Directors) shall be in writing except that, if it is in electronic form, it need not be in writing unless these Articles specifically require it to be.
 
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113.4 A member who sends to the Company an address at which a document or information may be sent using electronic communications shall be entitled to have notices or other documents sent to him at that address or the address specified for that member in the Register (provided that, in the case of a document or information sent by electronic means, including without limitation any notification that the document or information is available on a website, the Company so agrees, which agreement the Company shall be entitled to withhold in its absolute discretion including, without limitation, in circumstances in which the Company considers that the sending of the document or information to such address using electronic communications would or might infringe the laws of any other jurisdiction), but otherwise:
113.4.1 no such member shall be entitled to receive any document or information from the Company; and
113.4.2 without prejudice to the generality of the foregoing, any notice of a general meeting of the Company which is in fact sent or purports to be sent to such member shall be ignored for the purpose of determining the validity of the proceedings at such general meeting.
113.5 Subject to the Statutes, the Board may from time to time issue, endorse or adopt terms and conditions relating to the use of electronic means under these Articles.
113.6 Nothing in these Articles shall prevent the Company from sending or supplying any notice, document or information in hard copy form instead of in electronic form on any occasion.
113.7 A member present, either in person or by proxy, at any meeting of the Company or of the holders of any class of shares in the capital of the Company shall be deemed to have been sent notice of the meeting and, where requisite, of the purposes for which it was called unless such member is present only for the purposes of protesting the adequacy of such notice and has so advised the Company prior to the meeting.
113.8 A document or information may be sent or supplied by the Company to the person or persons entitled by transmission to a share by sending it in any manner the Company may choose authorised by these Articles for the sending of a document or information to a member, addressed to them by name, or by the title of representative of the deceased, or trustee of the bankrupt or by any similar description at the address (if any) as may be supplied for that purpose by or on behalf of the person or persons claiming to be so entitled. Until such an address has been supplied, a document or information may be sent in any manner in which it might have been sent if the death or bankruptcy or other event giving rise to the transmission had not occurred.
113.9 Every person who becomes entitled to a share shall be bound by any notice in respect of that share which, before his name is entered in the Register, has been sent to a person from whom he derives his title.
113.10 Proof that a document or information was properly addressed, prepaid and posted shall be conclusive evidence that the document or information was sent. Proof that a document or information sent or supplied by electronic means was properly addressed shall be conclusive evidence that the document or information was sent or supplied. A document or information sent by the Company to a member by post shall be deemed to have been received:
113.10.1 if sent by first class post or special delivery post from an address in the United Kingdom or Jersey to another address in the United Kingdom or Jersey, or by a postal service similar to first class post or special delivery post from an address in another country to another address in that other country, on the day following that on which the document or information was posted;
113.10.2 if sent by airmail from an address in the United Kingdom or Jersey to an address outside the United Kingdom or Jersey, or from an address in another country to an address outside that country (including without limitation an address in the United Kingdom or Jersey), on the third day following that on which the document or information was posted; and
 
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113.10.3 in any other case, on the second day following that on which the document or information was posted.
113.11 A document or information sent or supplied by the Company to a member in electronic form shall be deemed to have been received by the member on the day following that on which the document or information was sent to the member. Such a document or information shall be deemed received by the member on that day notwithstanding that the Company becomes aware that the member has failed to receive such document or information for any reason and notwithstanding that the Company subsequently sends a hard copy of such document or information by post to the member.
113.12 A document or information sent or supplied by the Company to a member by means of a website shall be deemed to have been received by the member:
113.12.1 when the document or information was first made available on the website; or
113.12.2 if later, when the member is deemed by Articles 113.10 or  113.11 to have received notice of the fact that the document or information was available on the website. Such a document or information shall be deemed received by the member on that day notwithstanding that the Company becomes aware that the member has failed to receive the relevant document or information for any reason and notwithstanding that the Company subsequently sends a hard copy of such document or information by post to the member.
113.13 Subject to the Statutes, if at any time the Company is unable effectively to convene a general meeting by notices sent through the post in Jersey, Canada or the United Kingdom as a result of the suspension or curtailment of postal services, notice of general meeting may be sufficiently given by advertisement in Jersey, Canada and the United Kingdom. Any notice given by advertisement for the purpose of this Article shall be advertised in at least one newspaper having a national circulation. If advertised in more than one newspaper, the advertisements shall appear on the same date. Such notice shall be deemed to have been sent to all persons who are entitled to have notice of meetings sent to them on the day when the advertisement appears. In any such case, the Company shall send confirmatory copies of the notice by post, if at least seven days before the meeting the posting of notices to addresses throughout Jersey, Canada or the United Kingdom again becomes practicable.
113.14 A notice, document or other information may be served, sent or supplied by the Company in electronic form to a member who has agreed that notices, documents or information can be sent or supplied to them in that form and has not revoked such agreement.
113.15 Where the notice, document or other information is served, sent or supplied by electronic means, it may only be served, sent or supplied to an address specified for that purpose by the intended recipient (generally or specifically).
113.16 A notice, document or other information may be served, sent or supplied by the Company to a member by being made available on a website if the member has agreed (generally or specifically), or pursuant to Article 113.17 below is deemed to have agreed, that notices, documents or information can be sent or supplied to the member in that form and has not revoked such agreement.
113.17 If a member has been asked individually by the Company to agree that the Company may serve, send or supply notices, documents or other information generally, or specific notices, documents or other information to them by means of a website and the Company does not receive a response within a period of 28 days beginning with the date on which the Company's request was sent (or such longer period as the Directors may specify), such member will be deemed to have agreed to receive such notices, documents or other information by means of a website in accordance with Article 113.16 above (save in respect of any notices, documents or information that are required to be sent in hard copy form pursuant to the Statutes). A member can revoke any such deemed election in accordance with Article 113.20 below.
 
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113.18
A notice, document or other information served, sent or supplied by means of a website must be made available in a form, and by a means, that the Company reasonably considers will enable the recipient: (i) to read it, and (ii) to retain a copy of it. For this purpose, a notice, document or other information can be read only if: (i) it can be read with the naked eye; or (ii) to the extent that it consists of images (for example photographs, pictures, maps, plans or drawings), it can be seen with the naked eye.
113.19 If a notice, document or other information is served, sent or supplied by means of a website, the Company must notify the intended recipient of: (i) the presence of the notice, document or other information on the website, (ii) the address of the website; (iii) place on the website where it may be accessed, and (iv) how to access the notice, document or information. The document or information is taken to be sent on the date on which the notification required by this Article is sent or if later, the date on which the document or information first appeared on the website after that notification is sent.
113.20 Any amendment or revocation of a notification given to the Company or agreement (or deemed agreement) under this Article shall only take effect if in writing, signed (or authenticated by electronic means) by the member and on actual receipt by the Company thereof.
113.21 Communications sent to the Company by electronic means shall not be treated as received by the Company if it is rejected by computer virus protection arrangements.
113.22 Where these Articles require or permit a notice or other document to be authenticated by a person by electronic means, to be valid it must incorporate the electronic signature or personal identification details of that person, in such form as the Directors may approve, or be accompanied by such other evidence as the Directors may require to satisfy themselves that the document is genuine.
113.23 For the avoidance of doubt, where a member of the Company has received a document or information from the Company otherwise than in hard copy form, he is entitled to require the Company to send to him a version of the document or information in hard copy form within 21 days of the Company receiving the request.
113.24 Nothing in this Article 113 shall require the Company to take any action or step which could cause the Company to breach any applicable securities laws, regulations or similar.
114. Communication with joint holders
114.1 In the case of joint holders of a share, all notices, documents or other information shall be given to the joint holder whose name stands first in the Register in respect of the joint holding and shall be deemed to have been given to all the joint holders.  Any agreement by that holder that notices, documents and other information may be sent or supplied in electronic form or by being made available on a website shall be binding on all the joint holders.
115. Communications after transmission
115.1 Any notice, document or other information sent or supplied to any member pursuant to these Articles shall, notwithstanding that the member is then dead or bankrupt or that any other event giving rise to the transmission of the share by operation of law has occurred and whether or not the Company has notice of the death, bankruptcy or other event, be deemed to have been properly sent or supplied in respect of any share registered in the name of that member as sole or joint holder.
115.2 Unless agreed otherwise with the relevant transmittee, the Company may send or supply any notice, document or other information to a transmittee in any manner in which it might have been sent or supplied to the member from whom the transmittee derives title to the relevant share, and as if the transmittee's address were the same as the member's address in the Register or the electronic address (if any) specified by the member; but the Company shall not be entitled to assume that the address or electronic address is correct if sending notice to the transmittee under Article 27.
 
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116. When notice deemed served
116.1 Any notice, document or other information:
116.1.1 if sent by the Company by post or other delivery service shall be deemed to have been received on the day (whether or not it is a working day) following the day (whether or not it was a working day) on which it was put in the post or given to the delivery agent and, in proving that it was duly sent, it shall be sufficient to prove that the notice, document or information was properly addressed, prepaid and put in the post or duly given to the delivery agent;
116.1.2 if sent by the Company by electronic means shall be deemed to have been received on the same day that it was sent, and proof that it was sent in accordance with guidance issued by the Institute of Chartered Secretaries and Administrators shall be conclusive evidence that it was sent;
116.1.3 if made available on a website shall be deemed to have been received when notification of its availability on the website is deemed to have been received or, if later, when it is first made available on the website;
116.1.4 not sent by post or other delivery service but delivered personally or left by the Company at the address for that member on the Register shall be deemed to have been received on the day (whether or not it was a working day) and at the time it was so left;
116.1.5 sent or delivered by a relevant system shall be deemed to have been received when the Company (or a sponsoring system-participant acting on its behalf) sends the issuer instructions relating to the notice, document or information;
116.1.6 sent or supplied by the Company by any other means agreed by the member concerned shall be deemed to have been received when the Company has duly performed the action it has agreed to take for that purpose; and
116.1.7 to be given by the Company by advertisement shall be deemed to have been received on the day on which the advertisement appears.
117. Record date for communications
117.1 Any notice, document or information may be sent or supplied by the Company by reference to the Register as it stands at any time not more than 21 days before the day it was sent or supplied. No change in the Register after that time shall invalidate the delivery of that notice, document or information, and every transmittee or other person not on the Register in relation to a particular share at that time who derives any title or interest in the share shall be bound by the notice, document or information without the Company being obliged to send or supply it to that person.
118. Loss of entitlement to receive communications
118.1 If on two consecutive occasions notices, documents or information have been sent to any member at the registered address or his address (including an electronic address) for the service of notices but, through no fault of the Company, have been undelivered, such member shall not from then on be entitled to receive notices, documents or other information from the Company until he has notified to the Company in writing a new address to be either his registered address or his address (including an electronic address) for the service of notices.
 
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119. Notice when post not available
119.1 If at any time postal services within Jersey , Canada or the United Kingdom are suspended or curtailed so that the Company is unable effectively to convene a general meeting or a meeting of the holders of any class of shares in its capital by notice sent through the post, the Board may decide that the only members to whom notice of the meeting must be sent are those to whom notice to convene the meeting can validly be sent by electronic means and those to whom notification as to the availability of the notice of meeting on a website can validly be sent by electronic means.  In any such case the Company shall also advertise the meeting in at least two national daily newspapers published in Jersey , Canada and the United Kingdom.  If at least six clear days prior to the meeting the giving of notices by post to addresses throughout Jersey , Canada and the United Kingdom has, in the Board's opinion, become practicable, the Company shall send confirmatory copies of the notice by post or such other manner as is permitted under these Articles to the persons entitled to receive them when postal services are running normally.
119.2 At any time that postal services within Jersey , Canada and the United Kingdom are suspended or curtailed, any other notice or information considered by the Board to be capable of being supplied by advertisement shall, if advertised in at least one such newspaper, be deemed to have been notified to all members and transmittees to whom it would otherwise have been supplied in hard copy form.
WINDING UP AND SALE OF ASSETS
120. Distribution in specie on winding up
120.1 If the Company is wound up, the liquidator may, with the sanction of a special resolution of the Company and any other sanction required by law, and subject to any rights, restrictions, limitations and privileges attaching to any class or series of shares, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members.  The liquidator may, with such sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of members as the liquidator with such sanction determines, but no member shall be compelled to accept any assets upon which there is a liability.
120.2 A sale, lease or exchange of all or substantially all the property of the Company other than in the ordinary course of business of the Company shall require approval by special resolution.  Each share of the Company shall carry the right to vote on such special resolution whether or not it otherwise carries the right to vote.
INDEMNITY
121. Indemnity
121.1 In so far as the Statutes allow and subject to the rules made by the competent authority of any other regulated or exchange regulated market on which the shares of the Company may be listed, every present and former Director, Secretary or other officer of the Company shall be indemnified out of the assets of the Company against any costs, charges, losses, damages and liabilities incurred by him in the actual or purported execution or discharge of his duties or exercise of his powers or otherwise in relation thereto, including (without prejudice to the generality of the foregoing) any liability incurred in defending any proceedings (whether civil or criminal) which relates to anything done or omitted or alleged to have been done or omitted by him in any such capacity, and in which judgment is given in his favour or in which he is acquitted or in connection with any application under the Statutes in which relief is granted to him by any court of competent jurisdiction.
 
54
122.
Power to insure
122.1 The Board may purchase and maintain insurance at the expense of the Company for the benefit of any person who is or was at any time a director or other officer (unless the office is or was as Auditor) or employee of the Company or of any present or former subsidiary undertaking of the Company or of any body corporate in which the Company has or had an interest (whether direct or indirect) or who is or was at any time a trustee of any pension fund or employee benefits trust in which any employee of the Company or of any such undertaking or body corporate is or has been interested, indemnifying such person against any liability which may attach to him, and any loss or expenditure which he may incur, in relation to anything actually or allegedly done or omitted to be done by him as a director, officer, employee or trustee, whether or not it  involves any negligence, default, breach of duty or breach of trust by him in relation to the Company or the relevant undertaking, body corporate, fund or trust.

55






 
Exhibit 4.1
 
 
CALEDONIA MINING CORPORATION

2015 OMNIBUS EQUITY INCENTIVE COMPENSATION PLAN


 

 



TABLE OF CONTENTS

Page
ARTICLE 1 ESTABLISHMENT, PURPOSE AND DURATION
1
1.1 Establishment of the Plan
1
1.2 Purpose of the Plan
1
1.3 Duration of the Plan
1
1.4 Successor Plan
1
ARTICLE 2 DEFINITIONS
1
ARTICLE 3 ADMINISTRATION
8
3.1 General
8
3.2 Authority of the Committee
8
3.3 Delegation
8
ARTICLE 4 SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
9
4.1 Number of Shares Available for Awards
9
4.2 Adjustments in Authorized Shares
9
ARTICLE 5 ELIGIBILITY AND PARTICIPATION
10
5.1 Eligibility
10
5.2 Actual Participation
10
ARTICLE 6 STOCK OPTIONS
10
6.1 Grant of Options
10
6.2 Award Agreement
10
6.3 Option Price
11
6.4 Duration of Options
11
6.5 Exercise of Options
11
6.6 Payment
11
6.7 Restrictions on Share Transferability
11
6.8 Death, Retirement and Termination of Employment
12
6.9 Nontransferability of Options
13
ARTICLE 7 SHARE APPRECIATION RIGHTS
14
7.1 Grant of SARs
14
7.2 SAR Agreement
14
7.3 Term of SAR
14
 
(i)
7.4 Exercise of Freestanding SARs
14
7.5 Exercise of Tandem SARs
14
7.6 Payment of SAR Amount
14
7.7 Termination of Employment
15
7.8 Nontransferability of SARs
15
7.9 Other Restrictions
15
ARTICLE 8 RESTRICTED SHARE AND RESTRICTED SHARE UNITS
15
8.1 Grant of Restricted Shares or Restricted Share Units
15
8.2 Restricted Share or Restricted Share Unit Agreement
15
8.3 Nontransferability of Restricted Share and Restricted Share Units
15
8.4 Other Restrictions
16
8.5 Certificate Legend
16
8.6 Voting Rights
16
8.7 Dividends and Other Distributions
17
8.8 Death, Retirement and other Termination of Employment
17
8.9 Payment in Settlement of Restricted Share Units
19
ARTICLE 9 DEFERRED SHARES UNITS
20
9.1 Grant of Deferred Share Units
20
9.2 Deferred Share Unit Agreement
20
9.3 Nontransferability of Deferred Share Units
20
9.4 Termination of Employment
20
ARTICLE 10 PERFORMANCE SHARES AND PERFORMANCE UNITS
20
10.1 Grant of Performance Shares and Performance Units
20
10.2 Value of Performance Shares and Performance Units
20
10.3 Earning of Performance Shares and Performance Units
20
10.4 Form and Timing of Payment of Performance Shares and Performance Units
20
10.5 Dividends and Other Distributions
20
10.6 Death and other Termination of Employment.
20
10.7 Nontransferability of Performance Shares and Performance Units
22
ARTICLE 11 FULL VALUE SHARE-BASED AWARDS
23
11.1 Share-Based Awards
23
11.2 Termination of Employment
23
11.3 Nontransferability of Share-Based Awards
23
ARTICLE 12 BENEFICIARY DESIGNATION
23
12.1 Beneficiary
23
12.2 Discretion of the Committee
24
ARTICLE 13 RIGHTS OF PERSONS ELIGIBLE TO PARTICIPATE
24
 
(ii)
 
13.1 Employment
24
13.2 Participation
24
13.3 Rights as a Shareholder
24
ARTICLE 14 CHANGE OF CONTROL
24
14.1 Accelerated Vesting and Payment
24
14.2 Alternative Awards
25
ARTICLE 15 AMENDMENT, MODIFICATION, SUSPENSION AND TERMINATION
25
15.1 Amendment, Modification, Suspension and Termination
25
15.2 Adjustment of Awards Upon the Occurrence of Unusual or Nonrecurring Events
26
15.3 Awards Previously Granted
27
ARTICLE 16 WITHHOLDING
27
16.1 Withholding
27
16.2 Acknowledgement
27
ARTICLE 17 SUCCESSORS
27
ARTICLE 18 GENERAL PROVISIONS
27
18.1 Forfeiture Events
27
18.2 Legend
28
18.3 Delivery of Title
28
18.4 Investment Representations
28
18.5 Uncertificated Shares
28
18.6 Unfunded Plan
28
18.7 No Fractional Shares
29
18.8 Other Compensation and Benefit Plans
29
18.9 No Constraint on Corporate Action
29
18.10 Compliance with Canadian Securities Laws
29
ARTICLE 19 LEGAL CONSTRUCTION
29
19.1 Gender and Number
29
19.2 Severability
29
19.3 Requirements of Law
29
19.4 Governing Law
30
19.5 Compliance with Section 409A of the Code
30


 
(iii)

CALEDONIA MINING CORPORATION
2015 OMNIBUS EQUITY INCENTIVE COMPENSATION PLAN
ARTICLE 1
ESTABLISHMENT, PURPOSE AND DURATION
1.1   Establishment of the Plan .  Caledonia Mining Corporation, a Canadian federal corporation (the " Company "), hereby establishes an incentive compensation plan to be known as the 2015 Omnibus Equity Incentive Compensation Plan (the " Plan ").  The Plan permits the grant of Stock Options, Share Appreciation Rights, Restricted Shares, Restricted Share Units, Deferred Stock Units, Performance Shares, Performance Units and Share-Based Awards.  The Plan shall be adopted and become effective on the date approved by the Board (the " Effective Date "), provided that no Awards may be exercised, paid or settled until the Plan has been approved by the shareholders of the Company and the Toronto Stock Exchange.
1.2   Purpose of the Plan .  The purposes of the Plan are: (i) to promote a significant alignment between officers and employees of the Company and its Affiliates (as defined below) and the growth objectives of the Company; (ii) to associate a portion of participating employees' compensation with the performance of the Company over the long term; and (iii) to attract, motivate and retain the critical employees to drive the business success of the Company.
1.3   Duration of the Plan .  The Plan shall commence as of the Effective Date, as described in Section  1.1 herein, and shall remain in effect until terminated by the Board (as defined below) pursuant to Article 15 hereof.
1.4   Successor Plan .  This Plan shall in respect of Options (as defined below) serve as the successor to the Company's current Incentive Stock Option Plan dated April 10, 2007 (the " Predecessor Plan "), and no further awards shall be made under the Predecessor Plan from and after the Effective Date of this Plan.  Each Option granted under the Predecessor Plan shall continue to be governed solely by the terms and conditions of the instrument evidencing such grant.
ARTICLE 2
DEFINITIONS
Whenever used in the Plan, the following terms shall have the respective meanings set forth below, unless the context clearly requires otherwise, and when such meaning is intended, such term shall be capitalized.
 
" Affiliate " means any corporation, partnership or other entity (i) in which the Company, directly or indirectly, has majority ownership interest or (ii) which the Company controls.  For the purposes of this definition, the Company is deemed to " control " such corporation, partnership or other entity if the Company possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation, partnership or other entity, whether through the ownership of voting securities, by contract or otherwise, and includes a corporation which is considered to be a subsidiary for purposes of consolidation under International Financial Reporting Standards.
 
2
" Award " means, individually or collectively, a grant under this Plan of Options, SARs, Restricted Shares, Restricted Share Units, Performance Shares, Performance Units or Share‑Based Awards, in each case subject to the terms of this Plan.
" Award Agreement " means either (i) a written agreement entered into by the Company or an Affiliate of the Company and a Participant setting forth the terms and provisions applicable to Awards granted under this Plan; or (ii) a written statement issued by the Company or an Affiliate of the Company to a Participant describing the terms and provisions of such Award.  All Award Agreements shall be deemed to incorporate the provisions of the Plan.  An Award Agreement need not be identical to other Award Agreements either in form or substance.
" Beneficial Ownership " shall have the meaning ascribed to such term in Section 90 of the OSA.
" Blackout Period " means a period of time during which the Participant cannot sell Shares, due to applicable law or policies of the Company in respect of insider trading.
" Board " or " Board of Directors " means the Board of Directors of the Company.
" Cause " means any of:
(a) dishonesty of the Participant as it relates to the performance of his duties in the course of his employment by, or as an officer or director of, the Company or an Affiliate;
(b) fraud committed by the Participant;
(c) willful disclosure of confidential or private information regarding the Company or an Affiliate by the Participant;
(d) the Participant aiding a competitor of the Company or an Affiliate;
(e) misappropriation of a business opportunity of the Company or an Affiliate by the Participant;
(f) willful misconduct or gross negligence in the performance of the Participant's duties under his or her employment agreement;
(g) a breach by the Participant of a material provision of his or her employment agreement or the Code of Business Conduct and Ethics adopted by the Company from time to time;
(h) the willful and continued failure on the part of the Participant to substantially perform duties in the course of his employment by, or as an officer of, the Company or an Affiliate, unless such failure results from an incapacity due to mental or physical illness;
(i) willfully engaging in conduct that is demonstrably and materially injurious to the Company or an Affiliate, monetarily or otherwise; or
 
3
 
(j) any other act or omission by the Participant which would amount to just cause for termination at common law.
" Change of Control " shall occur if any of the following events occur:
(a) the acquisition, directly or indirectly and by any means whatsoever, by any person, or by a group of persons acting jointly or in concert, of beneficial ownership or control or direction over that number of Voting Securities which is greater than 50% of the total issued and outstanding Voting Securities immediately after such acquisition, unless such acquisition arose as a result of or pursuant to:
(i) an acquisition or redemption by the Company of Voting Securities which, by reducing the number of Voting Securities outstanding, increases the proportionate number of Voting Securities beneficially owned by such person to 50% or more of the Voting Securities then outstanding;
(ii) acquisitions of Voting Securities which were made pursuant to a dividend reinvestment plan of the Company;
(iii) the receipt or exercise of rights issued by the Company to all the holders of Voting Securities to subscribe for or purchase Voting Securities or securities convertible into Voting Securities, provided that such rights are acquired directly from the Company and not from any other person;
(iv) a distribution by the Company of Voting Securities or securities convertible into Voting Securities for cash consideration made pursuant to a public offering or by way of a private placement by the Company (" Exempt Acquisitions ");
(v) a stock-dividend, a stock split or other event pursuant to which such person receives or acquires Voting Securities or securities convertible into Voting Securities on the same pro rata basis as all other holders of securities of the same class (" Pro-Rata Acquisitions "); or
(vi) the exercise of securities convertible into Voting Securities received by such person pursuant to an Exempt Acquisition or a Pro-Rata Acquisition (" Convertible Security Acquisitions ");
provided, however, that if a person shall acquire 50% or more of the total issued and outstanding Voting Securities by reason of any one or a combination of (1) acquisitions or redemptions of Voting Shares by the Company, (2) Exempt Acquisitions, (3) Pro-Rata Acquisitions, or (4) Convertible Security Acquisitions and, after such share acquisitions or redemptions by the Company or Exempt Acquisitions or Pro-Rata Acquisitions or Convertible Security Acquisitions, acquires additional Voting Securities exceeding one per cent of the Voting Securities outstanding at the date of such acquisition other than pursuant to any one or a combination of Exempt Acquisitions, Convertible Security Acquisitions or Pro-Rata Acquisitions, then as of the date of such acquisitions such acquisition shall be deemed to be a "Change of Control" ;
 
4
(b) the replacement by way of election or appointment at any time of one-half or more of the total number of the then incumbent members of the Board of Directors, unless such election or appointment is approved by 50% or more of the Board of Directors in office immediately preceding such election or appointment in circumstances where such election or appointment is to be made other than as a result of a dissident public proxy solicitation, whether actual or threatened; and
(c) any transaction or series of transactions, whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, whereby all or substantially all of the shares or assets of the Company become the property of any other person (the " Successor Entity "), (other than a subsidiary of the Company) unless:
(i) individuals who were holders of Voting Securities immediately prior to such transaction hold, as a result of such transaction, in the aggregate, more than 50% of the voting securities of the Successor Entity;
(ii) a majority of the members of the board of directors of the Successor Entity is comprised of individuals who were members of the Board of Directors immediately prior to such transaction; and
(iii) after such transaction, no person or group of persons acting jointly or in concert, holds more than 50% of the voting securities of the Successor Entity unless such person or group of persons held securities of the Company in the same proportion prior to such transaction.
" Change of Control Price " means (i) the highest price per Share offered in conjunction with any transaction resulting in a Change of Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash), or (ii) in the case of a Change of Control occurring solely by reason of a change in the composition of the Board, the highest Fair Market Value of the Shares on any of the thirty (30) trading days immediately preceding the date on which a Change of Control occurs, except if the relevant participant is subject to taxation under the ITA such Change of Control price shall be deemed to be a price determined by the Committee based on the closing price of a Share on the TSX on the trading day preceding the Change of Control date or based on the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the Change of Control date.
" Code " means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
" Committee " means the Board of Directors or if so delegated in whole or in part by the Board, the Compensation Committee of the Board of Directors, or any other duly authorized committee of the Board appointed by the Board to administer the Plan or.
 
5
" Company " means Caledonia Mining Corporation, a Canadian federal corporation, and any successor thereto as provided in Article 17 herein.
" Consultant " means a Person that:
(i) is engaged to provide services to the Company or an Affiliate other than services provided in relation to a distribution of securities of the Company or an Affiliate;
(ii) provides the services under a written contract with the Company or an Affiliate; and
(iii) spends or will spend a significant amount of time and attention on the affairs and business of the Company or an Affiliate;
provided that with respect to Consultants who are U.S. Persons, such Consultants shall be granted Awards under this Plan only if:
(i) they are natural persons;
(ii) they provide bona fide services to the Company or its majority-owned subsidiaries; and
(iii) such services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the Company's securities.
" Deferred Share Unit " means an Award denominated in units that provides the holder thereof with a right to receive Shares or cash or a combination thereof upon settlement of the Award, granted under Article 9 herein and subject to the terms of this Plan.
" Director " means any individual who is a member of the Board of Directors of the Company.
" Disability " means the Participant's inability to substantially fulfil his or her duties on behalf of the Company or an Affiliate for a continuous period of six (6) months or more or the Participant's inability to substantially fulfil his or her duties on behalf of the Company or an Affiliate for an aggregate period of six (6) months or more during any consecutive twelve (12) month period; and if there is any disagreement between the Company or an Affiliate and the Participant as to the Participant's Disability or as to the date any such Disability began or ended, the same shall be determined by a physician mutually acceptable to the Company and the Participant whose determination shall be conclusive evidence of any such Disability and of the date any such Disability began or ended.
" Dividend Equivalent " means a right with respect to an Award to receive cash, Shares or other property equal in value and form to dividends declared by the Board and paid with respect to outstanding Shares.  Dividend Equivalents shall not apply to an Award unless specifically provided for in the Award Agreement, and if specifically provided for in the Award Agreement shall be subject to such terms and conditions set forth in the Award Agreement as the Committee shall determine.
 
6
" Employee " means any employee of the Company or an Affiliate.  Directors who are not otherwise employed by the Company or an Affiliate shall not be considered Employees under this Plan.
" Fair Market Value " or " FMV " means, unless otherwise required by any applicable provision of the Code or any regulations thereunder or by any applicable accounting standard for the Company's desired accounting for Awards or by the rules of the TSX, a price that is determined by the Committee, provided that such price cannot be less than the greater of (i) the volume weighted average trading price of the Shares on the TSX for the five trading days immediately prior to the grant date or (ii) the closing price of the Shares on the TSX on the trading day immediately prior to the grant date.
" Fiscal Year " means the Company's fiscal year commencing on January 1 and ending on December 31 or such other fiscal year as approved by the Board.
" Freestanding SAR " means a SAR that is not a Tandem SAR, as described in Article 7 herein.
" Grant Price " means the price against which the amount payable is determined upon exercise of a SAR.
" Insider " shall have the meaning ascribed thereto in Section 1(1) of the OSA.
" ITA " means the Income Tax Act (Canada).
" Non-Employee Director " means a Director who is not an Employee.
" Notice Period " means any period of contractual notice or reasonable notice that the Company or the Affiliate may be required at law, by contract or otherwise agrees to provide to a Participant upon termination of employment, whether or not the Company or Affiliate elects to pay severance in lieu of providing notice to the Participant, provided that where a Participant's employment contract provides for an increased severance or termination payment in the event of termination following a Change of Control, the Notice Period for the purposes of the Plan shall be the Notice Period under such contract applicable to a termination which does not follow a Change of Control.
" Option " means the conditional right to purchase Shares at a stated Option Price for a specified period of time subject to the terms of this Plan.
" Option Price " means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee.
" OSA " means the Securities Act (Ontario), as may be amended from time to time.
" Participant " means an Employee, Non-Employee Director or Consultant who has been selected to receive an Award, or who has an outstanding Award granted under the Plan.
 
7
" Performance-Based Compensation " means compensation under an Award that is granted in order to provide remuneration solely on account of the attainment of one or more Performance Goals under circumstances that satisfy the requirements of Section 162(m) of the Code.
" Performance Goal " means a performance criterion selected by the Committee for a given Award.
" Performance Period " means the period of time during which the assigned performance criteria must be met in order to determine the degree of payout and/or vesting with respect to an Award.
" Performance Share " means an Award granted under Article 10 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
" Performance Unit " means an Award granted under Article 10 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
" Period of Restriction " means the period when an Award of Restricted Share or Restricted Share Units is subject to forfeiture based on the passage of time, the achievement of performance criteria, and/or upon the occurrence of other events as determined by the Committee, in its discretion.
" Person " shall have the meaning ascribed to such term in Section 1(1) of the OSA.
" Restricted Share " means an Award of Shares subject to a Period of Restriction, granted under Article 8 herein and subject to the terms of this Plan.
" Restricted Share Unit " means an Award denominated in units subject to a Period of Restriction, with a right to receive Shares or cash or a combination thereof upon settlement of the Award, granted under Article 8 herein and subject to the terms of this Plan.
" Retirement " or " Retire " means a Participant's permanent withdrawal from employment or office with the Company or Affiliate on terms and conditions accepted and determined by the Board.
" Shares " means common shares of the Company.
" Share Appreciation Right " or " SAR " means the conditional right to receive the difference between the FMV of a Share on the date of exercise over the Grant Price, pursuant to the terms of Article 7 herein and subject to the terms of this Plan.
" Share-Based Award " means an equity-based or equity-related Award granted under Article 11 herein and subject to the terms of this Plan, and not otherwise described by the terms of this Plan.
" Successor Entity " has the meaning ascribed thereto under subsection (c) of the definition of Change of Control.
 
8
" Tandem SAR " means a SAR that the Committee specifies is granted in connection with a related Option pursuant to Article 7 herein and subject to the terms of this Plan, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be cancelled) or a SAR that is granted in tandem with an Option but the exercise of such Option does not cancel the SAR, but rather results in the exercise of the related SAR.  Regardless of whether an Option is granted coincident with a SAR, a SAR is not a Tandem SAR unless so specified by the Committee at the time of grant.
" Total Share Authorization " has the meaning ascribed thereto under Section 4.1.
" TSX " means the Toronto Stock Exchange and at any time the Shares are not listed and posted for trading on the TSX, shall be deemed to mean such other stock exchange or trading platform upon which the Shares trade and which has been designated by the Committee.
" Voting Power " shall mean such number of Voting Securities as shall enable the holders thereof to cast all the votes which could be cast in an annual election of directors of a company.
" Voting Securities " shall mean any securities of the Company ordinarily carrying the right to vote at elections of directors and any securities immediately convertible into or exchangeable for such securities.
ARTICLE 3
ADMINISTRATION
3.1   General .  The Committee shall be responsible for administering the Plan.  The Committee may employ attorneys, consultants, accountants, agents and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons.  All actions taken and all interpretations and determinations made by the Committee shall be final, conclusive and binding upon the Participants, the Company, and all other interested parties.
3.2   Authority of the Committee .  The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of the Plan and any Award Agreement or other agreement ancillary to or in connection with the Plan, to determine eligibility for Awards, and to adopt such rules, regulations and guidelines for administering the Plan as the Committee may deem necessary or proper.  Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including grant, exercise price, issue price and vesting terms, determining Performance Goals applicable to Awards and whether such Performance Goals have been achieved, and, subject to Article 15 , adopting modifications and amendments, or subplans to the Plan or any Award Agreement, including, without limitation, any that are necessary or appropriate to comply with the laws or compensation practices of the jurisdictions in which the Company and Affiliates operate.
3.3   Delegation .  The Committee may delegate to one or more of its members any of the Committee's administrative duties or powers as it may deem advisable; provided, however, that any such delegation must be permitted under applicable corporate law.
 
9
 
ARTICLE 4
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1   Number of Shares Available for Awards .  Subject to adjustment as provided in Section  4.2 herein, the number of Shares hereby 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 (the " Total Share Authorization ").  Subject to applicable law, the requirements of the TSX and any shareholder or other approval which may be required, the Board may in its discretion amend the Plan to increase such limit without notice to any Participants.
The number of Shares reserved for issue to Insiders pursuant to this Plan, together with Shares reserved for issue to Insiders under any other share compensation arrangements of the Company, shall not exceed 10% of the aggregate outstanding Shares of the Company.  Within any one-year period, the number of Shares issued to Insiders pursuant to this Plan and all other share compensation arrangements of the Company shall not exceed 10% of the aggregate outstanding Shares of the Company.  If the number of Shares shall be increased or decreased as a result of a stock split, consolidation reclassification or recapitalization and not as a result of the issuance of Shares for additional consideration or by way of a stock dividend in the ordinary course, the Company may make appropriate adjustments to the maximum number of Shares which may be issued from the treasury of the Company under the Plan.
 
This Plan is an "evergreen" plan whereby the number of Shares equivalent to the number of Awards and securities of any other share compensation arrangements that have been issued, exercised, terminated, cancelled, redeemed, repurchased or expired, at any time, are immediately re-reserved for issuance under the Plan and available for future issuances subject to the limits contained herein.
 
4.2    Adjustments in Authorized Shares .  In the event of any corporate event or transaction (collectively, a " Corporate Reorganization ") (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, arrangement, amalgamation, consolidation, reorganization, recapitalization, separation, stock dividend, extraordinary dividend, stock split, reverse stock split, split up, spin-off or other distribution of stock or property of the Company, combination of securities, exchange of securities, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee shall make or provide for such adjustments or substitutions, as applicable, in the number and kind of Shares that may be issued under the Plan, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Total Share Authorization, the limit on issuing Awards other than Options granted with an Option Price equal to at least the FMV of a Share on the date of grant or Share Appreciation Rights with a Grant Price equal to at least the FMV of a Share on the date of grant, and any other value determinations applicable to outstanding Awards or to this Plan, as are equitably necessary to prevent dilution or enlargement of Participants' rights under the Plan that otherwise would result from such corporate event or transaction.  In connection with a Corporate Reorganization, the Committee shall have the discretion to permit a holder of Options to purchase (at the times, for the consideration, and subject to the terms and conditions set out in this Plan) and the holder will then accept on the exercise of such Option, in lieu of the Shares that such holder would otherwise have been entitled to purchase, the kind and amount of shares or other securities or property that such holder would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, that holder had owned all Shares that were subject to the Option.  Such adjustments shall be made automatically, without the necessity of Committee action, on the customary arithmetical basis in the case of any stock split, including a stock split effected by means of a stock dividend, and in the case of any other dividend paid in Shares.
 
 
10
 
The Committee shall also make appropriate adjustments in the terms of any Awards under the Plan as are equitably necessary to reflect such corporate event or transaction and may modify any other terms of outstanding Awards, including modifications of performance criteria and changes in the length of Performance Periods.  The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan, provided that any such adjustments must comply with Section 409A of the Code with respect to any U.S. Participants.
 
Subject to the provisions of Article 13 and any applicable law or regulatory requirement, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance, assumption, substitution or conversion of Awards under this Plan in connection with any such corporate event or transaction, upon such terms and conditions as it may deem appropriate.  Additionally, the Committee may amend the Plan, or adopt supplements to the Plan, in such manner as it deems appropriate to provide for such issuance, assumption, substitution or conversion as provided in the previous sentence.
 
ARTICLE 5
ELIGIBILITY AND PARTICIPATION
5.1    Eligibility .  Individuals eligible to participate in the Plan include all Employees, Non-Employee Directors and Consultants.
 
5.2    Actual Participation .  Subject to the provisions of the Plan, the Committee may, from time to time, in its sole discretion select from among eligible Employees, Non-Employee Directors and Consultants, those to whom Awards shall be granted under the Plan, and shall determine in its discretion the nature, terms, conditions and amount of each Award.
 
ARTICLE 6
STOCK OPTIONS
6.1    Grant of Options .  Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee in its discretion.
 
6.2    Award Agreement .  Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and any such other provisions as the Committee shall determine.
 
 
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6.3    Option Price .  The Option Price for each grant of an Option under this Plan shall be determined by the Committee and shall be specified in the Award Agreement.  The Option Price for an Option shall be not less than the FMV of the Shares on the date of grant.
 
6.4    Duration of Options .  Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant.  Notwithstanding the foregoing, the expiry date of any Option shall be extended to the tenth business day following the last day of a Blackout Period if the expiry date would otherwise occur in a Blackout Period or within five days of the end of the Blackout Period.
 
6.5    Exercise of Options .  Options granted under this Article 6 shall be exercisable at such times and on the occurrence of such events, and be subject to such restrictions and conditions, as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.
 
6.6    Payment .  Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares (subject to the application of any cashless exercise procedures accepted by the Committee.
 
The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash, certified cheque or wire transfer; or (b) by any other method approved or accepted by the Committee in its sole discretion subject to the rules of the TSX and such rules and regulations as the Committee may establish.  Such methods may include cashless exercise and settlement.
 
Subject to Section 6.7 and any governing rules or regulations, as soon as practicable after receipt of a notification of exercise and full payment for the Shares, the Shares in respect of which the Option has been exercised shall be issued as fully-paid and non-assessable shares of the Company.  As of the business day the Company receives such notice and such payment, the Participant (or the person claiming through him, as the case may be) shall be entitled to be entered on the share register of the Company as the holder of the number of Shares in respect of which the Option was exercised and to receive as promptly as possible thereafter a certificate or evidence of book entry representing the said number of Shares.  The Company shall cause to be delivered to or to the direction of the Participant Share certificates or evidence of book entry Shares in an appropriate amount based upon the number of Shares purchased under the Option(s), but in any event, on or before the 15th day of the third month of the year following the year in which the Option was exercised.
 
6.7    Restrictions on Share Transferability .  The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted pursuant to this Plan as it may deem advisable, including, without limitation, requiring the Participant to hold the Shares acquired pursuant to exercise for a specified period of time, or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed and/or traded.
 
 
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6.8    Death, Retirement and Termination of Employment .
 
 
(a) Death:  If a Participant dies while an Employee, Director of, or Consultant to, the Company or an Affiliate:
(i) the executor or administrator of the Participant's estate may exercise Options of the Participant equal to the number of Options that were exercisable at the Termination Date (as defined at Section  6.8(d) below);
(ii) the right to exercise such Options terminates on the earlier of: (i) the date that is 12 months after the Termination Date; and (ii) the date on which the exercise period of the particular Option expires.  Any Options held by the Participant that are not yet vested at the Termination Date immediately expire and are cancelled and forfeited to the Company on the Termination Date; and
(iii) such Participant's eligibility to receive further grants of Options under the Plan ceases as of the Termination Date.
(b) Retirement: If a Participant voluntarily Retires then:
(i) any Options held by the Participant that are exercisable at the Termination Date continue to be exercisable by the Participant until the earlier of: (i) the date that is six months after the Termination Date; and (ii) the date on which the exercise period of the particular Option expires.  Any Options held by the Participant that are not yet vested at the Termination Date immediately expire and are cancelled and forfeited to the Company on the Termination Date,
(ii) the eligibility of a Participant to receive further grants under the Plan ceases as of the date that the Company or an Affiliate, as the case may be, provides the Participant with written notification that the Participant's employment or term of office or engagement, is terminated, notwithstanding that such date may be prior to the Termination Date, and
(iii) notwithstanding (b)(i) and (ii) above, unless the Committee, in its sole discretion, otherwise determines, at any time and from time to time, Options are not affected by a change of employment arrangement within or among the Company or an Affiliate for so long as the Participant continues to be an employee of the Company or an Affiliate.
(c) Termination of Employment:  Where a Participant's employment or term of office or engagement terminates (for any reason other than death or voluntary Retirement (whether such termination occurs with or without any or adequate notice or reasonable notice, or with or without any or adequate compensation in lieu of such notice)), then:
 
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(i) any Options held by the Participant that are exercisable at the Termination Date continue to be exercisable by the Participant until the earlier of: (i) the date that is three months after the Termination Date; and (ii) the date on which the exercise period of the particular Option expires.  Any Options held by the Participant that are not yet vested at the Termination Date immediately expire and are cancelled and forfeited to the Company on the Termination Date,
(ii) the eligibility of a Participant to receive further grants under the Plan ceases as of the date that the Company or an Affiliate, as the case may be, provides the Participant with written notification that the Participant's employment or term of office or engagement, is terminated, notwithstanding that such date may be prior to the Termination Date, and
(iii) notwithstanding (c)(i) and (ii) above, unless the Committee, in its sole discretion, otherwise determines, at any time and from time to time, Options are not affected by a change of employment arrangement within or among the Company or an Affiliate for so long as the Participant continues to be an employee of the Company or an Affiliate.
(d) For purposes of section  6.8 , the term, " Termination Date " means, in the case of a Participant whose employment or term of office or engagement with the Company or an Affiliate terminates:
(i) by reason of the Participant's death, the date of death;
(ii) for any reason whatsoever other than death, the date of the Participant's last day actively at work for or actively engaged by the Company or the Affiliate, as the case may be; and for greater certainty "Termination Date" in any such case specifically does not mean the date on which any period of contractual notice or reasonable notice that the Company or the Affiliate, as the case may be, may be required at law to provide to a Participant would expire; and
(iii) the resignation of a director shall be considered to be a Retirement whereas the expiry of a director's term on the Board without re-election (or nomination for election) shall be considered to be a termination of his or her term of office.
 
6.9    Nontransferability of Options . Except as otherwise provided in a Participant's Award Agreement at the time of grant or thereafter by the Committee, an Option granted under this Article 6 may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.  Further, except as otherwise provided in a Participant's Award Agreement at the time of grant or thereafter by the Committee, all Options granted to a Participant under this Article 6 shall be exercisable during such Participant's lifetime only by such Participant.
 
 
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ARTICLE 7
SHARE APPRECIATION RIGHTS
7.1    Grant of SARs .  Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time and upon such terms as shall be determined by the Committee in its discretion.  The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.
 
The SAR Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement.  The SAR Grant Price may include a Grant Price based on one hundred percent (100%) of the FMV of the Shares on the date of grant, a Grant Price that is set at a premium to the FMV of the Shares on the date of grant, or is indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion, provided that the Grant Price may never be less than the FMV of the Shares on the date of Grant.  The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.
 
7.2    SAR Agreement .  Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and any such other provisions as the Committee shall determine.
 
7.3    Term of SAR .  The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, the expiry date of any SAR shall be extended to the tenth business day following the last day of a Blackout Period if the expiry date would otherwise occur in a Blackout Period or within five days of the end of the Blackout Period.
 
7.4    Exercise of Freestanding SARs .  Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.
 
7.5    Exercise of Tandem SARs .  With respect to Participants who are not subject to taxation under the ITA, Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option.  With respect to Participants subject to taxation under the ITA, prior to exercising a Tandem SAR the Participant must elect to receive the Tandem SAR in consideration for the disposition of that Participant's right to receive shares under the Option.  A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
 
7.6    Payment of SAR Amount .  Upon the exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount representing the difference between the FMV of the underlying Shares on the date of exercise over the Grant Price.  At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares of equivalent value (based on the FMV on the date of exercise of the SAR, as defined in the Award Agreement or otherwise defined by the Committee thereafter), in some combination thereof, or in any other form approved by the Committee at its sole discretion.  Payment shall be made no earlier than the date of exercise nor later than 2½ months after the close of the year in which the SAR is exercised.  The Committee's determination regarding the form of SAR payout shall be set forth or reserved for later determination in the Award Agreement for the grant of the SAR.
 
 
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7.7    Termination of Employment .  Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment or other relationship with the Company or Affiliates.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
 
7.8    Nontransferability of SARs .  Except as otherwise provided in a Participant's Award Agreement at the time of grant or thereafter by the Committee, a SAR granted under the Plan may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.  Further, except as otherwise provided in a Participant's Award Agreement at the time of grant or thereafter by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during such Participant's lifetime only by such Participant.
 
7.9    Other Restrictions .  Without limiting the generality of any other provision of this Plan, the Committee may impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable.  This includes, but is not limited to, requiring the Participant to hold the Shares received upon exercise of a SAR for a specified period of time.
 
 
ARTICLE 8
RESTRICTED SHARE AND RESTRICTED SHARE UNITS
8.1    Grant of Restricted Shares or Restricted Share Units .  Subject to the terms and conditions of the Plan, the Committee, at any time and from time to time, may grant Restricted Shares and/or Restricted Share Units to Participants in such amounts and upon such terms as the Committee shall determine.
 
8.2    Restricted Share or Restricted Share Unit Agreement .  Each Restricted Share and/or Restricted Share Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Restricted Shares or the number of Restricted Share Units granted, the settlement date for Restricted Share Units, and any such other provisions as the Committee shall determine, provided that unless otherwise determined by the Committee or as set out in any Award Agreement, no Restricted Share Unit shall vest later than three years after the date of grant.
 
8.3    Nontransferability of Restricted Share and Restricted Share Units .  Except as otherwise provided in this Plan or the Award Agreement, the Restricted Shares and/or Restricted Share Units granted herein may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Period of Restriction specified in the Award Agreement (and in the case of Restricted Share Units until the date of settlement through delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Award Agreement at the time of grant or thereafter by the Committee.  All rights with respect to the Restricted Shares and/or Restricted Share Units granted to a Participant under the Plan shall be available during such Participant's lifetime only to such Participant, except as otherwise provided in the Award Agreement at the time of grant or thereafter by the Committee.
 
 
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8.4    Other Restrictions .  The Committee shall impose, in the Award Agreement at the time of grant or anytime thereafter, such other conditions and/or restrictions on any Restricted Shares or Restricted Share Units granted pursuant to this Plan as it may deem advisable, including, without limitation, a requirement that Participants pay a stipulated purchase price for each Restricted Share or each Restricted Share Unit, restrictions based upon the achievement of specific performance criteria, time-based restrictions on vesting following the attainment of the performance criteria, time-based restrictions, restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Shares or Restricted Share Units.
 
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Restricted Shares, or Shares delivered in settlement of Restricted Share Units, in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
 
Except as otherwise provided in this Article 8, Restricted Shares covered by each Restricted Share Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse, and Restricted Share Units shall be settled through payment in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion, shall determine.
 
8.5    Certificate Legend .  In addition to any legends placed on certificates pursuant to Section 8.4 herein, each certificate representing Restricted Shares granted pursuant to the Plan may bear a legend such as the following:
 
"The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer as set forth in the 2015 Omnibus Equity Incentive Compensation Plan and in the associated Award Agreement.  A copy of the Plan and such Award Agreement may be obtained from the Chief Financial Officer of Caledonia Mining Corporation."
 
8.6    Voting Rights .  To the extent required by law, Participants holding Restricted Shares granted hereunder shall have the right to exercise full voting rights with respect to those Shares during the Period of Restriction.  A Participant shall have no voting rights with respect to any Restricted Share Units granted hereunder.
 
 
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8.7    Dividends and Other Distributions .  During the Period of Restriction, Participants holding Restricted Shares or Restricted Share Units granted hereunder may, if the Committee so determines, be credited with dividends paid with respect to the underlying Shares or Dividend Equivalents while they are so held in a manner determined by the Committee in its sole discretion.  Dividend Equivalents shall not apply to an Award unless specifically provided for in the Award Agreement.  The Committee may apply any restrictions to the dividends or Dividend Equivalents that the Committee deems appropriate.  The Committee, in its sole discretion, may determine the form of payment of dividends or Dividend Equivalents, including cash, Shares, Restricted Shares or Restricted Share Units.
 
8.8    Death, Retirement and other Termination of Employment .
 
(a) Death:  If a Participant dies while an Employee, Director of, or Consultant to, the Company or an Affiliate:
(i) any Restricted Share or Restricted Share Units held by the Participant that have not vested as at the Termination Date (as defined at Section  8.8(e) below) shall vest immediately;
(ii) any Restricted Shares and Restricted Share Units held by the Participant that have vested (including Restricted Shares and Restricted Share Units vested in accordance with Section 8.8(a)(i) ) as at the Termination Date (as defined at Section  8.8(e) below), shall be paid to the Participant's estate in accordance with the terms of the Plan and Award Agreement; and
(iii) such Participant's eligibility to receive further grants of Restricted Share Units or Restricted Shares under the Plan ceases as of the Termination Date.
(b) Disability:  If a Participant suffers a Disability while an Employee, Director of, or Consultant to, the Company or an Affiliate and, as a result, his or her employment or engagement with the Company or an Affiliate is terminated:
(i) the number of Restricted Shares or Restricted Share Units held by the Participant and that have not vested (collectively referred to in this Section  8.8 as the " Unvested Awards ") shall be reduced to be equal to the product of (A) the number of Unvested Awards; and (B) the fraction obtained when dividing (x) the number of calendar days from the date of the award of the Unvested Awards to the Termination Date (as defined at Section  8.8(e) below) and (x) the number of calendar days from the date of the award of the Unvested Awards to the original vesting date set out in the Award Agreement;
(ii) the number of Unvested Awards, as calculated pursuant to Section 8.8(b)(i) , shall continue to vest in accordance with the terms of the Plan and Award Agreement; and
 
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(iii) such Participant's eligibility to receive further grants of Restricted Share Units or Restricted Shares under the Plan ceases as of the Termination Date.
(c) Retirement: If a Participant voluntarily Retires then:
(i) any Restricted Share Units held by the Participant that have vested before the Termination Date (as defined at Section  8.8(e) below) shall be paid to the Participant;
(ii) any Unvested Awards held by the Participant at the Termination Date (as defined at Section  8.8(e) below) shall continue to vest in accordance with the terms of the Plan and Award Agreement following the Termination Date (as defined at Section  8.8(e) below) until the earlier of: (i) the date determined by the Committee, in its sole discretion; and (ii) the date on which the Restricted Share Units vest pursuant to the original Award Agreement in respect of such Unvested Awards; and
(iii) such Participant's eligibility to receive further grants of Restricted Share Units or Restricted Shares under the Plan ceases as of the Termination Date.
(d) Termination other than Death, Disability or Retirement: Unless determined otherwise by the Committee, where a Participant's employment or term of office or engagement terminates for any reason other than death, Disability or Retirement (whether such termination occurs with or without any or adequate notice or reasonable notice, or with or without any or adequate compensation in lieu of such notice), then:
(i) any Restricted Share Units held by the Participant that have vested before the Termination Date (as defined at Section  8.8(e) below) shall be paid to the Participant. Any Restricted Share Units or Restricted Shares held by the Participant that are not yet vested at the Termination Date (as defined at Section  8.8(e) below) will be immediately cancelled and forfeited to the Company on the Termination Date;
(ii) the eligibility of a Participant to receive further grants under the Plan ceases as of the date that the Company or an Affiliate provides the Participant with written notification that the Participant's employment or term of office or engagement, is terminated, notwithstanding that such date may be prior to the Termination Date; and
(iii) notwithstanding Sections 8.8(d)(i) and (ii) above, unless the Committee, in its sole discretion, otherwise determines, at any time and from time to time, Restricted Share Units and Restricted Shares are not affected by a change of employment arrangement within or among the Company or an Affiliate for so long as the Participant continues to be an employee of the Company or an Affiliate.
 
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(e) For purposes of section  8.8 , the term, " Termination Date " means, in the case of a Participant whose employment or term of office or engagement with the Company or an Affiliate terminates:
(i) by reason of the Participant's death, the date of death;
(ii) by reason of termination for Cause, resignation by the Participant or Retirement, the Participant's last day actively at work for or actively engaged by the Company or an Affiliate;
(iii) by reason of Disability, the date of the Participant's last day actively at work for or actively engaged by the Company or an Affiliate;
(iv) for any reason whatsoever other than death, termination for Cause, Retirement or termination by reason of Disability, the later of the (A) date of the Participant's last day actively at work for or actively engaged by the Company or the Affiliate, and (B) the last date of the Notice Period; and
(v) the resignation of a director and the expiry of a director's term on the Board without re-election (or nomination for election) shall each be considered to be a termination of his or her term of office.
(f) Change of Control:  The occurrence of a Change of Control will not result in the vesting of Unvested Awards, provided that: (i) such Unvested Awards will continue to vest in accordance with the Plan and Award Agreement; and (ii) any Successor Entity agrees to assume the obligations of the Company in respect of such Unvested Awards.
(g) Termination Following a Change of Control:  Where a Participant's employment or term of office or engagement is terminated for any reason, other than for Cause, during the 24 months following a Change in Control, any Unvested Awards as at the date of such termination shall be deemed to have vested as at the date of such termination and shall become payable as at the date of termination.
8.9    Payment in Settlement of Restricted Share Units .  When and if Restricted Share Units become payable, the Participant issued such units shall be entitled to receive payment from the Company in settlement of such units in cash, Shares (issued from treasury) of equivalent value (based on the FMV, as defined in the Award Agreement at the time of grant or thereafter by the Committee), in some combination thereof, or in any other form, all as determined by the Committee at its sole discretion.  The Committee's determination regarding the form of payout shall be set forth or reserved for later determination in the Award Agreement for the grant of the Restricted Share Units.  In the event settlement is made by payment in cash, such payment shall be made by the earlier of (i) 2½ months after the close of the year in which such conditions or restrictions were satisfied or lapsed and (ii) December 31 of the third year following the year of the grant date.
 
 
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ARTICLE 9
DEFERRED SHARES UNITS
9.1    Grant of Deferred Share Units .  Subject to the terms and conditions of the Plan, the Committee, at any time and from time to time, may grant Deferred Share Units to Participants in such amounts and upon such terms as the Committee shall determine.
 
9.2    Deferred Share Unit Agreement .  Each Deferred Share Unit grant shall be evidenced by an Award Agreement that shall specify the number of Deferred Share Units granted, the settlement date for Deferred Share Units, and any other provisions as the Committee shall determine, including, but not limited to a requirement that Participants pay a stipulated purchase price for each Deferred Share Unit, restrictions based upon the achievement of specific performance criteria, time-based restrictions, restrictions under applicable laws or under the requirements of any stock exchange or market upon which the Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Deferred Share Units.
 
9.3    Nontransferability of Deferred Share Units .  Except as otherwise provided in this Plan or the Award Agreement, the Deferred Share Units granted herein may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated.  All rights with respect to the Deferred Share Units granted to a Participant under the Plan shall be available during such Participant's lifetime only to such Participant, except as otherwise provided in the Award Agreement at the time of grant or thereafter by the Committee.
 
9.4    Termination of Employment, Consultancy or Directorship .  Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Deferred Share Units following termination of the Participant's employment or other relationship with the Company or Affiliates.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Deferred Share Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
 
ARTICLE 10
PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1    Grant of Performance Shares and Performance Units .  Subject to the terms and conditions of the Plan, the Committee, at any time and from time to time, may grant Performance Shares and/or Performance Units to Participants in such amounts and upon such terms as the Committee shall determine.
 
10.2    Value of Performance Shares and Performance Units .  Each Performance Share and Performance Unit shall have an initial value equal to the FMV of a Share on the date of grant.  The Committee shall set performance criteria for a Performance Period in its discretion, which, depending on the extent to which they are met, will determine, in the manner determined by the Committee and set forth in the Award Agreement, the value and/or number of each Performance Share or Performance Unit that will be paid to the Participant.
 
10.3    Earning of Performance Shares and Performance Units .  Subject to the terms of this Plan and the applicable Award Agreement, after the applicable Performance Period has ended, the holder of Performance Shares/Performance Units shall be entitled to receive payout on the value and number of Performance Shares/Performance Units, determined as a function of the extent to which the corresponding performance criteria have been achieved.  Notwithstanding the foregoing, the Company shall have the ability to require the Participant to hold any Shares received pursuant to such Award for a specified period of time.
 
10.4     Form and Timing of Payment of Performance Shares and Performance Units .  Payment of earned Performance Shares/Performance Units shall be as determined by the Committee and as set forth in the Award Agreement.  Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Shares/Performance Units in the form of cash or in Shares issued from treasury (or in a combination thereof) equal to the value of the earned Performance Shares/Performance Units at the end of the applicable Performance Period.  Any Shares may be granted subject to any restrictions deemed appropriate by the Committee.  The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement for the grant of the Award or reserved for later determination.  In no event will delivery of such Shares or payment of any cash amounts be made later than the earlier of (i) 2½ months after the close of the year in which such conditions or restrictions were satisfied or lapsed and (ii) December 31 of the third year following the year of the grant date.
 
10.5    Dividends and Other Distributions .  The Committee shall determine whether Participants holding Performance Shares will receive Dividend Equivalents with respect to dividends declared with respect to the Shares.  Dividends or Dividend Equivalents may be subject to accrual, forfeiture or payout restrictions as determined by the Committee in its sole discretion.
 
10.6     Death and other Termination of Employment .
 
(a) Death: If a Participant dies while an Employee, Director of, or Consultant to, the Company or an Affiliate:
(i) the number of Performance Shares or Performance Share Units held by the Participant that have not vested (collectively referred to in this Section  10.6 as " Unvested Awards ") shall be adjusted as set out in the applicable Award Agreement (collectively referred to in this Section  10.6 as " Deemed Awards ");
(ii) any Deemed Awards shall vest immediately;
(iii) any Performance Shares and Performance Shares Units held by the Participant that have vested (including Deemed Awards vested in accordance with Section 10.6(a)(ii) shall be paid to the Participant's estate in accordance with the terms of the Plan and Award Agreement; and
(iv) such Participant's eligibility to receive further grants of Performance Shares or Performance Share Units under the Plan ceases as of the Termination Date (as defined at Section 10.6(e) below).
 
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(b) Disability:  If a Participant suffers a Disability while an Employee, officer or director of or Consultant to the Company or an Affiliate and as a result his or her employment with the company or Affiliate is terminated:
(i) Unvested Awards shall be reduced to be equal to the product of (A) the number of Unvested Awards; and (B) the fraction obtained when dividing (x) the number of calendar days from the date of the award of the Unvested Awards to the Termination Date (as defined at Section  10.6(e) below) and (x) the number of calendar days from the date of the award of the Unvested Awards to the original vesting date set out in the Award Agreement;
(ii) the number of Unvested Awards, as calculated pursuant to Section  10.6(b)(i) , shall continue to vest in accordance with the terms of its Plan and Award Agreement; and
(iii) such Participant's eligibility to receive further grants of Performance Share Units or Performance Shares under the Plan ceases as of the Termination Date.
(c) Retirement: If a Participant voluntarily Retires then:
(i) any Performance Shares or Performance Share Units held by the Participant that have vested before the Termination Date shall be paid to the Participant;
(ii) any Unvested Awards held by the Participant at the Termination Date (as defined at Section  10.6(e) below) shall continue to vest in accordance with the terms of the Plan and Award Agreement following the Termination Date until the earlier of: (i) the date determined by the Committee, in its sole discretion; and (ii) the date on which the Performance Share Units vest pursuant to the original Award Agreement in respect of such Unvested Awards; and
(iii) such Participant's eligibility to receive further grants of Performance Shares or Performance Share Units under the Plan ceases as of the Termination Date.
(d) Termination other than Death, Disability or Retirement: Unless determined otherwise by the Committee, where a Participant's employment or term of office or engagement terminates for any reason other than death (whether such termination occurs with or without any or adequate notice or reasonable notice, or with or without any or adequate compensation in lieu of such notice), then:
(i) any Performance Share Units or Performance Shares held by the Participant that have vested before the Termination Date shall be paid to the Participant in accordance with the terms of the Plan and Award Agreement. Any Performance Shares Units or Performance Shares held by the Participant that are not yet vested at the Termination Date will be immediately cancelled and forfeited to the Company on the Termination Date;
 
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(ii) the eligibility of a Participant to receive further grants under the Plan ceases as of the date that the Company or an Affiliate provides the Participant with written notification that the Participant's employment or term of office or engagement, is terminated, notwithstanding that such date may be prior to the Termination Date; and
(iii) notwithstanding Sections  10.6(c)(i) and (ii) above, unless the Committee, in its sole discretion, otherwise determines, at any time and from time to time, Performance Share Units or Performance Shares are not affected by a change of employment arrangement within or among the Company or an Affiliate for so long as the Participant continues to be an employee of the Company or an Affiliate.
(e) For purposes of this Section 10.6 , the term, " Termination Date " has the meaning set out in Section 8.8(e) .
(f) Change of Control:  The occurrence of a Change of Control will not result in the vesting of Unvested Awards, provided that:
(i) such Unvested Awards will continue to vest in accordance with the Plan and the Award Agreement;
(ii) the level of achievement of Performance Goals for Fiscal Years completed prior to the date of the Change of Control shall be based on the actual performance achieved to the date of the Change of Control and the level of achievement of Performance Goals for Fiscal Years completed following the date of the Change of Control shall be based on the assumed achievement of 100% of the Performance Goals; and
(iii) any Successor Entity agrees to assume the obligations of the Company in respect of such Unvested Awards.
(g) Termination following Change of Control:  For the period of 24 months following a Change of Control, where a Participant's employment or term of office or engagement is terminated for any reason, other than for Cause:
(i) any Unvested Awards as at the date of such termination shall be deemed to have vested as at the date of such termination and shall become payable as at the date of termination; and
(ii) the level of achievement of Performance Goals for any Unvested Awards that are deemed to have vested pursuant to (i) above, shall be based on the actual performance achieved at the end of the Fiscal Year immediately prior to the date of termination.
 
23
 
10.7    Nontransferability of Performance Shares and Performance Units .  Except as otherwise provided in a Participant's Award Agreement at the time of grant or thereafter by the Committee, Performance Shares/Performance Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.  Further, except as otherwise provided in a Participant's Award Agreement or otherwise by the Committee at any time, a Participant's rights under the Plan shall inure during such Participant's lifetime only to such Participant.
 
ARTICLE 11
FULL VALUE SHARE-BASED AWARDS
11.1    Share-Based Awards .  The Committee may, to the extent permitted by the TSX, grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares and issuance of unrestricted Shares in satisfaction of compensation (including salary, bonus or other incentive)) in such amounts and subject to such terms and conditions, including, but not limited to, being subject to performance criteria, or in satisfaction of such obligations, as the Committee shall determine; provided that the maximum number of Share-Based Awards issued in any calendar year shall not exceed one per cent (1%) of the issued and outstanding Shares on January 1 of such calendar year. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares, subject to applicable corporate law and securities law requirements.
 
11.2    Termination of Employment .  Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive Share-Based Awards following termination of the Participant's employment or other relationship with the Company or Affiliates.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Share-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
 
11.3    Nontransferability of Share-Based Awards .  Except as otherwise provided in a Participant's Award Agreement at the time of grant or thereafter by the Committee, Share-Based Awards may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.  Further, except as otherwise provided in a Participant's Award Agreement at the time of grant or thereafter by the Committee, a Participant's rights under the Plan shall be exercisable during such Participant's lifetime only by such Participant.
 
ARTICLE 12
BENEFICIARY DESIGNATION
12.1     Beneficiary . A Participant's "beneficiary" is the person or persons entitled to receive payments or other benefits or exercise rights that are available under the Plan in the event of the Participant's death.  A Participant may designate a beneficiary or change a previous beneficiary designation at such times as prescribed by the Committee and by using such forms and following such procedures approved or accepted by the Committee for that purpose.  If no beneficiary designated by the Participant is eligible to receive payments or other benefits or exercise rights that are available under the Plan at the Participant's death, the beneficiary shall be the Participant's estate.
 
 
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12.2    Discretion of the Committee . Notwithstanding the provisions above, the Committee may, in its discretion, after notifying the affected Participants, modify the foregoing requirements, institute additional requirements for beneficiary designations, or suspend the existing beneficiary designations of living Participants or the process of determining beneficiaries under this Article 12, or both, in favor of another method of determining beneficiaries.
 
ARTICLE 13
RIGHTS OF PERSONS ELIGIBLE TO PARTICIPATE
13.1    Employment .  Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or an Affiliate to terminate any Participant's employment, consulting or other service relationship with the Company or an Affiliate at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or an Affiliate.
 
Neither an Award nor any benefits arising under this Plan shall constitute part of an employment or service contract with the Company or an Affiliate, and, accordingly, subject to the terms of this Plan, this Plan may be terminated or modified at any time in the sole and exclusive discretion of the Committee or the Board without giving rise to liability on the part of the Company or an Affiliate for severance payments or otherwise, except as provided in this Plan.
 
For purposes of the Plan, unless otherwise provided by the Committee, a transfer of employment of a Participant between the Company and an Affiliate or among Affiliates, shall not be deemed a termination of employment.  The Committee may provide in a Participant's Award Agreement or otherwise the conditions under which a transfer of employment to an entity that is spun off from the Company or an Affiliate shall not be deemed a termination of employment for purposes of an Award.
 
13.2    Participation .  No Employee or other Person eligible to participate in the Plan shall have the right to be selected to receive an Award.  No person selected to receive an Award shall have the right to be selected to receive a future Award, or, if selected to receive a future Award, the right to receive such future Award on terms and conditions identical or in proportion in any way to any prior Award.
 
13.3    Rights as a Shareholder .  A Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
 
ARTICLE 14
CHANGE OF CONTROL
14.1    Accelerated Vesting and Payment .  Subject to the provisions of Section 14.2 or as otherwise provided in the Plan or the Award Agreement, in the event of a Change of Control, the Committee shall have the discretion to unilaterally determine that all outstanding Awards shall be cancelled upon a Change of Control, and that the value of such Awards, as determined by the Committee in accordance with the terms of the Plan and the Award Agreements, shall be paid out in cash in an amount based on the Change of Control Price within a reasonable time subsequent to the Change of Control.
 
 
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14.2    Alternative Awards .  Notwithstanding Section 14.1, no cancellation, acceleration of vesting, lapsing of restrictions, payment of an Award, cash settlement or other payment shall occur with respect to any Award if the Committee reasonably determines in good faith prior to the occurrence of a Change of Control that such Award shall be honored or assumed, or new rights substituted therefor (with such honored, assumed or substituted Award hereinafter referred to as an " Alternative Award ") by any successor to the Company or an Affiliate as described in Article 16; provided, however, that any such Alternative Award must:
 
(a) be based on stock which is traded on the TSX and/or an established securities market in London, England or the United States;
(b) provide such Participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule (including vesting upon termination of employment) and identical or better timing and methods of payment;
(c) recognize, for the purpose of vesting provisions, the time that the Award has been held prior to the Change of Control; and
(d) have substantially equivalent economic value to such Award (determined prior to the time of the Change of Control).
ARTICLE 15
AMENDMENT, MODIFICATION, SUSPENSION AND TERMINATION
15.1    Amendment, Modification, Suspension and Termination .
 
(a) Except as set out in clauses (b) and (c) below, and as otherwise provided by law, or stock exchange rules, the Committee or Board may, at any time and from time to time, alter, amend, modify, suspend or terminate the Plan or any Award in whole or in part without notice to, or approval from, shareholders, including, but not limited to for the purposes of:
(i) making any amendments to the general vesting provisions of any Award;
(ii) making any amendments to the general term of any Award provided that no Award held by an Insider may be extended beyond its original expiry date;
 
26
 
(iii) making any amendments to add covenants or obligations of the Company for the protection of Participants;
(iv) making any amendments not inconsistent with the Plan as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the Board, it may be expedient to make, including amendments that are desirable as a result of changes in law or as a "housekeeping" matter; or
(v) making such changes or corrections which are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error.
(b) Other than as expressly provided in an Award Agreement or as set out herein with respect to a Change of Control, the Committee shall not alter or impair any rights or increase any obligations with respect to an Award previously granted under the Plan without the consent of the Participant.
(c) The following amendments to the Plan shall require the prior approval of the Company's shareholders:
(i) A reduction in the Option Price of a previously granted Option or the Grant Price of a previously granted SAR benefitting an Insider of the Company or one of its Affiliates except for adjustments to the Option Price or Grant Price applicable to outstanding Awards pursuant to Section  4.2 hereof.
(ii) Any amendment or modification which would increase the total number of Shares available for issuance under the Plan.
(iii) An increase to the limit on the number of Shares issued or issuable under the Plan to Insiders of the Company;
(iv) An extension of the expiry date of an Option or SAR, other than as otherwise permitted hereunder in relation to a Blackout Period or otherwise; or
(v) Any amendment to the amendment provisions of the Plan under this Section  15.1 .
15.2    Adjustment of Awards Upon the Occurrence of Unusual or Nonrecurring Events .  The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events in addition to the events described in Section 4.2 hereof affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.  The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.
 
 
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15.3     Awards Previously Granted .  Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.
 
ARTICLE 16
WITHHOLDING
16.1    Withholding . The Company or any Affiliate shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company or any Affiliate, an amount sufficient to satisfy federal, state and local taxes or provincial, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising or as a result of this Plan or any Award hereunder.  The Committee may provide for Participants to satisfy withholding requirements by having the Company withhold and sell Shares or the Participant making such other arrangements, including the sale of Shares, in either case on such conditions as the Committee specifies.
 
16.2    Acknowledgement . Participant acknowledges and agrees that the ultimate liability for all taxes legally payable by Participant is and remains Participant's responsibility and may exceed the amount actually withheld by the Company.  Participant further acknowledges that the Company: (a) makes no representations or undertakings regarding the treatment of any taxes in in connection with any aspect of this Plan; and (b) does not commit to and is under no obligation to structure the terms of this Plan to reduce or eliminate Participant's liability for taxes or achieve any particular tax result.  Further, if Participant has become subject to tax in more than one jurisdiction, Participant acknowledges that the Company may be required to withhold or account for taxes in more than one jurisdiction.
 
ARTICLE 17
SUCCESSORS
Any obligations of the Company or an Affiliate under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company or Affiliate, respectively, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the businesses and/or assets of the Company or Affiliate, as applicable.
 
ARTICLE 18
GENERAL PROVISIONS
18.1    Forfeiture Events .  Without limiting in any way the generality of the Committee's power to specify any terms and conditions of an Award consistent with law, and for greater clarity, the Participant's rights, payments and benefits with respect to an Award shall, at the sole discretion of the Committee, be subject to reduction, cancellation, forfeiture of any vested and unvested Awards or recoupment of any payments or settlements made in the current Fiscal Year or immediately prior Fiscal Year (provided such determination is made within 45 days of the end of that Fiscal Year) upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such specified events shall include, but shall not be limited to, any of: (a) the Participant's failure to accept the terms of the Award Agreement, violation of material Company and Affiliate policies, breach of noncompetition, confidentiality, nonsolicitation, noninterference, corporate property protection or other agreements that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and Affiliates; (b) the Participant's misconduct, fraud, gross negligence; and (c) the restatement of the financial statements of the Company that resulted in Awards which should not have vested, settled, or been paid had the original financial statements been properly stated.
 
 
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Except as expressly otherwise provided in this Plan or an Award Agreement, the termination and the expiry of the period within which an Award will vest and may be exercised by a Participant shall be based upon the last day of actual service by the Participant to the Company and specifically does not include any period of notice that the Company may be required to provide to the Participant under applicable employment law.
 
18.2    Legend .  The certificates for Shares may include any legend that the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
 
18.3    Delivery of Title .  The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:
 
(a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the Shares under any applicable law or ruling of any governmental body that the Company determines to be necessary or advisable.
18.4    Investment Representations .  The Committee may require each Participant receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the Participant is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
 
18.5    Uncertificated Shares .  To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis to the extent not prohibited by applicable law or the rules of any applicable stock exchange.
 
18.6    Unfunded Plan .  Participants shall have no right, title or interest whatsoever in or to any investments that the Company or an Affiliate may make to aid it in meeting its obligations under the Plan.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or an Affiliate and any Participant, beneficiary, legal representative or any other person.  Awards shall be general unsecured obligations of the Company, except that if an Affiliate executes an Award Agreement instead of the Company the Award shall be a general unsecured obligation of the Affiliate and not any obligation of the Company.  To the extent that any individual acquires a right to receive payments from the Company or an Affiliate, such right shall be no greater than the right of an unsecured general creditor of the Company or Affiliate, as applicable.  All payments to be made hereunder shall be paid from the general funds of the Company or Affiliate, as applicable, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.
 
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18.7    No Fractional Shares .  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award Agreement.  In such an instance, unless the Committee determines otherwise, fractional Shares and any rights thereto shall be forfeited or otherwise eliminated.
 
18.8    Other Compensation and Benefit Plans .  Nothing in this Plan shall be construed to limit the right of the Company or an Affiliate to establish other compensation or benefit plans, programs, policies or arrangements.  Except as may be otherwise specifically stated in any other benefit plan, policy, program or arrangement, no Award shall be treated as compensation for purposes of calculating a Participant's rights under any such other plan, policy, program or arrangement.
 
18.9    No Constraint on Corporate Action .  Nothing in this Plan shall be construed (i) to limit, impair or otherwise affect the Company's or an Affiliate's right or power to make adjustments, reclassifications, reorganizations or changes in its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell or transfer all or any part of its business or assets, or (ii) to limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
 
18.10    Compliance with Canadian Securities Laws . All Awards and the issuance of Shares underlying such Awards issued pursuant to the Plan will be issued pursuant to an exemption from the prospectus requirements of Canadian securities laws where applicable.
ARTICLE 19
LEGAL CONSTRUCTION
19.1    Gender and Number .  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
 
19.2    Severability .  In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
 
19.3    Requirements of Law .  The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or securities exchanges as may be required.  The Company or an Affiliate shall receive the consideration required by law for the issuance of Awards under the Plan.
 
The inability of the Company or an Affiliate to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company or an Affiliate to be necessary for the lawful issuance and sale of any Shares hereunder, shall relieve the Company or Affiliate of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
 
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19.4    Governing Law .  The Plan and each Award Agreement shall be governed by the laws of the Province of Ontario excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.
 
19.5    Compliance with Section 409A of the Code .
 
(a) To the extent the Plan is applicable to a particular Participant subject to the Code, it is intended that this Plan and any Awards made hereunder shall not provide for the payment of "deferred compensation" within the meaning of Section 409A of the Code or shall be structured in a manner and have such terms and conditions that would not cause such a Participant to be subject to taxes and interest pursuant to Section 409A of the Code.  This Plan and any Awards made hereunder shall be administrated and interpreted in a manner consistent with this intent.
(b) To the extent that any amount or benefit in favour of a Participant who is subject to the Code would constitute "deferred compensation" for purposes of Section 409A of the Code would otherwise be payable or distributable under this Plan or any Award Agreement by reason of the occurrence of a Change of Control or the Participant's disability or separation from service, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless: (i) the circumstances giving rise to such Change of Control, disability or separation from service meet the description or definition of "change in control event," "disability," or "separation from service," as the case may be, in Section 409A of the Code and applicable proposed or final Treasury regulations thereunder, and (ii) the payment or distribution of such amount or benefit would otherwise comply with Section 409A of the Code and not subject the Participant to taxes and interest pursuant to Section 409A of the Code.  This provision does not prohibit the vesting of any Award or the vesting of any right to eventual payment or distribution of any amount or benefit under this Plan or any Award Agreement.
(c) The Committee shall use its reasonable discretion to determine the extent to which the provisions of this Article  19.5 will apply to a Participant who is subject to taxation under the ITA.


Exhibit 4.2


EMPLOYMENT AGREEMENT

between

GREENSTONE MANAGEMENT SERVICES PROPRIETARY LIMITED

and

TABLE OF CONTENTS
 
1 INTERPRETATION
1
2 APPOINTMENT
8
3 EMPLOYEE'S DUTIES
8
4 PLACE OF WORK
10
5 OVERTIME, WEEKEND WORK AND PUBLIC HOLIDAYS
10
6 DISBURSEMENTS
11
7 REMUNERATION
11
8 ANNUAL LEAVE
11
9 SICK LEAVE
12
10 PROFESSIONAL FEES AND EXECUTIVE MEDICALS
12
11 MEDICAL AID
12
12 SHORT TERM INCENTIVE SCHEME
12
13 LONG TERM INCENTIVE SCHEME
13
14 CELLULAR PHONE REIMBURSEMENT
13
15 PERSONAL CONDUCT AND COMPANY RULES AND POLICIES
13
16 INVENTIONS
13
17 CONFIDENTIALITY UNDERTAKINGS
14
18 COMMUNICATIONS
17
19 CONSENT TO DATA PROCESSING
18
20 DOMICILIUM AND NOTICES
18
21 TERMINATION
20
 
i
 
22 TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL
20
23 DISPUTE RESOLUTION
22
24 GENERAL
23
25 GOVERNING LAW
24
 
ANNEXURES
ANNEXURE A - TERM SHEET

ii


 


EMPLOYMENT AGREEMENT

between

GREENSTONE MANAGEMENT SERVICES PROPRIETARY LIMITED
and


1 INTERPRETATION

In this Agreement, clause headings are for convenience and shall not be used in its interpretation and, unless the context clearly indicates a contrary intention -

1.1 an expression which denotes -

1.1.1 any gender includes the other genders;

1.1.2 a natural person includes an artificial or juristic person and vice versa;

1.1.3 the singular includes the plural and vice versa;

1.2 the following expressions shall bear the meanings assigned to them below and cognate expressions bear corresponding meanings -

1.2.1 " Annual Leave Cycle " - the period of twelve months' employment of the Employee by the Company immediately following -

1.2.1.1 the Employee's commencement of employment, or

1.2.1.2 the completion of the Employee's prior leave cycle;

1.2.2 " this Agreement " - this document together with all of its annexures, as amended from time to time;
 
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1.2.3 " Acquisition " – when the acquirer becomes registered as the owner of the relevant shares in the relevant share register or when the acquirer becomes entitled to exercise the relevant voting rights or becomes entitled to appoint the relevant directors or when the ownership of the relevant assets have been transferred to the acquirer;

1.2.4 " BCEA " - the Basic Conditions of Employment Act, No. 75 of 1997 (as amended);

1.2.5 " Board " – the board of directors of the Company, lawfully appointed thereto;

1.2.6 " Caledonia " - Caledonia Mining Corporation as a company incorporated pursuant to the Canada Business Corporations Act listed on the Toronto Stock exchange. with the registration number 312975-6, being the holding company of the Company;

1.2.7 " Change in Control " -

1.2.7.1 the Acquisition, after the Signature Date, by a person or entity, other than a person or entity that is part of the Group, of more than 50% of the ordinary shares in the Company; or

1.2.7.2 the Acquisition, after the Signature Date, by a person or entity, other than a person or entity that is part of the Group, of more than 50% of the ordinary shares in Caledonia;

1.2.7.3 the Acquisition, after the Signature Date, by any person or entity, which is not part of the Group, of Control over the right to exercise the majority of the voting rights exercisable by the ordinary shareholders of the Company; or

1.2.7.4 the Acquisition, after the Signature Date, by any person or entity, which is not part of the Group, of Control over the right to exercise the majority of the voting rights exercisable by the ordinary shareholders of Caledonia; or
 
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1.2.7.5 the Acquisition, after the Signature Date, by any person or entity, which is not part of the Group, of the right to appoint the majority of the board of directors of the Company;

1.2.7.6 the Acquisition, after the Signature Date, by any person or entity, which is not part of the Group, of the right to appoint the majority of the board of directors of Caledonia;

1.2.7.7 the Acquisition, after the Signature Date, by any person or entity, which is not part of the Group, of more than 50% of the assets of the Company.  For the purposes of this 1.2.7.7 the percentage of the assets acquired shall be determined with reference to the value of the assets;

1.2.7.8 the Acquisition, after the Signature Date, by any person or entity, which is not part of the Group, of more than 50% of the assets of Caledonia.  For the purposes of this 1.2.7.8 the percentage of the assets acquired shall be determined with reference to the value of the assets;

1.2.8 " the Company " – Greenstone Management Services Proprietary Limited, a company incorporated pursuant to the laws of the RSA with the registration number 1993/000530/07;

1.2.9 " Confidential Information " - the Group's trade secrets and Confidential Information including the following -

1.2.9.1 know‑how, processes, techniques, methods, designs, products and organisational and other structures employed in the business of the Group;

1.2.9.2 the contractual and financial arrangements between the Group and its suppliers, customers, clients and other business associates;

1.2.9.3 the financial details of the group, including its results and details of the remuneration paid to its employees;
 
3

 
1.2.9.4 details of the prospective and existing customers and clients of the Group;

1.2.9.5 the business strategy/ies of the Group;

1.2.9.6 all other matters which relate to the business of the Group and in respect of which information is not readily available in the ordinary course of such business to the Group 's competitors;

1.2.10 " Control " –of the Company includes, without limiting the generality of the term –

1.2.10.1 the beneficial ownership of the majority of the issued ordinary shares of the Company;

1.2.10.2 the beneficial ownership of the issued ordinary shares of the Company entitling to the beneficial owner thereof to exercise less than a majority of the votes attached to all the issued shares of the Company, where such voting power is sufficiently dominant relative to the spread of the other shareholdings that it does constitute de facto Control of the Company;

1.2.10.3 the right, through shareholding or otherwise, to Control the composition of the Board and, without prejudice to the generality of the aforegoing, the composition of the Board shall be deemed to be so controlled if the person or entity holding the right may by the exercise of some power, directly or indirectly, appoint or remove the majority of the directors;

1.2.11 " Effective Date " – January 1, 2014;

1.2.12 " Employee " – _____________;

1.2.13 "Good Reason" means the occurrence of any of the following upon or  during the period referred to in 22.2.1 following a Change in Control, unless the Employee provides express written consent -
 
4

 
1.2.13.1 Unilateral Change in Duties - the unilateral assignment to the Employee of any duties inconsistent with the Employee's status as Vice President Finance and Administration and Chief Financial Officer or a material unilateral change in the nature or status of the Employee's responsibilities, or a material unilateral change in the duties of the Employee, in each case from those in effect immediately prior to a Change in Control;

 
1.2.13.2 Reduction of the Employee's total cost to company remuneration - a material reduction by the Company in the Employee's total cost to company remuneration as in effect as at the Signature Date or as the same may be increased from time to time or the failure by the Company to grant the Employee a total cost to company remuneration increase at a rate commensurate with the increases accorded to other key executives of the Company at the Employee 's status and level of seniority with the Company;

1.2.13.3 Relocation - the Company requiring the Employee to be based anywhere other than within the greater metropolitan area where the Executive is primarily based at the time of a Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Employee 's travel obligations in the ordinary course of business immediately prior to the Change in Control;

1.2.13.4 Incentive Schemes - the failure by the Company to allow the Employee to participate in the incentive schemes as more fully detailed in 12 and 13 in which the Employee is entitled to pursuant at the time of the Change in Control; or

1.2.13.5 Constructive Dismissal - any other reason which would be considered to amount to constructive dismissal by an RSA court or tribunal of competent jurisdiction, provided that any event, act or omission which may constitute Good Reason within the meaning of this definition shall be deemed not to be Good Reason if the Employee fails to object in writing to the Company within thirty Working Days of learning of the event, act or omission or, if the event, act or omission is curable and is cured in its entirety by the Company within thirty Working Days of such written notice. The Employee shall have thirty Working Days upon learning of the event, act or omission to give notice in writing to the Company stating the Employee's basis for the Employee's position that there is Good Reason. Upon the receipt of such written notice, the Company shall have thirty Working Days to cure the event, act or omission in its entirety and if so cured there shall be deemed to be no Good Reason. Where the Employee alleges a Unilateral Change in Duties or Constructive Dismissal, the Company shall: (a) advise the Employee within thirty (30) days if it objects to the allegation together with the reasons for such objection (failing which the Employee shall be deemed to have Good Reason); and (b) bear the onus of proving that the Employee did not experience a Unilateral Change in Duties or Constructive Dismissal.

5
 

1.2.14 " Group " – collectively the Company, its subsidiaries and holding company and the subsidiaries of its holding company from time to time including, any associated company of the Company.  For the purposes of giving effect to this definition, the expression " associated company " shall mean any company in which the Company holds and beneficially owns at least 20% of the entire issued capital thereof;

1.2.15 " Parties " – the Company and the Employee and the " Party " being either the Company or the Employee as the context may indicate;

1.2.16 " RSA " – the Republic of South Africa;

1.2.17 " Sick Leave Cycle " - the period of thirty‑six months employment of the Employee with the Company immediately following -

1.2.17.1 the Employee's commencement of employment; or

1.2.17.2 the completion of the Employee's prior Sick Leave Cycle;
 
6

 
1.2.18 " Signature Date " – the date of signature of this Agreement by the signatory which signs it last;

1.2.19 " Termination Date " – the date on which the Employee ceases to be employed by the Company or any company in the Group for whatsoever reason;

1.2.20 " Working Day " - any day of the week, excluding Saturdays and Sundays and any other day declared as an official public holiday in the RSA;

1.3 any reference to any statute, regulation or other legislation shall be a reference to that statute, regulation or other legislation as at the Signature Date, and as amended or substituted from time to time;

1.4 if any provision in a definition is a substantive provision conferring a right or imposing an obligation on any Party then, notwithstanding that it is only in a definition, effect shall be given to that provision as if it were a substantive provision in the body of this Agreement;

1.5 where any term is defined within a particular clause other than this 1, that term shall bear the meaning ascribed to it in that clause wherever it is used in this Agreement;

1.6 where any number of days is to be calculated from a particular day, such number shall be calculated as excluding such particular day and commencing on the next day.  If the last day of such number so calculated falls on a day which is not a business day, the last day shall be deemed to be the next succeeding day which is a Working Day;

1.7 any reference to days (other than a reference to Working Days), months or years shall be a reference to calendar days, months or years, as the case may be;

1.8 the use of the word "including" followed by a specific example/s shall not be construed as limiting the meaning of the general wording preceding it and the eiusdem generis rule shall not be applied in the interpretation of such general wording or such specific example/s.
 
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1.9 The terms of this Agreement having been negotiated, the contra proferentem rule shall not be applied in the interpretation of this Agreement.

2 APPOINTMENT

2.1 The Parties acknowledge that the Employee will be deemed to have commenced his employment with the Company on April 1, 2006.

2.2 With effect from the Effective Date the Employee's employment, including compensation, bonus entitlements and any other terms and conditions of employment, with the Company will be subject to the terms and conditions set out in this Agreement and any prior agreements regulating the Employee's employment with the Company shall lapse and be of no further force and effect on the Effective Date.

2.3 The Employee holds the position of Vice President Finance and Administration and Chief Financial Officer   reporting to the Chief Executive Officer and Board of Caledonia.

3 EMPLOYEE'S DUTIES

The Employee undertakes to -

3.1 act in the capacity to which he is appointed in terms of this Agreement, as more fully set out in Annexure A;

3.2 perform any duties that are reasonably ancillary to his capacity, in accordance with and as required by the Company, provided that such duties do not detract from the Employee's status or capacity to which he is appointed;

3.3 be accountable to and be required to report to the Company during the course of his employment with the Company in terms of the agreement;
 
3.4 comply with all reasonable and lawful instructions given to him from time to time by the Company;
 
8

 
3.5 not engage in activities which would detract from the proper performance of his duties in terms of this Agreement;

3.6 devote the whole of his working time and attention to performing his duties under this Agreement;

3.7 use his best endeavours to promote and extend the business of the Company for the duration of this Agreement;

3.8 deliver to the Company, whenever required to do so, all books of account, records, correspondence and notes concerning or containing any reference to the work and business of the Company, which belong to the Company and which is in the possession or under the control, directly or indirectly, of the Employee;

3.9 attend all meetings required of him by the Company;

3.10 to show the Company and the other companies in the Group the utmost good faith;

3.11 not to exceed or purport to exceed or purport to have the right to exceed the express limits of the authority attendant to the position to which he is appointed in terms of this Agreement, or such authorities as may necessarily be implied by virtue of the Employee's capacity and functions, from time to time;

3.12 to ensure that the Company maintains all required written records in an up‑to‑date and timely manner, and to keep such records and all other records of the Company's affairs which may be entrusted to him in a safe place, out of access to any other persons, save as specifically directed by the Company;

3.13 not to, otherwise than for the benefit of the Company, make any notes or memoranda relating to any matter within the scope of the business of the Company or concerning any of its dealings or affairs;
 
9

 
3.14 to report to the Company and to each of the companies in the Group any information relating to the products or services of the competitors of the Company which may reasonably be in the interests of the Company or any of the companies in the Group;

3.15 other than in the ordinary course of business or with the prior written consent of the Company not to remove from the Company's premises any books, records, documents or other items belonging to the Company;
3.16 to carry out his functions and duties for the Company or any other of the companies in the Group lawfully;

3.17 not to act on behalf of the Company or any of the other companies in the Group in a manner which would bring discredit or injury to the Company or to any of the other companies in the Group.

4 PLACE OF WORK

4.1 The Employee's formal place of work will be at the Company's Africa Office premises in Johannesburg, RSA, or at such other premises as the Company may occupy from time to time.  The Employee agrees to perform services at other locations as may be necessary from time to time.

4.2 The Employee acknowledges that he may be required to travel both within and outside the RSA in accordance with the Company's operational requirements and the Employee hereby agrees to do so.  All reasonable travel and accommodation costs incurred on behalf of the Employee will be borne by the Company in accordance with its business travel expense policy, as amended from time to time.

5 OVERTIME, WEEKEND WORK AND PUBLIC HOLIDAYS

Due to the operational requirements of the Company and the capacity in which the Employee is appointed to act in terms of this Agreement, the Employee recognises that he may be required and hereby agrees to work overtime, on weekends and on public holidays from time to time when requested to do so, without any additional remuneration.
 
10

 
6 DISBURSEMENTS

The Company shall reimburse the Employee all reasonable travelling and other expenses properly incurred by him which are necessary to enable the Employee to perform his duties under this Agreement and which are authorised or ratified by the Company.  Such reimbursement shall be made to the Employee as soon as reasonably practicable after the expenses have been incurred by the Employee.  The Employee shall provide receipts for all reimburseable expenses.

7 REMUNERATION

7.1 From the Effective Date the Employee's remuneration package calculated on a total cost to company basis is as set out, in Annexure A.

7.2 The Employee's remuneration package shall be reviewable annually, at the absolute discretion of the Company.

7.3 The following deductions will be made from the Employee's remuneration -

7.3.1 such deductions as may be required by law;

7.3.2 such deductions as may be provided for in this Agreement; or

7.3.3 such deductions as may otherwise be agreed between the Parties from time to time.

8 ANNUAL LEAVE

8.1 The Employee will be entitled to a total of twenty five Working Days' annual leave during each Annual Leave Cycle The leave entitlements making up the total annual leave shall be subject to the following terms and conditions -

8.1.1 at least ten Working Days annual leave must be taken during each Annual Leave Cycle in which it accrues;

8.1.2 a maximum of fifty Working Days may be accumulated at any point in time and any amount accumulated in excess of fifty Working Days in any six-month period shall and, if agreed upon by the parties, any other vacation entitlement may, be paid to the Employee at his current rate of remuneration;
 
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8.1.3 when the Employee takes leave, the number of days so taken by the Employee shall first reduce the Employee's entitlement to leave under the BCEA, and only to the extent that the Employee has no further statutory leave available in the given Annual Leave Cycle, shall thereafter reduce the Employee's entitlement to contractual leave in excess of the leave required under the BCEA.

9 SICK LEAVE

The Employee shall be entitled to sick leave in accordance with the provisions of the BCEA.  The Employee must inform the Company immediately should the Employee be absent due to illness or injury.  The Employee must provide the Company with a medical certificate should the Employee be absent from work for more than two consecutive days, or on more than two occasions in an eight week period.

10 PROFESSIONAL FEES AND EXECUTIVE MEDICALS

10.1 The Company will pay for, alternatively reimburse the Employee, for any professional licensing fees required by the Company or incurred on behalf of the Company (e.g. Institute membership as a CA (SA)).

10.2 The Company will pay the cost of any annual executive medical undergone by the Employee, provided that the Employees must have completed the medical by 31 July of each year and must submit the results to the Company.

11 MEDICAL AID

It is recorded that the Company does not, as at the Effective Date, operate or participate in or pay any contributions towards any medical scheme, pension or provident fund or any other retirement fund for the benefit of its employees.

12 SHORT TERM INCENTIVE SCHEME

The Employee will be invited to participate in a short term incentive scheme (" STIS ") once approved by the Board, subject to the terms and conditions of the STIS Plan, as amended from time to time.  The Company intends to implement the STIS as soon as practically possible and the Company will at that time enrol the Employee as a participant in the STIS.
 
12

13 LONG TERM INCENTIVE SCHEME

The Employee will be invited to participate in a long term incentive scheme (" LTIS ") once approved by the Board, subject to the terms and conditions of the LTIS Plan, as amended from time to time.  The Company intends to implement the LTIS as soon as practically possible and Company will at that time enrol the Employee as a participant in the LTIS.

14 CELLULAR PHONE REIMBURSEMENT

The Company will provide the Employee with an appropriate cellular phone, data bundle and Etag.

15 PERSONAL CONDUCT AND COMPANY RULES AND POLICIES

The Employee shall be required at all times to comply with the Company's rules, policies and procedure, Code of Conduct, as amended from time to time, which are considered to form part of the terms and conditions of this Agreement.  The Employee is also required to comply generally with the standards expected of his appointment and position and status attendant thereto.

16 INVENTIONS

16.1 If the Employee, in the course of his employment with the Company creates, makes or discovers any work, invention or design or makes any improvement upon or derivation from any existing work, invention or design whether or not the same has, or is capable of having, patent, registered design, copyright, design right, or other like protection and whether alone or in conjunction with any other person, he shall immediately disclose them to the Board and shall, at the Company's request and expense, do all such acts and execute all such documents as may be necessary to visit all rights to or relating to any such work, invention, design or improvement in the name of the Company or its nominee, so that all such rights shall become the absolute property of the Company or its nominee.  For the purpose of this 16, the Employee irrevocably appoints the Company as his attorney in his name to execute all documents and do all things required to give effect to the provisions of this clause.  Nothing in this 16 shall limit any statutory or other right of the Company or any member of the Group in relation to any such work, invention, design or improvement.
 
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16.2 The Employee shall not, except as may be necessary in the course of his employment, disclose or make use of any invention which is the property of the Company or any other invention subject to 16.

16.3 The rights and obligations under this 16 shall continue in force after the termination of this Agreement in respect of inventions made during the Employee's appointment and shall be binding upon the heirs, successors, assigns and personal representatives of the Employee.

17 CONFIDENTIALITY UNDERTAKINGS

17.1 Definitions

Unless the context clearly indicates a contrary intention, the following expressions bear the meanings assigned to them below (and cognate expressions bear corresponding meanings) in this clause -

17.1.1 " Confidential Records " - any records of any nature whatever (including documents, diagrams and data which have been created or stored in any medium irrespective of who created or owns such records) which contain any of the Confidential Information;

17.1.2 " Successors‑in‑title or Assigns " - shall include, but without limiting in any way the generality of the aforegoing term, any person, firm, company or association of persons who or which -

17.1.2.1 acquires all or part of the Business or goodwill of the Company;  or

17.1.2.2 becomes the beneficial owner through its membership interest in the Company of such Business or goodwill;  or
 
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17.1.2.3 has lawfully acquired the right to enforce the restraints in this Agreement.

17.2 Confidentiality undertakings

The Employee irrevocably undertakes in favour of the Company and its Successors‑in‑title or Assigns that -

17.2.1 he shall not at any time after the Signature Date disclose or permit to be disclosed to any person, or use or permit to be used in any manner whatsoever, any of the Confidential Information and/or any Confidential Records;

17.2.2 he will surrender to the Company, on demand or in any event on the Termination Date, any documents containing Confidential Information and any Confidential Records which have been or are made by him or which came into his possession or under his control during the period of his employment by the Company, which documentation and Confidential Records shall be deemed to be the property of the Company, and the Employee shall not retain any copies thereof or extracts therefrom.

17.3 Acknowledgements

The Employee acknowledges and agrees that -

17.3.1 by reason of his association with the Company, he has acquired and will acquire considerable knowledge and know-how relating to the Company and its business;

17.3.2 if he is not restricted as provided for in the aforegoing confidentiality undertakings the Company will potentially suffer considerable economic prejudice including loss of custom and goodwill.  Accordingly, the Company considers it essential to protect its interests that the Employee agrees to the aforegoing confidentiality undertakings;

17.3.3 the aforegoing confidentiality undertakings are fair and reasonable as to subject matter, area and duration and are reasonably necessary to protect the proprietary interests of the Company and to maintain its goodwill;
 
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17.3.4 each provision of the aforegoing confidentiality undertakings shall, notwithstanding the manner in which it has been grouped with or grammatically linked to the others, be construed as imposing a separate and an independent obligation, severable from the rest of them.  Without limiting the aforegoing -

17.3.4.1 the confidentiality undertakings in terms of 17.2 shall be severable in respect of -

17.3.4.1.1 each of the persons in whose favour they are given;

17.3.4.1.2 every month of the period for which the confidentiality undertakings are stipulated to be applicable;

17.3.4.1.3 every category of Confidential Information and Confidential Records;

17.3.5 the aforegoing confidentiality undertakings are stipulations for the benefit of the Company and its Successors‑in‑title or Assigns, which shall be entitled to elect whether to exercise its rights hereunder or not.  By signing this Agreement the Company accepts the benefits on behalf of each such persons.  Such acceptance by the Company constitute a separate acceptance on behalf of each such persons for the time being and, to the extent that such acceptance may not constitute valid acceptance on behalf of such person, that person may accept such benefits in the future by giving written notice to that effect to the Employee;

17.3.6 the failure by the Company or any Successors‑in‑title or Assigns to -

17.3.6.1 exercise any of its rights in terms of the aforegoing confidentiality undertakings; or
 
16

 
17.3.6.2 succeed in any proceedings instituted by it to enforce any of its rights in terms of the aforegoing confidentiality undertakings,

shall not preclude the Company or its Successors‑in‑title or Assigns from exercising any such rights in consequence of any subsequent breach by the Employee or of any subsequent decision of any court, as the case may be;

17.3.7 the aforegoing confidentiality undertakings are in addition to and without prejudice to the Company's other rights at law or in terms of any other agreement

17.4 Breach of undertakings may be interdicted

A breach of any of the undertakings stipulated in this Agreement shall entitle the Company, without prejudice to any other rights available to it in law and notwithstanding any other provision of this Agreement, to apply to any court of competent jurisdiction for an appropriate interdict.

18 COMMUNICATIONS

18.1 The Employee acknowledges that the Company's local and wide area network infrastructure and its telecommunications system and its components, including telephones, facsimile machines, photocopiers, printers, personal organisers, palmtops, computers and servers, as well as the applications running on and services provided by these systems including e-mail and voicemail, Internet and Intranet, and file storage facilities (" IT Systems ") and all oral communications, telephone conversations, information and messages or any part of a message (whether in the form of data, texts, images, speech or any other form) transferred via and/or stored on the IT Systems, including any recording and/or copies made of such communications, and any attachments to such communications (" Communications ") made via the IT Systems are the property of the Company.  The IT systems must be used only to conduct the Company's business and to enhance the Employee's productivity.
 
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18.2 The Employee agrees that in order to meet the Company's operational requirements, the Company may monitor, access, examine and otherwise intercept the Employee's Communications without further notice, by human or automated means from time to time in accordance with the Company's information technology usage practice.



19 CONSENT TO DATA PROCESSING

19.1 The Employee hereby agrees that the Company may retain any personal information relating to him for as long as the Company is obliged to retain such personal information or record, or for as long as the Company reasonably requires the record for lawful purposes related to its functions or activities.

19.2 The Employee acknowledges and agrees that if the personal information which is required by the Company for lawful purposes is not provided voluntarily by him, the Company and the Group may be left with no alternative but to take such steps as may be necessary in terms of applicable employment legislation.

19.3 The Employee shall, subject to the grounds for refusal of access to records which may apply in terms of the Promotion of Access to Information Act 2 of 2002, be entitled to request the Company to ‑

19.3.1 provide the Employee with a record or a description of the personal information about the Employee held by the Company, including information about third parties who have or have had access to the information; and

19.3.2 correct or delete information about the Employee that is inaccurate, irrelevant, excessive, out of date, incomplete, misleading or obtained unlawfully.

20 DOMICILIUM AND NOTICES

20.1 The Parties choose domicilium citandi et executandi (" domicilium ") for all purposes relating to this Agreement, including the giving of any notice, the payment of any sum, the serving of any process, as follows -
 
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20.1.1   the Company   physical-   24 Ninth Street
Lower Houghton
Johannesburg
2198
facsimile-   + 27 11 477 2554

 attention-

20.1.2   the Employee   physical-   19 Baker Street
Bryanston, Sandton
2021
e-mail-  

20.2 Either Party shall be entitled from time to time, by giving written notice to the other, to vary its physical domicilium to any other physical address (not being a post office box or poste restante) within the RSA and to vary its facsimile or e-mail domicilium to any other facsimile number or e-mail.

20.3 Any notice given or payment made by either Party to the other (" Addressee ") which is delivered by hand between the hours of 09:00 and 17:00 on any Working Day to the Addressee's physical domicilium for the time being shall be deemed to have been received by the Addressee at the time of delivery.

20.4 Any notice given by either Party to the other which is successfully transmitted by facsimile to the Addressee's facsimile domicilium for the time being shall be deemed (unless the contrary is proved by the addressee) to have been received by the Addressee on the day immediately succeeding the date of successful transmission thereof.

20.5 This 20 shall not operate so as to invalidate the giving or receipt of any written notice which is actually received by the Addressee other than by a method referred to in this 20.

20.6 Any notice in terms of or in connection with this Agreement shall be valid and effective only if in writing and if received or deemed to be received by the Addressee.

19

21 TERMINATION

21.1 The Employee may terminate this employment relationship on giving the Company three months' notice (" the Required Notice ").

21.2 The Company may terminate the Employee's employment, whether such termination is with or without the Required Notice, for any reason recognised in law as sufficient.  If the Company terminates the Employee's employment other than for misconduct, the Company will give the employee ninety (90) days' notice in writing.  At the conclusion of the notice period or such sooner date as mutually agreed upon, the Company will pay the Employee:

21.2.1 one month's pay per year of service, pro-rated for part years' service and calculated on the basis of his current remunerations package;

21.2.2 the Employee's short-term and long-term incentives accrued to his last day of active employment; and

21.2.3 accumulated but unpaid leave accrued to his last active day of employment; less

21.2.4 any amounts owing to the Company.

21.3 The Company may, at its sole discretion, elect whether to retain the Employee's services during any period of Required Notice.  Notwithstanding this provision, the Company shall pay the Employee the full remuneration, which the Employee would have received had the Employee worked during the Required Notice period.

22 TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL

22.1 Subject to 22.2, upon the occurrence a Change in Control and -

22.1.1 the termination of the Employee's employment by the Company, either upon the occurrence of a Change in Control or at any time prior to the expiry of the twenty-four month period following a Change in Control, for any reason other than for any reason justifying dismissal or the Employee's death or disability; or
 
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22.1.2 where the Employee terminates his employment with the Company for Good Reason, either upon the occurrence of a Change in Control or at any time prior to the expiry of the twenty-four month period following a Change in Control, and following the delivery of written notice of termination by the Employee to the Company.

22.2 On the happening of any of the events contemplated in 22.1, the Employee shall be entitled to terminate this Agreement and the Employee's employment with the Company, and shall be entitled to receive within fourteen Working Days following the effective date of such termination by the Employee (" End Date "), and in lieu of any other amounts to which the Employee may otherwise be entitled upon termination of the Employee's employment, including, without limitation, under any other section of this Agreement, the following –

22.2.1 in addition to the Employee's accrued and unpaid total cost to company remuneration to the End Date and accrued and unpaid amounts of STIS and LTIS, a lump sum payment equal to the Employee's total cost to company remuneration which the Employee would otherwise have been entitled to receive for a period of twenty-four months (" Protected Period "), less any amounts owing by the Employee to the Company;

22.2.2 annual leave accruing to the Employee for the Protected Period.
 
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23 DISPUTE RESOLUTION

23.1 Any disputes arising from or in connection with this agreement or the termination thereof shall if so required by either party by giving written notice to that effect to the other party be resolved by mediation, and failing which finally by arbitration in accordance with the rules of the Arbitration Foundation of Southern Africa or any similar entity which is a successor to AFSA which provides arbitration services, (" AFSA ") by an arbitrator or arbitrators appointed by AFSA.  There shall be no right of appeal as provided for in article 22 of the aforesaid rules.

23.2 The dispute shall be determined initially by mediation and, failing which, finally by arbitration on the following terms and conditions -

23.2.1 the mediation and the arbitration hearing shall be held in camera.  Save to the extent strictly necessary for the purposes of the arbitration or for any court proceedings related thereto, neither party shall disclose or permit to be disclosed to any person any information concerning the mediation or arbitration or the award (including the existence of the mediation or arbitration and all process, communications, documents or evidence submitted or made available in connection therewith);

23.2.2 the mediator and arbitrator in the dispute shall be determined by agreement between the parties within a period of forty‑eight hours of the giving of notice of a dispute by any party as set out in 23.1, in the case of the mediator and forty‑eight hours after the mediator has advised the parties in writing that he is unable to resolve the dispute, in the case of the arbitrator. Failing such agreement, the mediator and/or arbitrator shall be appointed by AFSA;

23.2.3 the arbitrator shall finalise and deliver to the parties an award, which award shall be final and binding on the parties and shall not be subject to appeal, in writing within seven days from the date of completion of the arbitration proceedings;

23.2.4 where the award made by the arbitrator orders the payment of a sum of money, such sum shall, unless the award provides otherwise, carry interest at the prime rate of  interest, as determined by the Company's bankers at the time of the award, from the date of the award;
 
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23.2.5 the mediation shall be conducted on a without prejudice basis and shall not be recorded.  The arbitrator shall however record the arbitration proceedings by means of cassette tape recording or such other form of recording as the parties may agree upon.

23.3 Each party to this agreement -

23.3.1 expressly consents to any arbitration in terms of the aforesaid rules being conducted as a matter of urgency; and

23.3.2 irrevocably authorises the other to apply, on its behalf, in writing, to the secretariat of AFSA in terms of article 23(1) of the aforesaid rules for any such arbitration to be conducted on an urgent basis.

24 GENERAL

24.1 This Agreement and the annexures thereto and the various agreements and documents referred to in this Agreement constitute the sole record of the agreement between the Parties in regard to the subject matter thereof and shall substitute any other agreement between the Parties in respect of the subject matter of this Agreement.

24.2 Neither Party shall be bound by any express or implied term, representation, warranty, promise or the like not recorded herein.

24.3 No relaxation, extension of time, latitude or indulgence which any of the Parties (" the Grantor ") might show, grant or allow to another (" the Grantee ") shall in any way constitute a waiver by the Grantor or any of the Grantor's rights in terms of this Agreement and the Grantor shall not thereby be prejudiced or stopped from exercising any of its rights against the Grantee which may have then already arisen or which may arise thereafter.
 
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24.4 No alteration, variation, amendment or purported consensual cancellation of this Agreement or any deletion there from shall be of any force or effect unless reduced to writing and signed by or on behalf of the Parties hereto.

24.5 If any provision of this Agreement is held to be illegal, invalid or unenforceable for any reason, such provision shall be deemed to be pro non scripto, but without affecting, impairing or invalidating any of the remaining provisions of this Agreement which shall continue to be of full force and effect.

24.6 If any provision of this Agreement, which is not a material provision, becomes ineffective or impractical, the Parties shall negotiate in the utmost good faith to agree upon a suitable substitute provision or upon alternative compensation to be payable to the Party disadvantaged by such provision.

25 GOVERNING LAW

This agreement shall be governed by and construed in accordance with the laws of the RSA.

Signed at   on 2016
for
Caledonia Mining Corporation
   
 
who warrants that he is duly
authorised hereto


Signed at   on 2016
   
   

24


ANNEXURE A - TERM SHEET

Element
Term & Conditions
Position
 
Reporting To
 
Term of Contract
 
Salary
   
Medical/ Pension / Provident Fund
 




25
Exhibit 8.1
 
Exhibit  8.1
List of Caledonia Mining Corporation PLC group entities

 
 
Country of
incorporation
Legal 
shareholding
   
2015
2014
Subsidiaries within the Caledonia Mining Corporation Plc Group
 
           %
%
Caledonia Holdings Zimbabwe (Private) Limited (1)
Zimbabwe
100
100
Caledonia Mining Services Limited (2)
Zimbabwe
100
100
Caledonia Kadola Limited
Zambia
-
100
Caledonia Mining (Zambia) Limited
Zambia
-
100
Caledonia Nama Limited
Zambia
-
100
Caledonia Western Limited
Zambia
-
100
Mulonga Mining Limited
Zambia
-
100
Eersteling Gold Mining Corporation Limited
South Africa
100
100
Fintona Investments Proprietary Limited
South Africa
100
100
Caledonia Mining South Africa Proprietary Limited
South Africa
100
100
Greenstone Management Services Limited (3)
United Kingdom
100
100
Maid O' Mist Proprietary Limited
South Africa
100
100
Mapochs Exploration Proprietary Limited
South Africa
100
100
Caledonia Holdings (Africa) Limited
Barbados
100
100
Blanket (Barbados) Holdings Limited (4)
Barbados
100
100
Blanket Mine (1983) (Private) Limited (5)
Zimbabwe
(2) 49
49

(1) Direct subsidiary of Greensotne Management Services Limited (United Kingdom)
(2) Direct subsidiary of Caledonia Holdings Zimbabwe (Private) Limited
(3) Direct subsidiary of  Blanket (Barbados) Holdings Limited
(4) Direct subsidiary of  Caledonia Holdings (Africa) Limited
(5) Direct subsidiary of Caledonia Holdings Zimbabwe (Private) Limited


Exhibit 12.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Steven Curtis , certify that:


1.   I have reviewed this annual report on Form 20-F of Caledonia Mining Corporation (the "Company").

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company, and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting 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 generally accepted accounting principles;

c. Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is likely to materially affect, the company's internal control over financial reporting; and

5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the Audit Committee of the Company's Board of Directors (or persons performing the equivalent function);

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

b. Any, fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.



Date: March 30, 2015         (signed) Steven Curtis

 
President and Chief
Executive Officer

Exhibit 12.2
 
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I  Mark Learmonth, certify that:


1.   I have reviewed this annual report on Form 20-F of Caledonia Mining Corporation (the "Company").

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company, and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting 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 generally accepted accounting principles;

c. Evaluated the effectiveness of the company's disclosure controls and procedures  and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is likely to materially affect, the Company's internal control over financial reporting; and

5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent function);

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to  adversely affect the company's ability to record, process, summarize and report financial information; and

b. Any, fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.



Date:  March 30, 2016         (signed) Mark Learmonth

Vice- President Finance and Chief
Financial Officer

Exhibit 13.1
 
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F of Caledonia Mining Corporation (the "Company") for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), that I, Steven Curtis, President and Chief Executive Officer of  Caledonia , certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code 18 U.S.C.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.


By:   ( signed) Steven Curtis
       Steven Curtis, President and Chief Executive Officer
       Caledonia Mining Corporation

Date:   March 30, 2016

A signed original of this written statement required by Section 906 has been provided by Steven Curtis and will be retained by Caledonia Mining Corporation and furnished to the Securities and Exchange Commission or its staff upon request.



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F of Caledonia Mining Corporation (the "Company") for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), that I, Mark Learmonth, Vice President Finance and Chief Financial Officer of  Caledonia , certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code 18 U.S.C.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1 The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.


By:   (signed) Mark Learmonth
        Mark Learmonth, Vice President Finance and Chief Financial Officer
       Caledonia Mining Corporation

Date:  March 30, 2016

A signed original of this written statement required by Section 906 has been provided by Mark Learmonth and will be retained by Caledonia Mining Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

 
Exhibit 15.1



 

 
QUALIFIED PERSON DECLARATION

I, Daan van Heerden, in the capacity of Qualified Person do hereby certify that:-

1. To the best of my knowledge, information and belief, the Report contains all scientific and technical information required to be disclosed to make the Report not misleading.
2. The facts presented in the Report are correct to the best of my knowledge.
3. The analyses and conclusions are limited only by the reported forecasts and conditions.
4. I have no present or prospective interest in the subject property or asset.
5. My compensation, employment or contractual relationship with the Commissioning Entity is not contingent on any aspect of the Report.
6. I have no bias with respect to the assets that are the subject of the Report, or to the parties involved with the assignment.

Yours faithfully,
 
 
D v HEERDEN
B.Eng (Mining), M.Comm. (Bus. Admin.)
Pr. Eng., FSAIMM, AMMSA
DIRECTOR
 




Prepared by Minxcon (Pty) Ltd
Directors: NJ Odendaal, D Van Heerden, CP Mostert
Registration No. 2004/029587/07


Qualified Person
D van Heerden (Director):
B.Eng. (Min. Eng.), M.Comm. (Bus. Admin.),
ECSA, FSAIMM, AMMSA
Authors
J Burger (Mining Engineer)
Pr. Eng. Mining, Fin. Management, MMC, MSAIMM, ECSA
J Knight (Process Engineer)
B.Eng. (Chem), B.Eng. Hon. (MOT), MSAIMM
FJJ Fourie (Mining Engineer):
B.Eng. (Mining), SAIMM
D Dreyer (Mechanical Engineer)
B.Eng. (Mechanical)
Reviewed by Directors
D van Heerden (Director):
B.Eng. (Min. Eng.), M.Comm. (Bus. Admin.),
ECSA, FSAIMM, AMMSA
D Clemente (Director)
NHD (Ext. Met.), GCC, BLDP (WBS) MMMA, FSAIMM
U Engelmann (Director)
B.Sc. (Zoology & Botany), B.Sc. (Geol.), B.Sc. Hons. (Geol.), GSSA, Pr. Sci. Nat.
NJ Odendaal (Director):
BSc (Geol.), BSc (Min. Econ.), MSc. (Min. Eng.),
Pr. Sci. Nat., FSAIMM, MGSSA, MAusIMM





Prepared by Minxcon (Pty) Ltd
Directors: NJ Odendaal, D Van Heerden, CP Mostert
Registration No. 2004/029587/07


i


INFORMATION RISK

This Report was prepared by Minxcon (Pty) Ltd ("Minxcon"). In the preparation of the Report, Minxcon has utilised information relating to operational methods and expectations provided to them by various sources. Where possible, Minxcon has verified this information from independent sources after making due enquiry of all material issues that are required in order to comply with the requirements of the SAMREC and NI 43-101 Codes.

OPERATIONAL RISKS

Mining and mineral and coal exploration, development and production by their nature contain significant operational risks. It therefore depends upon, amongst other things, successful prospecting programmes and competent management. Profitability and asset values can be affected by unforeseen changes in operating circumstances and technical issues.

POLITICAL AND ECONOMIC RISK

Factors such as political and industrial disruption, currency fluctuation and interest rates could have an impact on future operations, and potential revenue streams can also be affected by these factors. The majority of these factors are beyond the control of any operating entity.

ii

TABLE OF CONTENTS
Item 1
– Executive Summary
1
 
Item 1 (a)
    – Property Description
1
 
Item 1 (b)
    – Ownership of the Property
2
 
Item 1 (c)
    - Geology and Mineral Deposit
2
 
Item 1 (d)
    - Overview of the Project Geology
3
 
Item 1 (e)
    - Local Property Geology
4
 
Item 1 (f)
    – Status of Exploration
6
 
Item 1 (g)
    – Mineral Resource and Mineral Reserve Estimates
6
 
Item 1 (h)
    – Development and Operations
7
 
Item 1 (i)
    - Market Valuation
7
 
Item 1 (j)
    – Qualified Person's Conclusions and Recommendations
10
Item 2
– Introduction
15
 
Item 2 (a)
    – Issuer Receiving the Report
15
 
Item 2 (b)
    – Terms of Reference and Purpose of the Report
15
 
Item 2 (c)
    – Sources of Information and Data Contained in the Report
15
 
Item 2 (d)
    – Qualified Persons' Personal Inspection of the Property
15
 
Item 2 (e)
    – Forward-Looking Statement
16
Item 3
– Reliance on Other Experts
17
Item 4
– Property Description and Location
18
 
Item 4 (a)
    – Area of the Property
18
 
Item 4 (b)
    – Location of the Property
18
 
Item 4 (c)
    – Mineral Deposit Tenure
18
 
Item 4 (d)
    – Issuer's Title to/Interest in the Property
21
 
Item 4 (e)
    – Royalties and Payments
22
 
Item 4 (f)
    – Environmental Liabilities
22
 
Item 4 (g)
    – Permits to Conduct Work
22
 
Item 4 (h)
    – Other Significant Factors and Risks
22
Item 5
– Accessibility, Climate, Local Resources, Infrastructure and Physiography
23
 
Item 5 (a)
    – Topography, Elevation and Vegetation
23
 
Item 5 (b)
    – Access to the Property
23
 
Item 5 (c)
    – Proximity to Population Centres and Nature of Transport
23
 
Item 5 (d)
    – Climate and Length of Operating Season
23
 
Item 5 (e)
    – Infrastructure
25
Item 6
– History
26
 
Item 6 (a)
    – Prior Ownership and Ownership Changes
26
 
Item 6 (b)
    – Historical Exploration and Development
26
 
Item 6 (c)
    – Historical Mineral Resource Estimates
26
 
Item 6 (d)
    – Historical Mineral Reserve Estimates
26
 
Item 6 (e)
    – Historical Production
26
Item 7
– Geological Setting and Mineralisation
28
 
Item 7 (a)
    - Regional Geology
28
 
Item 7 (b)
    - Local Geology
29
 
Item 7 (c)
    - Project Geology
30
 
Item 7 (d)
    - Blanket Mine Mineral Deposits
32
Item 8
– Deposit Types
34
 
Item 8 (a)
    - Disseminated Sulphide Replacement Reefs
34
 
Item 8 (b)
    - Quartz-Filled Reefs and Shears
34
 
Item 8 (c)
    - Mineralisation
35
 
 
iii
 
Item 9
– Exploration
36
 
Item 9 (a)
    – Survey Procedures and Parameters
37
 
Item 9 (b)
    - Sampling Methods and Sample Quality
37
 
Item 9 (c)
    – Sample Data
38
 
Item 9 (d)
    – Results and Interpretation of Exploration Information
38
Item 10
– Drilling
40
 
Item 10 (a)
    – Type and Extent of Drilling
40
 
Item 10 (b)
    – Factors Influencing the Accuracy of Results
43
 
Item 10 (c)
    – Exploration Properties – Drill Hole Details
44
Item 11
  – Sample Preparation, Analyses and Security
47
 
Item 11 (a)
    – Sample Handling Prior to Dispatch
47
 
Item 11 (b)
     – Sample Preparation and Analysis Procedures
47
 
Item 11 (c)
    – Quality Assurance and Quality Control
48
 
Item 11 (d)
    – Adequacy of Sample Preparation
48
Item 12
– Data Verification
49
 
Item 12 (a)
    – Data Verification Procedures
49
 
Item 12 (b)
    – Limitations on/Failure to Conduct Data Verification
51
 
Item 12 (c)
    – Adequacy of Data
51
Item 13
– Mineral Processing and Metallurgical Testing
52
 
Item 13 (a)
    – Nature and Extent of Testing and Analytical Procedures
52
 
Item 13 (b)
    – Basis of Assumptions Regarding Recovery Estimates
52
 
Item 13 (c)
    – Representativeness of Samples
52
 
Item 13 (d)
    – Deleterious Elements for Extraction
52
Item 14
– Mineral Resource Estimates
53
 
Item 14 (a)
    – Assumptions, Parameters and Methods Used for Resource Estimates
53
 
Item 14 (b)
    – Disclosure Requirements for Resources
55
 
Item 14 (c)
    – Individual Grade of Metals
56
 
Item 14 (d)
    – Factors Affecting Resource Estimates
56
Item 15
– Mineral Reserve Estimates
57
 
Item 15 (a)
    - Key Assumptions, Parameters and Methods
57
 
Item 15 (b)
    - Mineral Reserve Reconciliation - Compliance with Disclosure Requirements
57
 
Item 15 (c)
    - Multiple Commodity Reserve (Prill Ratio)
58
 
Item 15 (d)
    - Factors Affecting Mineral Reserve Estimation
58
Item 16
– Mining Methods
59
 
Item 16 (a)
    – Parameters Relevant to Mine Design
59
 
Item 16 (b)
    – Production Rates, Expected Mine Life, Mining Unit Dimensions, and Mining Dilution
61
 
Item 16 (c)
    – Requirements for Stripping, Underground Development and Backfilling
62
 
Item 16 (d)
    – Required Mining Fleet and Machinery
62
Item 17
- Recovery Methods
63
 
Item 17 (a)
    - Flow Sheets and Process Recovery Methods
63
 
Item 17 (b)
    - Operating Results Relating to Gold Recovery
66
 
Item 17 (c)
    - Plant Design and Equipment Characteristics
67
 
Item 17 (a)
    – Current Requirements for Reagents and labour
70
Item 18
– Project Infrastructure
72
 
Item 18 (a)
    - Mine Layout and Operations
72
 
Item 18 (b)
     - Infrastructure
73
 
Item 18 (c)
     - Services
73
Item 19
– Market Studies and Contracts
75
 
Item 19 (a)
– Market Studies and Commodity Market Assessment
75
 
Item 19 (b)
– Contracts
86
 
 
iv
 
Item 20
– Environmental Studies, Permitting and Social or Community Impact
87
 
Item 20 (a)
    – Relevant Environmental Issues and Results of Studies Done
87
 
Item 20 (b)
    – Waste Disposal, Site Monitoring and Water Management
87
 
Item 20 (c)
    - Permit Requirements
88
 
Item 20 (d)
    – Social and Community-Related Requirements
88
 
Item 20 (e)
    – Mine Closure Costs and Requirements
88
Item 21
– Capital and Operating Costs
89
 
Item 21 (a)
   – Capital Costs
89
 
Item 21 (b)
    – Operating Cost
89
Item 22
– Economic Analysis
96
 
Item 22 (a)
    - Principal Assumptions
96
 
Item 22 (b)
    - Cash Flow Forecast
98
 
Item 22 (c)
    - Net Present Value
102
 
Item 22 (d)
    - Regulatory Items
102
 
Item 22 (e)
    - Sensitivity Analysis
103
Item 23
- Adjacent Properties
105
 
Item 23 (a)
    – Public Domain Information
105
 
Item 23 (b)
    – Sources of Information
105
 
Item 23 (c)
    – Verification of Information
106
 
Item 23 (d)
    – Applicability of Adjacent Property's Mineral Deposit to Project
106
 
Item 23 (e)
    – Historical Estimates of Mineral Resources or Mineral Reserves
106
Item 24
– Other Relevant Data and Information
107
 
Item 24 (a)
-     Upside Potential
107
Item 25
– Interpretation and Conclusions
116
Item 26
– Recommendations
119
Item 27
– References
121
 
Glossary of Terms
123
 
Appendix
128

FIGURES

     
Figure 1:
General Location of Blanket Mine
18
Figure 2:
Location of Blanket Mineral Rights
20
Figure 3:
 Blanket Mine Ownership Structure
21
Figure 4:
Gwanda Average Temperatures
24
Figure 5:
Gwanda Average Monthly Precipitation
24
Figure 6:
General Location and Infrastructure
25
Figure 7:
Historical Production Statistics
27
Figure 8:
Blanket Historical Production
27
Figure 9:
Zimbabwe Craton
28
Figure 10:
Regional Geology of the Gwanda Greenstone Belt
29
Figure 11:
Stratigraphic Column of the Blanket Mine Area
30
Figure 12:
Local Geology of Blanket Mine
31
Figure 13:
Blanket Mine Longitudinal Section Showing Production Areas
31
Figure 14:
Location of GG and Mascot Exploration Shafts
36
Figure 15:
GG Exploration Shaft
36
Figure 16:
Chip Sampling and Sludge Sampling and Evaluation Holes at Eroica
38
Figure 17:
An Example of a Vertical Projection Using the Chip Sampling to Delineate the Payable Mineral Deposit
39
 
 
v
 
Figure 18:
 GG Project Area Indicating Mineral Deposits Relative to Surface Drilling
40
Figure 19:
Typical Style of Drilling in Haulages
41
Figure 20:
Deep Drilling from Underground
42
Figure 21:
 Assay Plan
43
Figure 22:
 Section through GG Exploration Shaft with Resource Blocks, Development Sampling and Drilling
44
Figure 23:
Mascot Main Reef Resource Blocks as Defined by Historical Development Sampling and Current Drilling
45
Figure 24:
 Mascot South Parallel Reef Projection Indicating Resource Blocks as Defined by Drill Hole Intersections
46
Figure 25:
Development Assay Plan
49
Figure 26:
Resource Block Evaluation Sheet
50
Figure 27:
 Resource Block Summary (note that Sample Width has m and not cm units – affects other units)
50
Figure 28:
Underhand Stoping Method
59
Figure 29:
Long Hole Stoping
60
Figure 30:
 Blanket Mine Total Production
62
Figure 31:
Process Flow Schematic – Comminution Circuits
64
Figure 32:
Process Flow Schematic – CIL and Elution Circuits
65
Figure 33:
Historic Milled Tonnes and Head Grade from January 2013 to July 2014
66
Figure 34:
Historic Recoveries and Gold Production from January 2013 to July 2014
67
Figure 35:
Cone Crusher Feed Stockpile
67
Figure 36:
Cone Crushers
68
Figure 37:
Rod Mills
68
Figure 38:
CIL Circuit
69
Figure 39:
Elution and Electrowinning Vessels
70
Figure 40:
General Location and Infrastructure
72
Figure 41:
No 4 Shaft Headgear and Winder Room
72
Figure 42:
Surface Infrastructure Arrangement
73
Figure 43:
Diesel Genset Unit and Genset Shed
74
Figure 44:
Nominal Spot Gold Price and Price in Real Current Day Terms
75
Figure 45:
Top 10 Countries by Total Resource Ounces
77
Figure 46:
Gold Supply
78
Figure 47:
Recycled Gold and Price Relationship
79
Figure 48:
 Global Demand for Gold
80
Figure 49:
Central Bank Annual Net Sales and Purchases
81
Figure 50:
Gold Price vs. USD/Euro
83
Figure 51:
Gold Price vs. Real US Rate
84
Figure 52:
Gold Price vs. Real US Rate
84
Figure 53:
Gold Yearly Prices
85
Figure 54:
Real Gold Price Ranges
86
Figure 55:
Capital Schedule Based on Reserves
89
Figure 56:
Actual vs. Planned Operating Expenditure
90
Figure 57:
 Actual vs. Planned Operating Expenditure and Milled Tonnes
90
Figure 58:
Labour Split
91
Figure 59:
Actual vs. Forecast Unit Costs
93
Figure 60:
Production Cost per Milled Tonne vs. Tonnes Milled
95
Figure 61:
Fully-Allocated Costs vs. Gold Price
95
Figure 62:
Junior and Major Indices and Caledonia (CAL) Measured against the S&P 500
98
Figure 63:
Saleable Product
98
 
 
vi
 
Figure 64:
Annual and Cumulative Cash Flow
99
Figure 65:
Actual Profit vs. Forecasted Profit
100
Figure 66:
Project Sensitivity (NPV8.36%)
103
Figure 67:
Adjacent Properties
105
Figure 68:
Below 750 m Level - Blanket Mine
108
Figure 69:
Blanket PEA Production Profiles
108
Figure 70:
Saleable Product
109
Figure 71:
PEA Expansion Project Capital Scheduling
110
Figure 72:
PEA Study Capital Schedule
111
Figure 73:
Monte Carlo LoM Summary Report
113
Figure 74:
Annual and Cumulative Cash Flow
114
Figure 75:
Project Sensitivity (NPV8.36%)
114


TABLES
Table 1:
August 2013 and August 2014 Blanket Mine Mineral Resource Reconciliation (as tabulated by Blanket Mine)
54
Table 2:
August 2014 Mineral Resource as Verified by Minxcon
55
Table 3:
August 2014 Mineral Resource for GG as Verified by Minxcon
55
Table 4:
August 2014 Mineral Resource for Mascot as Verified by Minxcon
55
Table 5:
Mine Design Criteria - Stoping
57
Table 6:
Mineral Reserve Statement (October 2014)
57
Table 7:
Mineral Reserve Reconciliation
58
Table 8:
MCF History
61
Table 9:
Historic Production from 2013 to July 2014.
66
Table 10:
Labour Complement for the Plant
70
Table 11:
 Reagent and Consumable Consumptions
71
Table 12:
Geographical Gold Deposits
76
Table 13:
Country Listing of Gold Reserves
77
Table 14:
Top 20 Gold Mining Countries
78
Table 15:
Top 40 Reported Official Gold Holdings (As at March 2014)
82
Table 16:
Gold Price Forecast (Nominal Terms)
86
Table 17:
Fixed and Variable Mining Operating Cost
92
Table 18:
Historic Plant Operating Costs between 2012 and July 2014
92
Table 19:
Expected Plant Operating Cost at Steady State
93
Table 20:
OPEX Summary
94
Table 21:
Gold Forecast
96
Table 22:
Recovery Percentage
97
Table 23:
Nominal Discount Rate Calculation
97
Table 24:
Production Breakdown in LoM
99
Table 25:
Real Cash Flow
101
Table 26:
Project Valuation Summary – Real Terms
102
Table 27:
Profitability Ratios
102
Table 28:
Input Ranges
102
Table 29:
Range of Values
102
Table 30:
Sensitivity Analysis of Gold Price and Grade to NPV8.36% (USDm)
104
Table 31:
Sensitivity Analysis of Production Costs and Sustaining Capital to NPV8.36% (USDm)
104
Table 32:
PEA Production Breakdown in LoM
109
Table 33:
Expansion Project Capital Estimation
110
 
 
vii
 
Table 34:
Total Capital Estimation
110
Table 35:
PEA OPEX Summary
111
Table 36:
PEA Fully-Allocated Costs vs. Gold Price
112
Table 37:
PEA Valuation Summary – Real Terms
112
Table 38:
PEA Profitability Ratios
112
Table 39:
Monte Carlo Input Ranges
113
Table 40:
Sensitivity Analysis of Gold Price and Grade to NPV8.36% (USDm)
115
Table 41:
Sensitivity Analysis of Production Costs and Capital to NPV8.36% (USDm)
115
Table 42:
 Glossary of Terms
123


APPENDICES
 

Appendix 1:
Qualified Persons' Certificates
128
Appendix 2:
Blanket Operating Claims
133
Appendix 3:
Blanket Non-Operating Claims
137
Appendix 4:
Blanket Exploration Claims
138




1


ITEM 1 – EXECUTIVE SUMMARY
Minxcon (Pty) Ltd ("Minxcon") was commissioned by Greenstone Management Services (Pty) Limited ("GMS" or "the client") to compile an NI 43-101 Technical Report on behalf of Blanket Mine (1983) (Private) Limited ("Blanket") for its parent company Caledonia Mining Corporation ("Caledonia"), a Canadian registered company which is listed on the Toronto Stock Exchange ("TSX – CAL") and on the AIM Market of the London Stock Exchange ("LSE−CMCL") and also traded on the NASDAQ−OTCBB. GMS is a subsidiary of Caledonia that employs the South African based management that receives a management fee from Blanket. Following the implementation of indigenisation in September 2012, Caledonia owns 49% of Blanket; the other 51% of Blanket is held by Indigenous Zimbabwean shareholders including Blanket's employees and management and the community in which Blanket is located.  Blanket is incorporated in Zimbabwe and is the owner and operator of the Blanket Mine.
Item 1 (a) – Property Description
The Blanket Mine is located in the south-west of Zimbabwe, approximately 15 km northwest of Gwanda, the provincial capital of Matabeleland South. Gwanda is located 150 km southeast of Bulawayo, the country's second largest city, 196 km northwest of the Beit Bridge Border post with South Africa, and 560 km from Harare, Zimbabwe's capital city. Access to the mine is by an all-weather tarred road from Gwanda, which is linked to the Beit Bridge to Bulawayo, Harare by a national highway. The general geographic coordinates of Blanket Mine are Latitude 20°52' S, Longitude 28°54' E.
General Location of Blanket Mine
 
 
Location of the Blanket Mine
Blanket Mine is a well-established Zimbabwean gold mine, which operates at a depth of approximately 750 m below surface and produced approximately 45,500 ounces of gold in 2013. Blanket also holds brownfield exploration and development projects both on the existing mine area and its 18 satellite properties, which include the GG and Mascot projects which are located 10 km and 33 km from the Blanket metallurgical recovery plant, respectively.

2
Item 1 (b) – Ownership of the Property
The Indigenisation and Economic Empowerment Act ("The Act"), which was enacted in 2007, requires that 51% of all commercial enterprises in Zimbabwe be owned by indigenous Zimbabweans. On 20 February 2012 Caledonia 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 51% of Blanket would be sold for a paid transactional value of USD30.09 million. The various transactions were implemented with effect from September 5, 2012 on the following bases:-
· 16% was sold to the National Indigenisation and Economic Empowerment Fund;
· 10% was sold to a Management and Employee Trust for the benefit of the present and future managers and employees of Blanket;
· 15% was sold to identified Indigenous Zimbabweans; and
· 10% was donated to the Gwanda Community Share Ownership Trust. Blanket also made a non-refundable donation of USD1 million to the Trust as soon as it was established and paid advance dividends of USD4 million before the end of April 2013.
The Blanket Mine operates under a Special Licence (No. 5030) which was issued under the Mines and Minerals Act of 1961 (Chapter 21:05). The mine's claims are protected under this Act. The Blanket Mine covers the claims of Jethro, Blanket Section, Feudal, AR, Sheet, Eroica and Lima, comprising a total area of approximately 2,540 ha.
Ownership Structure
 
 
Ownership Structure
Item 1 (c) - Geology and Mineral Deposit
Zimbabwe's known gold mineralisation occurs in host rocks of the Zimbabwe Craton, which is made up of Archaean rocks. The geology of the Craton is characterised by deformed and metamorphosed rocks which include high-grade metamorphic rocks, gneisses, older granitoids, greenstone belts, intrusive complexes, younger granites and the Great Dyke, which makes up the geology of the Zimbabwe Craton. The Chingezi gneiss, Mashaba tonalite and Shabani gneiss form part of a variety of tonalities and gneisses of varying ages. Three major sequences of slightly younger gold-bearing greenstone belt supracrustal rocks exist:-

3
· Older greenstones called the Sebakwian Group, which are mostly metamorphosed to amphibolite facies. They comprise komatiitic and basaltic volcanic rocks, some banded iron formation ("BIF"), as well as clastic sediments.
· The Lower Bulawayan Group, which comprises basalts, high-Mg basalts, felsic volcanic rocks and mixed chemical and clastic sediments. The Lower Bulawayan Group forms the Belingwe (Mberengwa) greenstones.
· The Upper Bulawayan (upper greenstones) and Shamvaian groups, which comprise a succession of sedimentary and komatiitic to tholeiitic to calc-alkaline rocks.
Three metamorphic belts surround the Zimbabwe Craton:-
· Archaean Limpopo Mobile Belt to the south;
· Magondi Mobile Belt on the north-western margin of the Craton; and
· Zambezi Mobile Belt to the north and northeast of the Zimbabwe Craton.
Zimbabwe Craton Relative to Other Cratons
 
 
The Zimbabwe Craton Relative to Other Cratons
4



Item 1 (d) - Overview of the Project Geology
The Blanket Mine is situated on the north-western limb of the Archaean Gwanda Greenstone Belt. Several other gold deposits are situated along the same general strike as the mine. Approximately 268 mines operated in this greenstone belt at one stage, however, the Blanket Mine is one of the few remaining mines. At Blanket Mine, the rock units strike north−south, plunge in a westerly direction and dips to the west (in some areas, southwest).
Item 1 (e) - Local Property Geology
The local geology consists of a basal felsic unit in the east that is not known to be mineralised. It is generally on this lithology that the tailings disposal sites are located. An ultramafic zone that includes the BIFs hosting the eastern dormant cluster and the Mineral Deposits of the nearby Vubachikwe complex lies to the west of this unit. Active Blanket Mineral Deposits occur in the immediately overlying mafic unit. A capping of andesite completes the stratigraphic sequence.
Blanket Mine is part of the group of mines that make up the North Western Mining Camp, also called the Sabiwa group of mines. Blanket Mine is a cluster of mines that extend from Jethro in the south, through Blanket, the currently defunct Feudal, AR South, AR Main, Sheet, Eroica and Lima.
Longitudinal Section of Blanket Mine
 
 
Blanket Mine Longitudinal Section Showing Production Areas
Dormant old workings include Sabiwa, Jean, Provost, Redwick, Old Lima, and Smiler. The latter group of mines form the northern continuation of the Vubachikwe zone and are hosted by BIFs. The mafic unit which hosts the gold mineralisation is, for the most part, a metabasalt with occasional remnants of pillow basalts. Regionally, the rock is a fine-grained massive amphibolite with localised shear planes. A low angle transgressive shear zone (up to 50 m wide cutting through the mafic zone) is the locus of the gold ore 25 shoots. The shear zone is characterised by a well-developed fabric and the presence of biotite. A regional dolerite sill cuts the entire sequence from Vubachikwe through Blanket to Smiler. The sill does not cause a significant displacement and although it truncates all the ore shoots, there is continuity of mineralisation below the sill (AGS, 2006). The upper zone comprises massive to pillowed lavas with intercalations of interflow sediments. According to a 2006 report by AGS, the rock is a fine-grained massive amphibolite with localised shear planes.
5



Geology of the Project Area
 
 
Lithology of Blanket Mine Area
The gold Mineral Deposits are found around a low-angle transgressive shear zone. A simplified stratigraphic column for the Blanket mine is shown in the following figure.
6



Stratigraphic Column
 
 
Stratigraphy of Blanket Mine
Item 1 (f) – Status of Exploration
The Blanket Mine is a producing operation. Exploration activities are carried out both on and off the mine. Mine exploration takes place mostly underground on the producing claims and is aimed at expanding the knowledge of the ore shoot trends which are being mined, as well as searching for potential additional Mineral Deposits. Near-mine exploration takes place on non-producing assets, which have the potential to yield new sources of ore and possibly give rise to new mines.
The mine's exploration title holdings are in the form of registered mining claims (78 in total) in the Gwanda Greenstone Belt. These claims include a small number under option and cover an area of approximately 2,500 ha. The blocks of claims were pegged as follows:-
· 47 are registered as precious metal (gold) blocks covering 415 ha. Gold or precious metal claims measure 10 ha x 1 ha (10 ha) and;
· 31 claims were pegged and are registered as base metal (Cu, Ni, As) blocks, covering an area of 2,085 ha. Base-metal claims are larger than precious metal blocks.
Item 1 (g) – Mineral Resource and Mineral Reserve Estimates
The following table reflects the Mineral Resource Statement for Blanket Mine for August 2014, as verified by Minxcon. The Blanket Mine Resource classifications have been changed to Measured, Indicated and Inferred. No reserves are stated here, however, the Mineral Resources are declared inclusive of all Mineral Reserves. The reserves have been declared separately, as determined by the Reserve Life of Mine plan ("Reserve LoM Plan"). The proven and probable pillar reserves (as per the Blanket Mine mineral resource tabulation) have been declared as Measured Resources and the Probable Reserves (as per the Blanket Mine mineral resource tabulation) have been included in the Indicated Resource. The modifying factors, as applied by Blanket Mine to their Proven and Probable Reserves, have not been applied to the Minxcon Mineral Resource. The Indicated and Inferred mineral resource categories remained the same as that of the Caledonia Mineral Resource.

7
August 2014 Mineral Resource as Verified by Minxcon
Mineral Resource Category
Tonnage
Au
Au Content
Ounces
 
t
g/t
kg
oz.
Measured Resource
1,572,733
3.91
6,146
197,606
Indicated Resource
2,478,902
3.77
9,340
300,288
Total Measured and Indicated
4,051,635
3.82
15,486
497,895
Inferred Resource
3,344,831
5.11
17,106
549,963
Notes:
1. Tonnes are in situ .
2. All figures are in metric tonnes.
3. Mineral Reserves are included in the Mineral Resource.
4. Mineral Resources are stated at a 1.96 g/t cut-off.
5. No geological losses were applied to the tonnage.
6. Tonnage and grade have been rounded and this may result in minor adding discrepancies.
7. The tonnages are stated at a relative density of 2.86 t/m 3 .
8. Conversion from kg to oz.: 1:32.15076.
The Measured and Indicated Mineral Resources were converted to Proven and Probable Mineral Reserves by applying applicable mining rates and other modifying factors. The Mineral Reserve Statement for Blanket mine is illustrated in the following table.
Mineral Reserve Statement (October 2014)
Mineral Reserve Category
Tonnage
Au
Au Content
Ounces
t
g/t
kg
oz.
Proven
856,005
3.40
2,912
93,638
Probable
2,077,828
3.78
7,862
252,758
Total Mineral Reserves
2,933,833
3.67
10,774
346,396
Notes:
1. Tonnages refer to tonnes delivered to the metallurgical plant.
2. All figures are in metric tonnes.
3. 1kg = 32.15076 oz.
4. Pay limit Blanket Mine 2.03 g/t.
5. Pay Limit calculated: USD/oz. = 1250; Direct Cash Cost (C1) – 71 USD/t milled.
6. The reduction in ounces is mainly attributed to the exclusion of previously stated Proven and Probable Reserves below 750 m Level. (These ounces are accounted for as Measured and Indicated Resources.)
Item 1 (h) – Development and Operations
General Infrastructure
Blanket Mine is an operational mine with well-established infrastructure and no major modifications or upgrades are necessary to sustain mining and processing operations.
Processing
The Blanket Gold Plant consists of crushing, milling, Carbon-in-Leach ("CIL") and batch elution electro-winning circuits. The front-end comminution circuits (crushing and milling) have a capacity of about 40 ktpm while the CIL and downstream circuits have a capacity of approximately 100 ktpm to 120 ktpm. The plant achieved a recovery of about 93% over the past year. The plant is well-operated and maintained and housekeeping is of a high standard. The processing costs are high for a plant treating free milling material. Unit costs can be reduced by increasing tonnes treated and optimising reagent and power consumption.
Item 1 (i) - Market Valuation
This valuation is based on a free cash flow and measures the economic viability of the Reserves to demonstrate if the extraction of the Mineral Deposit is viable and justifiable under a defined set of realistically assumed modifying factors. This is illustrated by using the Discounted Cash Flow ("DCF") method on a Free Cash Flow to the Firm ("FCFF") basis, to calculate the nett present value ("NPV") and the intrinsic value (fundamental value based on the technical inputs, and a cash flow projection that creates a NPV) of the Project in real terms. The valuation reflects the full value of the operation and no values attributable to Caledonia's participation in Blanket were calculated. The model was set up in calendar years with year 2014 only including October to December. Blanket's financial years are also based on calendar years from January to December. The DCF valuation was calculated at a gold price of USD1,250/oz., as received from the Client.

8
Operating Costs
Costs reported for the Blanket Mine, which consist of plant and mining operating costs, are displayed in the following table. Other cash costs include the general and administration fees, Caledonia management fee as well as overheads. The royalty amount includes the 5% Zimbabwean revenue royalty.
OPEX Summary
Item
Unit
Amount
Unit
Amount
Net Turnover
USD/Milled tonne
138
USD/Gold oz.
1,250
Mine Cost
USD/Milled tonne
49
USD/Gold oz.
446
Plant Costs
USD/Milled tonne
17
USD/Gold oz.
153
Other Costs
USD/Milled tonne
5
USD/Gold oz.
41
Direct Cash Costs (C1)
USD/Milled tonne
71
USD/Gold oz.
641
Capex
USD/Milled tonne
5
USD/Gold oz.
45
Production Costs (C2)
USD/Milled tonne
76
USD/Gold oz.
685
Royalties
USD/Milled tonne
7
USD/Gold oz.
63
Other Cash Costs
USD/Milled tonne
13
USD/Gold oz.
116
Fully Allocated Costs/   Notional Costs (C3)
USD/Milled tonne
95
USD/Gold oz.
864
NCE Margin
%
31%
%
31%
EBITDA*
USD/Milled tonne
48
USD/Gold oz.
431
EBITDA Margin
%
34%
   
Gold Recovered
oz.
323,881
   
Notes:
1. * EBITDA excludes capital expenditure.
2. Numbers may not add up due to rounding.
Direct cash cost for Blanket is USD71/milled tonne that equates to USD641/oz., which is below the global cash cost of USD767/oz. The Blanket Mine has a fully-allocated cost of USD95/milled tonne that equates to USD864/oz. The capital schedule for the Blanket mining operations for the LoM is illustrated in the following figure. There is no initial or infrastructure capital for the Reserve LoM plan, only sustaining capital.
Capital Schedule Based on Reserves
The following table illustrates the Project NPV at various discount rates with a best-estimated value of USD66 million at a real discount rate of 8.36%.

9

Project Valuation Summary – Real Terms
Item
Unit
Value
Real NPV @ 0.00%
USDm
                                           87
Real NPV @ 5.00%
USDm
                                           70
Real NPV @ 8.36%
USDm
                                           66
Real NPV @ 10.00%
USDm
                                           57
Real NPV @ 15.00%
USDm
                                           47
The following table illustrates the Project profitability ratios.
Profitability Ratios
Item
Unit
Profitability Ratios
Total ounces in Reserve LoM plan
oz.
346,397
In Situ Mining Inventory Valuation
USD/oz.
190
Production LoM
Years
8
Present Value of Income Flow
USDm
106
Break Even Milled Grade
g/t
2.54
Incentive Gold Price
USD/oz.
864
The annual and cumulative cash flow forecast for the LoM is displayed in the following figure.
Annual and Cumulative Cash Flow (Real Terms)
For the DCF, the gold price and grade have the biggest impact on the sensitivity of the Project, followed by the operating cost. The Project is not sensitive to the sustaining capital.

10
Project Sensitivity (NPV8.36%)
Item 1 (j) – Qualified Person's Conclusions and Recommendations
Conclusions
Mineral Resources:-
· The Mineral Resources and Reserves tabulated on the operation are not aligned with best practises and reporting formats. These spread sheets should be revised.
· The manual mineral resource estimation methodology is deemed satisfactory, but a digital database would have advantages in terms of 3D visualisation and understanding the data.
· The QA/QC practices are not up to standard and need to be revised and implemented.
· The "deep" drilling and exploration drilling QA/QC needs to be improved.
· Drilling for the depth extensions should be increased to increase the confidence of the resource for the deepening of the project.
Mining:-
· The Reserve LoM plan is based on the depletion of Mineral Resource blocks following a study of mine plans.
· The developments required to access the mine's Measured and Indicated Mineral Resources have been completed.
· Historic production volumes have been on the increase since Jan 2012, moving closer to 35 ktpm. The mine plan will require production to maintain a slow but steady increase up to 40 ktpm in 2018.
· Rock conditions are fairly competent and roof support is rarely required.
Engineering and Infrastructure:-
· Existing infrastructure at the Blanket Mine is sufficient to sustain the current production profile.
Processing:-
· The plant is well-maintained and equipped to crush and mill up to 40 kt per month.
· The CIL circuit has adequate capacity to treat up to 120 kt of milled material per month.
· The plant is adequately staffed considering that most of the plant is manually controlled.
· Overall gold recoveries have been consistent on a monthly basis.
· The high free gold recovery of approximately 50% contributes to the overall high gold recovery.
· The incorporation of a central process control system can improve recoveries and reduce costs.
· Opportunities exist to reduce costs by optimising power measurement and reagent consumption.
11


Market Evaluation:-
· The Project investigated is financially feasible at an 8.36% real discount rate.
· The best-estimated value of the Project was calculated at USD66 million.
· The Blanket Mine has an NCE margin of 31% that is slightly higher when benchmarked against other mines.
· The Project is most sensitive to gold price and grade.
· Direct Cash cost for the Project is USD71/milled tonne that equates to USD641/oz., which is below the reported average global gold cash cost of USD767/oz.
· Fully-allocated cost for the Project is USD95/milled tonne that equates to USD864/oz.
Preliminary Economic Assessment Conclusions:-
Minxcon was commissioned by GMS in November 2014 to complete a scoping level study on the Blanket Mine which comprises an initial extension from below 750 m Level to 1120 m Level, in the form of a Preliminary Economic Assessment ("PEA"). The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized. The valuation does not include the current mine plan that is based on the Mineral Reserves and Resources above 750 m but only considers the expansion project below 750 m as a stand-alone project. The PEA thus reflects the Project economics on a stand-alone basis, and the economic analysis is based on an assumed requirement to raise money for the expansion capital expenditures, despite the fact that Caledonia would be able to fund those capital expenditures from cash flow from the existing mine operations. The best-estimated value of the PEA was calculated at USD65 million with at a real discount rate of 8.36%. The IRR was calculated at 42%. Substantial upside potential exists in that the resource planned in the PEA is small in comparison to the exploration targets that could be converted to resource below 750 m Level.
Study Level:
· The Mineral Resource confidence is concept level because the resources below 750 m Level are predominantly in the Inferred category. The following figure illustrates the red area included in the PEA Study:-
 
Below 750 m Level - Blanket Mine
 
 
Blanket Project Area Split, Below 750 m (Red Portion)

· The PEA Study, design, schedule and OPEX estimation is better than concept level and is based on current actual performance.
· The capital estimation was estimated at a very high level of confidence based on engineering designs, drawings and firm quotes and is at least at a definitive level of confidence.
12


Mining Areas:
· The PEA includes only the Inferred Mineral Resources from the Below 750 m Level area.
Infrastructure:
· The existing infrastructure at the Blanket mine will be utilised in parallel with new infrastructure which is specifically aimed at targeting the Below 750 m Level mining areas.
· The extensions will entail the sinking of a new vertical shaft from surface as well as the completion of the No 6 Winze deepening project.
Additional Capital:
· Capital for the various key expansion project items amounts to USD43 million.
Recoveries:
· The historic metallurgical recoveries of 93.5% are not expected to change with the increased tonnes from the Blanket Mine.
PEA Study:
· The tonnage profile for the PEA is based on the replacement tonnages (Inferred Resources) to be mined through the existing shaft and the new central shaft situated in-between AR Main and AR South.
· The average grade is expected to be 4.36 g/t.
· The infrastructure extensions as defined in the PEA contain approximately 385 koz of gold in situ .
· The PEA Study excludes the Exploration Target areas below AR Main, AR South, Lima and Eroica. The PEA project will provide access to these Exploration target areas and to future exploration areas below 1120 level that will potentially extend the LoM.
Valuation:
· The best-estimated value of the PEA was calculated at USD65 million at a real discount rate of 8.36%. The IRR was calculated at 42%
· By using the Monte Carlo model for the PEA, the value range of the Blanket operation plots between USD44 million and USD84 million.
· The PEA is most sensitive to gold price and grade.
· The PEA has a break-even gold price of USD789/oz., including capital.
·
Direct Cash cost for the PEA is USD67/milled t that equates to USD513/oz., which is below the average global gold cash cost of USD767/oz.
·
Fully-allocated cost for the PEA is USD86/milled t that equates to USD789/oz.; noticeably lower than similar gold mining operations.
13
Recommendations
Mineral Resources:-
· Minxcon recommends that the Mineral Resources are stated as inclusive of Mineral Reserves and that the Measured and Indicated Resources be declared separate from the Inferred Resources.
· The manual data should be captured digitally to reduce human error and assist in the 3D visualisation of the Mineral Deposit and potentially find hidden ore resource blocks.
· Geostatistical analysis of the data could possibly help to increase the mineral resources.
· Best practice QA/QC must be implemented on the operation, especially for the deep drilling and other exploration drilling as these sample points are single points and have greater influence than the day-to-day evaluation samples.
· Currently, the block evaluation does not correct for dip, which leads to under evaluation of the volume and content per resource block.
· Short deflections must be drilled when drilling the "deep" drill holes and exploration drill holes to understand variability and improve the confidence of the intersections for the Indicated and Inferred Resources.
· Long inclined boreholes ("LIB") or directional drilling should be investigated as an option to drill more and deeper intersections in the "pay shoots" without increasing the cross-cut development. This could help convert the Inferred mineral resource to an Indicated mineral resource.
Mining:-
· To assist in the LoM plan audit, a LoM design must be completed using one of the available software packages. This will be illustrated in the mining sequence and development.
Processing:-
· The incorporation of additional process control systems should be pursued to improve gold recoveries and reduce costs.
· Metering of power consumption to the main process units should be installed so that power utilisation can be controlled; this will lower operating costs.
· The mill feed bin should be upgraded in size to increase the retention time to allow the crushers to operate during the day only.
· Reagent consumption (cyanide, and carbon) should be optimised further.
· It is recommended that laboratory costs be captured centrally and allocated to the mining, geology and metallurgical department on a cost per sample basis.
PEA Recommendations
Exploration
· To fully de-risk the PEA expansion project, it is recommended to do exploration drilling as illustrated in the figure below, to increase the level of confidence of the Mineral Resources to Indicated.
 
 
Below 750 m Area

14


Mineral Resources:
· Best practice QA/QC must be implemented on the operation, especially for deep drilling and other exploration drilling as these sample points are single points and have greater influence than the day-to-day evaluation samples.
· Short deflections must be drilled when drilling the "deep" drill holes and exploration drill holes to understand variability and improve the confidence of the intersections for the Indicated and Inferred resources.
· Long inclined boreholes or directional drilling should be investigated as an option to drill more and deeper intersections in the "pay shoots" without increasing the cross-cut development. This could help to convert the Inferred Mineral Resources to Indicated Mineral Resources.
Processing:
· The incorporation of additional process control systems should be pursued to improve gold recoveries and reduce costs.
· Metering of power consumptions to the main process units should be installed so that plant power utilisation can be controlled.
· Although the Gemini tables operate effectively at the moment, installation of Acacia reactors should be considered for upgrading of Knelson concentrates.
 
15
 


ITEM 2 – INTRODUCTION

Item 2 (a) – Issuer Receiving the Report
Minxcon (Pty) Ltd ("Minxcon") was commissioned by Greenstone Management Services (Pty) Limited ("GMS" or "the client") to compile an NI 43-101 technical report on behalf of Blanket Mine (1983) (Private) Limited ("Blanket Mine") for its 49% shareholder, Caledonia Mining Corporation ("Caledonia"), a Canadian-registered company which is listed on the Toronto Stock Exchange ("TSX – CAL") and on the AIM Market of the London Stock Exchange ("LSE − CMCL") and also traded in the United States of America on the OTCQX. GMS is a subsidiary of Caledonia that employs the South African-based management that receives a management fee from Blanket. Blanket Mine is incorporated in Zimbabwe and is the owner and operator of the Blanket Mine.
Item 2 (b) – Terms of Reference and Purpose of the Report
Minxcon was commissioned by the Client to compile an NI 43-101 technical report for the Blanket Mine. This technical report was compiled in compliance with the specifications embodied in the Standards of Disclosure for Mineral Projects as set out by the Canadian Code for reporting of Resources and Reserves - National Instrument 43-101 (Standards of Disclosure for Mineral Projects), Form 43-101F1 and the Companion Policy Document 43-101CP ("NI 43-101"). All monetary figures in this Report are expressed in USD, unless stated otherwise.
Minxcon carried out the following scope of work for the Technical Report:-
· The Caledonia offices in Johannesburg were visited to collect information pertaining to the financial, legal and environmental aspects of the Project.
· Various technical and environmental reports prepared by various independent consultants were studied.
· Geological data and Mineral Resources were reviewed.
· The Reserve LoM plan, Mineral Reserves and processing methodology were reviewed.
· A Discounted Cash Flow ("DCF") analysis was completed.
Item 2 (c) – Sources of Information and Data Contained in the Report
The following sources of information were used to compile this Report:-
· Technical reports and technical information from the Blanket Mine.
· Historical Technical Reports, press releases and other public documents posted on SEDAR.
· Market research information from various websites, literature and other published articles.
· Personal Communication with the COO of Caledonia, Mr. Dana Roets.
· Personal Communication with the Vice President, Exploration of Caledonia, Dr. Trevor Pearton.
For further details on references, please refer to Item 27.
Item 2 (d) – Qualified Persons' Personal Inspection of the Property
A site visit of Blanket Mine was conducted from 22 to 24 October 2014 by Mr Dario Clemente ((Director, Minxcon) NHD (Ext. Met.), GCC, BLDP (WBS), (FSAIMM), Mr Uwe Engelmann (Director, Minxcon): B.Sc (Zoology & Botany), B.Sc (Geol.), B.Sc Hons. (Geol.), GSSA, Pr. Sci. Nat. Reg. No. 400058/08, and Mr Daniel van Heerden ((Director) BSc (Min. Eng.), MComm (Bus. Admin.), ECSA Reg. No.20050318, FSAIMM Reg. No.37309.4), each of whom is a Qualified Person (as that term is defined in NI 43-101) for this Report. During this visit, time was spent at the mine, the treatment plant, the waste dumps, and the sample assay laboratory and data management section.

16
Item 2 (e) – Forward-Looking Statement
Certain statements in this Report, other than statements of historical fact, contain forward-looking statements regarding the Blanket Mine, economic performance or financial condition, including, without limitation, those concerning the economic outlook for the mining and gold industry, expectations regarding gold prices, production, cash costs and other operating results, growth prospects and the outlook of operations, including the completion and commencement of commercial operations of specific production projects, its liquidity and capital resources and expenditure, and the outcome and consequences of any pending litigation or enforcement proceedings.
Although Minxcon believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Accordingly, results may differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other State actions, success of business and operating initiatives, fluctuations in commodity prices and business and operational risk management.

17

ITEM 3 – RELIANCE ON OTHER EXPERTS

Minxcon accepted the information supplied by Caledonia as valid and complete. The information applies, but is not limited to, the drill hole information, Environmental Management Plans ("EMPs") and licenses. Minxcon scrutinised this information, together with other sources of information (such as Public Reports by the MSA Group and Caledonia, and information provided by Mr Dana Roets), and found it fit for use in the estimation of the Gold Mineral Resources and Gold Mineral Reserves (that were used in the economic evaluation of the mine). The reliance on Knight Piesold, Paramark and Black Crystal for the mine closure cost estimate and closure plan, as described in item 20(e). Minxcon did not seek an independent legal opinion on the shareholding, effective rights and obligations of Blanket Ltd. and relied on existing available information.

18


ITEM 4 - PROPERTY DESCRIPTION AND LOCATION

Item 4 (a) – Area of the Property
The Blanket Mine covers the operating claims of Jethro, Blanket Section, Feudal, Harvard, Mbudzane Rock, OQUEIL, Sabiwa, Sheet, Eroica and Lima, comprising a total area of approximately 2,540 ha, as documented by Applied Geology Services ("AGS") in their NI 43-101 Technical Report dated July 2006.
Item 4 (b) – Location of the Property
The Blanket Mine is located in the southwest of Zimbabwe, approximately 15 km northwest of Gwanda, the provincial capital of Matabeleland South. Gwanda is located 150 km southeast of Bulawayo, the country's second largest city, 196 km northwest of the Beit Bridge Border post with South Africa, and 560 km from Harare, Zimbabwe's capital city. Access to the mine is by an all-weather tarred road from Gwanda, which is linked to the Beit Bridge to Bulawayo, Harare by a national highway.
Figure 1: General Location of Blanket Mine
 
 
Location of the Blanket Mine
The general geographic coordinates of Blanket Mine are Latitude 20°52' S and Longitude 28°54' E. Coordinates for individual claims are presented in Appendix 2, Appendix 3 and Appendix 4. The area is covered by topographic sheet number 2028D4.
Item 4 (c) – Mineral Deposit Tenure
Blanket Operating Claims
The Blanket Mine's exploration interests in Zimbabwe include operating claims (i.e. on-mine), non-operating claims and a portfolio of brownfields exploration projects ("satellite projects"). The Blanket Mine operates under a Special Licence (No. 5030) which was issued under the Mines and Minerals Act of 1961 (Chapter 21:05). The mine ' s claims are protected under this Act.
19


Blanket Mine covers the operating claims of Jethro, Blanket Section, Feudal, Harvard, Mbudzane Rock, OQUEIL, Sabiwa, Sheet, Eroica and Lima, comprising a total area of approximately 2,540 ha. Claims not covered by the Mining Lease application were reported not to form part of the production area at the time.
The registration numbers, area, number of claims and number of blocks of 2,884 operating claims (some are producing claims, others are exploration claims) belonging to the Blanket Mine were supplied to Minxcon by Caledonia and are listed in Appendix 2. The mine boundary in the figure is indicated as supplied by the Caledonia office in Johannesburg.

20
Figure 2: Location of Blanket Mineral Rights
 
 
Blanket Mine Boundary
21



Blanket Non-Operating Claims and Exploration Claims
Blanket Mine provided two separate lists of non-operating claims at the Blanket Mine and satellite exploration claims. The names of each claim, as well as registration numbers and type of minerals were provided to Minxcon (Appendix 3 and Appendix 4).
Item 4 (d) – Issuer's Title to/Interest in the Property
The Indigenisation and Economic Empowerment Act ("The Act"), which was enacted in 2007, requires that 51% of the equity of all commercial enterprises in Zimbabwe must be owned by indigenous Zimbabweans.
On February 20, 2012 Caledonia 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 51% of Blanket would be sold for a paid transactional value of USD30.09 million. The various transactions were implemented with effect from September 5, 2012 on the following bases:-
· 16% was sold to the National Indigenisation and Economic Empowerment Fund;
· 10% was sold to a Management and Employee Trust for the benefit of the present and future managers and employees of Blanket Mine;
· 15% was sold to identified indigenous Zimbabweans; and
· 10% was donated to the Gwanda Community Share Ownership Trust. Blanket also made a non-refundable donation of USD1 million to the Trust as soon as it was established and paid advance dividends of USD4 million before the end of April 2013.
Figure 3: Blanket Mine Ownership Structure
 
 
Ownership Structure
The Trust will receive no further dividends from Blanket until the advance dividends have been repaid by the offset of future dividends arising from the Blanket shares that are owned by the Trust. Caledonia facilitated the vendor funding of these transactions: i.e. indigenous Zimbabweans who purchased their interest in Blanket will repay their outstanding facilitation loan by sacrificing 80% of their future entitlement to Blanket dividends. Outstanding balances on the facilitation loans attract interest at London Interbank Offered Rate ("LIBOR") plus 10%. In October 2014, the Blanket board approved the suspension of dividend payments by Blanket Mine so that cash generated by Blanket Mine could be used to fund the revised investment plan.  It is anticipated that Blanket Mine will resume dividend payments in early 2016. During the period from October 2014 until the resumption of dividend distributions by Blanket Mine, the Blanket Board there will be a moratorium on the accumulation of interest on the facilitation loans. Following the implementation of Indigenisation, Caledonia received the Certificate of Compliance from the Government of Zimbabwe which confirms that Blanket is fully compliant with the Indigenisation and Economic Empowerment Act.

22
As an indigenised entity, Blanket can now develop and implement its long-term growth strategy. The recently re-constituted Blanket board, which includes representatives of the indigenous Zimbabwean shareholders, approved a capital investment programme for 2013 and a 4-year growth strategy for 2014 to 2017. This investment programme was endorsed by the Caledonia Board, is estimated at USD66 million, will be funded from Blanket's internally generated cash, and is expected to result in progressive increases in gold production.
Item 4 (e) – Royalties and Payments
Mining royalties are charged in terms of the Mines and Minerals Act (Chapter 21:05). The royalties are collectable from all the minerals or mineral-bearing products obtained from any mining location and disposed by a miner or on his behalf. The royalties are chargeable whether the disposal is made within or outside Zimbabwe.
Zimbabwean gold production has declined by 26% in the first-half of 2014, largely due to the effect of the lower gold price which has rendered a number of high-cost Zimbabwean gold producers unprofitable. A decision was made by the Government of Zimbabwe in its 2014 Mid-Year Fiscal Policy Review Statement to reduce the royalty on Zimbabwean gold producers from 7% to 5%, effective 1 October 2014. The royalty of 5% is, however, not tax deductible and the tax rate is applied on the earnings before royalty deductions.
The property does not appear to be subject to any royalties (other than the legislated royalty of 5% of sales value currently being paid to the Government), back-in rights, payments or other agreements and encumbrances. Ore mined from underground carries no third-party royalties. These are covered by payment of the annual claims protection fees to the Ministry of Mines.
Item 4 (f) – Environmental Liabilities
See Item 20 (e).
Item 4 (g) – Permits to Conduct Work
See Item 20 (c).
Item 4 (h) – Other Significant Factors and Risks
There is no reason to believe that there are any factors or risks that may affect the title or the ability to perform work on the property.

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ITEM 5 – ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

Item 5 (a) – Topography, Elevation and Vegetation
The area around the Blanket Mine is hilly and lies at an altitude of about 1,000 m to 1,300 m above mean sea level ("amsl"). Drainage is to the northeast, into the Mchabezi River on which the Sheet dam and the Blanket dam are located (some 5 km to the east of the mine).
The indigenous vegetation is dominated by savannah with Marula (Sclerocarya birrea), a variety of Combretum species, Terminalia sericea, Mopane groves and patches of grassland. Around the mine and local settlements vegetation has been cut down and invaded by secondary thorny scrub dominated by Dichrostachys cinerea. Agriculture is limited to subsistence farming of maize and vegetables.
Item 5 (b) – Access to the Property
Access to the Blanket Mine is by an all-weather single lane tarred road from Gwanda. Gwanda is linked by national highways to Bulawayo, Harare and the Beit Bridge Border post. Earlier, Zimbabwe had good road infrastructure. However, lack of investment over the past ten to fifteen years resulted in its deterioration; substantial investment is required country-wide. The railway line connecting the Zimbabwean national network to South Africa passes through Gwanda. An airstrip for light aircraft is located 5 km to the northwest of the town.
Item 5 (c) – Proximity to Population Centres and Nature of Transport
The Gwanda district hosts the provincial capital of Matabeleland, South Province, and the District Administrator's and Rural District Council offices are located 126 km south of Bulawayo and 195 km from Beit Bridge along the Bulawayo Beit Bridge highway. Gold mining, cement production, livestock production, game ranching and tourism are the major economic activities in the district. Labourers for Blanket Mine are accommodated with their families in a mine village about 1 km from the mine.
The district has 24 wards in which business centres, irrigation schemes, dams, wells, boreholes, clinics, schools, farms and mines are located. There is a fairly good road network linking the various wards internally and externally with the rest of the country. The district is serviced by telecommunication services offered by TelOne, and Telecel, NetOne and Econet whose cellular phone network covers nearly 50% of the district.
The district covers 31 km 2 and has an estimated population of 162,622. Of the total number of people employed, the highest proportion (64%) is engaged in agriculture and related occupations followed by services (11%). The population in the district is mostly rural.
The main natural water sources include the Tuli River, with its main tributaries (in the east bank running in a north-south direction) being the Mnyabetsi River in the Dibilashaba Communal Area, the Sengezane River in the Garanyemba Communal Area, and the Ntswangu and Pelele Rivers in the Gwanda Bolamba Communal Area.
Item 5 (d) – Climate and Length of Operating Season
Temperatures are as high as 40ºC during summer months and average 13ºC during winter. The climatic conditions make the area vulnerable to meteorological hazards such as droughts, floods, gusty winds, as well as lightening during the wet and hot season.

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Figure 4: Gwanda Average Temperatures
 
 
Gwanda Average Temperatures
The entire district lies within Natural Region IV and V, which experience a short, variable rainfall seasons (averaging generally below 400 mm per year), and long, dry winter periods. Rainfall is usually associated with thunderstorms, producing rainfall of short duration and high intensity. The rainfall, in general, is less than half of the potential evaporation which has necessitated irrigation development and, more recently, infield rainwater harvesting in some wards to improve crop production which complements animal husbandry as well as reclaims open access areas such as grazing lands and induce underground water recharge as part of improving the environment. The mine is able to operate year-round.
Figure 5: Gwanda Average Monthly Precipitation
 
 
Gwanda Average Precipitation
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Item 5 (e) – Infrastructure
Mine infrastructure comprises underground workings with head gear and hoist facilities, a process plant, workshops and a tailings dam. Stores, workshops and offices, as well as an assay laboratory, are located adjacent to the mine shafts. There is an adequate surface area for further expansion. The general location and surrounding infrastructure is indicated in Figure 6.
Figure 6: General Location and Infrastructure
 
 
General Location and Infrastructure
The two-compartment tailings dam, which is located to the east of the mine, is operated by Frazer Alexander Zimbabwe. Based on the throughput rate at that time (3,800 tpd), the tailings dam had a remaining capacity of 9.5 Mt. Since then the mine has slimed 6.0 Mt, leaving a capacity of 3.5 Mt as at January 2011. Since the mine no longer treats old slimes, the planned daily throughput has fallen to 1,000 tpd which equates to a life of approximately 14 years. At a production rate of 1,000 tpd, the rate of rise ("RoR") is 0.54 m per year based on the final design area of 28 ha, which is well below the legal maximum of 2 m per year.
Makeup process water and water for the mine village are derived from the Blanket dam which has a capacity of 15 Mm 3 . In addition, the mine has several boreholes to provide water during periods of drought (AGS, 2006). The Zimbabwe National Water Authority ("ZINWA") holds all water rights in Zimbabwe. Blanket purchases process and domestic water from ZINWA. This is supplemented with underground and borehole water. No problems have been recorded with water supply.
Two power lines (of 11 kVA and 33 kVA respectively) connect the mine to the national grid operated by the Zimbabwe Electricity Supply Authority ("ZESA"). Owing to frequent interruptions to the power supply the Blanket Mine has installed its own 10 MVA generator consisting of 4 diesel units. The mine is now self-sufficient and able to continue its mining and processing operations during disruptions to the grid supply.

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ITEM 6 – HISTORY

Item 6 (a) – Prior Ownership and Ownership Changes
The Blanket Mine is part of the Sabiwa group of mines within the Gwanda Greenstone Belt from which gold was first extracted in the 19 th century. The Blanket Mine   is a cluster of mines extending some 3 km from Jethro in the south through Blanket itself, Feudal, AR South, AR Main, Sheet, and Eroica, to Lima in the north. Blanket Mine has produced over a million ounces of gold during its lifetime.
Following sporadic artisanal working, the Blanket Mine was acquired in 1904 by the Matabele Reefs and Estate Company. Mining and metallurgical operations commenced in 1906 and between then and 1911, 128,000 t were mined. From 1912 to 1916 mining was conducted by the Forbes Rhodesia Syndicate who achieved 23,000 t. There are no reliable records of mining for the period between 1917 and 1941 and it is possible that operations were adversely affected by political instability during World Wars I and II. In 1941 F.D.A. Payne produced some 214,000 t before selling the property to Falconbridge in 1964 (Blanket Mine, 2009). Under Falconbridge, production increased to 45 kg per month and the property yielded some 4 Mt of ore up until September 1993. Kinross Gold Corporation ("Kinross") then took over the property and constructed a larger Carbon-in-Leach ("CIL") plant with a capacity of 3,800 tpd. This was designed to treat both run of mine ("RoM") ore and an old tailings dump.
The Blanket Mine is currently 49% owned and operated by Caledonia Mining Corporation who completed purchase of the mine from Kinross on 1 April 2006 (www.caledoniamining.com). The Blanket mine re-started production in April 2009 after a temporary shut-down due to the economic difficulties in Zimbabwe. In late 2010, Blanket Mine successfully completed an expansion project which increased production capacity from 24,000 ounces of gold per annum to 40,000 ounces of gold per annum.
Item 6 (b) – Historical Exploration and Development
Exploration was conducted between 1997 and 2006 around the GG and Mascot areas with follow-up exploration drilling in 2013 around these same areas. Currently, there are two exploration shafts being developed at these two sites.
Item 6 (c) – Historical Mineral Resource Estimates
There are no historical estimates which are currently considered to be relevant.
Item 6 (d) – Historical Mineral Reserve Estimates
There are no historical estimates which are currently considered to be relevant.
Item 6 (e) – Historical Production
First recorded production started in 1906. The production history for Blanket over the past 107 years are illustrated in Figure 7.

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Figure 7: Historical Production Statistics
 
 
Blanket Mine Historical Production Statistics (1906 to 2013)

Blanket's recent actual production per month up to September 2014 is illustrated in Figure 8.
Figure 8: Blanket Historical Production

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ITEM 7 – GEOLOGICAL SETTING AND MINERALISATION

Item 7 (a) - Regional Geology
Zimbabwe's known gold mineralisation occurs in host rocks of the Zimbabwe Craton. The Zimbabwean craton is made up of Archaean rocks. The geology of the Craton is characterised by deformed and metamorphosed rocks which include high-grade metamorphic rocks, gneisses, older granitoids, greenstone belts, intrusive complexes, younger granites and the Great Dyke, which make up the geology of the Zimbabwe Craton (Figure 9).
Figure 9: Zimbabwe Craton
 
 
The Zimbabwe Craton Relative to Other Cratons
Source : http://jgs.lyellcollection.org
The Chingezi gneiss, Mashaba tonalite and Shabani gneiss form part of a variety of tonalities and gneisses of varying ages. Three major sequences of slightly younger gold-bearing greenstone belts supracrustal rocks exist. These are:-
· Older greenstones called the Sebakwian Group, which are mostly metamorphosed to amphibolite facies. They comprise komatiitic and basaltic volcanic rocks, some BIF, as well as clastic sediments.
· The Lower Bulawayan Group, which comprises basalts, high-Mg basalts, felsic volcanic rocks and mixed chemical and clastic sediments. The Lower Bulawayan Group forms the Belingwe (Mberengwa) greenstones.
· The Upper Bulawayan (upper greenstones) and Shamvaian groups, which comprise a succession of sedimentary and komatiitic to tholeiitic to calc-alkaline rocks.
The following three metamorphic belts surround the Zimbabwe Craton:-
· The Archaean Limpopo Mobile Belt, which trends east-northeast and separates the Zimbabwe Craton from the Kaapvaal Craton to the south. High-grade metamorphic and igneous rocks, which include amphibolites, gneisses and granulites, characterise the Limpopo Mobile Belt.
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· The Magondi Mobile Belt on the north-western margin of the Craton, which formed as a result of deformation and metamorphism of the Palaeoproterozoic Magondi Supergroup. The Dewaras Group (volcano-sedimentary deposits), the Lomagundi Group (sedimentary deposits) and the Piriwiri Group (sedimentary deposits) form the Magondi Supergroup.
· The Zambezi Mobile Belt (comprising Neoproterozoic to Cambrian rocks) to the north and northeast of the Zimbabwe Craton, consisting of high grade and intensely deformed metasediments with intercalated basement gneisses.
Karoo Supergroup sediments and volcanic rocks of Permian-Triassic-Jurassic age, Cretaceous post-Karoo sediments, and Tertiary to Recent Kalahari sands overlie the Craton in the north, west, south and southeast of Zimbabwe.
Item 7 (b) - Local Geology
The Blanket Mine is situated on the north-western limb of the Archaean Gwanda Greenstone Belt, along strike from several other gold deposits. It is one of the few remaining producing gold mines out of the approximately 268 mines that were once operational in this greenstone belt. The Gwanda Greenstone Belt (Figure 10) is located in south-western Zimbabwe. It is approximately 70 km in length (west to east) and 15 km wide (north to south). The belt is typical of greenstone belts of the Zimbabwe Craton consisting of mafic to felsic volcanics with intercalated sedimentary units.
Figure 10: Regional Geology of the Gwanda Greenstone Belt
 
 
Regional Geology of the Gwanda Greenstone Belt
Repeated strong deformation affected all lithologies. Structurally, the Gwanda belt is dominated by a major periclinal synform, plunging approximately 60° to the northwest in the western half of the belt. It is flanked on both sides by two major deformation zones: the North West Gwanda Deformation Zone ("NWGDZ") on the north-western limb and the South Gwanda Deformation Zone ("SGDZ") along the southern limb. The SDGZ forms part of a regional structure bounding the southern margin of the belt. In the convergence zone of the NWGDZ and the SGDZ, the Colleen Bawn Deformation Zone ("CBDZ") splays off the SGDZ eastwards, following the north-eastern arm of the belt (Campbell and Pitfield, 1994).

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The NWGDZ is approximately 2 km wide by 18 km long with a general northwest to north-northwest trend, from the town of Gwanda to the north-western extremity of the belt (Campbell and Pitfield, 1994). Four phases of deformation have been defined by Fuchter (1990). Repetition of lithological units, particularly in the north-western arm of the greenstone belt, is interpreted as evidence of D1 thrusting. Wide zones of intense schistose deformation, considered to be associated with the gold mineralisation, are the product of the D2 event. The D1 thrust phase has a coincident trend and may be an early part of the D2 event.
The large fold structures of the D3 deformation event dominate the eastern and western ends of the greenstone belt and are easily identified on geological maps and in aerial imagery. The mineralisation at the Blanket Mine and Vubachikwe lies on the northern limb of the large western fold (the North West Mineralised Camp). The final D4 deformation event produced major lineaments which dominate the southern margin of the greenstone belt (Fuchter, 1990). According to the 2006 AGS report, "[t]he grade of metamorphism at Gwanda, which reaches upper greenschist to amphibolite facies, is higher than in the typical Zimbabwean greenstone belts, possibly due to the close proximity of the Gwanda belt to the Limpopo Mobile Belt" (AGS, 2006).
Item 7 (c) - Project Geology
At and near the Blanket Mine, the lithologies comprise felsic schists of either sedimentary or igneous origin, overlain by mafic to ultramafic rocks containing layers of BIF, in turn overlain by a thick sequence of mafic rocks (AGS, 2006). The generalised stratigraphic column for the area is shown in Figure 11. The mafic unit which hosts the gold mineralisation is mostly a metabasalt with some remnants of pillow basalts. Regionally, the rock is a fine-grained massive amphibolite with localised shear planes. The entire sequence is cut by a regional dolerite sill from the south, through the Blanket Mine, to the Smiler deposit which lies approximately 3 km north of the Blanket Mine (Figure 12). Mineralisation at Vubachikwe is hosted in BIF interlayers. The mineralisation at the Blanket Mine is located in the overlying mafic unit.
Figure 11: Stratigraphic Column of the Blanket Mine Area
 
 
Stratigraphy of Blanket Mine
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Figure 12: Local Geology of Blanket Mine
 
 
Lithology of Blanket Mine Area
The longitudinal section running through the Blanket Mine from Lima in the north to Jethro in the south is illustrated in Figure 13. This section shows the steep to vertical nature of the Mineral Deposits with their depth extension. These Mineral Deposits are areas of mineralisation within the various shears and zones of alteration. The Mineral Deposits of the Blanket mine are listed and described in the following.
Figure 13: Blanket Mine Longitudinal Section Showing Production Areas
 
 
Blanket Mine Longitudinal Section Showing Production Areas

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Item 7 (d) - Blanket Mine Mineral Deposits
 
Jethro Mineral Deposit
The Jethro Mineral Deposit strikes north−south and dips near vertical in a westerly direction. It tends to roll over locally.
Blanket Section
The Blanket Section is located approximately 400 m to the north of the Jethro Mineral Deposit. Blanket Mineral Deposits 1 and 4 are parallel. They occupy north−south trending shear segments whereas Mineral Deposits 2 and 5, which are also parallel, strike northwest−southeast. Mineral Deposit 3 is cylindrical and lies in a shear segment parallel to the 2 and 5 Mineral Deposits. On average, the Mineral Deposits dip 80° southwest. On surface, the Blanket Quartz Reef lies in the footwall of the disseminated sulphide replacement type Mineral Deposits. The reef has a shallower dip than the disseminated sulphide replacement bodies, but plunges in the same direction so that it progressively advances towards them with depth, displacing Mineral Deposits 2, 3, 1, 4 (MSA, June 2011). Mineral Deposit 2 reappears on the footwall of the Blanket Quartz reef and is established on the 630 mL through to the 730 mL.
AR Mineral Deposits
AR lies approximately 500 m to the north of the Blanket Mineral Deposits. It is a "Z"-shaped mineralised zone and consists of two separate Mineral Deposits that generally reach up to 30 m wide as a result of tectonic thickening from faulting and folding. The AR Mineral Deposits were first discovered in the late 1980s by exploration drilling from the 9 Level haulage. Lateral diamond drill holes (250 m long) were drilled either side of the haulage every 50 m. The body has no known surface expression and appears to form a peak under the regional dolerite sill just above 9 Level some 500 m north of the Blanket Mineral Deposits. From this point the body splits into two ore shoots: the AR Main and the AR South, plunging west at 55º and south-west at 58 º respectively (MSA, June 2011).
AR Main
The AR Main is a DSR-type Mineral Deposit occurring within a broad shear envelope in pillowed metabasalts. The envelope is generally irregular in plan and is bounded by shears which assist in defining the limits of the mineralisation. At the lowest level of development on 750 m Level, a shear disrupts the bodies causing the plunge to flatten to the west. The Mineral Deposit strike is between 40 m and 60 m with an average width of 30 m at the centre of the envelope.
The ore is a silicified amphibolite consisting predominantly of quartz with minor carbonate and chlorite minerals. Gold mineralisation is associated with arsenopyrite and to a much lesser extent pyrrhotite and pyrite. Finely-disseminated arsenopyrite occurs within the Mineral Deposit which form the high grade areas. Sulphide minerals seldom amount to more than 5% of the rock by volume. The Mineral Deposit is massive and is exploited using the long-hole open stoping method. It currently contributes 30% of the Blanket mine production.
AR South
The AR South Mineral Deposit plunges southwest, trending towards the Blanket No 2 Mineral Deposit at depth. AR South is also developed within a broad shear zone and is more pipe-like than the main body. Its maximum thickness is approximately 50 m. High grade sections of this body are defined by siliceous arsenopyrite.

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Eroica
The main Blanket underground workings are connected to Lima by a 2 km long haulage which follows the strike of the main fabric. It thus offered an opportunity to probe for lateral Mineral Deposits on either side which led to the discovery of the Eroica shoot. The Eroica Mineral Deposit lies approximately 1,300 m north of the main Blanket Mineral Deposits. It dips at 65° to the west and has a strike length of 300 m in a northerly direction. The Eroica Mineral Deposit is hosted in a high-strain area where the shear is up to 15 m wide. Brown carbonate alteration characterises the shear in strong association with biotite development. The Mineral Deposit is defined by thin silicified stringers that develop into swells of up to 5 m in width. The silicification shows pinch and swell both on strike and down-dip, resulting in a series of dismembered silicified pods developed within a particular shear. The biotite and carbonate alteration, together with the silicified stringers, form marker links between the dismembered pods. Finely-disseminated arsenopyrite, pyrite and pyrrhotite are associated with the gold mineralisation. The shoot is renowned for its high native gold content.
Lima
The Lima section is situated 2 km north of the Blanket Mineral Deposits. The two mines are linked by an underground haulage. Like the Blanket Mineral Deposits, the Lima Mineral Deposits developed in very high-strain areas. The main shoots are the Hanging wall and Interlimb. In the Hanging wall limb mineralisation exists in the form of pyrite with subordinate arsenopyrite in cleavage planes within the pervasive biotite/chlorite alteration. The Interlimb is characterised by a centrally silicified core with pyrite and arsenopyrite constituting the main sulphides. The mine was initially established as a stand-alone operation after an exploration programme followed up on an intensive soil sampling exercise which indicated the presence of a major gold anomaly (MSA, 2011).

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ITEM 8 – DEPOSIT TYPES

In greenstone belts, gold mineralisation occurs mainly as vein type or shear zone hosted disseminations. Most of the larger deposits are found within the greenstone belts or their contacts with the granitoids. All mineralisation is hydrothermally emplaced and associated with the regionally developed D2 deformation characterised (at the Blanket Mine) by areas of high strain wrapping around relatively undeformed remnants of the original basaltic flows. It is within the more ductile tensional high strain areas that the wider of the Mineral Deposits are located.
These orogenic gold deposits (also referred to as mesothermal, greenstone, shear zone related or lode gold deposits) are commonly associated with late syntectonic intermediate to felsic magmatism. Vein systems occur as a system of echelon veins on all scales. Tabular veins occur within less competent lithologies while veinlets and stringers forming stock works occur in more competent lithologies. Vein systems are often spatially associated with contacts between lithologies displaying competency contrasts. Lower-grade bulk tonnage styles of mineralisation may develop in areas marginal to veins with gold associated with disseminated sulphides in the host rock. Two broad groups of deposits based on precious metal composition were recognised by Roberts (1996):-
· Silver (Ag) rich deposits, in which the concentration of silver exceeds that of gold.
· Gold (Au) rich deposits, in which the concentration of gold exceeds that of silver. The gold and silver concentrations of both types are at the ppm level.
The gold-rich group of deposits may be subdivided into two styles of mineralisation, namely quartz-carbonate vein-hosted and disseminated sulphide replacement type mineralisation. At Blanket Mine silver has been reported up to 10% of precious metals (AGS, 2006), so that the gold-rich model may be applied. Two main types of mineralisation are recognised at Blanket mine, namely disseminated sulphide replacement reefs ("DSR") and quartz-filled reefs and shears.
Item 8 (a) - Disseminated Sulphide Replacement Reefs
DSRs host the best grades and comprise the bulk of the ore shoots. These zones have a silicified core with finely-disseminated arsenopyrite. Relatively high grades are found in a package of silicified biotite chlorite schist with irregular quartz stringers and disseminated and stringer arsenopyrite in the fabric planes. Due to lesser silicification, abundant biotite characterise the margins of these mineralised zones and as a result they have a lower gold content. Disseminated sulphide-replacement Mineral Deposits range up to 50 m in width with a strike of between 60 m and 90 m. Free-milling gold constitutes up to 50% of the total metal content with the remainder locked in the arsenopyrite. The ore is not refractory despite its association with arsenopyrite. Generally, plant recoveries in excess of 90% are achieved.
Item 8 (b) - Quartz-Filled Reefs and Shears
The second type of mineralisation is the quartz-filled reefs and shears. Two quartz shears are mined at the Blanket Mine: the Blanket Quartz Reef and the Eroica Reef. These reefs have long strikes, however, they are not uniformly mineralised. Continuous pay shoots of over 100 m on strike are not present. The Quartz Reef at the Blanket Mine has a surface strike of approximately 500 m, but economic mineralisation is restricted to three 90 m long shoots which were defined on surface by the early workers (AGS 2006). Quartz-filled reefs display a much wider grade range compared to the DSR deposits. On average, these shears are of a higher grade and are used in blending the ore to the mill. Dominant ore minerals are native gold and galena although arsenopyrite becomes more prevalent below the 470 m elevation.
Increasing levels of arsenopyrite association with depth confirm that the quartz shears represent higher level offshoots and splays with brittle deformation relative to the more ductile DSR-type core zone mineralised bodies (AGS 2006). See Item 8 (c) for the mineralisation characteristics of the Mineral Deposits forming the Blanket Mine property (MSA, J2225 Blanket Mine NI 43-101 Technical Report – June 2011).
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Item 8 (c) - Mineralisation
Wall rock alteration typically comprises silica−pyrite−muscovite within a broader carbonate alteration halo. Quartz-carbonate altered rock forms the most commonly recognised alteration assemblage.
Gold is deposited at crustal levels within and near the brittle-ductile transition zone at:-
· depths of between 6 km and 12 km;
· pressures between 1 and 3 kilobars; and
· temperatures between 200º C and 400º C.
The deposits may have a vertical extent of up to 2 km, demonstrate extensive down-plunge continuity, and lack pronounced zoning. The ore mineralogy is dominated by gold, pyrite and arsenopyrite. Subordinate minerals such as galena, chalcopyrite, pyrrhotite, sphalerite, tellurides, scheelite, bismuth and stibnite also occur. Sulphide mineralogy commonly reflects the litho-geochemistry of the host rock with arsenopyrite being the most common sulphide mineral in metasedimentary host rocks and pyrite or pyrrhotite being more typical in metamorphosed igneous hosts. The gangue and alteration mineralogy is dominated by quartz and carbonate (ferroan dolomite, ankerite, siderite, calcite) with subordinate albite, fuchsite, sericite, muscovite, chlorite and tourmaline.

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ITEM 9 – EXPLORATION

The majority of the exploration drilling currently conducted at the Blanket mine is referred to as "deep" drilling, as it is drilled from underground cross-cuts. This drilling is aimed at the depth extensions of the various pay shoots or shafts. Surface exploration drilling has been focused around the GG and Mascot Projects (Figure 14). Two exploration programmes were completed here; one in 1997 and the other in 2013. These two areas are now being explored with underground development at the two exploration shafts (Figure 15).
Figure 14: Location of GG and Mascot Exploration Shafts
 
 
Blanket Mine Current Mining Operation and Exploration Shafts

Figure 15: GG Exploration Shaft
 
 
GG Exploration Shaft
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Item 9 (a) – Survey Procedures and Parameters
This section summarises the exploration activities other than drilling undertaken during the history of the Blanket Mine. As part of the exploration/delineation of the Mineral Deposits in the underground operations the Blanket Mine conducts the following:-
· Mineralised zones are explored by means of development drives mined along the strike of the shear zones. Evaluation drill holes are drilled from these drives every 7.5 m from cubbies to assist in the delineation of the Mineral Deposits. The delineation of the mineralised zone is based on the geology and the grade above 1.96 g/t.
The above data is captured on 1:250 scale plans or multiples of the 1:250 scale. The sampling and mining data are captured on the following plans to capture the grade and volumes of the Mineral Deposits as ore resource blocks as well as the mined voids for depletion purposes:-
· The main survey plans are the main level plans and 15 m sub-level plans. Survey pegs are installed at about 30 m intervals to guide the development. All core drilling is indicated on these plans.
· There are assay plans which display the development with the chip sampling, sludge sampling and evaluation drilling sampling (Figure 16).
· Stope assay plans capture the stoping and the stope assaying.
· Geological plans to help delineate the Mineral Deposits.
· Due to the vertical nature of the Mineral Deposits there are also longitudinal projection assay plans.
The above survey procedures and plans assist in the accurate capturing of the Mineral Deposits.
Item 9 (b) - Sampling Methods and Sample Quality
Data from the following is used to generate Mineral Resource blocks at the Blanket Mine:-
· underground core;
· channel (chip) sampling;
· percussion drilling;
· sludge sampling;
· evaluation drilling; and
· some deep diamond cored holes drilled from surface or underground platforms.
The chip sample sections are taken every 2 m in the roof of the development in the Mineral Deposits except for Jethro and Blanket (every 1.5 m). The individual samples are 0.6 m long or less, depending on their geological nature. The same applies to the evaluation drill sampling lengths. In the case of the percussion/sludge sampling, the drill discharge water is captured in cloth sample bags. The water seeps out of the bag leaving only the sludge. The accuracy of this method is debatable, but it does give an indication of the mineralisation. Closely spaced horizontal drilling in the DSR Mineral Deposits is done in order to define Measured Resources. These holes are drilled along strike of the mineralised zone from cubbies in the sidewalls of the drives located in the centre. The drill hole spacing required for the definition of Measured Resources should not be more than 7.5 m. Percussion holes are drilled every 2 m in the DSR Mineral Deposits in which the mineralised zone is not expected to be more than several metres wider than the development drift (drive). The sludge from percussion drilling is sampled as an extension of the channel sampling pattern. Channel sampling alone is done on the narrow quartz reefs.
All three sampling methods are utilised in the evaluation of the resources and the effect of the mixing of the various types of sampling data in the evaluation has not been assessed. By the nature of the sampling methodologies the chip sampling (from the roof) and sampling of the evaluation drill holes have a higher confidence than the sludge sampling.
 
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Item 9 (c) – Sample Data
The density and type of the sampling for the evaluation of the Measured and Indicated resources are described above and presented in Figure 16. Deep hole drilling is carried out to determine the depth extensions of the pay shoots. These are drilled predominantly from drilling platforms (cross-cuts) underground. Surface drill holes are limited due to the depth at which the mining is taking place. The intersections of these drill holes are used as sample points in the evaluation of the drilled Indicated and Inferred resource blocks. The parameters for these resource classifications are discussed in Item 14 (a).
Figure 16: Chip Sampling and Sludge Sampling and Evaluation Holes at Eroica
 
 
Chip Sampling, Sludge Sampling and Evaluation Drill Holes on a Portion of 645 Level at Eroica
Item 9 (d) – Results and Interpretation of Exploration Information
The delineation/interpretation of the Mineral Deposits or mineralised zones is based on geological data as well as the grade from the chip, sludge and evaluation drilling sampling. The cut-offs for these purposes are based on a gold price of USD1,300/oz. and a cost of USD70.44/t. Using these parameters, the current cut-off for the mineralisation delineation is 1.96 g/t. The cut-off utilised is the same for all the Mineral Deposits. Figure 17 illustrates the delineation of the mineralised zones using the 1.96 g/t cut-off. These portions will be blocked as resource blocks, by level, and will be part of the resource block listing after evaluation.

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Figure 17: An Example of a Vertical Projection Using the Chip Sampling to Delineate the Payable Mineral Deposit
 
 
An Example of a Projection Using the Chip Sampling to Delineate the Mineralised Mineral Deposit


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ITEM 10 – DRILLING

The majority of the surface drilling was conducted by Kinross; the 1997-2006 drilling campaign was their last campaign. Caledonia Mining is continuing with the deep drilling exploration to assist with the evaluation of the depth extensions of the Mineral Deposits. Currently, there is one drill rig at the AR main Mineral Deposit and a second at the Blanket extension. No additional surface drilling is contemplated at the Blanket mine. However, in 2013 Caledonia completed additional surface drilling at the two satellite targets, GG and Mascot. Currently, no surface drilling is taking place as the exploration is being conducted by means of exploration shafts.
Item 10 (a) – Type and Extent of Drilling
Surface Drilling Procedures
There was no surface drilling in progress at the time of the site visit. The majority of the drill hole data is historical data from 1997 or earlier. Figure 18 depicts the historical surface drilling completed at GG. The most recent drilling was conducted by Caledonia at the GG and Mascot Projects in 2013. This drilling campaign was drilled using BQ diameter with no deflections. The core was transported by the geologist to the Blanket Mine where the core yard is located; all logging and sampling was completed here. The drill hole identification number and box numbers were clearly marked onto the upper side and face of each core tray. The drill core was put together to ensure that all pieces fit, no core was missing and that orientation lines were consistent. Core recoveries were reconciled by the Geologist at 3 m intervals to ensure that no core was missing. The core recoveries were recorded on geotechnical logging sheets with all core losses being noted on the log sheet. Core recoveries of less than 95% were not accepted.
Down hole surveys were carried out from the collar, every 50 m (at least 3 m) along the hole or as agreed upon with the Geologist. The entire drill core was logged by the Geologist/Geological Technician as per Blanket Mine core logging procedures.
Figure 18: GG Project Area Indicating Mineral Deposits Relative to Surface Drilling
 
 
GG Exploration Shaft with Associated Mineral Deposits and Surface Drilling
41


Underground Drilling
Diamond drilling is the main method of exploration used by the mine to increase the resource base. Diamond drilling is also used for probing for extensions of existing Mineral Deposits. For horizontal core drilling (evaluation drilling) AXT diameter core (which is described in the previous section) is used. This drilling is also used to locate additional mineralised zones in the hanging wall and footwall of the main reefs. Figure 19 shows an example of the exploration core drilling conducted at the underground Blanket mine. The deep drilling, which explores for the depth extensions, are drilled from the cross-cuts (Figure 19).
Figure 19: Typical Style of Drilling in Haulages
 
 
Horizontal Core Drilling in Haulages at Blanket Mine
The generation of Measured Mineral Resources is achieved by drilling more closely spaced horizontal drill holes (at 7.5 m intervals) through the DSR Mineral Deposits. The drilling is done from cubbies off a drive located in the centre of the mineralised zone and along the strike of the mineralised zone. A cross-section of one of the deep drilling holes is shown in Figure 20. This cross-section shows the surveyed path, geology, survey and sampling data, all of which are used as the sampling point data for further resource block valuations.

42
Figure 20: Deep Drilling from Underground
 
 
Deep Borehole Underground
Sampling Procedures
The exploration and deep drilling core is sampled every 0.6 m, as a standard, except when a smaller sample length is required for geological reasons. The core is split and one half is sent to the mine laboratory for sample preparation. The pulp is split in two and one sample is assayed at the mine laboratory with the second sample being sent to Duration Laboratory in Bulawayo or Harare. According to Dr Trevor Pearton, vice president of exploration, these laboratories are accredited. However, the certificates of accreditation were not available for inspection. The evaluation drill holes are not split; the entire sample is sent away for analysis.
The percussion/sludge holes are also sampled in 0.6 m intervals, but in this case the sludge is captured in cloth sample bags (instead of plastic sample bags) and the water drains, leaving the sludge behind for assay purposes. The hole is flushed between each sample to avoid contamination. Again, these samples are assayed at the mine laboratory. Individual sample tickets are assigned to all samples.

43
Underground Chip Sampling Procedures
The process of chip sampling was not observed during the site visit. The underground channel/chip sampling, which is taken in the roof, has similar sampling protocols. The distance from a known survey peg to the first sample section is noted. Subsequent sample sections are marked at 2 m intervals on the back of the drives on strike. Samples are taken every 0.6 m across the drive on the section starting from the hanging wall to the footwall. Where there are discrepancies between assay results and the visual grade estimation, a channel is cut across the mineralised zone with a diamond saw in order to improve the geometry of the sample groove. In wider Mineral Deposits where not all the mineralisation is exposed by the primary development, sidewall sludge holes are drilled to a depth of 1.2 m. In pinch-and-swell Mineral Deposits, like Eroica, the width of the transverse section is determined by the lithology, e.g. a 0.2 m quartz vein is sampled separately over its width. A sample weight of about 2 kg is collected in each instance.
Both chip and sludge samples (Figure 21) are taken to give a complete section across the strike at standard 0.6 m intervals. In all of the mineralised zones, except the very wide AR Main and AR South bodies, only 4.2 m is sampled across the strike and any mineralisation beyond these limits is not included in resource. The unsampled payable sections are mined, but reported as coming from not-in-reserve ("NIR") blocks. An exception to the standard 0.6 m channel sample interval occurs in the quartz shear deposits where lithology determines the sampled width when the vein is less than, or not a multiple of, 0.6 m. Cross-cuts through very wide Mineral Deposits are treated in the same way as evaluation core drilling and the sidewalls are sampled at 0.6 m intervals.
Figure 21: Assay Plan
 
 
Typical Assay Plan at Blanket Mine
44



Item 10 (b) – Factors Influencing the Accuracy of Results
No geotechnical core recovery logs were observed for the historical and underground deep exploration holes during the site visit, so the impact of this on the accuracy of drill hole assay is uncertain. In the case of the underground chip sampling the high volume of samples taken would reduce the impact of isolated inaccuracies. However, in the case of the underground exploration drilling the frequency of samples is lower and therefore the recovery records are important from an accuracy point of view.
The sludge samples, by the nature of their sampling, have inherent inaccuracies. Measures are taken to reduce these by flushing the hole between samples, and using cloth sample bags and individual sample ticket numbers. The fines in these samples are washed away and therefore there could be a bias introduced to the sampling process.
The drilling sample data points are based on a single intersection with no deflections. Due to the variability in this type of Mineral Deposit, Minxcon considers it prudent to drill an additional short deflection, for the deep drilling and surface exploration holes.
Item 10 (c) – Exploration Properties – Drill Hole Details
There are two satellite exploration sites that are being developed by Blanket Mine. These are the GG and Mascot sites. The sites are exploration shafts that have a combination of historical surface drilling, underground lateral drilling as well as on-reef sampling. Figure 22 shows the section through the GG exploration shaft with the associated development and resource blocks. The GG shaft has two mineralised zones - the South Main and North Main reefs. The Mascot shaft is represented in Figure 23 and Figure 24 which show the working plans of the Mascot Main parallel reef and the South parallel reef respectively. Resources were first declared for these two shafts in 2014. These resources are stated in the Mineral Resources section.
Figure 22:  Section through GG Exploration Shaft with Resource Blocks, Development Sampling and Drilling
 
 
GG North Main Resource Blocks

45


Figure 23: Mascot Main Reef Resource Blocks as Defined by Historical Development Sampling and Current Drilling
 
 
Mascot Surface Drilling and Resource Blocks

46


Figure 24: Mascot South Parallel Reef Projection Indicating Resource Blocks as Defined by Drill Hole Intersections
 
 
Mascot South Parallel Reef with Resource Blocks and Drill Hole Intersections


47


ITEM 11 – SAMPLE PREPARATION, ANALYSES AND SECURITY

Item 11 (a) – Sample Handling Prior to Dispatch
The management of drilled core at the drilling sites and its transportation (surface and underground) to the laboratory rests with the responsible Mine Geologist and or Geological Technician. At the drilling site, the Geologist/Technician:-
· Ensures that all core is sequentially laid down in core boxes which are kept secure and guarded against possible mixing.
· Checks the drillers to ensure core obtained attains a recovery of at least 95%.
· Ensures that all core boxes are collected at the end of the drilling shift. The core boxes are secured and transported to the core yard where they are entered into a log book, logged and sampled within 3 days.
· Places the boxes containing the core in the correct sequence and identifies the mineralised zones.
· Marks samples at 0.6 m intervals in nearly homogeneous mineralised zones. Selective sampling intervals are employed on mineralised units with unique features e.g. colour, concentration of mineralisation, alteration, and mineralogy.
· Splits the core into two halves (after completing marking) and then breaks at the marked intervals.
· Inserts blank samples (dolerite dyke material) at a minimum rate of 1 blank sample after every 20 samples and with duplicates inserted randomly in every batch of samples to the laboratory.
Measures taken to ensure the validity and integrity of samples taken include using the following three types of sample bags:-
· Cloth sample bags (for sludge sampling) to allow for effective decanting of water while retaining the sample. Since more than one sample is taken from the sludge hole, the hole is flushed thoroughly with water before drilling and collecting the next sample.
· Plastic sample bags are used in continuous chip and grab sampling.
· Paper bags are used for sampling on-site core. The above bags are used once and discarded to minimise contamination. A ticket tagging system is used with sketches drawn at the face showing the ticket numbers corresponding to the samples taken. On receipt from the laboratory, results are plotted on the assay plan against the corresponding ticket numbers.
Item 11 (b) – Sample Preparation and Analysis Procedures
Borehole Samples
Boxes containing the core are laid out in the correct sequence and mineralised zones are identified. Samples are marked at 0.6 m intervals in nearly homogeneous mineralised zones. Selective sampling intervals are employed on mineralised units with unique features e.g. colour, concentration of mineralisation, alteration and mineralogy.
Once the samples have been marked, the core is split into two halves and broken at the marked intervals in accordance with the company's core cutting procedure. The two halves from the same interval are assigned and marked with the same ID, but with the additional labels, e.g. A1 or A2 for the half that is retained and B1 or B2 for the half that will be bagged. Also included in the assignment of sample IDs is a blank sample. At the Blanket mine the blank sample used is dolerite dyke. Certified reference materials are occasionally inserted by the Laboratory Supervisor. However, no records of this were available.
The halved core samples that are to be bagged are placed into sample bags with corresponding sample IDs. Individual sample bags from each intersection are sent to the in-house Blanket Mine laboratory for gold determinations. At the laboratory a sample submission sheet listing all sample numbers is completed. As a check control, residue pulp from duplicate samples are extracted from the samples at the Blanket Mine Laboratory and sent to another laboratory for independent assaying. All mineralised (payable) intersections from the deep drilling programme and the exploration surface drilling are sent to an external laboratory for check assay.
48


Item 11 (c) – Quality Assurance and Quality Control
During the site visit no QA/QC protocols were readily available. QA/QC procedures should be documented and revised to adapt to changing conditions. Very few QA/QC samples are introduced into the sample stream, be that for the underground chip and sludge samples or the drilling samples (evaluation or exploration). This is evident in the fact that no QA/QC plots were available to check. Therefore, there is no tracking of re-assays or whether they were conducted or not. In the case of the day-to-day production and development, sludge and evaluation drilling samples might not be as crucial due to the high volume of samples being processed. However, in the case of the deep drilling and surface exploration drilling it is crucial that a high QA/QC standard is maintained as these are single sample points that are utilised for resource evaluation purposes.
Best QA/QC practices require that CRMs, blanks and duplicates are introduced into the sample stream to test for accuracy and precision. Industry standard assay QA/QC protocols require that percentages introduced generally range from 10% to 20% depending on the type of Mineral Deposit and operation. In the case of the Blanket operation only dolerite blanks are introduced into the sampling stream of the surface exploration but not for the other sampling. The exploration drilling pulp (which is prepared at the mine laboratory) is split in two and one sample is sent to an external laboratory (Duration) in Bulawayo or Harare (Performance Labs) (according to mine personnel this laboratory is accredited). The records of the QA/QC should be documented as part of best practice. Blanket Mine must review the QA/QC protocols and ensure that best practice is implemented in the future, especially for the deep drilling and exploration drilling samples.
Minxcon does, however, still deem the sampling data base to be acceptable for resource estimation.
Item 11 (d) – Adequacy of Sample Preparation
The mine laboratories were inspected by Mr Dario Clemente and even though the mine laboratory is not accredited, it employs good housekeeping, suggesting a fairly high standard (refer to Item 13). As part of its external verification process the mine laboratory sends samples away to Duration, Met Solution and Performance Laboratories (accredited according to the mine personnel), to test their precision and accuracy. Minxcon was supplied with figures for January, April, July and August 2014 which (apart from April) had a good correlation coefficient. In addition, the laboratory makes use of standard reference material which it sources from Geostats in Australia or AMIS from South Africa. Graphs, which show a good correlation, were supplied to Minxcon. The laboratory is manually operated and does not have an electronic tracking system. The implementation of a Laboratory Information Management system ("LIMS") will assist in reducing human error. The sample preparation methodology could be improved but is considered to be adequate for Mineral Resource estimation purposes given the good correlation between planned grades and actual recovered grades in the plant.

49

ITEM 12 – DATA VERIFICATION

During the site visit, the Qualified Person reviewed the data utilised for the Mineral Resource estimation of the mine in order to independently verify the data. Due to time constraints and the manual nature of the large database, only spot checks were done. These checks focused on the data flow process to verify the data from the sampling stage to the resource block listing which makes up the resource statement; this data forms the basis for the geological model. The historical data is currently being captured digitally which will minimise human error in data flow as well as assist in visualising the complex geology in 3D.
Item 12 (a) – Data Verification Procedures
As part of the verification process the development assay plans were checked in terms of the displayed data and how it feeds into the mineral resource evaluation process. The chip, sludge and evaluation drilling assay data is displayed on the development assay plan (Figure 25) and this data is weighted to determine the grade of a section of the resource block. It must be noted that the individual grades are top cut to the 90% percentile when calculating the block grades.
Figure 25: Development Assay Plan
 
 
Various Sampling Points Utilised in the Evaluation of the Block Summaries
This grade is weighted by the length of the section of influence as can be seen in Figure 26. This weighted value is then assigned to that specific block which uses the level as part of its nomenclature. The valuation of the block uses the value of the level above it as well as the value of the level beneath it by means of weighting. This is weighted equally as the block is influenced equally between the 15 m sub levels. It is, in addition, weighted by the length of the section.
50


Figure 26: Resource Block Evaluation Sheet
 
 
Resource Block Evaluation Sheet on AR South Mineral Deposit
The area of the block is measured off the plans using a planimeter on the two levels and an average is calculated. The height between the two levels is used to work out the volume, after which it is multiplied by the standard historical SG of 2.86. This results in the tonnage of the resource block which will form part of the resource block listing (with an associated grade) which, in turn, makes up the mine mineral resource. The cut-off for the delineation of the mineralised portion is currently 1.96 g/t.
Figure 27: Resource Block Summary (note that Sample Width has m and not cm units – affects other units)
 
 
Block Summary for the Resource Block Listing
51


The manual nature of the process is prone to human error when data is transferred from one activity to the next, e.g. from the block listing to the actual resource block plans in longitudinal sections. The total resource and the various classifications are discussed in the resources section.
Item 12 (b) – Limitations on/Failure to Conduct Data Verification
The QA/QC data was not readily available or well-documented. This suggests that the QA/QC procedure is not consistently applied and the results are not statistically analysed. Discrepancies appear to be visually assessed; it is uncertain when these discrepancies are considered unacceptable or how they are dealt with.
Item 12 (c) – Adequacy of Data
The data observed during the site visit is deemed adequate due to the manual nature and high volume of data; the mine has been operating successfully for a number of years using this system. The reconciliations indicate that the mine has a fairly high mine call factor (>90%) which indicates that the evaluation is close to the actual grade or that there is a possible underestimation of gold loss during mining due to the under evaluation via the sludge samples due to the fines being lost.
Minxcon is however of the opinion that the sampling data base is acceptable for the manual resource estimation methodology being utilised at the Blanket Operation because of the sheer volume of sampling data from the mining operation as well as the historical reconciliation between the gold called for and the recovered gold which indicates a good correlation.


52


ITEM 13 – MINERAL PROCESSING AND METALLURGICAL TESTING

Item 13 (a) – Nature and Extent of Testing and Analytical Procedures
The plant currently treats RoM from the main Mineral Deposits (refer to Item 17 (b) for analysis on the historic production efficiencies). The ore is free milling and the mineralogy has not changed to a significant degree (the gold recoveries have been consistent for the past two years). Sufficient information from historic production is required to determine the expected production performance with reasonable confidence.
Item 13 (b) – Basis of Assumptions Regarding Recovery Estimates
The expected processing efficiencies are based on historic production.
Item 13 (c) – Representativeness of Samples
The samples measured from historic production are considered reliable and representative. As a result, they can be used to adequately predict future performance.
Item 13 (d) – Deleterious Elements for Extraction
The arsenopyrite content of RoM material currently being treated from Blanket Mine is sufficiently low enough not to pose a risk to economic extraction and deposition of tailings.
Blanket ores are free milling in that 93% of the gold is recovered via direct cyanidation. Arsenic therefore reports to the mine residue deposit in the form of undecomposed arsenopyrite, constituting less than 1% of the ore. The ore contains approximately 35% carbonate minerals which results in the tailings having an alkaline chemistry which inhibits the decomposition of arsenopyrite which is not exposed to the atmosphere. Rain water run-off from the tailings dam is channelled within bund walls to a sump from where it is returned to the plant as makeup water.
Blanket will be undertaking a pilot plant test work programme on the other more-refractory Mineral Deposits not currently being mined which may have a higher arsenopyrite content. Continuous testing and analysing of arsenic and other potential deleterious elements will be conducted as part of this test programme. Appropriate neutralisation steps will be included in the process design as required.



53
 


ITEM 14 – MINERAL RESOURCE ESTIMATES

The Mineral Resources were compiled and supplied by the Blanket mine personnel. During the site visit and audit process, the Qualified Person verified that the Mineral Resources comply with the definitions and guidelines for the reporting of Exploration Information, Mineral Resources and Mineral Reserves in Canada, "the CIM Standards on Mineral Resources and Reserves – Definitions and Guidelines" and the Rules and Policies of the National Instrument 43-101 – Standards of Disclosure for Mineral Projects, Form 43-101F1 and Companion Policy 43-101CP. However, the mineral resources reported on the Blanket Mine combine the reserves and resources in a single tabulation which is not strictly compliant (Table 1).
Item 14 (a) – Assumptions, Parameters and Methods Used for Resource Estimates
Due to the manual nature of the sampling database no electronic modelling or estimation is conducted on the sampling database. Estimation methodologies such as Kriging is, therefore, not utilised in the mineral resource estimation. The block listing received from the mine is compiled using the method described in Item 12. A summary of the parameters used in the resource estimation is as follows:-
· Manual weighted averages of sampling data.
· No kriging or digital estimation process.
· The individual sample points are top cut to the 90 th percentile.
· Mineralised widths are determined by the combination of geology and the mineral resource cut-off of 1.96 g/t (based on a gold price of $ 1 300/oz. and a cost of $ 70.44/t).
· A historical SG of 2,86 is standard for all reefs.
· For narrow reefs a minimum mining width of 1.2 m is used.
· Ore resource blocks are based on the geology and the geometry of mined-out areas.
· Ore resource blocks are not corrected for dip.
· The block model is the combination of the mineral resource blocks.
· Depletions are determined by the mine survey department.
· The resources are classified into Measured, Indicated and Inferred Mineral Resources (classification criteria are described in the following section as per the mine's definition).
Inferred Mineral Resources
Inferred Mineral Resource block boundaries are taken to the following limits where no point within the block is greater than the specified distance from a sample point:-
· 60 m on strike; and
· 120 m on dip.
Down-dip continuity at two times strike is taken from the known limits of pay shoots on other Mineral Deposits (Jethro and Blanket No.1) which have tapered outlines with depths three to four times maximum strike. The following exceptions limit the distance of a resource block boundary from a sample point:
 
· Where the 60 m limit exceeds the strike confines of the pay shoot defined by existing up-dip mining limits.

· Where peripheral intersections suggest a significant thinning of the mineralised zone.
· Where un-mineralised holes indicate termination of the mineralised zone. In this instance the boundary is taken halfway between the mineralised and non-mineralised intercepts, with the restrictions of pay shoot boundary-taking precedence.
· Where projected geological features (e.g. dykes and faults) are likely to affect the mineralised zone.
54
 
Indicated Mineral Resources
Indicated Mineral Resources are generated from core holes, mainly from underground drifts and in some instances from channel sampling of mine development. The latter are essentially extension blocks from Measured Mineral Resources and Proven Mineral Reserves. Indicated Mineral Resource block boundaries are taken to the following limits where no point within the block is greater than the specified distance from a sample point, with the following exceptions:-
· 30 m on strike; and
· 60 m on dip.
The 30 m strike distance of a resource block from a borehole intersection is reduced in the following situations:-
· Where the 30 m limit exceeds the strike confines of the ore shoot defined by the up-dip mining limits.
· Where peripheral intersections suggest a significant thinning of the mineralised zone.
· Where un-mineralised holes indicate termination of the mineralised zone. In this instance the boundary is taken halfway between the mineralised and non-mineralised intercepts, with the restrictions of pay shoot boundary taking precedence.
· Where projected geological features (e.g. dykes and faults) are likely to affect the mineralised zone.
Measured Mineral Resources
In practice, Measured Mineral Resources are not normally reported as these are converted upon completion of development and sampling to Proven Reserves. Measured resource blocks are taken to the following limits, where no point within the block is greater than the specified distance from a sample point, with the following exceptions:-
· 7.5 m on strike; and
· 7.5 m on dip.
Down-dip continuity is determined by the mining method of 15 m lifts on the DSR Mineral Deposits and quartz shear reefs.
Mineral Resource for Blanket Underground Operations
Table 1 details the reconciliation of the August 2013 and August 2014 Mineral Resource as tabulated by the Blanket Mine.
Table 1: August 2013 and August 2014 Blanket Mine Mineral Resource Reconciliation (as tabulated by Blanket Mine)

 
2013
2014
Category
Estimated
Tonnes
Est Mill
Head Grade
%
Ounces
Estimated
Tonnes
Est Mill
Head Grade
%
Ounces
t
g/t
oz.
t
g/t
oz.
Proven *
966,733
3.72
13.48
115,517
895,194
3.37
11.78
96,943
Total Available
966,733
3.72
13.48
115,517
895,194
3.37
11.78
96,943
Probable*
2,121,373
3.56
29.57
243,143
1,888,805
3.58
24.85
217,591
Probable Pillars*
765,337
4.13
10.67
101,740
772,143
4.05
10.16
100,522
Total Reserves*
3,853,442
3.72
53.72
460,400
3,556,142
3.63
46.79
415,055
Indicated Resources**
448,364
3.81
6.25
54,940
698,963
3.66
9.20
82,177
Inferred Resources**
2,871,099
5.02
40.03
462,944
3,344,831
5.11
44.01
549,963

Notes:
1. * Reserve tonnages are fully diluted (factor of 7.5%).
2. ** Resource tonnages are in situ i.e. no modifying factors have been applied.
3. 2013 gold price = USD1,400/oz.
4. 2013 pay limit = 1.95 g/t.
5. 2014 gold price = USD1,300/oz.
6. 2014 pay limit = 1.96 g/t.
7. Conversion from g to troy oz. = 32.15076.
55

Table 2 reflects the reclassified Mineral Resource as verified by Minxcon. The Blanket mine/operation resource classifications have been changed to Measured, Indicated and Inferred. No reserves are stated here, however, the Mineral Resources are declared as inclusive of all Mineral Reserves. The reserves have been declared separately, as determined by the Reserve LoM plan.
The Proven and Probable pillar reserves of the Caledonia mineral resource have been declared Measured Resources and the Probable Reserves have been included in the Indicated Resource. The modifying factors as applied by Caledonia have not been applied to the Minxcon mineral resource. The Indicated and Inferred Mineral Resource categories remained the same as the Caledonia calculated mineral resource.
Table 2: August 2014 Mineral Resource as Verified by Minxcon
Mineral Resource Category
Tonnage
Au
Au Content
Ounces
 
t
g/t
kg
oz.
Measured Resource
1,572,733
3.91
6,146
197,606
Indicated Resource
2,478,902
3.77
9,340
300,288
Total Measured and Indicated
4,051,635
3.82
15,486
497,895
Inferred Resource
3,344,831
5.11
17,106
549,963
Notes:
1. Tonnes are in situ .
2. All figures are in metric tonnes.
3. Mineral Reserves are included in the Mineral Resource.
4. Mineral Resources are stated at a 1.96 g/t cut-off.
5. No geological losses were applied to the tonnage.
6. Tonnage and grade have been rounded and this may result in minor adding discrepancies.
7. The tonnages are stated at a relative density of 2.86 t/m 3 .
8. Conversion from kg to oz.: 1:32.15076.
Mineral Resource for GG and Mascot Exploration Shafts
The Mineral Resource for the two exploration shafts are a combination of drilling data as well as underground sampling of the development haulages. The evaluation process is the same as for the Blanket mine. Sections of the two exploration shafts can be seen in the mineral resource working plans illustrated in Figure 22 to Figure 24.
Table 3: August 2014 Mineral Resource for GG as Verified by Minxcon
Resource Category
Tonnage
Width
Au
Au Content
Ounces
 
t
m
g/t
kg
oz.
Measured Resource
127,178
4.53
3.79
482
15,486
Indicated Resource
55,123
2.45
5.86
323
10,386
Measured & Indicated Resource
182,301
3.90
4.41
805
25,872
Inferred Resource
110,242
2.73
2.87
316
10,173
Notes:
1. Tonnes are in situ .
2. All figures are in metric tonnes.
3. Mineral Resources are stated at a 1.96 g/t cut-off.
4. No geological losses were applied to the tonnage.
5. Tonnage and grade have been rounded and this may result in minor adding discrepancies.
6. The tonnages are stated at a relative density of 2.86 t/m 3 .
7. Conversion from kg to oz.: 1:32.15076.
Table 4: August 2014 Mineral Resource for Mascot as Verified by Minxcon
Resource Category
Tonnage
Width
Au
Au Content
Ounces
 
t
m
g/t
kg
oz.
Measured Resource
66,532
1.75
2.60
173
5,571
Indicated Resource
69,006
3.18
4.83
333
10,716
Measured & Indicated Resource
135,538
2.48
3.74
507
16,288
Inferred Resource
69,587
2.53
8.23
573
18,416
Notes:
1. Tonnes are in situ .
2. All figures are in metric tonnes.
3. Mineral Resources are stated at a 1.96 g/t cut-off.
4. No geological losses were applied to the tonnage.
5. Tonnage and grade have been rounded and this may result in minor adding discrepancies.
6. The tonnages are stated at a relative density of 2.86 t/m3.
7. Conversion from kg to oz.: 1:32.15076.
56


Item 14 (b) – Disclosure Requirements for Resources
All Mineral Resources have been categorised and reported in compliance with the definitions embodied in the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by the CIM Council (incorporated into NI 43-101). As per CIM Code specifications, Mineral Resources have been reported separately in the Measured, Indicated and Inferred Mineral Resource categories. Inferred Mineral Resources have been reported separately and have not been incorporated with the Measured and Indicated Mineral Resources.
Item 14 (c) – Individual Grade of Metals
Mineral Resources for gold have been estimated for the Blanket Mine (Table 2). No other metals or minerals have been estimated for the Project.
Item 14 (d) – Factors Affecting Resource Estimates
No socio-economic, legal or political modifying factors have been taken into account in the estimation of Mineral Resources for the Blanket Mine.
 
57


ITEM 15 – MINERAL RESERVE ESTIMATES

Item 15 (a) - Key Assumptions, Parameters and Methods
Key Assumptions
· It is assumed that the planned production will be achieved.
· The modifying factors applied over the LoM were derived from historical production figures that are assumed to be untampered and correct.
Parameters
· All the Mineral Resources included in the Reserve LoM plan will be extracted mainly though the existing infrastructure. Production rates applied are inclusive of required on-reef development, such as raises, ore passes, travelling ways, etc. the cost of the on reef development are included in the mining costs.
· The mining rate was applied as a rate per day, supported by achieved actual rates.
· Stoping rates were planned between 50 tpd in some areas and up to 500 tpd in others.
· The rates were based on shaft hoisting capacity constraints and further reduced to accommodate other capital development activities that is required beyond the scope of the NI 43-101 report. These are discussed in Item 24 (a).
Methods
The Reserve LoM plan comprises Measured and Indicated Mineral Resources in the area above 750 m (above 22 Level) at Blanket Mine. The Mineable Resources were indicated on the mine plans and subsequently logged into a block list. The position of each resource block was evaluated regarding its position relative to existing infrastructure, such as shafts, and the position in terms of stoping sequence. An extraction sequence number was given to each resource block, after which the block list was sorted to reflect the order of extraction. This sorted list was imported into Enhanced Production Scheduler ("EPS"). The blocks from different areas were tagged and the appropriate mining rates were applied according to the mine's extraction strategy (Table 5).
Table 5: Mine Design Criteria - Stoping
Description
Unit
Value
Stope Preparation
Months
                         2
Above 750 level Blanket Production
t/day
                       50
Above 750 level AR Main Production
t/day
                     400
Above 750 level AR South Production
t/day
                     500
Above 750 level Eroica Production
t/day
                     200
Above 750 level Lima Production
t/day
                       50
Mining rates were applied as a rate per day; the mine will produce 352 days a year. Modifying factors were built into the EPS schedule.
Item 15 (b) - Mineral Reserve Reconciliation - Compliance with Disclosure Requirements
The Mineral Reserves for Blanket Mine is illustrated in Table 6.
Table 6: Mineral Reserve Statement (October 2014)
Mineral Reserve Category
Tonnage
Au
Au Content
Ounces
t
g/t
kg
oz.
Proven
      856,005
3.40
         2,912
       93,638
Probable
   2,077,828
3.78
         7,862
     252,758
Total Mineral Reserves
   2,933,833
3.67
       10,774
     346,396
Notes:
1. Tonnages refer to tonnes delivered to the metallurgical plant.
2. All figures are in metric tonnes.
3. 1kg = 32.15076 oz.
4. Pay limit Blanket Mine 2.03 g/t.
5. Pay Limit calculated: USD/oz. = 1,250; Direct Cash Cost (C1) – 71 USD/t milled.
6. Production profile cut end 2021.
 
58


Mineral Reserve Reconciliation
Table 7: Mineral Reserve Reconciliation
 
2013
2014
Difference
Category
Estimated
Est. Mill
Ounces
Estimated
Est. Mill
Ounces
Estimated
Est. Mill
Ounces
Tonnes
Head Grade
Tonnes
Head Grade
Tonnes
Head Grade
Mt
g/t
Moz.
Mt
g/t
Moz.
Mt
g/t
Moz.
Proven
1,349,000
3.84
166,600
856,005
3.40
93,638
-492,995
-0.44
-72,962
Probable
2,121,000
3.56
243,000
2,077,828
3.78
252,758
-43,172
0.22
9,758
Total Mineral Reserves
3,470,000
3.67
409,400
2,933,833
3.67
346,396
-536,167
0.00
-63,004
Notes:
1. Tonnages refer to tonnes delivered to the metallurgical plant.
2. All figures are in metric tonnes.
3. 1kg = 32.15076 oz.
4. The reduction in ounces is mainly attributed to the exclusion of previously stated Proven and Probable Reserves below 750 m Level. (These ounces are accounted for as Measured and Indicated Resources)
5. 2013 Probable Reserves include Probable and Probable Pillars.
Item 15 (c) - Multiple Commodity Reserve (Prill Ratio)
Gold is the only commodity within the mining areas that is present in significant concentrations.
Item 15 (d) - Factors Affecting Mineral Reserve Estimation
No factors were identified that can materially alter the Mineral Reserve statement.

59

ITEM 16 – MINING METHODS

Item 16 (a) – Parameters Relevant to Mine Design
Mining Methods
Blanket Mine uses mining methods that are commonly employed and well-understood by Greenstone Belt miners who generally have to deal with steep tabular to massive Mineral Deposits. Since the nature of the Mineral Deposits varies, the exact mining practices are tailored to suit the specific attributes of each particular Mineral Deposit. The mining methods employed represent experience gained from many years of mining. Two types of mining methods are used at the Blanket Mine:-
· Underhand stoping in the narrow Mineral Deposits.
· Long hole stoping in the wider Mineral Deposits.
The Mineral Deposits can be accessed on several main levels: 7 Level, 9 Level, 14 Level, 18 Level and 22 Level. In-between these levels cross-cuts are cut every 30 m from where diamond drilling is used to locate ore shoots for development planning. Most of the development is within mineralised zones, except when developing transfer levels between Mineral Deposits. Such development is treated as waste.
Stoping preparations in narrow Mineral Deposits (<3.0 m) begin by mining box raises sited at 10 m intervals from the footwall of the Mineral Deposit. In wider Mineral Deposits (>3.0 m), air loader operated draw points are mined instead of boxes to facilitate long hole open stoping which generates large rocks. Underhand bench stoping is usually applied in the narrow Mineral Deposits and allows for control of the stoping width (+/-2 m) and dilution. Figure 28 presents a schematic section of a typical underhand stoping method.
Figure 28: Underhand Stoping Method
 
 
Underhand Stoping Method
Long hole stoping is the mining method used most often at the Blanket Mine. Figure 29 is a schematic section of a typical long hole stoping layout in wider Mineral Deposits.
60


Figure 29: Long Hole Stoping
 
 
Long Hole Stoping
Modifying Factors
The Mineral Reserves were calculated based on the block list supplied by Blanket Mine. The blocks were arranged according to an extraction strategy and modifying factors were applied. Only Measured and Indicated Mineral Resources were included in the Reserve LoM plan. The applied modifying factors are:-
· Extraction rate – A 100% extraction rate was applied to the Measured and Indicate Mineral Resources. The indicated pillars are resources that were left behind as pillars either for shaft stability, cones or crown pillars. After the extraction of the above ore and/or the decommissioning of the shaft, these resources can be extracted with an expected 70% extraction ratio.
· Dilution – Waste dilution was applied based on a 10 cm over break into the hanging wall and 10 cm into the footwall.
· Mine Call Factor ("MCF") – By applying an MCF, the differences between shaft head grade and Reserve grades that are supported by historical measurements, will be accounted for. These differences typically occur due to gold losses in fines. The MCF only affects the gold grade; it has no impact on the plant feed tonnes. An MCF of 100% was applied for the Blanket Mine based on historical recordings. The MCF history is illustrated in Table 8.
Table 8: MCF History
Year
Milled Tonnes
Gold Recovered
Gold in Tails
Gold Accounted For
Total Mined Tonnes
Mined Grade
Gold Called For
MCF
t
oz.
oz.
oz.
t
g/t
oz.
%
1998
215,580
24,194
3,604
27,798
216,330
4.56
31,716
88%
1999
205,330
22,838
2,839
25,677
199,787
4.27
27,428
94%
2000
193,300
23,725
2,859
26,584
187,466
4.34
26,158
102%
2001
195,400
24,748
3,204
27,952
176,625
4.71
26,746
105%
2002
179,891
26,773
3,236
30,009
178,329
5.19
29,756
101%
2003
173,700
24,525
2,234
26,759
165,887
4.80
25,600
105%
2004
178,896
24,119
2,416
26,535
185,302
4.60
27,405
97%
2005
212,319
24,783
2,867
27,650
212,176
4.05
27,628
100%
2006
99,361
11,685
1,342
13,027
94,824
4.08
12,439
105%
2007
100,082
9,885
1,098
10,983
100,082
3.70
11,906
92%
2008
81,987
7,687
760
8,447
81,987
3.75
9,885
85%
2009
103,445
11,295
1,117
12,412
103,445
3.54
11,773
105%
2010
153,501
17,707
1,540
19,247
153,501
3.75
18,507
104%
2011
299,257
35,826
2,738
38,564
299,257
3.85
37,042
104%
2012
363,725
45,464
3,057
48,521
363,725
3.83
44,788
108%
2013
392,320
45,527
3,269
48,796
392,320
3.99
50,328
97%
Tot/Ave
3,148,094
380,781
38,181
418,962
3,111,043
4.19
419,104
100%
61


Ventilation Design Criteria
Ventilation is downcast via the Main shaft, Jethro surface, 5 Winze and N° 4 shaft. In the Lima, Sheet, Jethro Winze and other old shafts, ventilation is up cast. Various axial flow fans have been installed on the mine to enhance the ventilation volume.
Rock Engineering Design Criteria
The different rock types at the Blanket Mine are generally competent and support such as rock bolts are only installed on rare occasions where weaker rock conditions are encountered. There are zones with unstable sidewalls such as the Quartz Reef and Feudal at Blanket, but this is addressed by the application of a shrinkage methodology. The types of stopes do not contribute a relatively high tonnage and is insignificant to the overall dilution incurred.
Item 16 (b) – Production Rates, Expected Mine Life, Mining Unit Dimensions, and Mining Dilution
The production for the Blanket mine is from five different areas that are all above 750 m. The production from the different levels is illustrated in Figure 30. The tonnes are illustrated as an average per month. Following a financial analysis, all production after 2021 was excluded from the Reserve LoM plan as it is uneconomical.
Figure 30: Blanket Mine Total Production
62


Item 16 (c) – Requirements for Stripping, Underground Development and Backfilling
Underground Development
All the areas that form part of the Reserve LoM plan have development in place. The blocks only originate from the Above 750 m level and the mining rates applied are within the shaft capacity limits; no new development will be required for the Above 750 m level areas.
Backfilling
Backfilling is needed when mining at great depth. It is currently not a Rock Engineering requirement to backfill stoped-out panels at Blanket Mine, as mining is still shallow.
Item 16 (d) – Required Mining Fleet and Machinery
As at June 2011, underground drilling equipment comprised seventy Seco 23, Seco 25, Seco 215 jackhammers and Seco 36 (Konkola) drifters. The jackhammers are mainly used for development and the drifters for production (long hole drilling). Tramming of ore and waste is done by LM56/57 air loaders, grandby cars, cocopans and battery-operated locomotives.
 
63
 


ITEM 17 - RECOVERY METHODS

Item 17 (a) - Flow Sheets and Process Recovery Methods
The Blanket gold Plant consists of a conventional crushing, milling and CIL, batch elution and smelting configuration with a current capacity of 40 ktpm. The crushing and milling circuits are designed to process RoM. However, the CIL and downstream circuits were designed to treat tailings dam material at a rate of about 110 ktpm (or 3,800 tonnes per day). More recently, historic tailings and RoM were treated in the CIL plant at a combined rate of approximately 100 ktpm to 120 ktpm. The tailings treatment was stopped about three years ago. The CIL is currently used exclusively for treatment of RoM at a rate of 30 ktpm to 35 ktpm. The retention time in the CIL circuit is as high as 72 hr as a result of the lower tonnage throughput. A process flow diagram can be seen in Figure 31.
The plant consists of the following circuits:-
· jaw crushing;
· cone crushing in closed circuit with a screen;
· primary rod mill in open circuit;
· ball mill in closed circuit with cyclones;
· gravity circuit;
· dewatering cyclones;
· CIL;
· combined elution and electrowinning;
· smelt house;
· carbon re-activation in a kiln;
· reagent make-up and dosing circuits; and
· water recycling and storage.
 
64
 

 
Figure 31: Process Flow Schematic – Comminution Circuits
 
 
Process Flow Schematic – Comminution Circuits
 

 
65

Figure 32: Process Flow Schematic – CIL and Elution Circuits
 
 
Process Flow Schematic – CIL and Elution Circuits



66

Item 17 (b) - Operating Results Relating to Gold Recovery
Historic Production Efficiencies
Table 9 summarises historic production data and operating costs between 2013 and July 2014.
Table 9: Historic Production from 2013 to July 2014.
Item
Source
Unit
Average per Month 2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Milled tonnes
Blanket
ktpm
32.69
28.33
32.10
32.42
35.29
30.11
33.83
35.53
Head
Blanket
g/t
3.87
3.63
3.67
3.70
3.54
3.82
3.89
3.57
Head
Calculated
kg
126.65
102.97
117.88
119.98
124.85
115.12
131.59
126.83
Gravity Recovery
Blanket
%
49.28
46.68
51.85
49.53
49.46
52.51
54.50
52.14
CIL Recovery
Blanket
%
87.63
86.56
87.10
87.56
87.32
87.82
86.60
86.50
Overall Recovery
Blanket
%
93.30
93.10
93.80
93.90
94.00
94.40
93.72
93.37
Production
Calculated
kg
118.17
95.86
110.57
112.66
117.36
108.68
123.33
118.41
Residue
Calculated
g/t
0.26
0.25
0.23
0.23
0.21
0.21
0.24
0.24
Residue
Calculated
kg
8.49
7.10
7.31
7.32
7.49
6.45
8.27
8.41
Source : Blanket Mine
Figure 33: Historic Milled Tonnes and Head Grade from January 2013 to July 2014
Source : Blanket Mine
The milled tonnes varied between 28.3 ktpm and 37.4 ktpm from 2013 with an average of 32.6 ktpm (Figure 33). The overall recoveries varied between 92.7% and 95.1% with an average of 93.5% (Figure 34). The gravity gold recovery varies between 46% and 52% with an average of 49%. The CIL circuit gold recovery is also very steady with an average of 87.6%. The plant is expected to achieve a similar recovery in future when treating current Blanket RoM material. RoM material from other sources may be more refractory and will have to be tested before being treated in the Blanket plant.
There is a fully equipped assay laboratory which is located at the plant offices. The mine laboratory was inspected by Mr Dario Clemente and even though the mine laboratory is not accredited, it does have the necessary equipment required to prepare and analyse mine and plant samples. The sample preparation areas are demarcated for low grade and high grade areas, especially where cross-contamination is a risk.
Good housekeeping standards are applied in the sample crushing and preparation and fire assay areas. As part of its external verification process the mine laboratory sends samples away to Duration, Met Solution and Performance Laboratories (accredited according to the mine personnel), to test their precision and accuracy. Minxcon was supplied with figures for January, April, July and August 2014 which (apart from April) had a good correlation coefficient. In addition, the laboratory makes use of standard reference material which it sources from Geostats in Australia or AMIS from South Africa. Graphs, which show a good correlation, were supplied to Minxcon. The laboratory does not have an electronic tracking system. The implementation of a Laboratory Information Management system ("LIMS") will reduce human error.

67
Figure 34: Historic Recoveries and Gold Production from January 2013 to July 2014
Source : Blanket Mine
Item 17 (c) - Plant Design and Equipment Characteristics
This section details the process flow. Refer to Figure 31 for the process flow schematic diagram.
The plant was designed and constructed by Kinross Mining Company to treat RoM ore from the Blanket mine. The ore is fed over 14" x 24" jaw crushers to reduce the top size from -300 mm to less than 80 mm. Tramp iron magnets (located ahead of the crushers) remove scrap iron before it enters the cone crushers. This is important as any iron products from underground will cause major damage to the crushers if allowed to enter the crusher bowl. The crushed ore is stored on a 900 tonne open stockpile (Figure 35) from where material is fed to the cone crushers.
Figure 35: Cone Crusher Feed Stockpile
 
 
Cone Crusher Feed Stockpile
The cone crushers were upgraded recently and replaced with two 38" hydraulically adjusted Nordberg crushers (Figure 36). The crushers can operate independently and feed Osborne vibrating screens. The screened product which is smaller than 10 mm is delivered to the mill feed bin. The equipment quality is good and good maintenance is applied (an observation made during the site visit).
 
 
68
Figure 36: Cone Crushers
 
 
Cone Crushers
The rod mill feed bin live capacity is small which, in turn, requires that the crushers operate on a three-shift cycle to ensure that the rod mills have adequate feed for continuous operation. There are plans to install additional storage capacity which will result in reduced operating costs in the crushing circuit. The cone crushers can then operate for fewer hours at a higher throughput thereby reducing operating unit costs and introducing more flexibility.
Figure 37: Rod Mills
 
 
Rod Mills
There are three 6.5 ft. x 12 ft. rod mills which operate in parallel. Each feed belt has a mill feed mass meter which is used to control and measure the mill feed rate. The foundations of the previous mills were in the process of being demolished which leaves adequate space for future expansion.
Approximately 45% to 50% of the gold production is recovered as gravity gold. Concentrate from the Knelson Concentrators is stored and re-concentrated on a Gemini table every 24 hours with the tailings recycled back into the circuit. Gemini table concentrates go for direct smelting whilst the tailings are pumped to the classifying hydro cyclone. The Knelson Concentrator tails are pumped through cyclones, the underflow of which reports to the open-circuit regrind ball mill.

69
The product from the Knelson tails cyclone overflow and the regrind mill discharge is pumped into the CIL plant. The CIL consists of one pre-aeration tank and eight leach tanks where alkaline-cyanide leaching and simultaneous absorption of dissolved gold onto granular activated carbon takes place (Figure 38).
Figure 38: CIL Circuit
 
 
CIL Circuit
Oxygen generated from a pressure oxygen plant is added into the first CIL tank; liquid oxygen is also available in the event of the oxygen plant being out of circuit for maintenance or breakdowns. There is a TAC 1000 cyanide online analyser which measures and controls cyanide addition. This process control system, in conjunction with oxygen injection, has reduced cyanide consumption.
Elution of the gold from the loaded carbon and subsequent electro-winning is done on site. There are two 2.5 tonne elution columns which operate in parallel. The design of the columns is unique in that the elution and the electro-winning processes take place in the same pressurised vessel. The advantage of this is that there is no circulation of solution outside the vessel which requires heat exchangers for heating and cooling. The overall effect is that the system is very energy efficient and cost effective.
During electrowinning (Figure 39) the gold is deposited on wire wool cathodes within the elution column, and the loaded cathodes are removed on a planned cycle and acid-digested. The resultant gold solids from acid digestion and the re-dressed gold concentrate from Knelson Concentrators are smelted into bars. The granular activated carbon is kiln regenerated before it is recirculated back to the CIL section. Loaded carbon is not acid treated in an attempt to reduce reagent costs. Carbon reactivation has remained acceptable although the acid treatment can be re-introduced if required. The gold bullion, in the form of doré bars, is delivered, as required by Zimbabwean gold-mining law, to the Government-operated Fidelity for sampling and onward delivery to the Zimbabwe gold refinery.
70
 
 
Elution and Electrowinning Vessels
Power is supplied from the national grid, but a fully-automated diesel driven power plant is available when power trips occur. The diesel power generation sets have a capacity of 10 Megawatts and can service both the mine and the plant when required.
The plant tailings from CIL are reduced in cyanide content and deposited on two licensed tailing impoundment areas located close to the plant. The maximum amount of tailings water is pumped back to the metallurgical plant for re-use. Daily management and operation of the tailing deposition area is contracted out to the Zimbabwean subsidiary of Fraser Alexander.
Item 17 (a) – Current Requirements for Reagents and labour
Labour Requirements
Table 10   summarises the current labour complement for the Blanket Gold Plant.
Table 10: Labour Complement for the Plant
Section
Position
Number
Plant Senior Staff
Mill Superintendent
1
Asst. Mill Superintendent
1
Plant Staff
Plant Metallurgist
1
Senior Assayer
1
Plant Foreman
1
Metallurgical Technician
1
Plant Operators
3
Mill Clerk
1
Elution Supervisor
1
Senior Smelting Assistant
1
Senior Lab. Assistant
1
Primary Crusher
Senior Crusher Attendants
2
Crusher Attendants
13
Secondary Crusher
Senior Crusher Attendants
1
Crusher Attendants
5
Crusher Attendants
1
Gravity &Smelting Assistants
3
Milling
Mill Attendants
4
Mill Attendants
10
Elution
Senior Elution Assistant
1
Elution Assistants
2
Elution Attendants
3
Tailings
Supervisor
1
Slimes Dam Attendants
3
Pump Attendants
3
CIL
CIL Attendants
4
CIL Attendants
6
CIL Attendants
1
Water
Water Works Attendant
1
Water Works Attendant
2
Water Works Attendant
1
Metallurgical Lab and Sample preparation
Laboratory Assistants
2
Laboratory Assistants
4
Fusion Furnaces
Supervisor
1
Laboratory Assistant
1
Wet Assay
Supervisor
1
Lab Assistants
1
Sub Total
 
90
Engineering
Mechanical Engineer
1
Foreman
1
Fitter
5
B/Maker
4
Plumber
1
Rubber Liner
1
Assistant Fitter
5
B/maker Assistant
4
Lubricator
1
R/Liner Assistant
1
Plumber's Assistant
1
Electrician
1
Assistant Electricians
1
Sub Total
 
27
Total
 
117
Source : Blanket Mine
71
The Electrical Engineer is not included in the above table as he is shared between the plant and the mine. All the plant employees are adequately trained and from observation around the plant, as well as the condition of equipment, it is clear that management is of a high standard. The higher labour complement is in part due to the manual control nature of the plant.
The laboratory personnel account for an additional ten people. The laboratory is used for plant analysis as well as management of mine and exploration samples. The plant does not have a central process control system, but there are local controls in the important areas such as mill feed control cyanide addition and level controls in relevant areas.
Reagents and Consumables
The reagent and consumable consumptions are shown in Table 11. The forecasted consumptions are not expected to change significantly.
Table 11: Reagent and Consumable Consumptions
Item
Unit
Average 2014
Grinding Media and CIL reagents
 
 
Rods
kg/t
                0.7
Balls- 40mm
kg/t
                0.9
Total Steel Media
kg/t
                1.5
Lime
kg/t
                1.7
Carbon
kg/t
                0.1
Sodium Cyanide
kg/t
                0.8
Liquid Oxygen
kg/t
                0.2
Elution Consumables
 
 
Steel wool
kg/tC
                0.3
Caustic Soda
kg/tC
              52.8
Source : Blanket Mine
Some of the higher consumptions of reagents was due to the high retention times of approximately 72 hours in the CIL circuit. This mainly affects carbon consumption due to the long exposure to agitation and abrasion in the CIL tanks, as well as cyanide consumption.
 
 
72


ITEM 18 – PROJECT INFRASTRUCTURE

The Blanket Mine Project Area is accessed by an all-weather single lane tarred road and is situated roughly 16 km from Gwanda. Gwanda is linked by national highways to Bulawayo, Harare and the Beit Bridge Border post. The railway line connecting the Zimbabwean national network to South Africa passes through Gwanda. An airstrip for light aircraft is located approximately 5 km to the northwest of the town. The general location and infrastructure of the Blanket Mine is illustrated in Figure 40.
Figure 40: General Location and Infrastructure
 
 
General Location and Infrastructure
Item 18 (a) - Mine Layout and Operations
The Blanket Mine consists of a series of small shafts providing access to the underground workings. The majority of these shafts are used for ventilation while the 4 m x 2 m, two-compartment rectangular 4 shaft (Figure 41) is used to hoist the approximate 1,300 tpd of ore and development waste generated down to 750 m level. Jethro shaft and its associated sub-shaft system is used to transport men and material underground.
Figure 41: No 4 Shaft Headgear and Winder Room
 
 
No 4 Shaft Headgear and Winder Room
Additional information on the mining operations is contained in the relevant sections of this Report.
73


Item 18 (b) - Infrastructure
Surface infrastructure comprises mine offices, change houses, workshops, store rooms, a processing plant and an assay laboratory to name but a few. Surface infrastructure is located adjacent to the shafts and there is adequate room for future expansion. A Tailings Storage Facility ("TSF") is also located in close proximity to the Project Area. The labour force and their families reside within a kilometre of the mine in accommodation supplied by the mine.
Production shafts on surface consist of the No 4 shaft and the Jethro shaft. Sub-shaft infrastructure in the form of the No 5 Winze connects Jethro to the underground workings. Other shafts and raise bore holes on surface, primarily used for ventilation purposes, include Lima, Eroica and Sheet to name but a few. A total of 11 hoists are installed at the mine, 3 of which are used for ore handling (main incline shaft, the sub-vertical shaft and 6 Winze shaft). All ore is transported to the Blanket Mine area for hoisting to surface. The surface infrastructure at the Blanket Mine is illustrated in Figure 42.
Figure 42: Surface Infrastructure Arrangement
 
 
Surface Infrastructure Arrangement
The two-compartment TSF, which lies to the east of the mine, is operated by Frazer Alexander Zimbabwe. As at January 2011 the TSF had a remaining capacity of 3.5 Mt. Since the mine no longer treats old slimes, the planned daily throughput of 1,000 tpd equates to a remaining estimated lifespan of 14 years. The final design area of the TSF will total 28 ha.
Item 18 (c) - Services
Power Reticulation
The mine is supplied with power via 33kV and 11kV overhead power lines from a main substation situated in Gwanda. The power lines are owned and maintained by ZESA. Four additional standalone diesel generators with suitable switchgear, transformers, and controls were also installed to ensure that the mine can stay operational during power interruptions. This additional installation has a total installed capacity of 10 MVA (Figure 43).

74
Figure 43: Diesel Genset Unit and Genset Shed
 
 
Diesel Genset Unit and Genset Shed
Power is fed down the shafts to the underground workings and is stepped down to the required 550 V service voltages.
Water Reticulation
ZIMWA holds all water rights in Zimbabwe and Blanket subsequently purchases process and domestic water from ZIMWA. Water for the mine, metallurgical plant and the mine village is obtained from the Blanket dam which is located 5 km east of the mine. The Blanket dam has a total capacity of 15Mm³. In addition to this water source, the mine has equipped several boreholes to alleviate water shortages during the dry season and droughts. Underground water is pumped to surface from the 7 level pump station at a rate of between 40 m³ and 60 m³ per hour. The pump station has a maximum pumping capacity of 150 m³ per hour to handle excessive water inflow (especially during the rainy seasons). Pumping is done in stages on five different levels, 7, 9, 14, 19 and 22 Levels.
Ventilation
Ventilation at the Blanket Mine is largely natural with the main incline shaft, Jethro shaft, 5 Winze shaft and sub-vertical shaft down-casting. Shafts such as Lima, Sheet and Jethro Winze are used for up-casting ventilation. A single booster fan as well as several other fans are installed at development ends to aid ventilation. Once mining operations expand to the below 750 m Level, a proper ventilation system with forced up and down-cast ventilation will be commissioned.
Compressed Air
Underground drilling and lashing is aided by jackhammers, drifters and loaders. This creates a significant compressed air demand and subsequently a total compressed air capacity of 10,400 cfm is installed on the mine. Compressor locations and their capacities are as follows:-
· Two 4,400 cfm ER8 Atlas Copco Compressors at Blanket;
· Two 2,000 cfm GA160 Atlas Copco Rotary Screw Compressor at Blanket;
· One 1,000 cfm GA160 Atlas Copco Rotary Screw Compressor at Lima; and
· Two 3,000 cfm GA250 Atlas Copco Rotary Screw Compressor at Lima.
Compressed air is fed underground at Blanket via an 8" pipeline with an additional 4" line feeding the plant. The air supply at Lima is fed underground via a 6" pipeline.
 
75
 

ITEM 19 – MARKET STUDIES AND CONTRACTS

Item 19 (a) – Market Studies and Commodity Market Assessment
The Market Studies were compiled by the Qualified Person, in compliance with the definitions and guidelines for the reporting of Exploration Information, Mineral Resources and Mineral Reserves in Canada, "the CIM Standards on Mineral Resources and Reserves – Definitions and Guidelines" and in accordance with the Rules and Policies of the National Instrument 43-101 – Standards of Disclosure for Mineral Projects, Form 43-101F1 and Companion Policy 43-101CP.
Gold Market
Gold has seen two major rallies over the past two centuries. From 1833 to 1933, gold prices were constant at around USD20 per ounce. From 1934 to 1967, gold prices increased to USD35 per ounce after President Roosevelt fixed the gold price in 1934; the gold price remained stable until 1967 when it was freed. Gold was traded in the market from 1967 and the price increased with rapid fluctuations from then on.
Two significant price jumps occurred in the historical trend of the gold price. The first was in early January 1980, when gold prices reached USD850/oz., but it plunged significantly in the following year. The second historical jump in price started in 2001. This increase is substantially more firmly based and less volatile than the first. Shown in real current-day terms, the price rise in the 1980s was more significant, reaching, when measured in today's terms, over USD2,000/oz.
Figure 44: Nominal Spot Gold Price and Price in Real Current Day Terms
The global gold market has attracted a lot of attention since 2001. During the 2013 calendar year the market observed an end to the twelve-year Bull Run in gold prices and thus far 2014 is shaping up to be a year of consolidation for gold with the price drivers continuing to adjust from concerns over the health and stability of the global financial system.
Gold mining companies need to know where to next. This section of the Report reviews the world gold market. This is followed by an investigation into the relationship between the gold price and other key influencing variables, such as inflation and currency fluctuation.

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There are several factors contributing to short-term and long-term gold price escalations. In the short-term there are two main reasons why gold prices dramatically increase:-
· In a period where global financial markets are unstable and the global economy is in recession, investors are less trusting of financial markets as reliable investments and look at alternative investment avenues that act as a bulwark against any downturn. The gold market, one of such alternatives, operates as a type of insurance against extreme movements in the value of traditional assets during unstable financial markets.
· The devaluation of the US dollar versus other currencies, and international inflation with high oil prices are reasons why big companies use gold as a hedge against fluctuations in the US dollar.
In the long-term, there are three major reasons for increasing gold prices:-
· Mine production, increased mining costs, decreased exploration and difficulties in finding new deposits.
· Institutional and retail investment has rational expectations when markets are uncertain. They therefore keep gold in their investment portfolios as it is more liquid or marketable in unstable financial markets.
· Investing in gold is becoming easier via gold Exchange Traded Funds ("ETFs") compared to other finance markets. Gold ETFs have stimulated the demand side of gold because it has become as easy to trade as any stock or share.
Gold Resources
According to Natural Resource Holdings ("NRH") (2013), the total gold Resources (inclusive of Proven and Probable Reserves, Measured, Indicated and Inferred Resources) that are owned by 312 entities including public, private and government-backed companies' approximated 3.72 billion in situ ounces ("Boz.") in 2013. The average grade of all the deposits was estimated at 1.01 g/t gold.
The database comprises 580 mines and deposits which consist of over one million ounces of in situ resources in all categories. Of these 580 used, 199 are producing mines at an average grade of 1.18 g/t while the remaining 381 are undeveloped deposits at an average grade of 0.89 g/t. The average grade differs significantly (33%) between producing and undeveloped deposits. This has important implications on future gold production, and at a gold price reaching low levels many of these projects will simply not be economically feasible. While North America displays the largest amount of contained gold, Africa continues to be home to some of the highest grade (and highest risk) projects on the planet ( Table 12) .
Table 12: Geographical Gold Deposits
Continent
Resources
Number of Deposits
Average Grade
Moz.
g/t
North America
1,131
199
0.71
Africa
842
109
2.87
Asia
717
87
1.11
South America
543
90
0.83
Australasia
381
68
0.98
Europe
104
27
1.00
World total
3,717
580
1.01
Source : Natural Resource Holdings (2013).
The most resource ounces are held by the 10 countries displayed in Figure 45.

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Figure 45: Top 10 Countries by Total Resource Ounces
Source: Natural Resource Holdings (2013)
Gold Reserves
The global gold reserves are dominated by Australia, South Africa and Russia. Ghana moved up four places from 2013 and increased gold reserves by 400 million tonnes during 2013.
Table 13: Country Listing of Gold Reserves
 
Reserves
Mt
Australia
9,900
South Africa
6,000
Russia
5,000
Chile
3,900
United States
3,000
Indonesia
3,000
Brazil
2,400
Ghana
2,000
Peru
1,900
China
1,900
Uzbekistan
1,700
Mexico
1,400
Papua New Guinea
1,200
Canada
920
Other countries
10,000
World total (rounded)
54,220
Source: US Geological Survey, Mineral Commodity Summaries 2014, February 2014
Gold Supply
· Global gold mine production has grown at a Compounded Annual Growth rate ("CAGR") of only 1.12% per annum over the past 17 years, mainly due to significant declines in the South African industry. Production, however, accelerated to 2.11% per annum during the last 10 years following the rise in the gold price.
· In turn, recycling has grown by a steady 4.52% per annum over the 17 years from only 631 tonnes in 1997 to 1,280 in 2013.
· Producer de-hedging was estimated at 48 tonnes for 2013, leaving the outstanding delta-adjusted hedge book at just 73 tonnes.
· Globally, the average total cash increased by 4% in 2013, to USD767/oz. as producers made efforts to contain costs. Total production cost was USD989/oz.
· Excluding write downs (extraordinary costs), all-in costs averaged USD1,206/oz. These two figures give a sense of short-term and long-term support levels.
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Mine Production
It was estimated that global mine supply increased by 161 tonnes during 2013; 6% higher than 2012. With difficult current economic conditions, the increase in production is a result of a combination of factors.
· A large number of operations have reported higher year-on-year production over the last couple of quarters. In some cases it reflects a return towards "normal" levels of output following periods of low production due to political issues, geotechnical problems and mine sequencing.
· Supply from new operations has made an important contribution towards the increase in global production.
· Major producers focused on reducing non-essential capital expenditure, and more generally moved away from expansions and acquisitions as seen previously.
Figure 46: Gold Supply
Table 14 displays the top 20 gold mining countries for 2012 and 2013. China is now by far the biggest producer followed by Australia and Russia while Mali has moved down to occupy the 16 th position.
Table 14: Top 20 Gold Mining Countries
Country
Mine Production (t)
Change %
2012
2013
y-o-y
China
          413.1
        438.2
6%
Australia
          251.4
        266.1
6%
Russia
          230.1
        248.8
8%
United States
          231.3
        228.9
-1%
Peru
          180.4
        181.6
1%
South Africa
          177.3
        174.2
-2%
Canada
          108.0
        133.1
19%
Ghana
            95.8
        107.9
11%
Mexico
          102.8
        103.8
1%
Indonesia
            89.0
          99.2
10%
Brazil
            67.3
          79.9
16%
Uzbekistan
            73.3
          77.4
5%
PNG
            57.2
          63.3
10%
Argentina
            54.6
          50.1
-9%
Chile
            48.6
          48.6
0%
Mali
            50.3
          47.1
-7%
Tanzania
            49.1
          46.6
-5%
Kazakhstan
            40.0
          42.4
6%
Philippines
            41.0
          40.6
-1%
Colombia
            39.1
          40.4
3%
Rest of World
          464.3
        504.0
8%
World Total
2,864.0
3,022.1
5%
Source :   Thomson Reuters GFMS (2014)
Note :   y-o-y: year-on-year
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Recycled Gold
The annual supply of recycled gold declined for the fifth consecutive year to the lowest level since 2009. Global supply fell 22% to an estimated 1,280 tonnes in 2013. The scale of decline was the same for industrialised markets as for developing countries, although the drivers of behaviour differed. While price is not the only factor that determines the level of recycling, it is a key driver and its influence was clearly on display during the uptick in the gold price and again in 2013. The sharp fall in the price, and subsequent weakness resulted in a considerable decline in recycling in most of these markets.
Figure 47: Recycled Gold and Price Relationship
Source: World Gold Council
Gold Demand
· Jewellery fabrication contracted by a CAGR of 2.06% of the past 17 years but jumped by 13% to a five-year high of 2,198 tonnes in 2013 following the downturn in price.
· Industrial fabrication remained flat.
· Central banks turned from net sellers to net buyers but overall were net sellers of 773 tonnes over the past 10 years.
· World investment demand surged by a CAGR of almost 20% over the past 10 years.
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Figure 48: Global Demand for Gold
Jewellery
According to the world gold council (2014), 2013 recorded the largest volume growth in annual jewellery demand since 1997 and marked a return to pre-crisis levels. A longer-term perspective shows that an increasing share of global collective wealth has been allocated to gold jewellery since 2003 (with the exception of 2009, during the worst of the financial crisis). In 2013, gold jewellery value was almost 0.14% of global gross domestic product ("GDP") compared with less than 0.08% ten years previously. Significantly, jewellery's share of global GDP in 2013 was one fifth higher than 1997, which was the peak year for gold jewellery demand at 3,294 tonnes.
Investment
Gold exchange-traded products are traded on the major stock exchanges including Zurich, Mumbai, London, Paris and New York and most funds are physically backed by vaulted gold. Throughout 2013 the main feature of gold investment was the contrast between exchange-traded funds ("ETFs"), which acted as a source of supply to the market as substantial institutional positions were sold (-881 tonnes), and demand for bars and coins, which surged to an all-time high of 1,654 tonnes.
Over-the-counter ("OTC") investment and stock flows includes the more dense elements of the investment market as well as any stock changes that have yet to be identified and any statistical residual. By adding OTC investment and stock flows component into the picture for investment yields, the investment total is 10% below that of 2012. Also incorporated within OTC investment and stock flows is demand for gold deposit accounts, which has increased particularly in countries such as Turkey and China. An additional element contributing to the number is gold used to back financial transactions, for example in China, where a number of new instruments (e.g. inter-bank swaps and ETFs) have been introduced.
Technology
Application of gold in the technology sector remains relatively small. According to the world gold council, worldwide semiconductor reached record sales in 2013. This was driven by expanding demand for smartphones and tablets. Healthy gains were also seen in products using liquid-crystal display ("LCD") panels. In other areas of semiconductor applications, the automobile industry continues to provide strong support, led by China and the US.
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Gold used in dentistry continued its long-term downtrend, although the pace of decline slowed in response to lower gold prices. Gold is seeing a continuation of the long-term trend away from gold to cheaper alternatives (mainly cobalt, chrome, porcelain, and ceramics).
Central Banks
Central Banks turned net buyers in 2008 following a number of years where the banks were net sellers. Central banks made net purchases of 369 tonnes of gold in 2013. The pace of purchases slowed towards the end of the year due to the heightened volatility of gold and a slower rate of foreign reserve accumulation. Although the annual total is 32% lower than 2012, it is considered a healthy outcome – particularly in light of 2012 being the highest level of demand for almost 50 years (Figure 49). The central banks have been a source of net demand for four consecutive years; this is expected to continue into 2014.
Figure 49: Central Bank Annual Net Sales and Purchases
The following countries all saw significant increases in official reserves while a number of other central banks made smaller purchases of around eight tonnes and less during 2013:-
· Russia (77 tonnes);
· Kazakhstan (28 tonnes);
· Azerbaijan (20 tonnes); and
· Korea (20 tonnes).
Aside from the 3.5 tonne sale from Germany, which is related to its coin minting programme, there have been no further sales in what is the final year of the current Central Bank Gold Agreement ("CBGA"). In spite of the gold price action seen throughout 2013, there clearly remains little appetite from signatories to reduce their gold holdings any further. The top 40 countries' official gold holdings as at the end of March 2014 are displayed in Table 15.

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Table 15: Top 40 Reported Official Gold Holdings (As at March 2014)
Rank
Country
Tonnes
 
Rank
Country
Tonnes
1
United States
       8,133.5
21
Austria
        280.0
2
Germany
       3,386.4
22
Belgium
        227.4
3
IMF
       2,814.0
23
Philippines
        193.2
4
Italy
       2,451.8
24
Algeria
        173.6
5
France
       2,435.4
25
Thailand
        152.4
6
China
       1,054.1
26
Kazakhstan
        148.7
7
Russia
       1,040.7
27
Singapore
        127.4
8
Switzerland
       1,041.1
28
Sweden
        125.7
9
Japan
          765.2
29
South Africa
        125.1
10
Netherlands
          612.5
30
Mexico
        122.8
11
India
          557.7
31
Libya
        116.6
12
ECB
          503.2
32
BIS
        115.0
13
Turkey
          483.5
33
Greece
        112.2
14
Taiwan
          423.6
34
Korea
        104.4
15
Portugal
          382.5
35
Romania
        103.7
16
Venezuela
          367.6
36
Poland
        102.9
17
Saudi Arabia
          322.9
37
Australia
          79.9
18
United Kingdom
          310.3
38
Kuwait
          79.0
19
Lebanon
          286.8
39
Indonesia
          78.1
20
Spain
          281.6
40
Egypt
          75.6
Source :      World Gold Council – Q1 2014.
Note :          IMF : International Monetary Fund
    ECB: European Central Bank
    BIS: Bank for International Settlements
Currency
As gold is usually traded relative to its USD price, the value of the dollar has a meaningful impact on gold. More importantly, gold is viewed as a natural hedge to the USD as it is not directly linked to the monetary or fiscal policies of a particular government. This characteristic strengthens their inverse relationship. Because the USD is also the primary currency used in global transactions and is seen as a stable and reliable unit of exchange, countries aim to have ample reserves to be able to meet their USD denominated liabilities. As such, the dollar forms the lion's share of foreign reserve portfolios. However, governments need to manage the concentration risk in their reserves by diversifying into high quality, liquid assets that lack credit risk – like gold.
Gold is often seen as a currency that provides a natural alternative to money. Gold satisfies many criteria that define a currency including its use as convertibility, store of value and medium of exchange. Through the years it can be seen that gold has the evolving nature of the relationship with the USD, its geological scarcity and its physical/chemical qualities as a non-corrosive, durable metal make it a natural hedge to paper currencies. Because fiat money can be printed as a result of monetary policies, part of gold's value as a hard asset is derived from its lack of supply growth. Gold is a highly liquid asset, with daily trading volumes comparable to major currency pairs such as the USD-pound sterling, and is eclipsed only by USD-yen and USD-euro transactions (Figure 50).
 
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Figure 50: Gold Price vs. USD/Euro
Note:
1. Correlation: 0.670002946.
While gold is considered a commodity by many, in practice, its role as currency stands out. It is used by central banks as part of their foreign reserves, accepted in exchange for goods in parts of the world, and traded alongside other currencies in the financial system. According to the Bank for International Settlements ("BIS") 2013 annual report that states that "gold is to be dealt with as a foreign exchange position rather than a commodity because its volatility (which is almost consistently lower than commodities) is more in line with foreign currencies, and banks manage it in a similar manner to foreign currencies".
An allocation to gold, denominated in USDs, represents an implicit exposure to a foreign currency, providing international investors with protection against falls in their local currency. Further, when evaluating a portfolio's exchange risk in light of its foreign currency denominated holdings, gold can be used as a cost-effective and better-rounded complement to other hedging strategies. For example, for a US investor trying to hedge currency risk stemming from emerging market exposure, gold has been historically less costly than a basket of currencies, and including gold as part of the hedging strategy has significantly reduced drawdowns.
Driven by China's desire to increase its financial influence, the Chinese renminbi is likely to emerge gradually as a genuine international currency as Beijing eases restrictions on its use in transactions and investments abroad. It is expected that during the coming period of uncertainty and transition between different reserve currencies, official central bank asset managers around the world are likely to increase their interest in gold as a result of doubts about the overall strength of global monetary arrangements. This has been prominent since the economic downturn in 2008 (Figure 49).
US Inflation and Interest Rates
A common argument for buying gold is that it is seen as an inflation hedge. Consumer price indices ("CPI") measure "representative" baskets of goods that may well reflect a general price trend, but these will likely not reflect everyone's experience of inflation. The reason why the US CPI is the measure most widely used to measure gold's effectiveness as hedge, is because of the fact that gold is traded by the USD and that real interest rates create an opportunity cost for holding gold make US inflation a logical candidate to use as a reference in long-term pricing. Real US rate is the lending interest rate adjusted for inflation as measured by the GDP deflator. From Figure 51 it can be seen that when the real US rate becomes negative, the gold price increases, that gives an indication that investors start investing in gold rather than the banks to receive better returns.

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Figure 51: Gold Price vs. Real US Rate
Minxcon used the information from Figure 51 and plotted the price against the real inflation rate. This shows a strong negative Pearson correlation of -0.66%
Figure 52: Gold Price vs. Real US Rate
Note: r=-0.663393969

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From the preceding figures it is evident that the gold price is directly influenced by the change in the real US rate. The forecast of the real US rate is thus a good indication of what will happen to the gold price in the short-term.
Gold Pricing
The second quarter of 2013 saw an absolute drop in the gold price of more than USD400/oz. – a double-digit decline in the average quarterly price compared with both Q1 2013 and Q2 2012. In the first quarter of 2014 a gold price rally was driven by some weak U.S. economic data releases coupled with a rise in safe-haven buying as emerging market risk increased and several currencies depreciated sharply.
The price action also had an impact on the supply side of the gold market resulting in a sharp contraction in recycling. In what is a normal reaction to sharply weaker prices, recycling activity shrank – primarily due to consumers in developing markets holding onto their stocks of old gold as the profit motive faded along with the gold price.
An increasing conviction is depicted among Indian and Chinese consumers that gold prices will be stable or higher in the future, with particular positivity around longer-term expectations for the gold price. What is notable is that positive price expectations appeared to have increased with subsequent drops in the price, illustrating extremely resilient sentiment around the future trajectory of gold. There was major increases in jewellery demand, coin and bar purchases around the USD1,200/oz. level.
Figure 53: Gold Yearly Prices
Outlook for Gold
Economic theory suggests that prices should increase in line with the cost of producing the commodity otherwise it will lead to oversupply or deficit. Measuring the CAGR of the gold price over the past 35 years supports the general practise to increase commodity prices with the USD inflation rate – the CAGR of the gold price measured for this period is 2.71% and 3.12% from the high in 1980 to the September 2011 high. Although inflation fluctuated significantly in the 2 years following the spike in 1980, US inflation stabilised between 2% and 4% for most of the time. Measuring the gold price in real times show the two historic highs in Figure 54. Plotted on the graph is also the cash cost, all-in costs and consensus figures. Operating costs were discussed in detail earlier in this Report.

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Figure 54: Real Gold Price Ranges
Consensus opinion has the real gold price declining over the coming months and years. This is driven by continued economic recovery that would see tapering of the Federal Reserve's massive quantitative easing program continue, increase in U.S. treasury yields and equity markets and a stronger USD, all of which are negative for the gold price.
Table 16: Gold Price Forecast (Nominal Terms)
 
Unit
2014
2015
2016
2017
2018
Long-Term (Constant)
Gold
USD/oz.
1,238
1,234
1,287
1,257
1,280
1,181
Source : Consensus Economics (Oct 2014)
It is unlikely that the price will drop back to the cash cost level, currently at USD 767/oz. This will mean that no new mine will be developed and existing operations will spend no capital. This will very quickly lead to upward pressure on the price. A strong support level seems to be the USD1200/oz. level which represents the all-in cost number but also the current long-term consensus real term price for gold.
Item 19 (b) – Contracts
On January 28, 2014 Caledonia announced that as a result of new regulations introduced by the Zimbabwe Ministry of Finance, all gold produced in Zimbabwe must now be sold to Fidelity Printers and Refiners Limited ("Fidelity"), a company which is controlled by the Zimbabwean authorities and which is now responsible for the final refining and marketing of all gold produced in Zimbabwe. Accordingly, all of Blanket's production has subsequently been sold to Fidelity. Blanket receives 98.5% of the value of the gold within a maximum of 7 days of a sale to Fidelity. Blanket has received all payments due from Fidelity under these new arrangements in-full and on-time.

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ITEM 20 – ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT

Item 20 (a) – Relevant Environmental Issues and Results of Studies Done
Information regarding environmental consideration is taken largely from AGS (2006), Fraser Alexander Zimbabwe (Pty) Ltd (March 2010) and Blanket Mine (November 2009).
In 1995 a full Environmental Impact Assessment was completed by SRK to identify the major detrimental aspects of the mining operation and recommend remedial measures. Apart from the potential to pollute groundwater from the tailings dam, no significant detrimental environmental impacts were identified by this study.
Kinross Gold Corporation, the owners of the mine up until June, 2006, issued an Environmental Policy and Framework document in 2001 based on ISO 14001, which serves as the guideline for all environmental issues at Blanket Mine.
Item 20 (b) – Waste Disposal, Site Monitoring and Water Management
The Government of Zimbabwe has enacted regulations covering water and effluent disposal, through the all-encompassing Environmental and Natural Resources Act. Under the Water Act and the Waste Disposal Regulations a mine is required to obtain permits for all effluent disposal and two permits have been issued to the Blanket Mine by ZINWA, covering the sewage effluent and mill tailings disposals.
The Blanket Mine tailings operation is a gold tailings operation, comprising two dams/compartments adjacent to one another. Dam A and Dam B are operated as a paddock ("day wall") operation. Decanting of the two dams occurs through separate penstocks, with Dam A having an elevated penstock installed in 2005/2006. Dam A is the initial tailings dam with Dam B having been constructed subsequently and adjacent to Dam A. Dam A is in the order of 3 m lower in elevation to Dam B (height difference is an estimate as no current updated survey information is available). The tailings dams are operated by Frazer Alexander Zimbabwe.
The unresolved issue of the hard naturally occurring groundwater is an outstanding concern for the closure plan of Blanket. A letter has been written in December 2012 to the Environmental Management Agency ("EMA") requesting:-
1. Oxygen absorbed to be removed from the sampling parameters because it has limited relevance to ground water.
2. The TDS Limit Value increased to ≤2500 blue band to reflect the naturally occurring ground water.
3. In response to EMA suggesting the sewage pond outflows be used to irrigate the tailings dam vegetation which is being done; the sewage outflow should be removed from the sampling parameters as the "end of pipe" will reflect in the tailings dam unsaturated zone monitoring ("uzm").
Similar monitoring of the sewage disposal area shows that all holes are in the acceptable green category. In October, 2009, Epoch Resources (Pty) Ltd ("Epoch") was appointed by Fraser Alexander Tailings (Pty) Ltd to undertake an audit review of the tailings operation at the Blanket Mine. The audit review identified no significant operational or design risks associated with the dam. The following are two key findings of the audit:-
· A number of the findings and recommendations identified in the 2007 audit report have not been addressed.
· The level of reporting and documentation of the operational data pertaining to the tailings dam has declined significantly since the last audit.
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An updated survey of the tailings dam facility was not available at the time of the audit as was the case during the 2007 audit. In addition, no monthly depositional tonnages were made available and the rate of rise for the tailings dam could not be determined. However, at a production rate of 1,000 tpd the rate of rise ("RoR") is 0.54 m per year based on the final design area of 28 ha, which is well below the legal maximum of 2 m per year. Epoch recommended the following:-
· An updated comprehensive survey must be carried out on the entire tailings dam facility, including the dam basins, position of drains, penstock outlets and piezometers.
· Appropriate monitoring data sheets and report templates must be implemented for the collection, documentation and report of the various monitoring aspects pertaining to the tailings dam.
· A minimum vertical freeboard of 1.5 m for Dam A and B must be maintained at all times.
· Piezometers must be checked by carrying out Upset Tests to confirm that they are fully operational.
· Drains must be rodded and flushed to confirm that they are fully operational and not blocked.
· A comprehensive slope stability assessment must be undertaken.
· The height discrepancy between Dam A and B must be gradually phased out.
Item 20 (c) - Permit Requirements
No permits other than the operating claims, non-operating claims and exploration claims have been issued.
Item 20 (d) – Social and Community-Related Requirements
Blanket Mine is fully indigenised as required by Zimbabwe law; i.e. the company is 51% owned by indigenous Zimbabweans. Of the above portion, 10% was donated to the Gwanda Community Share Ownership Trust (GCSOT) and 10% is held by the Blanket Management and Employee Trust.
Blanket's investment in community and social projects is not limited to the operation of the mine and the welfare of its employees but includes payments to the GCSOT in terms of Blanket's indigenisation as well as certain ex gratia project related payments.  Blanket provides housing for all its employees, who live some distance from the mine, and has a policy of assisting local communities with their infrastructural requirements.
Item 20 (e) – Mine Closure Costs and Requirements
In March 2001 the Blanket Mine contracted Knight Piesold to estimate the costs of decommissioning and closure of the mine. This study included all aspects of the mining operation such as open workings, waste dumps and infrastructure. An updated decommissioning and reclamation cost estimate was undertaken by Blanket Mine and reported in November 2009.
There are a number of Government of Zimbabwe regulations and guidelines including the Mining General Regulations, the Environmental and Natural Resources Act, the Water Act and the Waste Disposal Regulations which cover a mine ' s closure obligations. These are all addressed and costed in the Knight Piesold report and in the updated report by Blanket Mine dated November 2009.
During December 2012 a review and update of the closure cost estimates and the closure plan was revised by Toltecs (Pvt) Limited t/a Paramark ("Paramark") and Black Crystal Environmental Consultants ("Black Crystal"). The closure cost was calculated at USD1.6 million. The mine is not required to post a bond for this amount, but has reached an agreement with government that the break-up value of the plant and mine infrastructure be pledged as a guarantee for the closure cost.

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ITEM 21 – CAPITAL AND OPERATING COSTS

Item 21 (a) – Capital Costs
The capital schedule for the Blanket mining operations for the LoM is illustrated in Figure 55. There is no initial or infrastructure capital for the Reserve LoM plan, only sustaining capital. Sustaining capital expenditures are capital expenditures resulting from improvements to and major renewals of existing assets. Such expenditures serve to maintain existing operations, but do not generate additional revenue. The total sustaining capital amounts to USD14.4 million over the LoM. Sustaining capital for 2014 only includes months October to December.
Figure 55: Capital Schedule Based on Reserves
Item 21 (b) – Operating Cost
Mining Opex
The operating costs used for Blanket Mine is based on the business plan received from the mine. The operating costs planned from October 2014 onwards were compared to the actual costs paid during 2012, 2013 and up to September 2014. The comparison was done to ensure that the planned opex, as received from the mine is achievable. The comparison is displayed in Figure 56. The increase in the cost per tonne from 2020 to 2021 is a function of the decrease in production, as displayed in Figure 57.

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Figure 56: Actual vs. Planned Operating Expenditure
 
The increase in the total direct mining cost and the decrease in cost per tonne are a function of the increase in tonnes mined and milled from an average of 381,000 tonnes from 2012 to 2014 to a forecasted average of 461,000 tonnes from 2015 to 2019. The actual and forecasted costs per tonne are displayed against the tonnes milled to better indicate the effect it has on the cost per tonne.
Figure 57: Actual vs. Planned Operating Expenditure and Milled Tonnes
From Figure 56 and Figure 57 it appears that the planned production costs are very similar to the actual cost for 2012, 2013 and 2014, and would be an acceptable assumed rate. Labour is the highest contributor to the direct mining costs and make up 35% of the cost followed by the electricity that averages 22% of the cost. The operating cost per milled tonne increased in year 2020 to 2021 as a result of the smaller amount of tonnes actually produced against similar operating expenditure.

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Labour cost is forecasted to increase by 12% when the forecasted production increases to 454,000 tonnes per year which is a result of the increase in total mine employees from 1,118 to ±1,163. A breakdown of the current labour complement is displayed in Figure 58. The majority of the employees (42%) is the directly related mining employees.
Figure 58: Labour Split
 
 
Labour Split
The costs were split between fixed costs and variable costs. The fixed cost component in the estimate was determined by identifying the activities which would remain fixed on the operation regardless of the tonnage produced. These activities are flagged as fixed in the model. It should be noted that some of the fixed costs (direct labour, electricity, water and others) would change with tonnage, whether it is a linear or step change. All activities of which the cost would directly change with tonnage, whether it is a linear or step change, has been assumed and flagged as variable cost. The majority portion of the costs is fixed.
Table 17 illustrates the average operating cost components over the LoM. Where relevant, the operating cost was linked to the ore tonnes produced. The cash flow was modelled on a variable cost basis for plant and mining consumable costs but fixed costs such as the administration, overheads and management were fixed independent of the tonnes mined. The mechanical engineering cost includes compressors, spares, rolling stock and transport. The other direct mining expense includes administration, security, human resources ("HR") and safety, health, and administration costs. Procurement costs and other overheads are included in the operating costs as non-direct mining expenses. The non-direct mining costs make up 18% of the total mining cost. The costs displayed in Table 17 are based on the costs at a steady-state of 461,000 tonnes per annum.

92


Table 17: Fixed and Variable Mining Operating Cost
Direct Mining Expenses
Unit
Amount per Year
Fixed Direct Mining Expenses
 
At Steady State
Mechanical engineering
USD
                       2,355,919
Mining
USD
                           699,433
Electrical engineering
USD
                           946,566
Other
USD
                       2,227,064
ZESA Power
USD
                       4,978,240
Diesel cost
USD
                           245,280
Total non-management payroll Mining
USD
                       7,103,228
Management payroll Mining
USD
                       1,105,192
Other on-mine costs
USD
                       1,854,000
Variable Direct Mining Expenses
 
 
Explosives Cost
USD/RoM t
                                    3.2
Mining Steel Cost
USD/RoM t
                                    1.3
Total Direct Mining Expenses
USD
                     23,558,393
Total Direct Mining Expenses
USD/RoM t
                                  51.1
Non-Direct Mining Expenses
Unit
Amount per Year
Fixed Non-Direct Mining Expenses
 
 
Other income/(expense)
USD
                             65,976
Exploration EPO fees
USD
                           422,004
Caledonia Management fee
USD
                       4,680,000
Total Non-Direct Mining Expenses
USD
                       5.167.980
Total Non-Direct Mining Expenses
USD/RoM t
                                  11.2
Total Combined Mining Expenses
USD/RoM t
                                  62.3
Processing Opex
Historic Processing Costs
The historic plant costs are summarised in Table 18.
Table 18: Historic Plant Operating Costs between 2012 and July 2014
Item
Unit
Monthly Average 2012
Monthly Average 2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Avg
Milled Tonnes
ktpm
30.31
32.69
28.33
32.10
32.42
35.29
30.11
33.83
35.53
31.73
Fixed  Plant Expenses
USD'000
181.68
193.30
157.57
151.72
158.48
168.22
156.51
162.94
156.10
181.01
Milling Fixed Consumables
USD'000
59.18
52.97
25.74
13.76
16.19
21.65
15.48
23.25
24.55
47.95
Non-Management
USD'000
100.02
112.64
104.14
110.27
114.60
118.88
113.34
112.00
110.57
107.60
Management
USD'000
22.48
27.69
27.69
27.69
27.69
27.69
27.69
27.69
20.99
25.46
Variable  Plant Expenses
USD/t
14.79
13.60
15.98
13.82
12.96
11.70
14.65
12.41
11.44
13.94
ZESA Power
USD/t
5.97
5.76
7.09
6.27
5.40
4.96
6.37
6.16
5.80
5.89
Diesel Power
USD/t
0.27
0.29
0.47
0.50
0.74
0.07
1.32
0.17
0.13
0.32
Cyanide
USD/t
3.36
3.01
3.47
3.02
2.48
2.12
2.65
1.98
2.17
3.02
Steel
USD/t
3.80
3.21
3.28
2.46
2.89
2.58
2.71
2.78
2.21
3.31
Other Consumables
USD/t
1.39
1.33
1.67
1.57
1.45
1.97
1.61
1.31
1.13
1.40
Total  Plant Expenses
USD'000
629.91
638.02
610.22
595.25
578.79
580.99
597.63
582.63
562.37
623.32
Total  Plant Expenses
USD/t
20.78
19.52
21.54
18.55
17.85
16.46
19.85
17.22
15.83
19.64
Source : Blanket
The average plant costs for this period were USD19.64 per RoM tonne (or per mill feed tonne) at an average of 31.73 ktpm. There are opportunities to reduce operating cost by measuring and controlling power consumption to the main plant units as well as optimising the plant throughput. Some initiatives have been implemented by plant management which have contributed to lower operating costs:-
· the installation of the cyanide analyser and controller has contributed to lower cyanide consumptions; and
· the addition of oxygen has contributed to the lower cyanide consumptions.
Projected Processing Costs
Table 19 summarises the total plant operating costs at steady-state production (between 2015 and 2019) of about 38.43 ktpm or 461.18 ktpa.

93

Table 19: Expected Plant Operating Cost at Steady State
Item
Unit
Monthly Averages
Yearly Averages
between 2015 and 2019
between 2015 and 2019
Milled Tonnes
kt
                       38.43
                     461.18
Fixed  Plant Expenses
USD'000
                             176.11
                          2,113.36
Milling Fixed Consumables
USD'000
                       21.49
                     257.83
Non-Management
USD'000
                     133.81
                  1,605.70
Management
USD'000
                       20.82
                     249.83
Variable  Plant Expenses
USD/t
                               12.04
                               12.04
ZESA Power
USD/t
                         6.34
                         6.34
Diesel Power
USD/t
                         0.20
                         0.20
Cyanide
USD/t
                         2.38
                         2.38
Steel
USD/t
                         1.53
                         1.53
Other Consumables
USD/t
                         1.60
                         1.60
Total  Plant Expenses
USD'000
                             638.81
                          7,665.72
Total  Plant Expenses
USD/t
                               16.62
                               16.62
Source : Blanket
Referring to Figure 59, the forecasted unit costs compare well with the historic unit costs.
Figure 59: Actual vs. Forecast Unit Costs
Operating Costs Summary
To produce an ounce of gold, mining companies incur not only operating costs, but also spend sustaining capital at the sites and capital to explore and to sustain their long-term future. Some confusion still exists in the mining industry on reporting mining costs and there is no specific set of standards. Minxcon used the current Australian method of reporting that was suggested by the Gold Institute. This method is perceived as being uniform in the industry but basic differences still exists between countries. The operating costs in the financial model were broken down into different categories:-
(C1) Direct Cash Cost;
(C2) Production Cost; and
(C3) Fully Allocated Cost.
The definitions of these costs are as follows:-

94
(C1) Direct Cash Cost
C1 represents the cash cost incurred at each processing stage, from mining through to recoverable metal delivered to market, less net by-product credits (if any). The M1 margin is defined as metal price received minus C1. Direct Cash Costs cover:-
· Mining, ore freight and milling costs;
· Ore purchase and freight costs from third parties in the case of custom smelters or mills;
· Mine-site administration and general expenses;
· Concentrate freight, smelting and smelter general and administrative costs;
· Matte freight, refining and refinery general and administrative costs; and
· Marketing costs (freight and selling).
(C2) Production Cost
Production Cost (C2) is the sum of net direct cash costs (C1) and Capex. The M2 margin is defined as metal price received minus C2.
(C3) Fully Allocated Cost
Fully Allocated Cost (C3) is the sum of the production cost (C2), indirect costs and net interest charges. The M3 margin is defined as metal price received minus C3. Indirect costs are the cash costs for:-
· The portion of corporate and divisional overhead costs attributable to the operation;
· Research and exploration attributable to the operation;
· Royalties and "front-end" taxes (excluding income and profit-related taxes);
· Extraordinary costs i.e. those incurred as a result of strikes, unexpected shutdowns etc.; and
· Interest charges including all interest paid, both directly attributable to the operation and any corporate allocation (net of any interest received) on short-term loans, long-term loans, corporate bonds, bank overdrafts etc.
Costs reported for the Blanket Mine, which consists of plant and mining operating costs, are displayed in Table 20. Other cash costs include the general and administration fees, Caledonia management fee as well as overheads. Detail about the operating cost and the breakdown of the mining and plant costs are described in the mining and plant cost sections. The royalty amount includes the Zimbabwean revenue royalty.
Table 20: OPEX Summary
Item
Unit
Amount
Unit
Amount
Net Turnover
USD/Milled tonne
138
USD/Gold oz.
1,250
Mine Cost
USD/Milled tonne
49
USD/Gold oz.
446
Plant Costs
USD/Milled tonne
17
USD/Gold oz.
153
Other Costs
USD/Milled tonne
5
USD/Gold oz.
41
Direct Cash Costs (C1)
USD/Milled tonne
71
USD/Gold oz.
641
Capex
USD/Milled tonne
5
USD/Gold oz.
45
Production Costs (C2)
USD/Milled tonne
76
USD/Gold oz.
685
Royalties
USD/Milled tonne
7
USD/Gold oz.
63
Other Cash Costs
USD/Milled tonne
13
USD/Gold oz.
116
Fully Allocated Costs/   Notional Costs (C3)
USD/Milled tonne
95
USD/Gold oz.
864
NCE Margin
%
31%
%
31%
EBITDA*
USD/Milled tonne
48
USD/Gold oz.
431
EBITDA Margin
%
34%
   
Gold Recovered
oz.
323,881
   
Notes:
1. * EBITDA excludes capital expenditure.
2. Numbers may not add up due to rounding.
Direct Cash cost for Blanket is USD71/milled t that equates to USD641/oz., which is below the global cash cost of USD767/oz.
 
95
 
Figure 60: Production Cost per Milled Tonne vs. Tonnes Milled
Blanket Mine has a fully-allocated cost of USD95/milled tonne that equates to USD864/oz. The fully allocated cost is displayed in Figure 61 on a per ounce basis together with the gold price of USD1,250/oz. that was used in the LoM.
Figure 61: Fully-Allocated Costs vs. Gold Price

96


ITEM 22 – ECONOMIC ANALYSIS

Item 22 (a) - Principal Assumptions
The purpose of this valuation exercise was to demonstrate the financial viability of the Project. This is illustrated by using the Discounted Cash Flow ("DCF") method on a Free cash flow to the firm ("FCFF") basis, to calculate the nett present value ("NPV") and the intrinsic value of the Project in real terms. The intrinsic value is the amount considered, on the basis of an evaluation of available facts, to be the "true", "real" or "underlying" worth of an item. Thus it is a long-term, Non-Market Value concept that smooths short term price fluctuations. In mining, the intrinsic value refers to the fundamental value based on the technical inputs, and a cash flow projection that creates a NPV. Few of these inputs are market related, except possibly for metal price, benchmarked costs and the discount rate applied.
A company has different sources of finance, namely common stock, retained earnings, preferred stock and debt. Free cash flow is based on either FCFF or Free cash flow to equity ("FCFE"). FCFF is the cash flow available to all the firm's suppliers of capital once the firm pays all operating expenses (including taxes) and expenditures needed to sustain the firm's productive capacity. The expenditures include what is needed to purchase fixed assets and working capital, such as inventory. FCFE is the cash flow available to the firm's common stockholders once operating expenses (including taxes), expenditures needed to sustain the firm's productive capacity, and payments to (and receipts from) debt holders are accounted for. It must be noted that FCFF minus Nett Debt = FCFE.
The NPV is derived post-royalties and tax, pre-debt real cash flows, after taking into account operating costs, capital expenditures for the mining operations and the processing plant and using forecast macro-economic parameters. The valuation date for the Discounted Cash Flow is 1 October 2014.
Basis of Valuation of the Mining Assets
In generating the financial model and deriving the valuations, the following was considered:-
· This Report details the optimised cash flow model with economic input parameters.
· The cash flow model is in constant money terms and done in USD.
· A hurdle rate of 8.36% (in real terms) was calculated for the discount factor.
· The impact of the Mineral Royalties Act as per the Zimbabwean Mining Regulation.
· Sensitivity analyses were performed to ascertain the impact of discount factors, commodity prices, grade, working costs and capital expenditure.
· The full value of the operation was reported for Blanket Mine – no attributable values were calculated.
· The model was set up in calendar years with year 2014 only including October to December.
· Blanket's financial years are based on calendar years from January to December.
Macro-Economic Forecasts
The following section includes the macro-economic and commodity price forecasts for the operation over the LoM. The USD gold price is in real monetary terms and constant throughout the LoM. The model is set up in calendar years from January to December starting October 2014. Table 21 displays the forecast for gold product in real terms as received from the client. The historic gold price over the past 3 years averaged USD1,531/oz. and the 2014 average up to September 2014 averaged USD1,298/oz. By comparing the forecast to the Energy and Metals Consensus Forecast with an average gold price of USD1,237/oz. over the next four years, a gold price of USD1,250/oz. is considered to be an acceptable and appropriate forecast.

97
Table 21: Gold Forecast
Item
Unit
2014
Gold
USD/oz.
1,250
Gold
USD/kg
40,188
Source : Caledonia
Working Capital
The creditors and debtors days were calculated as the actual averages over the past 3 years. The creditors' days were calculated at 94 days and debtors days at 13 days. On September 2014 Blanket's working capital consisted of debtors receivables of USD1.7 million to be received and creditor payment outstanding of USD3.5 million. This balance was also included in the working capital calculation of the financial model.
Recoveries and Working Capital
The ore from the Blanket Mine operation is treated at the existing Blanket plant; the expected recovery percentage can be seen in Table 22. The recovery is detailed in the processing Section of this Report.
Table 22: Recovery Percentage
Item
Percentage
Plant Recovery % Blanket Mine
93.5%
Discount Rate
Capital Asset Pricing Model
To test the appropriateness of the discount rate for the specific Project, Minxcon used the Capital Asset Pricing Model ("CAPM") to calculate the discount rate. The following were considered:-
· The US Risk Free Rate (30 years) at 3.33% was considered an acceptable risk-free rate at the time of the valuation.
· The market risk premium of 5.0%, a rate generally considered as being the investor's expectation for investing in equity rather than a risk-free government bond.
· The beta of a stock is used to reflect the stock price's volatility over and above other general equity investments in the country of listing – the Beta was calculated at 1.50 as described below.
Table 23: Nominal Discount Rate Calculation
Cost of Equity
Discount Rate
US Risk free rate
3.33%
Risk premium of market
5.0%
Operational Risk (Base Beta)
1.50
Nominal Cost of equity (CAPM)
10.83%
Real Cost of equity (CAPM)
8.36%
Beta
Beta is a measure of the volatility or systematic risk of a security or a portfolio in comparison to the market as a whole. The analyst must make two estimation decisions when setting up the Beta calculations:-
1. The first decision concerns the length of the estimation period. Most estimates of betas, including those by Value Line and Standard and Poor's 500 ("S&P 500"), use five years of data, while Bloomberg uses two years of data.
2. The second decision concerns the use of daily or intra-day returns, which will increase the number of observations in the regression, but it exposes the estimation process to a significant bias in beta estimates related to non-trading, in particular small stocks.
98


Finding a measurable database for Zimbabwe is not possible. Minxcon considered two Exchange Traded Funds which includes a basket of equities, Junior Gold Miners ETF ((NYSEARCA: "GDXJ") and Gold Miners ETF (NYSEARCA: "GDX"). This was measured against the S&P 500 typically used for Beta calculations. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market. The composite split of junior miners for the GDXJ is based on companies in the following countries which unfortunately are biased towards US and Australian companies but nevertheless gives an indication of a basket Beta: The United States (21.8%), Australia (11.2%), South Africa (2.4%), China (1.3%) and the United Kingdom (0.7%). The GDX consist of the global majors. Using a start date for the indices from 4 January 2010, the following betas were calculated over 56 months:-
· GDX (Juniors) - 0.93741627;
· GDX (Majors) 0.258442589 – this is very much aligned with current Betas of individual mines; and
· Caledonia (Toronto price) – 0.81.
Measured monthly over a historic 2-year period, it is evident that Betas of the two gold indices and in particular that of Juniors, have declined. In contrast, those of Blanket Mine have increased.
Figure 62: Junior and Major Indices and Caledonia (CAL) Measured against the S&P 500
Considering that less volatility recently occurred in the Betas of Gold operations, Minxcon proposes a Beta for Blanket Mine averaging between the longer term 0.81 and current number of 2.17 – i.e. – 1.50.
Item 22 (b) - Cash Flow Forecast
The saleable product per annum is illustrated in Figure 63. The average recovery over the LoM is 93.5% for an average grade of 3.67 g/t.

99
Figure 63: Saleable Product
A breakdown of the tonnes and ounces used in the LoM are displayed in Table 24. The Reserve LoM plan included only Mineral Reserves that has been diluted by using the modifying factors described in the mining section. The cash flow became negative in year 2022 and all Reserves beyond this point were not included in the Reserve statement.
Table 24: Production Breakdown in LoM
Item
Project
Blanket Mine LoM
Ore Tonnes Mined
Tonnes ('000)
2,934
Average Mined Grade
g/t
3.67
Total Oz in Reserve LoM Plan
oz.
346,397
Grade Delivered to Plant
g/t
3.67
Metal Recovered
   
Recovered grade
g/t
3.43
Yield/Recovery
%
93.5%
Total Oz Recovered
oz.
323,881
Discounted Cash Flow
Minxcon's in-house DCF model (Table 25) was employed to illustrate the NPV for the Project in real terms. The NPV was derived post-royalties and tax, pre-debt real cash flows, using the techno-economic parameters, commodity price and macro-economic projections.
This valuation is based on a free cash flow and measures the economic viability of the Reserves to demonstrate if the extraction of the Mineral Deposit is viable and justifiable under a defined set of realistically assumed modifying factors. The model is based on financial years running from January to December and commences in October 2014. The annual and cumulative cash flow forecast for the LoM are displayed in Figure 64.
During 2018 the tonnes mined and the grade mined is higher than the average of the preceding and succeeding years which results in peak cash flow of USD16.6 million during this year.

100
Figure 64: Annual and Cumulative Cash Flow
The actual profit after tax and the forecasted profit after tax are displayed against the ounces recovered (Figure 65). During 2012 and 2013 the ounces produced were higher than the forecasted and actual produced ounces from 2014 onwards (except during 2016) and thus had higher revenues during these two years. The operating profits were also higher because of the actual average annual gold prices of USD1,657/oz. and USD1,393/oz. during 2012 and 2013 respectively. The revenue generated during 2012 was more than 2013 although the profit during 2012 is less than 2013 as there was an Investing Zone ("IZ") transaction cost of USD15.3 million that was paid. The average gold price in 2014 was slightly higher than the forecasted USD1,250/oz. used in 2015. The increase in profit during 2016 to 2019 is a function of the increase in ounces recovered as the production increases. The decrease in profit from 2020 to 2021 is a function of the Reserve LoM plan, with a decrease in tonnages scheduled. This decline would be reversed if the Inferred Resources were converted into Reserves generating further upside potential for the mine.
Figure 65: Actual Profit vs. Forecasted Profit
 
 
101
 
 
 
 
102

Item 22 (c) - Net Present Value
The highlights of the valuation conducted by Minxcon are discussed in the following sections. Table 26 illustrates the Project NPV at various discount rates with a best-estimated value of USD66 million at a real discount rate of 8.36%. Blanket is an existing operation and the IRR is not applicable.
Table 26: Project Valuation Summary – Real Terms
Item
Unit
Value
Real NPV @ 0.00%
USDm
87
Real NPV @ 5.00%
USDm
70
Real NPV @ 8.36%
USDm
66
Real NPV @ 10.00%
USDm
57
Real NPV @ 15.00%
USDm
47
Table 27 illustrates the Project profitability ratios.
Table 27: Profitability Ratios
Item
Unit
Profitability Ratios
Total ounces in Reserve LoM plan
oz.
346,397
In Situ Mining Inventory Valuation
USD/oz.
190
Production LoM
Years
8
Present Value of Income flow
USDm
106
Break Even Milled Grade
g/t
2.54
Incentive Gold Price
USD/oz.
864
A range of values was calculated for the DCF valuation by determining an upper and lower range. The upper and lower ranges were determined by applying a maximum and minimum standard deviation on the following input parameters with the lower confidence categories having a wider variance:-
· Commodity Price (USD/Au oz.);
· Grade (g/t);
· Fixed Cost;
· Variable Cost; and
· Sustaining Capex.
In order to evaluate risk, a simulation was developed using a population of 5,000 simulations. This allows the simulation of random scenarios to determine the effect thereof. Minxcon simulated various input parameters using a range in which a parameter is expected to vary (see Table 28).
Table 28: Input Ranges
 
Min
Max
Current
Min
Max
Gold Price (USD/oz.)
80%
120%
1,250
1,100
1,500
Grade (g/t)
90%
110%
3.7
3.3
4.0
Fixed Costs (USD/t)
95%
110%
61
58
67
Variable Cost (USD/t)
95%
110%
10
9
11
Sustaining Capex (USDm)
95%
110%
14
14
16
By applying these ranges, a lower and upper value was determined for the DCF (see Table 29).
Table 29: Range of Values
Valuation Method
Lower Value
Best Estimated Value
Higher Value
USDm
USDm
USDm
Discounted Cash Flow
43
66
96
Item 22 (d) - Regulatory Items
Corporate Taxes
The prevailing taxation regime for mining companies in Zimbabwe includes the following provisions:-
· Corporate Income tax at 25%.
 
103


· Exploration, development and capital costs can be expensed against profit in the year incurred or carried forward to be expensed against the first year of production.
· Exemptions on customs duty and import taxes on capital items during exploration and development phases.
· Withholding tax on dividend payments to non-Zimbabweans and on services provided by foreign suppliers at a rate of 5% to 15% depending on the location of the payee.
Royalties
Mining royalties are charged in terms of the Mines and Minerals Act (Chapter 21:05). The royalties are collectable from all the minerals or mineral-bearing products obtained from any mining location and disposed by a miner or on his behalf. The royalties are chargeable whether the disposal is made within or outside Zimbabwe.
Zimbabwean tax laws and international pricing have pushed deliveries in the gold sector to decline by 26% within the first-half of 2014. A decision was made by the Government of Zimbabwe in its 2014 Mid-Year Fiscal Policy Review Statement to reduce the royalty on Zimbabwean gold producers from 7% to 5%, effective 1 October 2014. The royalty of 5% is, however, not tax deductible and the tax rate is applied on the earnings before royalty deductions.
Item 22 (e) - Sensitivity Analysis
Based on the real cash flow calculated in the financial model, Minxcon performed single-parameter sensitivity analyses to ascertain the impact on the NPV. The bars represents various inputs into the model each being increased or decreased by 2.5% i.e., left side of graph shows lower NPVs because of lower prices and lower grades, higher Opex and Capex and the opposite on the right hand. The red line and black line representing the least sensitive and most sensitive impacts to the NPV. For the DCF, the gold price and grade have the biggest impact on the sensitivity of the Project followed by the operating cost. The Project is not sensitive to the sustaining capital.
Figure 66: Project Sensitivity (NPV8.36%)
A sensitivity analysis was conducted on the grade and the gold price to better indicate the effect these two factors have on the NPV, as well as the production costs (C1) and the sustaining capital. This is displayed in Table 30 and Table 31.
 
 
104
Table 30: Sensitivity Analysis of Gold Price and Grade to NPV8.36% (USDm)
 
Grade
3.12
3.21
3.31
3.40
3.49
3.58
3.67
3.76
3.86
3.95
4.00
4.13
4.22
Au Price
Change %
70.0%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
105.0%
110.0%
115.0%
120.0%
112.5%
115.0%
1,063
85.0%
6
11
15
20
25
29
34
38
43
47
50
56
61
1,094
87.5%
11
15
20
25
30
34
39
44
48
53
56
62
67
1,125
90.0%
15
20
25
30
35
39
44
49
54
59
62
68
73
1,156
92.5%
20
25
30
35
40
45
50
55
60
64
67
74
79
1,188
95.0%
25
30
35
40
45
50
55
60
65
70
73
80
85
1,219
97.5%
29
34
39
45
50
55
60
66
71
76
79
86
92
1,250
100.0%
34
39
44
50
55
60
66
71
76
82
85
92
98
1,313
105.0%
38
44
49
55
60
66
71
77
82
87
91
98
104
1,375
110.0%
43
48
54
60
65
71
76
82
88
93
97
104
110
1,438
115.0%
47
53
59
64
70
76
82
87
93
99
102
110
116
1,500
120.0%
50
56
62
67
73
79
85
91
97
102
106
114
120
1,563
125.0%
56
62
68
74
80
86
92
98
104
110
114
122
129
1,625
130.0%
61
67
73
79
85
92
98
104
110
116
120
129
135
1,688
135.0%
70
76
83
89
96
102
108
115
121
128
132
141
147

Table 31: Sensitivity Analysis of Production Costs and Sustaining Capital to NPV8.36% (USDm)
 
Capex
12.3
12.6
13.0
13.3
13.7
14.1
14.4
14.8
15.1
15.5
15.7
16.2
16.6
Production  Cost (USD/t)
Change %
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
102.5%
105.0%
107.5%
109.0%
112.5%
115.0%
92
130.0%
30
30
30
30
30
30
30
30
30
30
30
30
30
88
125.0%
36
36
36
36
36
36
36
36
36
36
36
36
36
85
120.0%
42
42
42
42
42
42
42
42
42
42
42
42
42
81
115.0%
48
48
48
48
48
48
48
48
48
48
48
48
48
78
110.0%
54
54
54
54
54
54
54
54
54
54
54
54
54
74
105.0%
60
60
60
60
60
60
60
60
60
60
60
60
60
71
100.0%
66
66
66
66
66
66
66
66
66
66
66
66
66
67
95.0%
72
72
72
72
72
72
72
72
72
72
72
72
72
64
90.0%
77
77
77
77
77
77
77
77
77
77
77
77
77
60
85.0%
83
83
83
83
83
83
83
83
83
83
83
83
83
57
80.0%
89
89
89
89
89
89
89
89
89
89
89
89
89
53
75.0%
95
95
95
95
95
95
95
95
95
95
95
95
95
50
70.0%
101
101
101
101
101
101
101
101
101
101
101
101
101


105


ITEM 23 - ADJACENT PROPERTIES

Item 23 (a) – Public Domain Information
The Zimbabwean craton hosts more than 6,000 gold occurrences and over 790 recorded gold mines, most of which have some current or historic gold production. The Blanket Mine is one of only three surviving major gold producers from about 268 mines once worked in the Gwanda greenstone belt. The other two are the nearby Vubachikwe, and Jessie at the south-eastern end of the belt near West Nicholson. Freda at the belt's western end is mined out.
Vubachikwe Mine is situated 9 km northwest of Gwanda, and has reached a depth of 1,155 m. Ores are hosted in beds of BIF striking northwest and dipping 75° to the southwest. The gold is present as free gold and inclusions in arsenopyrite. Generally, the ore occur in lenses 5 m-40 m in thickness and up to 200 m down-dip. The mine is located on the northern limb of a plunging syncline, and Mineral Deposits are folded. Gold also occurs as disseminated replacements in adjacent basaltic rocks.
Jessie mine mineralisation consists of hornblende schist hosts auriferous quartz veins dipping steeply to the southwest. Pyrite, pyrrhotite, chalcopyrite and galena are erratically distributed.
Mining at Freda started in 1919. The deposit is located 22 km west of Gwanda. Oxidised ore containing pyrrhotite, pyrite and arsenopyrite, with minor amounts of tetradymite was mined by opencast methods and 7,550 kg Au were recovered, grading at 3.3 g/t Au. The vein-type ores are hosted in epidiorite surrounded by grits and quartz-mica schist. The Mineral Deposits were up to 30 m thick, striking 115° and inclined steeply to the southwest.
Figure 67: Adjacent Properties
 
 
Blanket Mine Adjacent Properties
Item 23 (b) – Sources of Information
· Spilpunt. Mineral Commodities and Africa. Available from: http://spilpunt.blogspot.com/2007/04/zimbabwe.html. Viewed: 29 October 2014.
· A Technical Report dated 28 June 2011, by the MSA Group (Pty) titled "Technical Report on the Blanket Gold Mine Zimbabwe".
106


Item 23 (c) – Verification of Information
The information was sourced from the Spilpunt Blogspot and is publicly available. The information has not been independently verified by Minxcon.
Item 23 (d) – Applicability of Adjacent Property's Mineral Deposit to Project
Vubachikwe Mine is the only adjacent property of significance. While the remainder of the Gwanda Greenstone Belt is tied up by numerous claim and EPO holders, they are for the most part passive holders whose holding is largely as a result of their political alignment. Although the mines work separate Mineral Deposits, the style of mineralisation is essentially the same; a structural and genetic link between the two mines is very likely. Vubachikwe mine workings extend to depths of over 1,155 m below surface, compared with about 750 m at Blanket. The proximity of the Blanket Mine to Vubachikwe enabled it to buy and treat the Vubachikwe sand dumps through the Blanket metallurgical plant from 2000 to 2005.
Item 23 (e) – Historical Estimates of Mineral Resources or Mineral Reserves
Up until the end of 1991 the Vubachikwe Mine produced almost 21,744 kg of gold at an average of 7 g/t. Between 2000 and 2005 the Blanket Mine bought and treated the dumps at Vubachikwe in its metallurgical plant. The total resource of this deposit is estimated at 40 t Au.
The Jessie Mine reported ores grading at 10,5 g/t, and previously reported production was approximately 12 tonnes of Au, as well as a minor amount of copper.
 
107
 


ITEM 24 – OTHER RELEVANT DATA AND INFORMATION

Item 24 (a) - Upside Potential
Minxcon was commissioned by GMS in October 2014 to complete a scoping level study on the deeper extensions of Blanket mine below 750 m Level. The LoM extension strategy for Blanket Mine includes the areas below 750 m Level and associated Inferred Mineral Resources. Access to this area will require the following:-
· Development of a new Tramming loop on 750 mL;
· Complete the sink to deepen No 6 Winze; and
· Sinking of a new central shaft positioned in-between AR Main and AR South mineral deposits.
The Report details a scoping-level study in the form of a Preliminary Economic Assessment ("PEA"). The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as Mineral Reserves (the "PEA Study"), and there is no certainty that the preliminary economic assessment will be realized. The PEA Study includes the deepening of the mine from 750 m to 1120 m on a stand-alone basis.
A DCF valuation was carried out on the PEA Study area on a stand-alone basis and includes mainly Inferred Resources. The value derived from the PEA is considered to represent the upside potential to the current Blanket Mine operation.
The scope of work was to complete the PEA Study as a stand-alone underground mine and using the existing processing plant to treat gold ore from the Below 750 m level mining areas. The following tasks were completed during the PEA study:-
1. a mining strategy was discussed;
2. mining areas were targeted;
3. capital and operating cost was calculated;
4. metallurgical test work was evaluated;
5. processing design criteria were identified and costs were calculated; and
6. a financial evaluation was conducted in the form of a DCF based predominantly on Inferred Resources.
Study Status
Inferred Mineral Resources were included in the PEA Study. Inferred classification implies a low level of confidence in the Mineral Resources. The remainder of the PEA Study was based on information obtained through past experiences and records, hence the mining schedule, mining rates, capital schedule and operating costs are estimated on a very high level of confidence. The capital cost estimation is based on quotations and is also regarded as accurate.
Target Area
The PEA Study includes Indicated and Inferred Resources from Below 750 m level. These areas are illustrated in Figure 68.
 
 
108
Figure 68: Below 750 m Level - Blanket Mine
 
 
Blanket Project Area Split, Below 750 m (Red Portion)
All exploration targets (red borders) are excluded from the PEA Study due to the paucity of information in these areas Figure 69 illustrates the areas included in the PEA.
PEA Production
The PEA Study Production from Below 750 m level is illustrated in Figure 69.
Figure 69: Blanket PEA Production Profiles
 
Processing
The Blanket Gold Plant consists of crushing, milling, CIL and batch elution electro-winning circuits. The crushing, milling and gravity gold recovery circuit are going to be upgraded to treat between 75 tph and 85 tph (50 ktpm to 55 ktpm). With the proposed upgrades and modifications, the front-end comminution circuits (crushing and milling) will have a capacity of about 160 to 180 tph. The CIL and downstream circuits have a capacity of approximately 185 tph. The plant will treat RoM ore from the Blanket Mine at a recovery of about 93.5%.
 
109
Saleable Product
The saleable product per year is illustrated in Figure 70. The average recovery over the LoM is forecast at 93.5% at an average grade of 4.36 g/t.
Figure 70: Saleable Product
A breakdown of the tonnes and ounces used in the LoM are displayed in Table 32. The PEA Study included Mineral Resources that were diluted by using the modifying factors described in the mining section.
Table 32: PEA Production Breakdown in LoM
Item
Project
Blanket Mine LoM
Ore Tonnes Mined
Tonnes ('000)
2,938
Average Mined Grade
g/t
4.36
Total Oz. in PEA Study
oz.
411,862
Grade Delivered to Plant
g/t
4.36
Metal Recovered
   
Recovered grade
g/t
4.08
Yield/Recovery
%
93.5%
Total Oz. Recovered
oz.
385,091

PEA Infrastructure
The existing infrastructure at the Blanket mine will be utilised in parallel with new infrastructure and is specifically aimed at targeting the Below 750 m Level mining areas. The extensions will entail the sinking of a new vertical shaft (Central Shaft) from surface as well as the deepening of an old sub-shaft, named 6 Winze, to access the Blanket Below 750 m Level mining area and to provide secondary access to the development of the Central Shaft. The Central Shaft will be a 6 m diameter shaft with four compartments, designed to hoist all men, material and rock.
PEA Capital Estimation Summary
Capital contained in this section was supplied by the client and reviewed by Minxcon. The capital is deemed sufficient and all major infrastructure costs have been accounted for. Processing Capital Cost details the capital required to upgrade the comminution (crushing and milling) circuits at the Blanket Plant over the next four years. The upgrades will allow the circuits to process the targeted mine throughput of 55 ktpm. The leaching as well as the elution and smelting circuits have sufficient capacity. The capital expenditure schedule is in line with the tonnes ramp-up according to the PEA Study.
 
110
The following major upgrades are planned between 2015 and 2018:-
· Extension of the jaw crusher product stockpile.
· Additional primary and regrind mills with auxiliary equipment such as feed weightometers and slurry pumping.
· Addition of a Knelson Concentrator.
· Although the installation will only be considered at a later date, provision has been made for the installation of Acacia reactors for upgrading of Knelson concentrates. The Gemini tables will be used initially with some modifications as these units operate effectively at present.
The capital summary for the PEA Study is illustrated in Table 33.
Table 33: Expansion Project Capital Estimation
Item Description
Total Cost
USD
 New Central Shaft *
       22,303,316
 Haulage Development
          7,040,000
 Metallurgical Plant
5,589,644
 No 6 Winze
          1,000,000
 Blanket Deep Drilling Project
          6,800,000
 Total
42,732,690
The total capital estimation including sustaining capital over the LoM is illustrated in Table 34.
Table 34: Total Capital Estimation
Item Description
Total
Sustaining Capital
12,085,547
Project Capital
 42,732,690
Total
54,818,507
The PEA Study capital expenditure schedule is expected to span a period of approximately 5 years with minor capital being spent in the 6 th year. The Project capital schedule is illustrated in Figure 71.
Figure 71: PEA Expansion Project Capital Scheduling
 
111
The capital schedule for the Blanket mining operations over the Reserve LoM is illustrated in Figure 55 and consists of sustaining capital. Sustaining capital expenditures are capital expenditure resulting from improvements to and major renewals of existing assets. Such expenditures serve to maintain existing operations but do not generate additional revenues. Total Project capital expenditure over the PEA Study period is USD43 million with the peak capital expenditure of USD16 million during 2016.
Figure 72: PEA Study Capital Schedule
PEA Operating Costs
The operating costs used for Blanket Mine is based on the business plan received from the mine. The operating costs planned from October 2014 onwards were compared to the actual costs paid during 2012, 2013 and up to September 2014. The comparison was done to ensure that the planned opex, as received from the mine, is, in fact, achievable. Costs reported for the Blanket Mine PEA, which consist of plant and mining operating costs are displayed in Table 35. Other costs (C3) include the general and administration fees, Caledonia management fee as well as overheads. The royalty amount includes the Zimbabwean revenue royalty of 5%.
Table 35: PEA OPEX Summary
Item
Unit
Amount
Unit
Amount
Net Turnover
USD/Milled tonne
164
USD/Gold oz.
1,250
Mine Cost
USD/Milled tonne
47
USD/Gold oz.
358
Plant Costs
USD/Milled tonne
17
USD/Gold oz.
127
Other Costs
USD/Milled tonne
4
USD/Gold oz.
28
Direct Cash Costs (C1)
USD/Milled tonne
67
USD/Gold oz.
513
Capex
USD/Milled tonne
19
USD/Gold oz.
142
Production Costs (C2)
USD/Milled tonne
86
USD/Gold oz.
656
Royalties
USD/Milled tonne
8
USD/Gold oz.
63
Other Cash Costs
USD/Milled tonne
9
USD/Gold oz.
71
Fully Allocated Costs/   Notional Costs (C3)
USD/Milled tonne
103
USD/Gold oz.
789
NCE Margin
%
37%
%
37%
EBITDA*
USD/Milled tonne
79
USD/Gold oz.
603
EBITDA Margin
%
48%
   
Gold Recovered
oz.
385,091
   
Notes:
1. * EBITDA excludes capital expenditure.
2. Numbers may not add up due to rounding.
Direct Cash cost for Blanket is USD67/milled tonne that equates to USD513/oz., which is below the global cash cost of USD767/oz. Blanket Mine has a fully-allocated cost of USD103/milled tonne that equates to USD789/oz. The fully allocated cost is displayed per ounce together with the gold price of USD1,250/oz. that was used in the LoM (Table 36). During year 2024 the tonnes mined decreases but the grade mined increases resulting in lower cost per ounce produced.
 
 
112
Table 36: PEA Fully-Allocated Costs vs. Gold Price
Valuation
The macro economic forecasts used in the PEA are based on the assumptions used in the Reserve LoM plan valuation.
Table 37: PEA Valuation Summary – Real Terms
Item
Unit
Value
Real NPV @ 0.00%
USDm
127
Real NPV @ 5.00%
USDm
81
Real NPV @ 8.36%
USDm
65
Real NPV @ 10.00%
USDm
52
Real NPV @ 15.00%
USDm
33
Internal Rate of Return (IRR)
%
42%
Table 38 illustrates the Project profitability ratios.
Table 38: PEA Profitability Ratios
Item
Unit
Profitability Ratios
Total ounces in PEA Study
oz.
411,862
In situ Mining Inventory Valuation
USD/oz.
157
Production LoM
Years
8.5
Project LoM
Years
10.3
Present Value of Income flow
USDm
136
Present Value of Investment
USDm
36
Benefit-Cost Ratio
Ratio
3.8
Return on Investment
%
281%
Average Payback Period (From start of production)
Years
3.7
Peak Funding Requirement
USDm
-25
Peak Funding Year
Year
2016
Break Even Milled Grade (Including Capex)
g/t
2.75
Incentive Gold Price (Including Capex)
USD/oz.
789
Monte Carlo
In order to evaluate risk, a Monte Carlo simulation was developed using a population of 5,000 simulations. This is a tool which allows the simulation of random scenarios to determine the effect thereof. Minxcon simulated various input parameters using a range in which a parameter is expected to vary (see Table 39).

113


Table 39: Monte Carlo Input Ranges
Input
Min
Max
Current
Min
Max
Gold Price (USD/oz.)
80%
120%
1,250
1,000
1,500
Grade (g/t)
90%
110%
4.3
3.9
4.8
Fixed Costs (USD/t)
95%
105%
57
54
60
Variable Cost (USD/t)
95%
105%
10
9
10
Mining Capex (USD)
95%
110%
49
47
54
Plant Capex (USD)
95%
105%
6
5
6
The simulation was done on the LoM model. The results of the simulation are depicted in Figure 73. Using these figures in the Monte Carlo model, the value range of the Blanket expansion operation plots between USD44 million (Q25%) and USD84 million (Q75%). The analysis shows a positive distribution with a relatively small deviation from the mean. The operation is therefore a robust operation and not very sensitive to change in the input parameters - an indication of low risk. The best-estimated value of USD65 million is also similar to the mean value of USD64 million derived from the Monte Carlo.
Figure 73: Monte Carlo LoM Summary Report
PEA Cash Flows
The annual cash flow before capital expenditure, total capital expenditure and cumulative cash flow forecast for the LoM is displayed in Figure 64. During 2022 the tonnes mined are higher than the average of the preceding and succeeding years which results in peak cash flow of USD44 million during this year.
114
Figure 74: Annual and Cumulative Cash Flow
PEA Sensitivity Analysis
Based on the real cash flow calculated in the financial model, Minxcon performed single-parameter sensitivity analyses to ascertain the impact on the NPV. The bars represent various inputs into the model, each being increased or decreased by 2.5% i.e., the left side of the graph shows lower NPVs because of lower prices and lower grades, higher Opex and Capex and the opposite on the right hand. The red line and black line representing the least sensitive and most sensitive impacts to the NPV. For the DCF, the gold price and grade have the biggest impact on the sensitivity of the Project followed by the operating cost. The Project is not sensitive to the capital.
Figure 75: Project Sensitivity (NPV8.36%)
A sensitivity analysis was conducted on the grade and the gold price to better indicate the effect these two factors have on the NPV, as well as the total costs and the capital including renewals and replacement capital (Table 40 and Table 41).
 
115
Table 40: Sensitivity Analysis of Gold Price and Grade to NPV8.36% (USDm)
 
Grade delivered to plant
3.71
3.82
3.92
4.03
4.14
4.25
4.36
4.47
4.58
4.69
4.75
4.91
5.02
AU Price
Change %
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
102.5%
105.0%
107.5%
109.0%
112.5%
115.0%
1,063
85.0%
10
15
19
23
27
32
36
40
44
48
51
56
60
1,094
87.5%
15
19
23
28
32
36
41
45
49
53
56
62
66
1,125
90.0%
19
23
28
32
37
41
45
50
54
59
61
67
72
1,156
92.5%
23
28
32
37
41
46
50
55
59
64
66
73
77
1,188
95.0%
27
32
37
41
46
51
55
60
64
69
72
78
83
1,219
97.5%
32
36
41
46
51
55
60
65
69
74
77
84
88
1,250
100.0%
36
41
45
50
55
60
65
70
75
79
82
89
94
1,281
102.5%
40
45
50
55
60
65
70
75
80
85
88
95
99
1,313
105.0%
44
49
54
59
64
69
75
80
85
90
93
100
105
1,344
107.5%
48
53
59
64
69
74
79
85
90
95
98
105
111
1,363
109.0%
51
56
61
66
72
77
82
88
93
98
101
109
114
1,406
112.5%
56
62
67
73
78
84
89
95
100
105
109
116
122
1,438
115.0%
60
66
72
77
83
88
94
99
105
111
114
122
127
1,500
120.0%
69
75
80
86
92
98
104
109
115
121
124
133
138

Table 41: Sensitivity Analysis of Production Costs and Capital to NPV8.36% (USDm)
 
Total Capex
46.6
48.0
49.3
50.7
52.1
53.4
54.8
56.2
57.6
58.9
59.8
61.7
63.0
Production Cost (USD/t)
Change %
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
102.5%
105.0%
107.5%
109.0%
112.5%
115.0%
87
130.0%
44
43
42
42
41
40
40
39
38
37
37
36
35
84
125.0%
48
47
47
46
45
45
44
43
42
42
41
40
40
81
120.0%
52
52
51
50
50
49
48
47
47
46
46
45
44
77
115.0%
57
56
55
54
54
53
52
52
51
50
50
49
48
74
110.0%
61
60
59
59
58
57
56
56
55
54
54
53
52
71
105.0%
65
64
64
63
62
61
61
60
59
59
58
57
56
67
100.0%
69
68
68
67
66
66
6 5
64
63
63
62
61
61
64
95.0%
73
73
72
71
70
70
69
68
68
67
66
65
65
61
90.0%
77
77
76
75
75
74
73
73
72
71
71
70
69
57
85.0%
82
81
80
80
79
78
77
77
76
75
75
74
73
54
80.0%
86
85
84
84
83
82
82
81
80
79
79
78
77
50
75.0%
90
89
89
88
87
87
86
85
84
84
83
82
82
47
70.0%
94
93
93
92
91
91
90
89
89
88
87
86
86

116


ITEM 25 – INTERPRETATION AND CONCLUSIONS

Minxcon reviewed all the information and has made the following observations regarding the Blanket Mine:-
Mineral Resources:-
· The Mineral Resources and Reserves tabulated on the operation are not aligned with best practises and reporting formats. These spread sheets should be revised.
· The manual mineral resource estimation methodology is deemed satisfactory, but a digital database would have advantages in terms of 3D visualisation and understanding the data.
· The QA/QC practices are not up to standard and need to be revised and implemented.
· The "deep" drilling and exploration drilling QA/QC needs to be improved.
· Drilling for the depth extensions should be increased to increase the confidence of the resource for the deepening of the Project.
Mining:-
· The Reserve LoM plan is based on the depletion of Mineral Resource blocks following a study of mine plans.
· The developments required to access and mine the Measured and Indicated Mineral Resources have been completed.
· Historic production volumes are on the increase since Jan 2012 moving closer to 35 ktpm line. The Reserve LoM plan will require production to keep increasing to just below 40 ktpm.
· Rock conditions are fairly competent and roof support is seldom required.
Engineering and Infrastructure:-
· Existing infrastructure at the Blanket Mine is sufficient to sustain the current production profile.
Processing:-
· The plant is well-maintained and equipped to crush and mill up to 40 kt per month.
· The CIL circuit has adequate capacity to treat up to 120 kt of milled material per month.
· The plant is adequately staffed considering that most of the plant is manually controlled.
· Overall gold recoveries have been consistent on a monthly basis.
· The high free gold recovery of approximately 50% contributes to the overall high gold recovery.
· The incorporation of a central process control system can improve recoveries and reduce costs.
· Opportunities exist to reduce costs by optimising power measurement and reagent consumption.
Reserve Market Evaluation:-
· The Project investigated is financially feasible at an 8.36% real discount rate.
· The best-estimated value of the Project was calculated at USD66 million with at a real discount rate of 8.36%.
· The Blanket Mine has an NCE margin of 31% that is slightly higher than that of other mines.
· The Project is most sensitive to gold price and grade.
·
Direct Cash cost for the Project is USD71/milled tonne that equates to USD641/oz., which is below the average global gold cash cost of USD767/oz.
· Fully-allocated cost for the Project is USD95/milled tonne that equates to USD864/oz.
117
PEA Conclusions:-
Minxcon was commissioned by GMS in November 2014 to complete a scoping level study on an initial extension to the Blanket Mine from below 750 m Level to 1120 m Level, in the form of a Preliminary Economic Assessment ("PEA"). The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized. The valuation does not include the current mine plan that is based on the Mineral Reserves and Resources above 750 m but only considered the expansion project below 750 m as a stand-alone project. The PEA thus reflects Project economics on a stand-alone basis, and the economic analysis is based on an assumed requirement to raise money for the expansion capital expenditures, despite the fact that Caledonia would be able to fund those capital expenditures from cash flow from the existing mine operations. The best-estimated value of the PEA was calculated at USD65 million at a real discount rate of 8.36%. The IRR was calculated at 42%. Substantial upside potential exists in that the resource planned in the PEA is small in comparison to the exploration targets that could still be converted to resource below 750 m Level.
Study Level:
· The Mineral Resource confidence is concept level because the resources below 750 m Level are predominantly in the Inferred Resource category. The following figure illustrates the red area included in the PEA Study:-
Below 750 m Level - Blanket Mine
 
 
Blanket Project Area Split, Below 750 m (Red Portion)

· The PEA Study, design, schedule and OPEX estimation is better than concept level and is based on current actual performance.
· The capital estimation was estimated at a very high level of confidence based on engineering designs, drawings and firm quotations and is at least at a definitive level of confidence.
Mining Areas:
· The PEA includes the Inferred Mineral Resources from the Below 750 m Level area.
118


Infrastructure:
· The existing infrastructure at the Blanket mine will be utilised in parallel with new infrastructure which is specifically aimed at targeting the Below 750 m Level mining areas.
· The extensions will entail the sinking of a new vertical shaft from surface as well as the completion of the No 6 Winze deepening project.
Additional Capital:
· Capital for the various key expansion project items amounts to USD43 million.

Recoveries:
· The historic metallurgical recoveries of 93.5% are not expected to change with the increased tonnes from the Blanket Mine.
PEA Study:
· The tonnage profile for the PEA Study is based on the replacement tonnages (Inferred Resources) to be mined through the existing shaft and the new central shaft situated in-between AR Main and AR South.
· The average grade is expected to be 4.36 g/t.
· The infrastructure extensions as defined in the PEA adds approximately 385 koz.
· The PEA Study excludes the Exploration Target areas below AR Main, AR South, Lima and Eroica. The PEA project will provide access to these Exploration target areas and to future exploration areas below 1120 level that will potentially extend the LoM.
Valuation:
· The best-estimated value of the PEA was calculated at USD65 million at a real discount rate of 8.36%. The IRR was calculated at 42%
· By using the Monte Carlo model for the PEA, the value range of the Blanket operation plots between USD44 million and USD84 million.
· The PEA is most sensitive to gold price and grade.
· The PEA has a break-even gold price of USD789/oz., including capital.
· Direct Cash cost for the PEA is USD67/milled t that equates to USD513/oz., which is below the average global gold cash cost of USD767/oz.
· Fully-allocated cost for the PEA is USD86/milled t that equates to USD789/oz.; noticeably lower than similar gold mining operations.


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ITEM 26 – RECOMMENDATIONS

Minxcon recommends the following for the Blanket Mine:-
Mineral Resources:-
· Minxcon recommends that the Mineral Resources are stated as inclusive of Mineral Reserves and that the Measured and Indicated Resources be declared separate from the Inferred Resources.
· The manual data should be captured digitally to reduce human error and assist in the 3D visualisation of the Mineral Deposit and potentially find hidden ore resource blocks.
· Geostatistical analysis of the data could possibly help to increase the mineral resources.
· Best practice QA/QC must be implemented on the operation, especially for the deep drilling and other exploration drilling as these sample points are single points and have greater influence than the day-to-day evaluation samples.
· Currently, the block evaluation does not correct for dip, which leads to under evaluation of the volume and content per resource block.
· Short deflections must be drilled when drilling the "deep" drill holes and exploration drill holes to understand variability and improve the confidence of the intersections for the Indicated and Inferred Resources.
· Long inclined boreholes or directional drilling should be investigated as an option to drill more and deeper intersections in the "pay shoots" without increasing the cross-cut development. This could help convert the Inferred mineral resource category to the Indicated mineral resource category.
Mining:-
· To assist in the LoM plan audit, a LoM design must be completed using one of the available software packages. This will be illustrated graphically in the mining sequence and development.
Processing:-
· The incorporation of additional process control systems should be pursued to improve gold recoveries and reduce costs.
· Metering of power consumption to the main process units should be installed so that power utilisation can be controlled; this will contribute to lower operating costs.
· The mill feed bin should be upgraded in size to increase the retention time to allow the crushers to operate during the day only.
· Reagent consumption (cyanide, and carbon) should be optimised further.
· It is recommended that laboratory costs be captured centrally and allocated to the mining, geology and metallurgical department on a cost per sample basis.
PEA Recommendations
Exploration
· To fully de-risk the PEA expansion project, it is recommended to do exploration drilling as illustrated in the figure below, to increase the level of confidence of the Mineral Resources to Indicated.
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Below 750 m Area

Mineral Resources:
· Best practice QA/QC must be implemented on the operation, especially for deep drilling and other exploration drilling as these sample points are single points and have greater influence than the day-to-day evaluation samples.
· Short deflections must be drilled when drilling the "deep" drill holes and exploration drill holes to understand variability and improve the confidence of the intersections for the Indicated and Inferred resources.
· Long inclined boreholes or directional drilling should be investigated as an option to drill more and deeper intersections in the "pay shoots" without increasing the cross-cut development. This could help to convert the Inferred Mineral Resources to Indicated Mineral Resources.
Processing:
· The incorporation of additional process control systems should be pursued to improve gold recoveries and reduce costs.
· Metering of power consumptions to the main process units should be installed so that plant power utilisation can be controlled.
· Although the Gemini tables operate effectively at the moment, installation of Acacia reactors should be considered for upgrading of Knelson concentrates.


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ITEM 27 – REFERENCES

· AngloGold Ashanti. 2014. Home | Operational profiles 2012 | AngloGold Ashanti. [ONLINE] Available at: http://www.aga-reports.com/12/op. [Accessed 01 February 2014].
· Anon. The Geology of Mali South (Southern Mali).
· Applied Geological Services (AGS), July 2006, Independent Qualified Person's Report Blanket Mine, Zimbabwe.
· Appropriate Process Technologies, 2014, Quotation ARM-D13-DG02, Caledonia Alluvial Plant.
· Consolidated Main Reef. 2014. Downloads | Investors. [ONLINE] Available at: http://demo.crgsa.com/wpcontent/uploads/CRG%20%202012%20Annual%20Report_FINAL.pdf [Accessed 01 February 2014].
· Contrarian Investors' Journal. Pricing of Gold Forward Rate. 8 April 2009. [ONLINE] Available at:  http://contrarianinvestorsjournal.com/?p=491# . [Accessed 14 March 2014].
· Caledonia Ventures Inc. Caledonia's Mali exploration program delivers excellent grades Update on Drill Results at the Blanket Mine Project, Mali. Released 15 January 2013.
· Caledonia Ventures Inc. Drilling on the First of Six Gold Hosting Mineralised Zones on Caledonia's Farabantourou Permit Yields Better than Anticipated Results. Released 23 April 2013.
· Caledonia Ventures Inc. Presentation, February 2012.
· Caledonia Mining Corporation, Annual Information Form for the year ending December 31, 2013.
· Diner, JA., 2010, Geology and Exploration Potential - Sanoukou Claim.
· Dunbar, P. & Sangaré, S. A Technical Review of the Yanfolila Gold Concession, Mali, West Africa for Compass Gold Corporation. Watts, Griffis and McQuat: 15 January 2010.
· Energy & Metals Consensus Forecasts. 20 October 2014. Philip M. Hubbard. 53 Upper Brook Street, London, United Kingdom.
· Filing Statement, November 2011, Filing Statement of Caledonia Ventures Inc. Concerning The Proposed Acquisition Of 100% of the Outstanding Shares of Transafrika Belgique S.A.
· Gold Fields - Quarterly Financial Reports. Thompson Reuters. 2014. Gold Fields - Quarterly Financial Reports. [ONLINE] Available at: http://www.goldfields.co.za/inv_rep_quarterly.php. [Accessed 01 February 2014].
· GoldOne. 2014. Downloads | Investors. [ONLINE] Available at: http://www.gold1.co.za/index.php?option=com_docman&Itemid=134. [Accessed 01 February 2014].
· Great Basin Gold. 2014. Investors | Financials. [ONLINE] Available at: http://www.grtbasin.com/c_investorcentre/Financials/FY2012/2Q/GBG_Jun2012QuarterliesPresentation.pdf [Accessed 31 January 2014].
· http://jgs.lyellcollection.org/content/170/2/353/F1.large.jpg
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· Harmony FY2013. 2014. Harmony Quarterly Results FY2013. [ONLINE] Available at: http://www.harmony.co.za/investors/reporting/quarterly-results/fy2013. [Accessed 01 February 2014].
· IAMGOLD Operations. Sadiola Gold Mine. Available from: http://www.iamgold.com/English/Operations/Operating-Mines/Sadiola-Gold-Mine/default.aspx Accessed: 21 August 2014.
· Kimberly Amadeo. US Economy. U.S. Inflation Rate. 2014. [ONLINE] Available at: http://useconomy.about.com/od/inflationfaq/a/US-Inflation-Rate.htm. [Accessed 22 May 2014].
· Kitco Historical Gold Charts and Data - 2014. Historical Gold Charts and Data - London Fix. [ONLINE] Available at: http://www.kitco.com/charts/historicalgold.html. [Accessed 03 February 2014].
· Minxcon Projects SA, August 2014, Preliminary Economic Assessment – Blanket Mine.
· MSA, June 2011,  NI 43−101 Technical Report on the Blanket Gold Mine, Zimbabwe.
· Natural Resource Holdings. Global Gold Mine and Deposit Rankings 2013. [ONLINE] Available at: http://www.visualcapitalist.com/global-gold-mine-and-deposit-rankings-2013 . [Accessed 12 February 2014].
· Ndiaye, PM., et al., 2014, Polycyclic Evolution of Paleoproterozoïc Rocks in the Southwestern Part of the Mako Group (Eastern Senegal, West Africa), International Journal of Geosciences, 5, 739-748.
· Pan African. 2014. Financial Reports » Pan African. [ONLINE] Available at: http://www.panafricanresources.com/investors/financial-reports/. [Accessed 01 February 2014].
· Peacocke Simpson, 2014, Report Number PSA/33/14, 2014, Gravity Concentration and Cyanide Leaching Pilot Testing Upon Rubble Sample Submitted By Caledonia Plc.
· RandGold Resources. Loulo-Gounkoto Complex. Available from:  http://www.randgoldresources.com/randgold/content/en/randgold-loulo-gounkoto-complex Accessed: 21 August 2014.
· SGS SA, 2013, Report number 1112/283, Gold deportment Study on Borehole Samples from Blanket Mine.
· Sibanye Gold. 2014. Downloads | Quarterly Reports | Financial Reports. [ONLINE] Available at: http://www.sibanyegold.co.za/index.php/2012-12-30-10-07-54/2013-05-27-09-34-20/quarterly-reports . [Accessed 01 February 2014].
· The London Bullion Market Association. GOFO (Gold Forward Offered Rates) and Libor Means 2013. [ONLINE] Available at: http://www.lbma.org.uk/pages/?page_id=55&title=gold_forwards&show=2013. [Accessed 17 March 2014].
· Thomson Reuters. Gold Fields Mineral Services. Gold Survey 2013 Update 2. Thomson Reuters Building. 30 South Colonade, London, United Kingdom. Published: February 2014. [ONLINE] Available at: https://thomsonreuterseikon.com/markets/metal-trading/ . [Accessed 12 February 2014].
· Transafrika Resources Limited. Caledonia Acquires Transafrika Belgique. December 2011.
· U.S. Geological Survey. Mineral Commodity Summaries 2014. Manuscript approved for publication February 28, 2014. U.S. Geological Survey, Reston, Virginia: 2014.

· Village | Report for the Quarter Ended 30 September 2013, 30 October 2013. 2014. Press release [ONLINE] Available at: http://www.villagemainreef.co.za/news/press-2013/VMR-press-30Oct2013.htm. [Accessed 03 February 2014].
· World Gold Council. Gold Demand Trends, Full Year 2013. Thomson Reuters Gold Fields Mineral Services. 10 Old Bailey, London, United Kingdom. Published: February 2014.
· World Gold Council. Gold Investor. Risk management and capital preservation Volume 4. 10 Old Bailey, London, United Kingdom. Published: October 2013.
 
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GLOSSARY OF TERMS

Table 42: Glossary of Terms
Term
Definition
Alluvial
The product of sedimentary processes in rivers, resulting in the deposition of alluvium (soil deposited by a river).
Arenite
A sedimentary rock composed mainly of quartz minerals.
Argillite
A sedimentary rock composed mainly of clay minerals.
Assay laboratory
A facility in which the proportions of metal in ores or concentrates are determined using analytical techniques.
Auriferous
A synonym for gold-bearing.
Beneficial Interest
The ultimate interest accruing or due to a party in a project. Depending on the circumstances, the beneficial interest may differ from participation, contributory or share subscription interests.
Capital Asset Pricing Model (CAPM)
A model that describes the relationship between risk and expected return.
Carbon-In-Leach (CIL)
A process similar to CIP (described below) except that the ore slurries are not leached with cyanide prior to carbon loading. Instead, the leaching and carbon loading occur simultaneously.
Carbon-In-Pulp (CIP)
A common process used to extract gold from cyanide leach slurries. The process consists of carbon granules suspended in the slurry and flowing counter-current to the process slurry in multiple-staged agitated tanks. The process slurry, which has been leached with cyanide prior to the CIP process, contains solubilised gold. The solubilised gold is absorbed onto the carbon granules, which are subsequently separated from the slurry by screening. The gold is then recovered from the carbon by electrowinning onto steel wool cathodes or by a similar process.
Comminution
Action of reducing material, normally ore, to minute particles or fragments.
Conglomerate
A sedimentary rock containing rounded fragments (clasts) derived from the erosion and abrasion of older rocks. Conglomerates are usually formed through the action of water in rivers and beaches. The interstitial spaces between the clasts are filled with finer grained sediment.
Contributory interest
In general, a contributory interest is the amount required to be contributed towards the exploration and development costs of a project by a party in order for that party to earn its participation interest in the project. If that party does not contribute its share of the funding then its participating interest will be diluted. The precise definition of this term can differ between agreements.
Cut-off grade
Cut-off grade is any grade that, for any specific reason, is used to separate two courses of action, e.g. to mine or to leave, to mill or to dump.
Development
Activities related to preparation for mining activities to take place and reach the required level of production.
Diamond drilling
An exploration drilling method, where the rock is cut with a diamond drilling bit, usually to extract core samples.
Dilution
Waste which is mixed with ore in the mining process.
Dip
The angle that a structural surface, i.e. a bedding or fault plane, makes with the horizontal. It is measured perpendicular to the strike of the structure.
Discount rate
The interest rate used in discounted cash flow analysis to determine the present value of future cash flows. The discount rate takes into account the time value of money (the idea that money available now is worth more than the same amount of money available in the future because it could be earning interest) and the risk or uncertainty of the anticipated future cash flows (which might be less than expected).
Discounted Cash Flow (DCF)
In finance, discounted cash flow analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values (PVs) – the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question.
Electro-winning
The process of removing gold from solution by the action of electric currents.
EMPR
Environmental Management Programme Report.
Exploration
Prospecting, sampling, mapping, diamond drilling and other work involved in the search for mineralisation.
Facies
The features that characterise rock as having been emplaced, metamorphosed or deposited in a sedimentary fashion, under specific condition. In the case of sediment host deposits, this infers deposition within a particular depositional environment.

 
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Term
Definition
Faulting
The process of fracturing that produces a displacement within, of across lithologies.
Fair Value
The estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between knowledgeable and willing parties at the measurement date (an exit price) [IFRS], other than in a liquidation sale [US GAAP, FAS 157].
Feasibility study
A definitive engineering estimate of all costs, revenues, equipment requirements and production levels likely to be achieved if a mine is developed. The study is used to define the economic viability of a project and to support the search for project financing.
Fluvial
River environments.
Footwall
The underlying side of a fault, Mineral Deposit or stope.
Forward sales
The sale of a commodity for delivery at a specified future date and price.
Grade
The quantity of metal per unit mass of ore expressed as a percentage or, for gold, as grams per tonne of ore.
Hanging wall
The overlying side of a fault, Mineral Deposit or stope.
Heap leaching
A low-cost technique for extracting metals from ore by percolating leaching solutions through heaps of ore placed on impervious pads. Generally used on low-grade ores.
In situ
In place, i.e. within unbroken rock.
Indicated Mineral Resource
An "Indicated Mineral Resource" is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed (NI43-101 definition).
Inferred Mineral Resource
An "Inferred Mineral Resource‟ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
Internal Rate of return (IRR)
The internal rate of return on an investment or project is the "annualised effective compounded return rate" or "rate of return" that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. It can also be defined as the discount rate at which the present value of all future cash flow is equal to the initial investment or in other words the rate at which an investment breaks even.
Intrinsic Value
The amount considered, on the basis of an evaluation of available facts, to be the "true", "real" or "underlying" worth of an item.  Thus it is a long-term, Non-Market Value concept that smooths short term price fluctuations. In the case of real estate, this would be the value of the property taking into account the structure, size, location etc., as opposed to taking into account the current state of the market. In mining, the intrinsic value refers to the fundamental value based on the technical inputs, and a cash flow projection that creates a Net Present Value. Few of these inputs are market related, except possibly for metal price, benchmarked costs and the discount rate applied.
Kriging
An estimation method that minimises the estimation error between data points in determining mineral resources. Kriging is the best linear unbiased estimator of a mineral resource.
Level
The workings or tunnels of an underground mine which are on the same horizontal plane.
Lithology
The general compositional characteristics of rocks.
Marginal  mine
A mine which has a relatively small cash operating margin (cash operating costs including capital expenditures in relation to gross gold sales) at the current gold price.
Market Value
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion [IVSC, IFRS].
Measured mineral resource
"Measured Mineral Resource‟ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
 
 
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Term
Definition
Metallurgical plant
Process plant erected to treat ore and extract the contained gold.
Metallurgical recovery
Proportion of metal in mill feed which is recovered by a metallurgical process or processes.
Metallurgy
The science of extracting metals from ores and preparing them for sale.
Milling/Crush
The comminution of the ore, although the term has come to cover the broad range of machinery inside the treatment plant where the gold is separated from the ore prior to leaching or flotation processes.
Mine call factor (MCF)
The ratio of the grade of material recovered at the mill (plus residue) to the grade of ore calculated by sampling in stopes.
Mine recovery factor (MRF)
The MRF is equal to the mine call factor multiplied by the plant recovery factor.
Mineable
That portion of a mineral resource for which extraction is technically and economically feasible.
Mineral Reserve
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. Adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined. (NI43-101 definition). Mineral reserves are reported as general indicators of the life of mineral deposits. Changes in reserves generally reflect:
i.     development of additional reserves;
ii.    depletion of existing reserves through production;
iii.   actual mining experience;  and
iv.   price forecasts.
Grades of mineral reserve actually processed from time to time may be different from stated reserve grades because of geologic variation in different areas mined, mining dilution, losses in processing and other factors. Neither reserves nor projections of future operations should be interpreted as assurances of the economic life of mineral deposits or of the profitability of future operations.
Mineral Resource
A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilised organic material including base and precious metals, coal, and industrial minerals in or on the Earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.
Mineralisation
The presence of a target mineral in a mass of host rock.
Mineralised area
Any mass of host rock in which minerals of potential commercial value occur.
Net Present Value (NPV)
The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyse the profitability of an investment or project.
Notional Cost
All in cost which includes total cash costs (net of by-product credits), capital spending, general and administrative expenses, and exploration expenses.
Ore
A mixture of valuable and worthless minerals from which at least one of the minerals can be mined and processed at an economic profit.
Mineral Deposit
A continuous well defined mass of material of sufficient ore content to make extraction economically feasible.
Outcrop
The exposure of rock on surface.
Participation interest
The interest that a party holds in any benefits arising from the development or sale of a project. In order to earn this interest the party may, or may not, be required to contribute towards the exploration and development costs. The definition of this term may differ between agreements.
Pay limit
The breakeven grade at which the Mineral Deposit can be mined without profit or loss and is calculated using the gold price, the working cost and recovery factors.
PEA Study
The Life of Mine plan that was done as part of the Preliminary Economic Assessment of the area that includes "Above 750 m Level" areas and "Below 750 m Level" areas. The PEA Study are inclusive of the Reserve LoM plan and Inferred Mineral Resources.
Placer
A sedimentary deposit containing economic quantities of valuable minerals mainly formed in alluvial and eluvial environments.
Plant recovery factor
The gold recovered after treatment processes in a metallurgical plant. It is expressed as a percentage of gold produced (in mass) over the mass of gold fed into the front of the plant (i.e. into the milling circuit).
Probable Mineral Reserve
"Probable Mineral Reserve" is the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. (NI43-101 definition).
 
 
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Term
Definition
Proven Mineral Reserve
A "Proven Mineral Reserve" is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. (NI43-101 definition).
Recovered grade
The actual grade of ore realised or produced after the mining and treatment processes.
Reef
A narrow gold-bearing lithology, normally a conglomerate in the Witwatersrand Basin that may contain economic concentrates of gold and uranium.
Refining
The final stage of metal production in which final impurities are removed from the molten metal by introducing air and fluxes. The impurities are removed as gases or slag.
Reserve LoM Plan
The Life of Mine that are based only on Measured and Indicated Mineral Resources and only for the area "Above 750 m Level". The Reserve LoM plan will be used to state Mineral Reserves.
Rehabilitation
The process of restoring mined land to a condition approximating to a greater or lesser degree its original state.  Reclamation standards are determined by the South African Department of Mineral and Energy Affairs and address ground and surface water, topsoil, final slope gradients, waste handling and re-vegetation issues.
Sampling
Taking small pieces of rock at intervals along exposed mineralisation for assay (to determine the mineral content).
Sedimentary
Formed by the deposition of solid fragmental material that originates from weathering of rocks and is transported from a source to a site of deposition.
Semi-Autogenous Grinding (SAG) mill
A piece of machinery used to crush and grind ore, which uses a mixture of steel balls, and the ore itself to achieve communition.
Semi-variogram
A graph that describes the expected difference in value between pairs of samples as a function of sample spacing.
Share Subscription Right
The right which a party has to subscribe for shares in any company set up to develop the mineral rights. The precise definition can differ between agreements.
Slimes
The finer fraction of tailings discharged from a processing plant after the valuable minerals have been recovered.
Slurry
A fluid comprising fine solids suspended in a solution (generally water containing additives).
Smelting
Thermal processing whereby molten metal is liberated from beneficiated ore or concentrate with impurities separating as lighter slag.
Spot price
The current price of a metal for immediate delivery.
Stockpile
A store of unprocessed ore or marginal grade material.
Stope
Excavation within the Mineral Deposit where the main production takes place.
Stratigraphic
A term describing the chronological sequence in which bedded rocks occur that can usually be correlated between different localities.
Strike length
Horizontal distance along the direction that a structural surface takes as it intersects the horizontal.
Stripping
The process of removing overburden to expose ore.
Sulphide
A mineral characterised by the linkages of sulphur with a metal or semi-metal, such as pyrite (iron sulphide). Also a zone in which sulphide minerals occur.
Sweepings
The clean-up of residual broken ore in stopes.
Syncline
A basin shaped fold.
Syndepositional
A process that took place at the same time as sedimentary deposition.
Tailings
Finely ground rock from which valuable minerals have been extracted by milling.
Tailings dam
Dams or dumps created to store waste material (tailings) from processed ore after the economically recoverable gold has been extracted.
Tonnage
Quantities where the tonne is an appropriate unit of measure. Typically used to measure reserves of gold-bearing material in situ or quantities of ore and waste material mined, transported or milled.
Total cost per ounce
A measure of the average cost of producing an ounce of gold, calculated by dividing the total operating costs in a period by the total gold production over the same period.
Transgress
Systematic inundation of an erosional surface by sedimentary deposition.
Unconformity
A surface within a package of sedimentary rocks which may be parallel to or at an angle with overlying or underlying rocks, and which represents a period of erosion or non-deposition, or both.
Vamping
The final clean-up of gold bearing rock and mud from track ballast and/or accumulations in gullies and along transportation routes.
Waste rock
Rock with an insufficient gold content to justify processing.
127
 
 
 
Term
Definition
Weighted average Cost of Capital
A company's assets are financed by either debt or equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation.
Working costs
Working costs represent production costs directly associated with the processing of gold and selling, administration and general charges related to the operation.
Zinc precipitation
A chemical reaction using zinc dust that converts gold solution to a solid form for smelting into unrefined gold bars.
 
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APPENDIX

Appendix 1: Qualified Persons' Certificates

CERTIFICATE of QUALIFIED PERSON – U Engelmann

I, Uwe Engelmann, do hereby certify that:
1. I am a Director of Minxcon Consulting (Pty) Ltd
Suite 5, Coldstream Office Park,
2 Coldstream Street,
Little Falls, Roodepoort, South Africa
2. I graduated with a BSc (Hons.) Geology from the University of the Witwatersrand in 1991.
3. I have more than 17 years' experience in the mining and exploration industry. This includes 8 years as an Ore Resource Manager at the Randfontein Estates Gold Mines on the West Rand. I have completed a number of assessments and technical reports pertaining to various commodities, including gold, using approaches described by the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects).
4. I am affiliated with the following professional associations:
Class
Professional Society
 
Member
Geological Society of South Africa (Reg. No. 966310)
2010
Member
South African Council for Natural Scientific Professions (Pr. Sci. Nat. Reg. No. 400058/08)
2008
5. I am responsible for Items 1-3, 6-14, 23-27 of the Qualified Person's Report titled "A Technical Report on the Blanket Mine, Gwanda Area, Zimbabwe", effective 29 August 2014.
6. I have read the definition of "Qualified Person" set out in the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects), Form 43-101F1 and the Companion Policy Document 43-101CP ("NI 43-101") and certify that by reason of my education, affiliation with professional associations and past relevant work experience, I fulfil the requirements to be a Qualified Person for the purposes of this Qualified Persons' Report.
7. I have read the NI43-101 and this Report has been prepared in compliance with it.
8. As of the effective date, to the best of my knowledge, information and belief, the Report contains all scientific and technical information required to be disclosed to make the Report not misleading.
9. The facts presented in the Report are, to the best of my knowledge, correct.
10. The analyses and conclusions presented in the Report are limited only by the reported forecasts and conditions.
11. I have no present or prospective interest in the subject property or asset and have no bias with respect to the assets that are the subject of the Report, or to the parties involved with the assignment.
12. My compensation, employment or contractual relationship with the Commissioning Entity is not contingent on any aspect of the Report.
13. I have had no prior involvement with the property that is the subject of this Report.
14. I did not undertake a personal inspection of the property.

Yours faithfully,
U ENGELMANN
B.Sc. (Hons.) Geology
SANCASP, GSSA
DIRECTOR
 
129



CERTIFICATE of QUALIFIED PERSON – D v Heerden

I, Daniel van Heerden, do hereby certify that:
1. I am a Director of Minxcon Consulting (Pty) Ltd
Suite 5, Coldstream Office Park,
2 Coldstream Street,
Little Falls, Roodepoort, South Africa
2. I graduated with a B.Eng. (Mining) degree from the University of Pretoria in 1985 and an M.Comm. (Business Administration) degree from the Rand Afrikaans University in 1993. In addition, I obtained diplomas in Data Metrics from the University of South Africa and Advanced Development Programme from London Business School in 1989 and 1995, respectively. In 1989 I was awarded with a Mine Managers Certificate from the Department of Mineral and Energy Affairs.
3. I have worked as a Mining Engineer for more than 28 years with my specialisation lying within Mineral Reserve and mine management. I have completed a number of Mineral Reserve estimations and mine plans for various commodities, including gold, using approaches described by the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects).
4. I am a member/fellow of the following professional associations, which meet all the attributes of a Professional Association or a Self-Regulatory Professional Association, as applicable (as those terms are defined in NI43-101):-
Class
Professional Society
Year of Registration
Member
Association of Mine Managers of SA
1989
Fellow
South African Institute of Mining and Metallurgy
1985
Professional Engineer
Engineering Council of South Africa (ECSA)
2005
Member
Engineering Council of South Africa (Pr. Eng. Reg. No. 20050318)
2005

5. I am responsible for Items 1-3, 15-16, 18, 21, 23-27 of the Qualified Person's Report titled "A Technical Report on the Blanket Mine, Gwanda Area, Zimbabwe", effective 29 August 2014.
6. I have read the definition of "Qualified Person" set out in the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects), Form 43-101F1 and the Companion Policy Document 43-101CP ("NI 43-101") and certify that by reason of my education, affiliation with professional associations and past relevant work experience, I fulfil the requirements to be a Qualified Person for the purposes of this Qualified Persons' Report.
7. I have read the NI43-101 and this Report has been prepared in compliance with it.
8. As of the effective date, to the best of my knowledge, information and belief, the Report contains all scientific and technical information required to be disclosed to make the Report not misleading.
9. The facts presented in the Report are, to the best of my knowledge, correct.
10. The analyses and conclusions presented in the Report are limited only by the reported forecasts and conditions.
11. I have no present or prospective interest in the subject property or asset. I have no bias with respect to the assets that are the subject of the Report, or to the parties involved with the assignment.
12. I have read this technical Report and NI43-101 Standards of Disclosure for Mineral Projects and this Report has been prepared in compliance with NI43-101.
13. My compensation, employment or contractual relationship with the Commissioning Entity is not contingent on any aspect of the Report.
14. I did not undertake a personal inspection of the property.
15. I have had no prior involvement with the property that is the subject of this Report.

Yours faithfully,
D v HEERDEN
B.Eng (Mining), M.Comm. (Bus. Admin.)
Pr. Eng., FSAIMM, AMMSA
DIRECTOR

130

CERTIFICATE of QUALIFIED PERSON - D Clemente

I, Dario Clemente, do hereby certify that:
1. I am a Director of Minxcon Consulting (Pty) Ltd
Suite 5, Coldstream Office Park,
2 Coldstream Street,
Little Falls, Roodepoort, South Africa
2. I graduated with an HND (Ext. Met.) from the University of the Witwatersrand in 1976. In addition, I have completed the Business Leadership Development Programme at (WBS)
3. I have more than 37 years' experience in the mining and metallurgical industry. This includes 15 years as a metallurgical manager and consultant as well as four years in mine management.   I have completed various technical reports on metallurgical operations and have been co-author of a technical paper presented overseas. I have completed a number of assessments and technical reports pertaining to various commodities, including gold, using approaches described by the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects).
4. I am a member/fellow of the following professional associations, which meet all the attributes of a Professional Association or a Self-Regulatory Professional Association, as applicable (as those terms are defined in NI43-101):-
Class
Professional Society
Year of Registration
Fellow
South African Institute of Mining and Metallurgy (FSAIMM Reg. No. 701139)
1995
Member
Mine Metallurgical Managers Association of South Africa (MMMA) No. (M000948)
1988

5. I am responsible for Items 1-3, 17-18, 23-27 of the Qualified Person's Report titled "A Technical Report on the Blanket Mine, Gwanda Area, Zimbabwe", effective 29 August 2014.
6. I have read the definition of "Qualified Person" set out in the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects), Form 43-101F1 and the Companion Policy Document 43-101CP ("NI 43-101") and certify that by reason of my education, affiliation with professional associations and past relevant work experience, I fulfil the requirements to be a Qualified Person for the purposes of this Qualified Persons' Report.
7. I have read the NI43-101 and this Report has been prepared in compliance with it.
8. As of the effective date, to the best of my knowledge, information and belief, the Report contains all scientific and technical information required to be disclosed to make the Report not misleading.
9. The facts presented in the Report are, to the best of my knowledge, correct.
10. The analyses and conclusions presented in the Report are limited only by the reported forecasts and conditions.
11. I have no present or prospective interest in the subject property or asset and have no bias with respect to the assets that are the subject of the Report, or to the parties involved with the assignment.
12. I have read this technical Report and NI43-101 Standards of Disclosure for Mineral Projects and this Report has been prepared in compliance with NI43-101.
13. My compensation, employment or contractual relationship with the Commissioning Entity is not contingent on any aspect of the Report.
14. I did not undertake a personal inspection of the property.
15. I have had no prior involvement with the property that is the subject of this Report.
 

Yours faithfully,
 
D Clemente
NHD (Ext. Met.), GCC, MMMMA, FSAIMM
DIRECTOR, MINXCON PROJECTS



131

CERTIFICATE of QUALIFIED VALUATOR - N J Odendaal

I, Johan Odendaal, do hereby certify that:
1. I am a Director of Minxcon Consulting (Pty) Ltd
Suite 5, Coldstream Office Park,
2 Coldstream Street,
Little Falls, Roodepoort, South Africa
2. I graduated with a BSc (Geol.) degree from the Rand Afrikaans University in 1985. In addition, I have obtained a BSc (Hons.) (Mineral Economics) from the Rand Afrikaans University in 1986 and an MSc (Min. Eng.) from the University of the Witwatersrand in 1992.
3. I have worked as a Geoscientist for more than 25 years. As a former employee of Merrill Lynch, I was actively involved in advising mining companies and investment bankers on corporate-related issues, analysing platinum and gold companies. I completed a number of valuations on various commodities including gold, using the valuation approaches described by the Standards and Guidelines for Valuation of Mineral Properties recommended by the Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum or Valuation of Mineral Properties (CIMVAL).
4. I am a member/fellow of the following professional associations, which meet all the attributes of a Professional Association or a Self-Regulatory Professional Association, as applicable (as those terms are defined in CIMVAL):-
Class
Professional Society
Year of Registration
Member
Geological Society of South Africa (MGSSA No. 965119)
2003
Fellow
South African Institute of Mining and Metallurgy (FSAIMM Reg. No. 702615)
2003
Member
Australasian Institute of Mining and Metallurgy (MAusIMM Reg. No. 220813)
2003
Member
South African Council for Natural Scientific Professions (Pr. Sci. Nat. Reg. No. 400024/04)
2003

5. I am responsible for Items 1-6, 19-27 of the Qualified Person's Report titled "A Technical Report on the Blanket Mine, Gwanda Area, Zimbabwe", effective 29 August 2014.
6. I have read the definition of "Qualified Person" set out in the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects), Form 43-101F1 and the Companion Policy Document 43-101CP ("NI 43-101") and certify that by reason of my education, affiliation with professional associations and past relevant work experience, I fulfil the requirements to be a Qualified Person for the purposes of this Qualified Persons' Report.
7. I am a Qualified Valuator as the terms are defined in CIMVAL for the purpose of the valuation and the Valuation Report.
8. I have read the NI43-101 and this Report has been prepared in compliance with it.
9. As of the effective date, to the best of my knowledge, information and belief, the Report contains all scientific and technical information required to be disclosed to make the Report not misleading.
10. The facts presented in the Report are, to the best of my knowledge, correct.
11. The analyses and conclusions presented in the Report are limited only by the reported forecasts and conditions.
12. I have no present or prospective interest in the subject property or asset and have no bias with respect to the assets that are the subject of the Report, or to the parties involved with the assignment.
13. My compensation, employment or contractual relationship with the Commissioning Entity is not contingent on any aspect of the Report.
14. I did not undertake a personal inspection of the property.
15. I have had no prior involvement with the property that is the subject of this Report.

Yours faithfully,
 

132



CERTIFICATE of QUALIFIED VALUATOR - J Burger
I, Jaco Burger, do hereby certify that:
1. I am an employee of Minxcon Consulting (Pty) Ltd
Suite 5, Coldstream Office Park,
2 Coldstream Street,
Little Falls, Roodepoort, South Africa
2. I graduated with a B.Eng. Mining degree from the University of Pretoria in 2009. In addition, I have obtained a Mine Managers' Certificate in 2012. I completed a post graduate diploma in Financial Management through UNISA in 2011 and am currently a 2014 CFA Level 1 Candidate.
3. I have worked as a Mining Engineer for more than 5 years. As a former employee of Anglo Platinum I was involved in the mining production activities and was in charge of supervising various underground operations. I have been employed by Minxcon for the past two years as a valuator and completed a number of valuations on various commodities, including gold, using the valuation approaches described by the Standards and Guidelines for Valuation of Mineral Properties recommended by the Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum or Valuation of Mineral Properties (CIMVAL).
4. I am a member/fellow of the following professional associations, which meet all the attributes of a Professional Association or a Self-Regulatory Professional Association, as applicable (as those terms are defined in CIMVAL):-
Class
Professional Society
Year of Registration
Professional
Engineering Council of South Africa (Registration Number: 20130533)
2013
Member
South African Institute of Mining and Metallurgy (Number: 705773)
2012

5. I am responsible for Items 1-6, 19-27 of the Qualified Person's Report titled "A Technical Report on the Blanket Mine, Gwanda Area, Zimbabwe", effective 1 October 2014.
6. I have read the definition of "Qualified Person" set out in the Canadian Code for reporting of Resources and Reserves – National Instrument 43-101 (Standards of Disclosure for Mineral Projects), Form 43-101F1 and the Companion Policy Document 43-101CP ("NI 43-101") and certify that by reason of my education, affiliation with professional associations and past relevant work experience, I fulfil the requirements to be a Qualified Person for the purposes of this Qualified Persons' Report.
7. I am a Qualified Valuator as the terms are defined in CIMVAL for the purpose of the valuation and the Valuation Report.
8. I have read the NI43-101 and this Report has been prepared in compliance with it.
9. As of the effective date, to the best of my knowledge, information and belief, the Report contains all scientific and technical information required to be disclosed to make the Report not misleading.
10. The facts presented in the Report are, to the best of my knowledge, correct.
11. The analyses and conclusions presented in the Report are limited only by the reported forecasts and conditions.
12. I have no present or prospective interest in the subject property or asset and have no bias with respect to the assets that are the subject of the Report, or to the parties involved with the assignment.
13. My compensation, employment or contractual relationship with the Commissioning Entity is not contingent on any aspect of the Report.
14. I did not undertake a personal inspection of the property.
15. I have had no prior involvement with the property that is the subject of this Report.
Yours faithfully,
J BURGER
Pr Eng. (Mining)
ECSA, MSAIMM
VALUATOR
 






133



Appendix 2: Blanket Operating Claims
Name
Reg No.
Area
No. of Claims
No. of Blocks
Type
Blanket
1817
Gda
13
1
Au
Blanket 2
3958
Gda
8
1
Au
Blanket
5030
Gda
7
1
Au
Blanket 9
31202
Gda
7
1
Au
Blanket A
GA247
Gda
9
1
Au
Blanket B
GA248
Gda
10
1
Au
Blanket D
GA349
Gda
4
1
Au
Blanket F
GA512
Gda
6
1
Au
Blanket J
GA547
Gda
2
1
Au
Blanket K
6874BM
Gda
25
1
Tu
Blanket L
9627BM
Gda
23
1
Cu
D T
21775
Gda
10
1
Au
Feudal 2
10051BM
Gda
25
1
Tu
Feudal 3
31190
Gda
6
1
Au
Feudal 3
19918
Gda
9
1
Au
Feudal D B E
21065
Gda
8
1
Au
Feudal South
GA446
Gda
4
1
Au
Feudal West
10358BM
Gda
25
1
As
Harvard
5576BM
Gda
25
1
Tu
Jethro
19923
Gda
9
1
Au
Lima 17
36066
Gda
2.7
1
Au
Lima 18
36067
Gda
9.8
1
Au
Lima 19
36068
Gda
9.7
1
Au
Lima 20
36069
Gda
9.6
1
Au
Lima 21
36070
Gda
9.5
1
Au
Lima 22
36071
Gda
9.1
1
Au
Lima 23
36072
Gda
8.3
1
Au
Lima 24
36073
Gda
10
1
Au
Lima 25
36074
Gda
10
1
Au
Lima 26
36075
Gda
10
1
Au
Lima 27
36076
Gda
10
1
Au
Lima 28
36077
Gda
10
1
Au
Lima 29
36078
Gda
10
1
Au
Lima 30
36079
Gda
10
1
Au
Lima 31
36080
Gda
10
1
Au
Lima 32
36081
Gda
4
1
Au
Lima 33
36082
Gda
7
1
Au
Lima 34
36083
Gda
10
1
Au
Lima 35
36084
Gda
10
1
Au
Lima 36
36085
Gda
10
1
Au
Lima 37
36086
Gda
10
1
Au
Lima 38
36087
Gda
10
1
Au
Lima 39
36088
Gda
2.04
1
Au
Lima 40
36089
Gda
3.25
1
Au
Lima 41
36090
Gda
3.25
1
Au
Lima 42
36091
Gda
9
1
Au
Lima 43
36092
Gda
10
1
Au
Lima 44
36093
Gda
10
1
Au
Lima 45
39094
Gda
10
1
Au
Lima 46
36095
Gda
10
1
Au
Lima 47
36096
Gda
8.1
1
Au
Lima 48
36097
Gda
3
1
Au
Lima 49
36098
Gda
7.95
1
Au
Lima 50
36099
Gda
5.8
1
Au
Lima 51
36100
Gda
3.04
1
Au
Lima 52
36101
Gda
9.25
1
Au
Lima 53
36102
Gda
8.3
1
Au
Lima 54
36103
Gda
2.18
1
Au
Lima 55
36104
Gda
7.36
1
Au
Lima 56
36105
Gda
6.3
1
Au
Lima 57
36106
Gda
10
1
Au
Lima 58
36107
Gda
10
1
Au
Lima 59
36108
Gda
10
1
Au
Lima 60
36109
Gda
10
1
Au
 
 
134
 
Lima 61
36110
Gda
10
1
Au
Lima 62
36111
Gda
10
1
Au
Lima 63
36112
Gda
10
1
Au
Lima 64
36113
Gda
10
1
Au
Lima 65
36114
Gda
10
1
Au
Lima 66
36115
Gda
10
1
Au
Lima 67
36116
Gda
10
1
Au
Lima 68
36117
Gda
10
1
Au
Lima H
10925BM
Gda
93
1
As
Lima I
34052
Gda
10
1
Au
Lima J
34053
Gda
10
1
Au
Lima K
34054
Gda
10
1
Au
Lima L
34055
Gda
10
1
Au
Lima M
30456
Gda
10
1
Au
Lima N
34057
Gda
10
1
Au
Lima O
34058
Gda
10
1
Au
Lima P
34059
Gda
5
1
Au
Lima Q
34060
Gda
5
1
Au
Lima R
34061
Gda
10
1
Au
Lima S
34062
Gda
10
1
Au
Lima T
34063
Gda
10
1
Au
Lima U
34064
Gda
10
1
Au
Lima V
34065
Gda
10
1
Au
Lima W
34066
Gda
10
1
Au
Lima X
34067
Gda
10
1
Au
Lima1
35753
Gda
8
1
Au
Lima10
35762
Gda
10
1
Au
Lima11
35763
Gda
10
1
Au
Lima12
35764
Gda
10
1
Au
Lima13
35765
Gda
10
1
Au
Lima14
35766
Gda
10
1
Au
Lima15
35767
Gda
10
1
Au
Lima16
35768
Gda
5
1
Au
Lima2
35754
Gda
8
1
Au
Lima3
35755
Gda
10
1
Au
Lima4
35756
Gda
10
1
Au
Lima5
35757
Gda
10
1
Au
Lima6
35758
Gda
10
1
Au
Lima7
35759
Gda
10
1
Au
Lima8
35760
Gda
6
1
Au
Lima9
35761
Gda
10
1
Au
Mbudzane Rock A
36160
Gda
10
1
Au
Mbudzane Rock A1
36176
Gda
9.7
1
Au
Mbudzane Rock A2
36177
Gda
10
1
Au
Mbudzane Rock A3
36178
Gda
10
1
Au
Mbudzane Rock A4
36179
Gda
10
1
Au
Mbudzane Rock A5
36180
Gda
10
1
Au
Mbudzane Rock A6
36181
Gda
3.5
1
Au
Mbudzane Rock B
36161
Gda
10
1
Au
Mbudzane Rock B1
36182
Gda
2.25
1
Au
Mbudzane Rock B2
36183
Gda
6.5
1
Au
Mbudzane Rock B3
36184
Gda
10
1
Au
Mbudzane Rock B4
36185
Gda
10
1
Au
Mbudzane Rock B5
36186
Gda
10
1
Au
Mbudzane Rock B6
36187
Gda
10
1
Au
Mbudzane Rock B7
36188
Gda
10
1
Au
Mbudzane Rock B8
36189
Gda
3.2
1
Au
Mbudzane Rock B9
36190
Gda
6.5
1
Au
Mbudzane Rock C
36162
Gda
10
1
Au
Mbudzane Rock C1
36191
Gda
10
1
Au
Mbudzane Rock C2
36192
Gda
10
1
Au
Mbudzane Rock C3
36193
Gda
10
1
Au
Mbudzane Rock C4
36194
Gda
10
1
Au
Mbudzane Rock C5
36195
Gda
10
1
Au
Mbudzane Rock C6
36196
Gda
2.25
1
Au
 
135
 
Mbudzane Rock C7
36197
Gda
6
1
Au
Mbudzane Rock C8
36198
Gda
9.4
1
Au
Mbudzane Rock C9
36199
Gda
9.4
1
Au
Mbudzane Rock D
36163
Gda
6.13
1
Au
Mbudzane Rock D1
36200
Gda
9.4
1
Au
Mbudzane Rock D2
36201
Gda
9.4
1
Au
Mbudzane Rock D3
36202
Gda
9.17
1
Au
Mbudzane Rock E
36164
Gda
10
1
Au
Mbudzane Rock F
36165
Gda
10
1
Au
Mbudzane Rock G
36166
Gda
10
1
Au
Mbudzane Rock H
36167
Gda
5.83
1
Au
Mbudzane Rock I
36168
Gda
2.5
1
Au
Mbudzane Rock J
36169
Gda
3.45
1
Au
Mbudzane Rock K
36170
Gda
5.1
1
Au
Mbudzane Rock L
36171
Gda
8
1
Au
Mbudzane Rock M
36172
Gda
10
1
Au
Mbudzane Rock N
36173
Gda
10
1
Au
Mbudzane Rock O
36174
Gda
10
1
Au
Mbudzane Rock P
36175
Gda
6.23
1
Au
OQUEIL
35928
Gda
1
1
Au
OQUEIL 1
35929
Gda
2.5
1
Au
OQUEIL 10
35938
Gda
10
1
Au
OQUEIL 11
35939
Gda
6
1
Au
OQUEIL 12
35940
Gda
10
1
Au
OQUEIL 13
35941
Gda
10
1
Au
OQUEIL 14
35942
Gda
9
1
Au
OQUEIL 15
35943
Gda
3
1
Au
OQUEIL 16
35944
Gda
9
1
Au
OQUEIL 17
35945
Gda
10
1
Au
OQUEIL 18
35946
Gda
10
1
Au
OQUEIL 19
35947
Gda
2.5
1
Au
OQUEIL 2
35930
Gda
5
1
Au
OQUEIL 20
35948
Gda
10
1
Au
OQUEIL 21
35949
Gda
10
1
Au
OQUEIL 22
35950
Gda
8
1
Au
OQUEIL 23
35951
Gda
3
1
Au
OQUEIL 24
35952
Gda
8
1
Au
OQUEIL 25
35953
Gda
10
1
Au
OQUEIL 26
35954
Gda
7
1
Au
OQUEIL 27
35955
Gda
4
1
Au
OQUEIL 28
35956
Gda
10
1
Au
OQUEIL 29
35957
Gda
8
1
Au
OQUEIL 3
35931
Gda
3
1
Au
OQUEIL 30
35958
Gda
7
1
Au
OQUEIL 31
35959
Gda
10
1
Au
OQUEIL 32
35960
Gda
7
1
Au
OQUEIL 33
35961
Gda
6
1
Au
OQUEIL 34
35962
Gda
8
1
Au
OQUEIL 35
35963
Gda
4
1
Au
OQUEIL 4
35932
Gda
9
1
Au
OQUEIL 5
35933
Gda
10
1
Au
OQUEIL 6
35934
Gda
10
1
Au
OQUEIL 7
35935
Gda
10
1
Au
OQUEIL 8
35936
Gda
10
1
Au
OQUEIL 9
35937
Gda
10
1
Au
Sabiwa 10
10894BM
Gda
136
1
As
Sabiwa 11
10895BM
Gda
99
1
As
Sabiwa 12
10896BM
Gda
115
1
As
Sabiwa 13
10922BM
Gda
68
1
As
Sabiwa 14
10923BM
Gda
93
1
As
Sabiwa 2
GA513
Gda
5
1
Au
Sabiwa 3
9628BM
Gda
15
1
Cu
Sabiwa 4
10049BM
Gda
20
1
Cu
Sabiwa D B
GA281
Gda
10
1
Au
Sabiwa East
10050BM
Gda
20
1
Cu
 
136
 
 
Sabiwa North 1/2
25610
Gda
7
1
Au
Sabiwa South 1/2
1978
Gda
6
1
Au
Sheet
35628
Gda
10
1
Au
Sheet
34747
Gda
9.2
1
Au
Sheet 1
35629
Gda
10
1
Au
Sheet 10
35638
Gda
10
1
Au
Sheet 11
35639
Gda
5
1
Au
Sheet 2
35630
Gda
10
1
Au
Sheet 2
GA341
Gda
9
1
Au
Sheet 3
35631
Gda
10
1
Au
Sheet 3
9629BM
Gda
14
1
Cu
Sheet 4
35632
Gda
10
1
Au
Sheet 5
35633
Gda
10
1
Au
Sheet 6
35634
Gda
10
1
Au
Sheet 7
35635
Gda
10
1
Au
Sheet 8
35636
Gda
10
1
Au
Sheet 9
35637
Gda
10
1
Au
Sheet A
34744
Gda
7.5
1
Au
Sheet B
34751
Gda
1
1
Au
Sheet North A
34748
Gda
9.2
1
Au
Sheet North B
34749
Gda
9.2
1
Au
Sheet North C
34750
Gda
2.99
1
Au
Sheet North D
34856
Gda
2.45
1
Au
Valentine 37
GA2767B
Gda
7.6
1
Au
Valentine 38
GA2768
Gda
8
1
Au
Valentine 39
GA2769
Gda
10
1
Au
Valentine 40
GA2770
Gda
10
1
Au
Valentine 41
GA2771
Gda
10
1
Au
Valentine 42
GA2772
Gda
7
1
Au
Valentine 43
GA2773
Gda
4
1
Au
Valentine 44
GA2774
Gda
10
1
Au
Valentine 45
GA2775
Gda
10
1
Au
Valentine 46
GA2776
Gda
10
1
Au
Valentine 47
GA2777
Gda
10
1
Au
Valentine 48
GA2778
Gda
10
1
Au
Valentine 49
GA2779
Gda
10
1
Au
Valentine 50
GA2780
Gda
10
1
Au
Valentine 51
GA2781
Gda
10
1
Au
Valentine 52
GA2782
Gda
10
1
Au
Valentine 53
GA2783
Gda
10
1
Au
Valentine 54
GA2784
Gda
10
1
Au
Valentine 55
GA2785
Gda
10
1
Au
Valentine 56
GA2786
Gda
10
1
Au
Valentine 57
GA2787
Gda
10
1
Au
Valentine 58
GA2788
Gda
10
1
Au
Valentine 59
GA2789
Gda
10
1
Au
Valentine 60
GA2790
Gda
10
1
Au
Valentine 61
GA2791
Gda
10
1
Au
Valentine 62
GA2792
Gda
4
1
Au
Valentine 63
GA2994
Gda
10
1
Au
Valentine 64
GA2995
Gda
10
1
Au
Valentine 65
GA2996
Gda
10
1
Au
Smiler Gold Dump
32939
Gda
10
1
Au
Site Cemetry
577
Gda
2
1
Site
Site Compound
701
Gda
10
1
Site
Site Compound
575
Gda
17
1
Site
Site Compound
574
Gda
7
1
Site
Site Dump
646
Gda
18
1
Site
Site Housing
573
Gda
23
1
Site
Site Housing
645
Gda
8
1
Site
Site Magazine
578
Gda
29
1
Site
Site Slimes
613
Gda
28
1
Site
Total
   
2,883.57
256
 
 
 
137
 
Appendix 3: Blanket Non-Operating Claims
Name
Reg No.
Area
No. of Claims
No. of Blocks
Type
Abercorn 11
11269BM
Gda
66
1
Arsenic
Abercorn
33251
Gda
10
1
Gold Dump
Great Abercorn
10602BM
Gda
150
1
Tungsten
Annette 10
GA3259
Gda
8
1
Gold Reef
Annette 11
GA3260
Gda
8
1
Gold Reef
Annette 9
GA3258
Gda
8
1
Gold Reef
Banshee J
11093BM
Gda
135
1
Arsenic
Bunny's Luck
10443BM
Gda
25
1
Copper
Bunny's Luck E1
10445BM
Gda
25
1
Copper
Bunny's Luck E2
10446BM
Gda
25
1
Copper
Bunny's Luck E3
10447BM
Gda
25
1
Copper
Bunny's Luck E4
10448BM
Gda
25
1
Copper
Bunny's Luck East
10444BM
Gda
25
1
Copper
Cinderella
11122BM
Gda
4
1
Arsenic
Cinderella B
10824BM
Gda
128
1
Arsenic
Cinderella C
10825BM
Gda
137
1
Arsenic
Cinderella D
10826BM
Gda
146
1
Arsenic
Cinderella E
11123BM
Gda
13
1
Arsenic
Dan's Luck East
GA537BM
Gda
88
1
Arsenic
Dan's Luck N2
GA3769B
Gda
8
1
Gold Reef
Dan's Luck North
11268BM
Gda
27
1
Arsenic
Dan's Luck South
GA538BM
Gda
20
1
Arsenic
Gum 1
GA3060
Gda
6
1
Gold reef
Gum 2
GA3061
Gda
6
1
Gold reef
Lincoln
30548
Gda
10
1
Gold Reef
Rubicon
34519
Gda
10
1
Gold Reef
Rubicon 7
34520
Gda
10
1
Gold Reef
Rubicon C
34795
Gda
10
1
Gold Reef
Rubicon D
34796
Gda
10
1
Gold Reef
Rubicon E
34797
Gda
10
1
Gold Reef
Rubicon F
34798
Gda
10
1
Gold Reef
Rubicon G
34799
Gda
10
1
Gold Reef
Rubicon H
34800
Gda
10
1
Gold Reef
Rubicon I
34801
Gda
10
1
Gold Reef
Rubicon J
34802
Gda
10
1
Gold Reef
Rubicon K
34803
Gda
10
1
Gold Reef
Rubicon L
34804
Gda
10
1
Gold Reef
Rubicon M
34805
Gda
10
1
Gold Reef
Rubicon N
34806
Gda
10
1
Gold Reef
Rubicon O
34913
Gda
10
1
Gold Reef
Rubicon P
34914
Gda
9
1
Gold Reef
Rubicon Q
34915
Gda
8
1
Gold Reef
Rubicon R
34916
Gda
10
1
Gold Reef
Rubicon S
34917
Gda
10
1
Gold Reef
Rubicon T
34918
Gda
7
1
Gold Reef
Rubicon U
34919
Gda
10
1
Gold Reef
Rubicon V
34920
Gda
10
1
Gold Reef
Rubicon W
34921
Gda
6
1
Gold Reef
Shakeshake
10625BM
Gda
108
1
Nickel
Shakeshake 2
10626BM
Gda
108
1
Nickel
Shakeshake 3
10627BM
Gda
72
1
Nickel
Spruit
10623BM
Gda
81
1
Nickel
Spruit 2
10624BM
Gda
81
1
Nickel
Spruit 4
GA532BM
Gda
50
1
Nickel
Spruit 5
GA533BM
Gda
110
1
Nickel
Spruit 6
GA534BM
Gda
66
1
Nickel
Surprise
10628BM
Gda
95
1
Nickel
Surprise 2
10629BM
Gda
101
1
Nickel
Mazeppa
32769
Gda
3
1
Gold Dump
Dan's Luck
32776
Gda
10
1
Gold Dump
Will South
33143
Gda
5
1
Gold Dump
Total
   
2,238.00
61
 
138



Appendix 4: Blanket Exploration Claims
Name
Reg No.
Area
No. of Claims
No. of Blocks
Type
GG
GA651
Gda
10
1
Gold Reef
GG 10
GA3772
Gda
4.9
1
Gold Reef
GG 11
GA3773
Gda
10
1
Gold Reef
GG 12
GA3774
Gda
8
1
Gold Reef
GG 13
GA3775
Gda
4
1
Gold Reef
GG 7
GA3769
Gda
10
1
Gold Reef
GG 8
GA3770
Gda
7
1
Gold Reef
GG 9
GA3771
Gda
9
1
Gold Reef
GG2
GA942
Gda
10
1
Gold Reef
GG3
GA943
Gda
10
1
Gold Reef
GG4
GA944
Gda
10
1
Gold Reef
GG5
GA945
Gda
10
1
Gold Reef
GG6
GA946
Gda
10
1
Gold Reef
GGA
GA947
Gda
10
1
Gold Reef
GGB
GA948
Gda
10
1
Gold Reef
GGC
GA949
Gda
10
1
Gold Reef
GGD
GA950
Gda
10
1
Gold Reef
GGE
GA951
Gda
10
1
Gold Reef
Mascot
GA 583
Gda
10
1
Gold Reef
Mascot 2
29657
Gda
10
1
Gold Reef
Mascot 5
32756
Gda
10
1
Gold Reef
Penzance North
11264BM
Gda
40
1
Arsenic
Penzance S2
11265BM
Gda
35
1
Arsenic
Penzance South
8838BM
Gda
24
1
Copper
Eagle 16
11266BM
Gda
51
1
Arsenic
Eagle Hawk
30544
Gda
10
1
Gold reef
Vulture
5031
Gda
10
1
Gold Reef
Vulture Dble Bank
8106
Gda
10
1
Gold Reef
Site
649
Gda
4
1
W/shop, water
Site
512
Gda
1
1
Water
Site
607
Gda
1
1
Water
Site
608
Gda
1
1
Water
Site
609
Gda
1
1
Water
Site
610
Gda
1
1
Water
Total
   
381.90
34
 



Exhibit 15.2
 
Property and Claims Information

THE DATA PROVIDED BELOW FOR THE THREE PROPERTY AREAS IS CONSIDERED THE MATERIAL INFORMATION RELATING TO THE PROPERTIES AND CLAIMS. THE FULL TEXT OF THIS DATA AND INFORMATION IS AVAILABLE IN THE VARIOUS TECHNICAL REPORTS THAT ARE AVAILABLE ON THE COMPANY WEBSITE   www.caledoniamining.com

BLANKET GOLD MINE
 
a)   Nature of Ownership Interests
 
Blanket Mine's claims   area is based on 2701 pegged claims.  An application made to the Ministry of Mines to convert the claims area into a mining lease was approved and its issue is awaited.
 
Blanket's exploration properties are all pegged claims (see Table 14 g(i)) and held 100% by Blanket although some of the claims are subject to royalties.
 
b)   Salient Terms of Agreements, Royalties
 
· 1.5 – 2.0% NSR. Blanket owns the claims totally.
Based on current mining law in Zimbabwe, Blanket's Mining Lease is valid in perpetuity.
 
Prospecting claims are renewable on an annual basis (Table 14 g(i)) by payment of a claim fee based on the area of the claim. The claims may also be maintained by carrying out exploration activities on the claims.  Royalties are payable on some of the claims (see Table 14 g(i)).
 
c)   Mineral Rights – Process of Acquisition
 
Mineral rights in Zimbabwe may be acquired by pegging claims or by purchasing claims. In the case of the purchase of an operating mine the mining lease/ claim is transferrable together with the related conditions.  Proposed changes to the Mining Law will require that indigenous persons hold a significant interest in mining companies.  Claims are held indefinitely so long as they are serviced in terms of work done or fees paid.
 
d)   The Claim/Right type and Conditions
 
Zimbabwe recognizes both precious metal (gold) and base metal claims regardless of the nature of the deposit.  In the event of a gold mine being located on base metal claims, the claims can be converted to precious metal claims. The claims are awarded and monitored by the State.  A mining lease is awarded over existing claims on application by the mining company.
 
e)   Property details
 
See Table 14 g(i).
 
f)   Conditions of retention, Payments etc
 
See Table 14 g(i).  Claim fee payments are made by Blanket Gold Mine (responsible person – V. Naik).
 
g)   Property area – see Table 14 g (i)

The protection of non-producing claims is the subject of ongoing discussions as the claim protection fees have been dramatically increased and the economic feasibility of protecting all claims is being assessed.

 
CLAIM BLOCK
NUMBER OF
CLAIM
CLAIM/BLOCK
EXPIRY DATES
AREA
PROPERTY NAME
CLAIM BLOCKS
TYPE
NUMBERS
 
(ha)
GWANDA CLAIMS
 
 
 
 
 
Blanket Mine
 
 
 
 
 
Valentine
26
Gold
GA2767-92
21-Mar-16
240.6
Oqueil
36
Gold
35928-63
29-Jan-16
270
Havard
1
Base
5576BM
02-Feb-15
25
Blanket
11
Gold
GA512'GA547,GA247-8,GA349,
06-Apr-16
114
 
 
 
GA5030,1817,31202,3958
 
 
 
 
Base
6874BM,9627BM
26-Aug-15
 
Feudal
6
Gold
31190,19918,21065,GA446,
10-May-16
77
 
 
Base
10051BM,10358BM
25-Sep-15
 
Lima
85
Gold
36066-117,35753-68,34052-67,
02-Apr-16
828.5
 
 
Base
10925BM
23-Sep-15
 
Sheet
21
Gold
35628-39,34744,34747-51,34856,GA341,
03-Apr-16
179.6
 
 
Base
9629BM
26-Aug-15
 
Sabiwa
12
Gold
GA281,GA513,1978,25610,9628BM,
11-Apr-16
594
 
 
Base
9628BM,10922-23BM,10894-96BM,10049-50BM
23-Sep-15
 
Mbudzane Rock
43
Gold
36160-202
21-May-16
353.9
Jethro
1
Gold
19923
23-Jul-16
9
DT
2
Gold
21775
01-Sep-16
10
Smiler
1
Gold
32939
20-Nov-15
10
Site Cemetry
1
Site
577
14-Dec-15
2
Site Compound
1
Site
701
15-Sep-15
10
Site Compound
1
Site
575
14-Dec-15
17
Site Compound
1
Site
574
14-Dec-15
7
Site Dump
1
Site
646
15-Sep-15
18
Site Housing
1
Site
573
17-Mar-15
23
Site Housing
1
Site
645
15-Sep-15
8
Site Magazine
1
Site
578
14-Dec-15
29
Site Slimes
1
Site
613
21-Mar-15
28
Blanket Exploration
 
 
 
 
 
Penzance
3
Base
11264BM,11265BM,8838BM
07-Jan-15
99
Bunny's Luck
6
Base
10443-48BM
15-Jan-15
150
Cinderella
5
Base
11122-23BM,10824-26BM
19-Jan-15
428
Eagle 16
1
Base
11266BM
21-Jan-15
51
Spruit
5
Base
10623-24BM,GA532-4BM
24-Feb-15
388
Shakeshake
3
Base
10625-27BM
24-Feb-15
288
Surprise
2
Base
10628-29BM
24-Feb-15
196
Abercorn
2
Base
11269BM,10602BM
11-May-15
216
Banshee
1
Base
11093BM
14-Jul-15
135
Dan's Luck South
3
Base
GA537-38BM,11268BM
11-Mar-15
135
Abercorn
1
Gold
32251
28-Apr-15
10
Annette
3
Gold
GA3258-60
03-Apr-16
24
Dan's Luck
2
Gold
32776,GA3769B
13-May-15
18
Eagle Hawk
1
Gold
30544
08-Oct-16
10
GG
7
Gold
GA3769-75
06-Jul-16
162.9
Gum
2
Gold
GA3060-61
10-Oct-16
12
Lincoln
1
Gold
30548
01-Oct-16
10
Mascot
3
Gold
GA583,29657,32756
03-May-16
30
Mazeppa
1
Gold
32769
26-May-15
3
Rubicon
23
Gold
34519-20,34794-805,34913-21
23-Jan-16
220
Valentine
3
Gold
GA2994-96
11-Jul-16
30
Vulture
2
Gold
5031, 8106
13-Jan-16
20
Will South
1
Gold
33143
30-Sep-15
5
Site
1
Site
649
08-May-15
4
Site
1
Site
607
24-Sep-15
1
Site
1
Site
608
24-Sep-15
1
Site
1
Site
609
24-Sep-15
1
Site
1
Site
610
24-Sep-15
1
Site
1
Site
512
31-Dec-15
1
Bubi Claims
 
 
 
 
 
Stu
4
Base
12072-74BM,12021BM
07-Jan-13
495
Chikosi
7
Base
12011-17BM
30-Jan-13
499.5
Sandy
2
Base
12018-19BM
30-Jan-13
300
Ruswayi
6
Base
12022-27BM
30-Jan-13
544
Lonely
5
Base
12028-30BM,12075-76BM
02-Feb-13
670
Spawn
3
Base
12031-33BM
30-Jan-13
311
Kadoma Claims
 
 
 
 
 
Goldern Donkey
2
Gold
1254-55
18-Mar-13
8
Headley NE
3
Gold
1256-58
18-Mar-13
30
Harare
 
 
 
 
 
Apollo
27
Gold
17438-46,28665-79,28734-36
27-Sep-13
208
Electra
1
Base
19482BM
13-Mar-13
12
Apollo
3
Base
28382-84BM
27-Sep-13
96
Avlin
15
Gold
28030-28044
08-Sep-13
117
TOTAL
419
 
 
 
8793.96
Exploration claims
       
           
GG-GG6, GGA-GGE
11
Gold
GA651,GA942-51
06-Jul-16
110

Exhibit 15.3
 
Shareholder rights plan
Summary
Our AIM-listed client, Caledonia Mining Corporation (" Caledonia ", " the Company "), is emigrating from Canada to Jersey (the emigration is due to become effective on Monday 21 March 2016). The Company will therefore fall under the umbrella of The Takeover Code, and we, alongside their UK and Canadian lawyers, have been taking the Company through the implications of this.
Caledonia's Canadian lawyers have pointed out that the Company has entered into a rights plan agreement with Computershare (" the Rights Plan ") which has been approved by Caledonia's shareholders.   We are uncertain how the Rights Plan would be treated under Rule 21 (Restrictions on Frustrating Action)and would appreciate your comments on how The Takeover Panel would view the Rights Plan in the event a bid is made for the Company. We confirm that the Company has confirmed that it is not in receipt of any offers, nor to its knowledge are any in contemplation.
The Rights Plan
Set out below is a brief summary of the Rights Plan that was prepared by Caledonia's Canadian lawyers for the Caledonia Board when the Rights Plan was adopted back in 2013.  In general terms, the Rights Plan forces a bidder to make a bid for the Company that meets certain minimum conditions in terms of timing and acceptance procedures (see "Permitted Bid" below).  If the bidder does not make a Permitted Bid, the rights under the Rights Plan become exercisable such that all shareholders other than the bidder have the right to buy additional shares at a discount.  As a result, the Rights Plan creates a disincentive for a hostile bidder to acquire Caledonia without making a Permitted Bid because it dilutes the bidder's interest in Caledonia.  The Rights Plan was approved at the 2014 AGM.
We have also been advised by the Company's Canadian lawyers that, as a result of changes to Canada's takeover rules which were announced last week, there is currently much debate around the continued utility of rights plans (or "poison pills" as they are commonly known).  Their primary purpose was to extend the time for target companies to react to an unsolicited offer beyond the statutory time for which a takeover bid had to be open for acceptance, which is currently only 35 days, and to eliminate certain other potentially coercive aspects of some bids.  Under the new rules, which are to come into effect in May, the minimum period for a bid to be open (unless the target agrees to a shorter period) is increased to 105 days.  Caledonia's Rights Plan, in common with most plans, only requires that a bid be open for 60 days, so the new requirements will actually be better in some respects from Caledonia's perspective than the Rights Plan.
Details of the Rights Plan
Form:
The Rights Plan is an agreement dated December 5, 2013 between Caledonia and Computershare Investor Services Inc. (the " Rights Agent ").
   
Rights:
One Right is issued for each common share. Initially, the Rights are attached to and trade with the common shares and have an artificial exercise price in excess of the market price. Rights are not exercisable before the Separation Time (described below).
 
 
 
 
 
Flip-In Event:
Upon a person (an " Acquiring Person ") acquiring 20% or more of the outstanding common shares (a " Flip-In-Event "), each Right then entitles the holder to purchase one additional common share at 50% (or less) of the market price of the common shares as at the date which is ten trading days after the Flip-In Event. Rights held by the Acquiring Person, however, would be null and void. This massive dilution of the Acquiring Person's shareholdings is the "poison pill" in the Plan.  Two other conditions must be in place before the poison pill defence is fully activated: the Separation Time must have occurred and no waiver by the board of the dilution clause or other exempting steps shall have occurred.
   
Separation Time:
The "Separation Time" occurs on the tenth trading day following the earlier of an announcement that a person has become an Acquiring Person or the public announcement that someone proposes to make a take-over bid other than a Permitted Bid (or such later time as may be determined by the board) . After the Separation Time, the Rights become exercisable at the dilutive exercise price and become transferable separately from the shares.
   
Permitted Bid:
The poison pill provisions of the Rights Plan can be avoided if the prospective acquirer makes a Permitted Bid.  A Permitted Bid may be for all or less than all the outstanding common shares and must have the following characteristics:
   
 
a)      it must be made by way of take-over bid circular;
   
 
b)     it must be made to all shareholders;
   
 
c)      it must provide that no shares will be taken up or paid for until the bid has been open for at least 60 days, and then only if 50% of the shares held by independent shareholders (being shareholders not affiliated or acting jointly or in concert with the bidder) have been tendered; and
   
 
d)     if the 50% deposit condition described above is met, the bidder must announce that fact and allow the bid to remain open for tender of shares for at least a further 10 days.
   
Portfolio Managers:
The provisions of the Rights Plan relating to portfolio managers are designed to prevent the occurrence of a Flip-In Event solely by virtue of the customary activities of such managers, including trust companies and other such persons, where a substantial portion of the ordinary business of such person is the management of funds for unaffiliated investors, so long as any such person does not propose to make a take-over bid either alone or jointly with others.
   
Redemption:
At any time prior to the Separation Time, the Board may with the approval of shareholders redeem the Rights for nominal consideration.   This is a method for winding up and terminating the Rights Plan.
 
Amendments:
After the effective date of the Rights Plan, all substantive amendments can only be made with shareholder approval.
   
Expiration:
The Rights Plan expires unless approved by Caledonia's shareholders on or before the third anniversary of the date of the last shareholder approval of the Rights Plan.
 
 
 
Exhibit 15.4
 
Share Subscription Agreements – Blanket Mine
 


SUBSCRIPTION AGREEMENT
 
between
 
NATIONAL INDIGENISATION ECONOMIC EMPOWERMENT FUND
( The NIEEF is established by Section 12 of the Indigenisation Act and is administered by NIEEB, a body corporate established by Section 7 of the Act.)
("the Subscriber")
 
and
 
BLANKET MINE (1983) (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 172/69)
("the Company" )
 
and
 
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 5/45)
("CHZ")
 
 
 
 
 
 
 
 
 
 

 

CONTENTS


 

No
     Clause
                                                                             Page No
 
 
1
     DEFINITIONS
1
2
     BACKGROUND
2
3
     CONDITIONS PRECEDENT
2
4
     SUBSCRIPTION
3
5
     PRICE AND PAYMENT
3
6
     FUNDING
4
7
     DIRECTORS
5
8
     MANAGEMENT
6
9
     CONFIDENTIALITY
6
10
     SUPPORT
7
11
     DOMICILIUM CITANDI ET EXECUTANDI
7
12
     BREACH AND TERMINATION
8
13
     ARBITRATION
9
14
     GOVERNING LAW AND JURISDICTION
10
15
     INTERPRETATION
11
16
     GENERAL
11
17
     COSTS
12
18
     WARRANTY
12
SCHEDULE 1
THE MANAGEMENT AGREEMENT



 
 
 
 
 
 
 

 
 
 
     1   DEFINITIONS
 
 
In this Agreement, unless the context indicates otherwise, the words and expressions set out below shall have the meaning assigned to them and cognate expressions shall have a corresponding meaning, namely:
 

1.1  
 
Agreement
means this subscription agreement and Schedule 1 hereto;
1.2  
 
Auditors
means the Company’s auditors as at the Signature Date or failing that, at the election of the board of directors of the Company, Deloitte, KPMG or Ernst & Young;
1.3  
 
Business Day
means any day that is not a Saturday, Sunday or public holiday in Zimbabwe;
1.4  
 
Closing Date
means the 5 th (fifth) Business Day after the fulfilment of the suspensive conditions in clause   3;
1.5  
 
Directors
means the directors of the Company from time to time appointed in accordance with clause 7;
1.6  
 
Indigenisation
means the process and objectives contemplated in the Indigenisation Act and the Regulations;
1.7  
 
Indigenisation Act
means the Indigenisation and Economic Empowerment Act [ Chapter 14.33 ];
1.8  
 
Interest
means interest calculated monthly in arrears at  10 (ten) percentage points above the 12 (twelve) month London InterBank Offered Rate published by Thomson Reuters from time to time;
1.9  
 
Loan Account
means the loan account to be opened in the Subscriber's name in the books of the Company;
1.10  
 
MOU
means the memorandum of understanding concluded by Caledonia Mining Corporation, CHZ, the Company, and the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe on 20 February 2012;
 
 
1
 
 
 
1.11  
 
Parties
means CHZ, the Company, and the Subscriber and "Party" means any one of them, as the context may indicate;
1.12  
 
Regulations
means the Indigenisation and Economic Empowerment (General) Regulations, 2010;
1.13  
 
Signature Date
means the date of signature of this Agreement by the Party last in time to do so;
1.14  
 
Subscription Price
means the subscription price for the Subscription Shares as set out in clause 5.1 ; and
1.15  
 
Subscription Shares
means 6,848,000 (six million eight hundred and forty eight thousand) “A” class shares representing 16% (sixteen percent) of the issued share capital of the Company after the implementation of the transactions envisaged in the MOU.
 
 
 
     2   BACKGROUND
 
 
 
2.1  
CHZ and the Company have agreed to the Indigenisation of the Company in accordance with the provisions of the MOU.
 
2.2  
In terms of the MOU, the Company is required to issue the Subscription Shares to the Subscriber.
 
2.3  
The Parties wish to record the terms on which the Subscriber will subscribe for the Subscription Shares.
 
 
 
     3     CONDITIONS PRECEDENT
 
3.1  
The implementation of this Agreement is, save for the provisions of clauses 1 , 3 and 9 to 18 , inclusive, which will be of immediate force and effect, subject to:
 
3.1.1  
receipt by CHZ and the Company of written confirmation from the Ministry of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe that the implementation of this Agreement and the other transactions envisaged in the MOU constitutes compliance by CHZ and the Company with the requirements of the Indigenisation Act and the Regulations;
 
3.1.2  
receipt by CHZ and the Company of the approvals, to the extent certified in writing by the Auditors to be required by law, by the Reserve Bank of Zimbabwe of the transactions contemplated in the MOU and any related transactions and/or corporate re-organisation required to give effect to the Indigenisation by CHZ of the Company; and
 
 
2
 
 
3.1.3  
receipt by CHZ and the Company of written confirmation of the unconditional withdrawal by the Zimbabwe Ministry of Mines and Mining Development of the letter sent by it to the Company dated 13 December 2011 requiring the Company to reach agreement with the Zimbabwean Mining Development Corporation regarding the Indigenisation of the Company.
 
3.2  
The Parties shall use all commercially reasonable endeavours to procure the fulfilment of the conditions precedent stipulated in clause  3.1 .
 
3.3  
The conditions in clause  3.1 above are stipulated for the benefit of CHZ and CHZ may waive any one or all of those conditions by way of written notice to the Subscriber.
 
3.4  
In the event of the conditions stipulated in clause  3.1   not being fulfilled or waived on or before 30 September 2012, or on or before such later date as CHZ and the Company may agree upon in writing, this Agreement shall lapse and shall be of no further force or effect and no Party shall have any claim against the other Parties arising from the provisions of this Agreement or the termination thereof.
 
 
    4    SUBSCRIPTION
 
4.1  
The Subscriber hereby subscribes for the Subscription Shares.
 
4.2  
The Company hereby accepts the subscription for the Subscription Shares as set out in clause  4.1 , and undertakes to allot and issue the Subscription Shares to the Subscriber on the Closing Date.
 
 
    5    PRICE AND PAYMENT
 
5.1  
The Subscription Price for the Subscription Shares shall be the sum of US$ 11,742,439.02 (eleven million seven hundred and forty two thousand four hundred and thirty nine US Dollars and two cents), which amount shall be debited to the Loan Account which shall:
 
 
3
 
5.1.1  
bear compound Interest from the Closing Date to the date of repayment, both dates inclusive; and
 
5.1.2  
be paid in instalments on the date of payment of dividends by the Company from time to time, in an amount equal to 80% (eighty percent) of the dividends payable to the Subscriber, after deduction of withholding or any other taxes, in respect of the Subscription Shares. Each such payment shall be credited to the Loan Account in part settlement of Interest in the first instance and thereafter in settlement of capital owing in respect of the Subscription Price.  Such payments shall cease once the Loan Account has been settled.
 
5.2  
The remaining 20% (twenty percent) of the dividends payable to the Subscriber shall be paid by the Company to the Subscriber after deduction of any Zimbabwean withholding or other tax or levies that may be applicable on the full amount of dividends declared by the Company.
 
5.3  
The Subscriber hereby irrevocably authorises the Company to apply dividends declared and becoming due for payment to the Subscriber, in the manner set out in clause 5.1.2 .
 
5.4  
The Subscriber shall be entitled to transfer the Subscription Shares to any party provided that:
 
5.4.1  
the Company shall not register the transfer of the Subscription Shares unless the transferee acknowledges in writing to the Company that those shares are subject to the dividend rights in clause 5.1.2 ; and
 
5.4.2  
any transfer of the Subscription Shares will not result in non-compliance by CHZ or the Company with the requirements of the Indigenisation Act and the Regulations.
 
5.5  
The amount due in respect of the Subscription Price and Interest shall be payable free of any deduction or set off and any taxes that may be levied thereon, which shall be for the account of the Subscriber.
 
 
    6    FUNDING
 
6.1  
If the Directors should at any time resolve to call on the shareholders of the Company to advance capital to the Company, either by way of share capital or loans, the Subscriber shall advance such capital pro rata to its shareholding in the Company at the date on which the Directors determine that the capital is required.
 
4
6.1.1  
If the Subscriber is unable or unwilling to provide the capital required in terms of clause  6.1 , then it shall notify the Company in writing to that effect within 30 (thirty) days of the date on which it is advised in writing (“the Finance Date”) by the Company that capital is required from it.
 
6.1.2  
If the Company should receive a notice contemplated in clause  6.1.1 , or if the Subscriber should fail to give a notice as contemplated in clause  6.1.1 and should fail to comply with its obligation to advance capital to the Company in terms of this clause  6.1 within 90 (ninety) days from the Finance Date, and if CHZ is prepared to provide the amount of the finance which the Subscriber was required to advance to the Company, then CHZ shall notify the Company in writing to that effect within 10 (ten) Business Days of receipt of the notice referred to in clause 6.1.1 , or of failure by the Subscriber to advance capital as required in terms of this clause  6.1 .
 
6.2  
If the Subscriber is called upon to advance an amount to the Company in terms of clause  6.1 above, and if the Subscriber has declined or, as the case may be, failed to comply with such request in accordance with the provisions of clauses  6.1.1   and   6.1.2 , then, if it shall have exercised the right to advance to the Company the amount which the Subscriber has declined to advance, CHZ shall have the right, to call upon the Subscriber to sell to it such number of shares at par as shall, after transfer thereof into the name of CHZ, result in CHZ holding such percentage of the issued voting capital of the Company as shall be equal to the percentage which the aggregate of loan capital and share capital contributed by CHZ to the Company constitutes of the total capital contributed by all shareholders by way of share capital and loan capital.
 
 
    7    DIRECTORS
 
7.1  
The board of Directors shall be comprised of a minimum of 8 (eight) Directors.
 
7.2  
The Parties agree that:
 
7.2.1  
the Subscriber shall be entitled to appoint 1 (one) Director who shall be acceptable to the majority of the board of directors of the Company whose acceptance shall not be unreasonably withheld; and
 
7.2.2  
CHZ shall be entitled to appoint 4 (four) Directors.
 
7.3  
The Subscriber and CHZ shall have the right, from time to time, by notice in writing to the Company, to remove a Director nominated by it in terms of clause  7.1   as a Director and to nominate, in accordance with clause 7.2 another person in the place of the Director so removed.
 
 
5
    8    MANAGEMENT
 
The management of the Company shall continue to be undertaken by Greenstone Management Services (Proprietary) Limited ("Greenstone") in terms of the existing management agreement between Greenstone and the Company on at least identical terms and conditions as set out in Schedule 1 hereto.
 
 
    9    CONFIDENTIALITY
 
9.1  
All communications between the Parties and all information and other materials supplied to or received by a Party from any of the other Parties which relates in any way to this Agreement and to the Company shall be kept confidential by the Parties unless or until the relevant Party can reasonably demonstrate that:
 
9.1.1  
any such communication, information or material is, or part of it is, in the public domain through no fault of its own; or
 
9.1.2  
any such communication, information or material has been lawfully obtained from any third party; or
 
9.1.3  
the information is already lawfully known to the relevant Party at the time  that Party receives such information; or
 
9.1.4  
the relevant Party is obliged by law to disclose such information,
 
whereupon this obligation in respect of that information shall cease.
 
9.2  
The Parties shall use their best endeavours to procure the observance of these restrictions and shall take all reasonable steps to minimise the risk of disclosure of confidential information by ensuring that only they themselves and such of their employees, agents or consultants whose duties will require them to possess any of such information shall have access to such information, and will be instructed to treat the same as confidential.
 
9.3  
The obligation contained in this clause 9 shall endure, even after the termination of this Agreement, without limit in point of time, except and until such confidential information falls within any of the provisions of clauses 9.1.1 to 9.1.4 , and shall be subject to the Company's confidentiality regime at the Signature Date.
 
6
 
    10 SUPPORT
 
 
The Parties undertake at all times to do all such things, perform all such actions and take such steps (including in particular the exercise of their voting rights in the Company) and to procure the doing of all such things, the performance of all such actions and taking of all such steps as may be open to them and necessary for or incidental to the putting into effect the provisions of this Agreement.
 
 
    11    DOMICILIUM CITANDI ET EXECUTANDI
 
11.1  
Each Party chooses the address set out opposite its name below as its domicilium citandi et executandi at which all notices, legal processes and other communications must be delivered for the purposes of this Agreement:
 
11.1.1  
the Subscriber
12 th Floor, Social Security Centre
cnr Sam Nujoma Street & Julius Nyerere Way
Harare
Zimbabwe
 
Fax: +263 4 750 139
Email: chapfikadvd@yahoo.co.uk ,
wgwatiringa@nieeb.co.zw and
endhlovu@nieeb.co.zw
 
[For attention: Mr David Chapfika – Chairman
NIEEB and Mr Wilson Gwatiringa – Chief Executive
Officer [NIEEB]


 
11.1.2  
the Company
6 th Floor Red Bridge NE
Eastgate
3 rd Street and R. Mugabe Road
Harare
Zimbabwe
 
Fax: 263 284 23193
Email: CMangezi@blanketmine.com
[For attention: Mr. Caxton Mangezi]
 
 
11.1.3  
 CHZ
6 th Floor Red Bridge NE
Eastgate
3 rd Street and R Mugabe Road
Harare
Zimbabwe

Fax: +27 11 447 2554
Email: SCurtis@greenstone.co.za
[For attention: Mr. Steve Curtis]
 
7
11.2  
Any notice or communication required or permitted to be given in terms of this Agreement shall be valid and effective only if in writing, and delivered by hand or sent or transmitted by registered post, telefax or by email.
 
11.3  
Each Party may by written notice to the other Parties change its chosen address and/or its chosen telefax number and/or its email address to another physical address, telefax number or email, provided that the change shall become effective on the fourteenth day after the receipt of the notice by the addressee.
 
11.4   
Any notice to a Party:
 
11.4.1  
sent by prepaid registered post to it at its chosen address;
 
11.4.2  
delivered by hand to a responsible person during ordinary business hours at its chosen address;
 
11.4.3  
transmitted during ordinary office hours by facsimile to its chosen telefax number; or
 
11.4.4  
transmitted during ordinary office hours by email to its chosen email address,
 
 
unless the contrary is proved, shall be deemed to have been received, in the case of clause  11.4.1 , on the 7 th (seventh) Business Day after posting and, in the case of clauses  11.4.2 , 11.4.3 and 11.4.4 , on the day of delivery or transmission as the case may be.
 
 
    12 BREACH AND TERMINATION
 
12.1  
Should a Party (“the Defaulting Party”) commit a breach of any provision of this Agreement and fail to remedy such breach within 14 (fourteen) days from the date of written notice from any other Party to this Agreement (“the Aggrieved Party”) calling upon it to do so, the Aggrieved Party shall have the right, without prejudice to any other rights available in law, either:
 
12.1.1  
if the breach complained of can be fully remedied by the payment of money, to take whatever action may be necessary to obtain payment of the amounts required by the Aggrieved Party to remedy such breach; or
 
8
12.1.2  
if the breach complained of cannot be fully remedied by the payment of money, or, alternatively, if it can be so remedied and payment of any amounts claimed by the Aggrieved Party in terms of clause  12.1.1   is not made to the Aggrieved Party within 7 (seven) days of the date of determination through arbitration or legal process of the amount legally payable, to take whatever action may be necessary to enforce its rights under this Agreement or to terminate this Agreement,
 
 
and in either event to claim such damages as it may have suffered as a result of such breach of contract.
 
12.2  
The Defaulting Party shall be liable for all costs and expenses (calculated on an attorney and own client scale) incurred as a result of or in connection with the default.
 
12.3  
Without limiting the generality of this clause 12 , if at any time it is or becomes unlawful for the Company to perform or comply with any or all of its obligations under this Agreement or any of its obligations under this Agreement are not or cease to be legal, valid, binding and enforceable, the Company shall be entitled, without prejudice to any other rights or remedies which it may have under this Agreement or otherwise, by written notice to the Subscriber, to claim immediate payment of the balance of the Subscription Price and all Interest accrued in terms thereof regardless of whether or not such amounts are then otherwise due and payable.
 
12.4  
Should the Company terminate this Agreement in the circumstances contemplated in this clause 12 , the Company shall have the right, exercisable by written notice given to the Subscriber to purchase from the Subscriber all of the Subscription Shares at a value determined by the Auditors less any amounts owed by the Subscriber to the Company in terms of clause 5.1 .
 
 
    13    ARBITRATION
 
13.1  
Any dispute arising out of this Agreement or the interpretation thereof, both while in force and after its termination, shall be submitted to and determined by arbitration in accordance with the provisions of the First Schedule to the Arbitration Act, 6 of 1996, (for the purpose of this clause  13 , ("the Act").  Such arbitration shall be held in Harare unless otherwise agreed and shall be held in a summary manner with a view to it being completed as soon as possible.
 
13.2  
There shall be one arbitrator, who shall be, if the question in issue is:
 
9
13.2.1  
primarily an accounting matter, an independent chartered accountant of not less than 10 (ten) years' standing;
 
13.2.2  
primarily a legal matter, a practising Senior Counsel or commercial attorney of not less than 10 (ten) years' standing; and
 
13.2.3  
any other matter, a suitably qualified independent person.
 
13.3  
The appointment of the arbitrator shall be agreed upon between the Parties, but failing agreement between them within a period of 14 (fourteen) days after the arbitration has been demanded by a Party by notice in writing to the others, a Party shall be entitled to request the Commercial Arbitration Centre in Harare to make the appointment.
 
13.4  
The arbitrator shall have the powers conferred upon an arbitrator under the Act.
 
13.5  
A Party shall have the right to appeal against the decision of the arbitrator in accordance with the Act.  The decision resulting from such appeal shall be final and binding on the Parties, and may be made an order of any court of competent jurisdiction.  The Parties hereby submit to the jurisdiction of the High Court of Zimbabwe sitting at Harare should a Party wish to make the arbitrator's decision an order of Court.
 
13.6  
The fact that any dispute has been referred to or is the subject of arbitration in terms of this clause  13 , as well as any information submitted or furnished to the arbitrators or in any other manner forming part of the record of any arbitration proceedings, shall be kept confidential by the parties to such arbitration proceedings, and the parties to such proceedings shall use their reasonable endeavours to procure that all their employees, agents or advisers who are involved in or who obtain knowledge of any confidential information disclosed during such proceedings, shall be made aware of, and shall undertake in writing to be bound by, and to comply with, the provisions of this clause  13 .
 
    14    GOVERNING LAW AND JURISDICTION
 
14.1  
The interpretation of this Agreement shall be governed by the law of Zimbabwe in all respects.
 
14.2  
Any Party shall be entitled to institute all or any proceedings against any of the other Parties in connection with this Agreement in the High Court of Zimbabwe sitting at Harare.
 
 
10
    15    INTERPRETATION
 
15.1  
In this Agreement, unless the context requires otherwise:
 
15.1.1  
words importing any one gender shall include the other 2 (two) genders;
 
15.1.2  
the singular shall include the plural and vice versa ; and
 
15.1.3  
a reference to natural persons shall include created entities (corporate or unincorporated) and vice versa .
 
15.2  
In this Agreement, the headings have been inserted for convenience only and shall not be used for nor assist or affect its interpretation.
 
15.3  
If anything in a definition is a substantive provision conferring rights or imposing obligations on anyone, effect shall be given to it as if it were a substantive provision in the body of this Agreement.
 
 
    16    GENERAL
 
16.1  
This Agreement contains the entire agreement between the Parties as to the subject matter hereof.
 
16.2  
No Party shall have any claim or right of action arising from any undertaking, representation or warranty not included in this Agreement.
 
16.3  
No failure by a Party to enforce any provision of this Agreement shall constitute a waiver of such provision or affect in any way that Party’s right to require performance of any such provision at any time in the future, nor shall the waiver of any subsequent breach nullify the effectiveness of the provision itself.
 
16.4  
No agreement to vary, add to, or cancel this Agreement shall be of any force or effect unless reduced to writing and signed on behalf of all of the Parties to this Agreement.
 
16.5  
No Party may cede any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Parties to this Agreement.
 
16.6  
This Agreement may be signed in counterparts, in which event the originals together will constitute the entire agreement between the Parties.
 
11
 
    17    COSTS
 
 
Each Party shall bear its own costs to be incurred in connection with the drafting and negotiation of this Agreement.
 
 
    18    WARRANTY
 
The Company and CHZ warrant that the shareholder of the Company does not at the Signature Date have any liability for the unlawful conduct of the business and affairs of the Company.
 
  SIGNED at Johannesburg on 12 June 2012

For and on behalf of:
NATIONAL INDIGENISATION ECONOMIC EMPOWERMENT FUND
 
 
 
______________________________
Signatory: D. Chapfika
Capacity: Chairman NIEEB
Authority: Board Resolution

 
 
Witness:
 
 
______________________________
Name:
 

 

  SIGNED at Johannesburg on 12 June 2012

For:
BLANKET MINE (1983) (PRIVATE) LIMITED
 
____________________________________
Signatory: S.R. Curtis
Capacity:  Director
Authority:  Board Resolution

 
 
Witness:
 
 
______________________________
Name:
 

 

 
12
 
SIGNED at Johannesburg on 12 June 2012

For:
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED
 
 
_________________________________
Signatory: S.E. Hayden
Capacity:  Director
Authority:  Board Resolution


 
 
Witness:
 
 
______________________________
Name:
 

 


 
 
 
 
 
 
SCHEDULE 1

MANAGEMENT AGREEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14


SUBSCRIPTION AGREEMENT
 
between
 
FREMIRO INVESTMENTS (PRIVATE) LIMITED
( a company incorporated in Zimbabwe under registration number 5560/2011)
("the Subscriber")
 
and
 
BLANKET MINE (1983) (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 172/69)
("the Company" )
 
and
 
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 5/45)
("CHZ")

 
 
 
 

 
CONTENTS


No           Clause Page No


No
     Clause
                                       Page No
 
 
1
     DEFINITIONS
1
2
     BACKGROUND
2
3
     CONDITIONS PRECEDENT
2
4
     SUBSCRIPTION
3
5
     PRICE AND PAYMENT
3
6
     FUNDING
4
7
     DIRECTORS
5
8
     MANAGEMENT OF THE COMPANY
5
9
     CONFIDENTIALITY
6
10
     SUPPORT
6
11
     DOMICILIUM CITANDI ET EXECUTANDI
7
12
     BREACH AND TERMINATION
8
13
     ARBITRATION
9
14
     GOVERNING LAW AND JURISDICTION
10
15
     INTERPRETATION
10
16
     GENERAL
11
17
     COSTS
11
18
     WARRANTY
 12



 

     1    DEFINITIONS
 
 
In this Agreement, unless the context indicates otherwise, the words and expressions set out below shall have the meaning assigned to them and cognate expressions shall have a corresponding meaning, namely:
 
1.1  
 
Agreement
means this subscription agreement;
1.2  
 
Auditors
means the Company’s auditors as at the Signature Date or failing that, at the election of the board of directors of the Company, Deloitte, KPMG or Ernst & Young;
1.3  
 
Business Day
means any day that is not a Saturday, Sunday or public holiday in Zimbabwe;
1.4  
 
Closing Date
means the 5 th (fifth) Business Day after the fulfilment of the suspensive conditions in clause   3 ;
1.5  
 
Directors
means the directors of the Company from time to time appointed in accordance with clause 7 ;
1.6  
 
Indigenisation
means the process and objectives contemplated in the Indigenisation Act and the Regulations;
1.7  
 
Indigenisation Act
means the Indigenisation and Economic Empowerment Act [ Chapter 14.33 ];
1.8  
 
Interest
means interest calculated monthly in arrears at 10 (ten) percentage points above the 12 month LIBOR base rate published by REUTERS  from time to time;
1.9  
 
Loan Account
means the loan account to be opened in the Subscriber's name in the books of the Company;
1.10  
 
MOU
means the memorandum of understanding concluded and signed by Caledonia Mining Corporation, CHZ, the Company, and the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe on 20 February 2012;
 
 
1
 
 
1.11  
 
Parties
means CHZ, the Company, and the Subscriber and "Party" means any one of them, as the context may indicate;
1.12  
 
Regulations
means the Indigenisation and Economic Empowerment (General) Regulations, 2010;
1.13  
 
Signature Date
means the date of signature of this Agreement by the Party last in time to do so;
1.14  
 
Subscription Price
means the subscription price for the Subscription Shares as set out in clause 5.1 ; and
1.15  
 
Subscription Shares
means 6,420,000 (six million four hundred and twenty thousand) “A” class shares representing 15% (fifteen per cent) of the issued share capital of the Company after the implementation of the transactions envisaged in the MOU which will total 42,800,000 shares.
 
    2    BACKGROUND
 
2.1  
CHZ and the Company have agreed to the Indigenisation of the Company in accordance with the provisions of the MOU.
 
2.2  
In terms of the MOU, the Company and the Subscriber are required to conclude an agreement in terms of which the Subscriber will subscribe for the Subscription Shares.
 
2.3  
The Parties wish to record the terms on which the Subscriber will subscribe for the Subscription Shares.
 
 
     3    CONDITIONS PRECEDENT
 
3.1  
The implementation of this Agreement is, save for the provisions of clauses 1 ,   6.2 to 17 , inclusive, which will be of immediate force and effect, subject to:
 
3.1.1  
receipt by CHZ and the Company of written confirmation from the Ministry of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe that the implementation of this Agreement constitutes compliance by CHZ and the Company with the requirements of the Indigenisation Act and the Regulations;
 
2
3.1.2  
receipt by CHZ and the Company of the approvals, to the extent certified in writing by the Auditors to be required by law, by the Reserve Bank of Zimbabwe of the transactions contemplated in the MOU and any related transactions and/or corporate re-organisation required to give effect to the Indigenisation by CHZ of the Company; and
 
3.1.3  
receipt by CHZ and the Company of written confirmation of the unconditional withdrawal by the Zimbabwean Ministry of Mines and Mining Development of the letter sent by it to the Company dated 13 December 2011 requiring the Company to reach agreement with the Zimbabwean Mining Development Corporation regarding the Indigenisation of the Company.
 
3.2  
The Parties shall use all commercially reasonable endeavours to procure the fulfilment of the conditions precedent stipulated in clause  3.1 .
 
3.3  
In the event that CHZ is unable to obtain the confirmation stipulated in 3.1 on or before 30 September 2012, CHZ may at its sole discretion, renegotiate the terms of this agreement.
 
 
    4    SUBSCRIPTION
 
4.1  
The Subscriber hereby subscribes for the Subscription Shares.
 
4.2  
The Company hereby accepts the subscription for the Subscription Shares as set out in clause  4.1 , and undertakes to allot and issue the Subscription Shares to the Subscriber on the Closing Date.
 
 
    5 PRICE AND PAYMENT
 
5.1  
The Subscription Price for the Subscription Shares shall be the sum of US$ 11,008,536 (eleven million and eight thousand five hundred and thirty six dollars ), which amount shall be debited to the Loan Account which Loan Account shall:
 
5.1.1  
bear compound Interest from the Closing Date to the date of repayment, both dates inclusive; and
 
5.1.2  
be paid in instalments on the date of payment of dividends by the Company from time to time, in an amount equal to 80% (eighty percent) of the dividends payable to the Subscriber, after deduction of withholding or any other taxes, in respect of the Subscription Shares. Each such payment shall be credited to the Loan Account in part settlement of Interest in the first instance and thereafter in settlement of capital owing in respect of the Subscription Price. Such payments shall cease once the full loan amount has been settled.
 
3
5.2  
The remaining 20% (twenty percent) of the dividends payable to the Subscriber shall be paid by the Company to the Subscriber after deduction of any Zimbabwean withholding or other tax or levies that may be applicable on these dividends declared.
 
5.3  
The Subscriber hereby irrevocably authorises the Company to apply dividends declared and becoming due for payment to the Subscriber, in the manner set out in clause 5.1.2 .
 
5.4  
For as long as any amounts are owed to the Company by the Subscriber in respect of the Subscription Price in terms of clause 5.1   the Subscriber may not, without prior written consent of CHZ, cede any right, title or interest in, pledge, or otherwise encumber any Subscription Share.
 
5.5  
The amount due in respect of the Subscription Price and Interest shall be payable free of any deduction or set off and any taxes that may be levied thereon, which shall be for the account of the Subscriber.
 
 
    6    FUNDING
 
6.1  
If the Directors should at any time resolve to call on the shareholders of the Company to advance capital to the Company, either by way of share capital or loans, the Subscriber shall advance such capital pro rata to its shareholding in the Company at the date on which the Directors determine that the capital is required.
 
6.1.1  
If the Subscriber is unable or unwilling to provide the capital required in terms of clause  6.1 , then it shall notify the Company in writing to that effect within 30 (thirty) days of the date on which it is advised in writing (“the Finance Date”) by the Company that capital is required from it.
 
6.1.2  
If the Company should receive a notice contemplated in clause  6.1.1 , or if the Subscriber should fail to give a notice as contemplated in clause  6.1.1 and should fail to comply with its obligation to advance capital to the Company in terms of this clause  6.1 within 90 (ninety) days from the Finance Date, and if CHZ is prepared to provide the amount of the finance which the Subscriber was required to advance to the Company, then CHZ shall notify the Company in writing to that effect within 10 (ten) Business Days of receipt of the notice referred to in clause 6.1.1 , or of failure by the Subscriber to advance capital as required in terms of this clause  6.1 .
 
4
6.2  
If the Subscriber is called upon to advance an amount to the Company in terms of clause  6.1 above, and if the Subscriber has declined or, as the case may be, failed to comply with such request in accordance with the provisions of clauses  6.1.1   and   6.1.2 , then, if it shall have exercised the right to advance to the Company the amount which the Subscriber has declined to advance, CHZ shall have the right to call upon the Subscriber to sell to CHZ such number of shares at par as shall, after transfer thereof into the name of CHZ, result in CHZ holding such percentage of the issued voting capital of the Company as shall be equal to the percentage which the aggregate of loan capital and share capital contributed by CHZ to the Company constitutes of the total capital contributed by all shareholders by way of share capital and loan capital
 
 
    7    DIRECTORS
 
7.1  
The board of Directors shall be comprised of a minimum of 8 (eight) Directors.
 
7.2  
The Parties agree that:
 
7.2.1  
the Subscriber shall be entitled to appoint 1 (one) Director who shall be acceptable to the majority of the Board of Directors of the Company whose acceptance shall not be unreasonably withheld; and
 
7.2.2  
CHZ shall be entitled to appoint 4 (four) Directors.
 
7.3  
The Subscriber and CHZ shall have the right, from time to time, by notice in writing to the Company, to remove a Director nominated by it in terms of clause  7.1   as a Director and to nominate, in accordance with clause 7.2   another person in the place of the Director so removed.
 
 
    8    MANAGEMENT OF THE COMPANY
 
For as long as any amounts are owed to the Company by the Subscriber on the Loan Account, the management of the Company shall continue to be undertaken by Greenstone Management Services (“Greenstone”) in terms of the existing management agreement between Greenstone and the Company on   identical terms and conditions. The Parties undertake to vote in favour of all resolutions necessary to give effect to this clause   8   , failing which the vendor funding shall immediately be withdrawn and, the Subscriber asked to settle the outstanding balance in cash within 90 days of such notice, failing which the outstanding principal amount and interest shall automatically be converted into equivalent A shares and issued to CHZ.
 
 
5
    9 CONFIDENTIALITY
 
9.1  
All communications between the Parties and all information and other materials supplied to or received by a Party from any of the other Parties which relates in any way to this Agreement and to the Company shall be kept confidential by the Parties unless or until the relevant Party can reasonably demonstrate that:
 
9.1.1  
any such communication, information or material is, or part of it is, in the public domain through no fault of its own; or
 
9.1.2  
any such communication, information or material has been lawfully obtained from any third party; or
 
9.1.3  
the information is already lawfully known to the relevant Party at the time  that Party receives such information; or
 
9.1.4  
the relevant Party is obliged by law to disclose such information,
 
whereupon this obligation in respect of that information shall cease.
 
9.2  
The Parties shall use their best endeavours to procure the observance of these restrictions and shall take all reasonable steps to minimise the risk of disclosure of confidential information by ensuring that only they themselves and such of their employees, agents or consultants whose duties will require them to possess any of such information shall have access to such information, and will be instructed to treat the same as confidential.
 
9.3  
The obligation contained in clause 9.2 shall endure, even after the termination of this Agreement, without limit in point of time, except and until such confidential information falls within any of the provisions of clauses 9.1.1 to 9.1.4 , and shall be subject to the Company's confidentiality regime at the Signature Date.
 
 
     10 SUPPORT
 
 
The Parties undertake at all times to do all such things, perform all such actions and take such steps (including in particular the exercise of their voting rights in the Company) and to procure the doing of all such things, the performance of all such actions and taking of all such steps as may be open to them and necessary for or incidental to the putting into effect the provisions of this Agreement.
 
 
6
    11    DOMICILIUM CITANDI ET EXECUTANDI
 
11.1  
Each Party chooses the address set out opposite its name below as its domicilium citandi et executandi at which all notices, legal processes and other communications must be delivered for the purposes of this Agreement:
 
11.1.1  
 the Subscriber    
58 Broadlands Road
 
Emerald Hill,
Harare,
Zimbabwe

Fa x: To be advised
Email:july.ndlovu@mweb.co.za
[ For attention: July Ndlovu ]
 

11.1.2  
the Company    
6 th Floor Red Bridge NEEastgate
3 rd Street and R. Mugabe Road
Harare
Zimbabwe
 
Fax: 263 284 23193
Email: CMangezi@blanketmine.com
[For attention: Mr. Caxton Mangezi]
11.1.3  
 CHZ 
6 th Floor Red Bridge NEEastgate
  3 rd Street and R Mugabe Road
  Harare
  Zimbabwe

Fax: +27 11 447 2554
Email: SCurtis@caledoniamining.com
[ For attention: Mr. Steven Curtis]
11.2  
Any notice or communication required or permitted to be given in terms of this Agreement shall be valid and effective only if in writing, and delivered by hand or sent or transmitted by registered post, telefax or by email.
 
11.3  
Each Party may by written notice to the other Parties change its chosen address and/or its chosen telefax number and/or its email address to another physical address, telefax number or email, provided that the change shall become effective on the fourteenth day after the receipt of the notice by the addressee.
 
7
11.4   
Any notice to a Party:
 
11.4.1  
sent by prepaid registered post to it at its chosen address;
 
11.4.2  
delivered by hand to a responsible person during ordinary business hours at its chosen address;
 
11.4.3  
transmitted during ordinary office hours by facsimile to its chosen telefax number; or
 
11.4.4  
transmitted during ordinary office hours by email to its chosen email address,
 
 
unless the contrary is proved, shall be deemed to have been received, in the case of clause  11.4.1 , on the 7 th (seventh) Business Day after posting and, in the case of clauses  11.4.2 , 11.4.3 and 11.4.4 , on the day of delivery or transmission as the case may be.
 
 
    12 BREACH AND TERMINATION
 
12.1  
Should a Party (“the Defaulting Party”) commit a breach of any provision of this Agreement and fail to remedy such breach within 14 (fourteen) days from the date of written notice from any other Party to this Agreement (“the Aggrieved Party”) calling upon it to do so, the Aggrieved Party shall have the right, without prejudice to any other rights available in law, either:
 
12.1.1  
if the breach complained of can be fully remedied by the payment of money, to take whatever action may be necessary to obtain payment of the amounts required by the Aggrieved Party to remedy such breach; or
 
12.1.2  
if the breach complained of cannot be fully remedied by the payment of money, or, alternatively, if it can be so remedied and payment of any amounts claimed by the Aggrieved Party in terms of clause  12.1.1   is not made to the Aggrieved Party within 7 (seven) days of the date of determination through arbitration or legal process of the amount legally payable, to take whatever action may be necessary to enforce its rights under this Agreement or to terminate this Agreement,
 
 
and in either event to claim such damages as it may have suffered as a result of such breach of contract.
 
12.2  
The Defaulting Party shall be liable for all costs and expenses (calculated on an attorney and own client scale) incurred as a result of or in connection with the default.
 
12.3  
Without limiting the generality of this clause 12 , if at any time it is or becomes unlawful for the Company to perform or comply with any or all of its obligations under this Agreement or any of its obligations under this Agreement are not or cease to be legal, valid, binding and enforceable, the Company shall be entitled, without prejudice to any other rights or remedies which it may have under this Agreement or otherwise, by written notice to the Subscriber, to claim immediate payment of the balance of the Subscription Price and all Interest accrued in terms thereof regardless of whether or not such amounts are then otherwise due and payable.
 
12.4  
Notwithstanding the aforesaid, should the Subscriber institute and/or cause to be instituted, any legal action of any nature whatsoever against the Company, the Company shall have the right, exercisable by written notice given to the Subscriber at any time after the institution of any such legal action, to terminate this Agreement and purchase from the Subscriber all of the Subscription Shares at a value determined by the Auditors less any amounts owed by the Subscriber to the Company in terms of clause 5.1 .
 
 
    13 ARBITRATION
 
13.1  
Any dispute arising out of this Agreement or the interpretation thereof, both while in force and after its termination, shall be submitted to and determined by arbitration in accordance with the provisions of the First Schedule to the Arbitration Act, 6 of 1996, (for the purpose of this clause  13 , ("the Act"). Such arbitration shall be held in Harare unless otherwise agreed and shall be held in a summary manner with a view to it being completed as soon as possible.
 
13.2  
There shall be one arbitrator, who shall be, if the question in issue is:
 
13.2.1  
primarily an accounting matter, an independent chartered accountant of not less than 10 (ten) years' standing;
 
13.2.2  
primarily a legal matter, a practising Senior Counsel or commercial attorney of not less than 10 (ten) years' standing; and
 
13.2.3  
any other matter, a suitably qualified independent person.
 
13.3  
The appointment of the arbitrator shall be agreed upon between the Parties, but failing agreement between them within a period of 14 (fourteen) days after the arbitration has been demanded by a Party by notice in writing to the others, a Party shall be entitled to request the High Court of Zimbabwe to make the appointment.
 
8
13.4  
The arbitrator shall have the powers conferred upon an arbitrator under the Act.
 
13.5  
A Party shall have the right to appeal against the decision of the arbitrator in accordance with the Act. The decision resulting from such appeal shall be final and binding on the Parties, and may be made an order of any court of competent jurisdiction. The Parties hereby submit to the jurisdiction of the High Court of Zimbabwe sitting at Harare should a Party wish to make the arbitrator's decision an order of Court.
 
13.6  
The fact that any dispute has been referred to or is the subject of arbitration in terms of this clause  13 , as well as any information submitted or furnished to the arbitrators or in any other manner forming part of the record of any arbitration proceedings, shall be kept confidential by the parties to such arbitration proceedings, and the parties to such proceedings shall use their reasonable endeavours to procure that all their employees, agents or advisers who are involved in or who obtain knowledge of any confidential information disclosed during such proceedings, shall be made aware of, and shall undertake in writing to be bound by, and to comply with, the provisions of this clause  13 .
 
    14  GOVERNING LAW AND JURISDICTION
 
14.1  
The interpretation of this Agreement shall be governed by the law of the Zimbabwe in all respects.
 
14.2  
Any Party shall be entitled to institute all or any proceedings against any the other Parties in connection with this Agreement in the High Court of Zimbabwe sitting at Harare.
 
 
    15  INTERPRETATION
 
15.1  
In this Agreement, unless the context requires otherwise :
 
15.1.1  
words importing any one gender shall include the other 2 (two) genders;
 
15.1.2  
the singular shall include the plural and vice versa ; and
 
15.1.3  
a reference to natural persons shall include created entities (corporate or unincorporated) and vice versa .
 
9
15.2  
In this Agreement, the headings have been inserted for convenience only and shall not be used for nor assist or affect its interpretation.
 
15.3  
If anything in a definition is a substantive provision conferring rights or imposing obligations on anyone, effect shall be given to it as if it were a substantive provision in the body of this Agreement.
 
 
    16    GENERAL
 
16.1  
This Agreement contains the entire agreement between the Parties as to the subject matter hereof.
 
16.2  
No Party shall have any claim or right of action arising from any undertaking, representation or warranty not included in this Agreement.
 
16.3  
No failure by a Party to enforce any provision of this Agreement shall constitute a waiver of such provision or affect in any way that Party’s right to require performance of any such provision at any time in the future, nor shall the waiver of any subsequent breach nullify the effectiveness of the provision itself.
 
16.4  
No agreement to vary, add to, or cancel this Agreement shall be of any force or effect unless reduced to writing and signed on behalf of all of the Parties to this Agreement.
 
16.5  
No Party may cede any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Parties to this Agreement.
 
16.6  
This Agreement may be signed in counterparts, in which event the originals together will constitute the entire agreement between the Parties.
 
 
    17    COSTS
 
 
Each Party shall bear its own costs to be incurred in connection with the drafting and negotiation of this Agreement.
 
 

 
 
     18   WARRANTY
 
 
The Company and CHZ warrant that the shareholder of the Company does not at the date of this agreement have any liability for the unlawful conduct of the business and affairs of the Company.
 

10




SIGNED at
on 
2012

For:
BLANKET MINE (1983) (PRIVATE) LIMITED

    
_________________________________
Signatory:
Capacity:
Authority:




SIGNED at
on 
2012

For:
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED


_________________________________
Signatory:
Capacity:
Authority:


 

SIGNED at
on 
2012

For:
FREMIRO INVESTMENTS (PRIVATE) LIMITED



_________________________________
Signatory:
Capacity:
Authority:
 
 
11
 
 


SUBSCRIPTION AGREEMENT
 
between
 
BLANKET EMPLOYEE TRUST SERVICES (PRIVATE) LIMITED
( a company to be incorporated in Zimbabwe)
("the Subscriber")
 
and
 
BLANKET MINE (1983) (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 172/69)
("the Company" )
 
and
 
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 5/45)
("CHZ" )

 
 
 
 
 
 

 
CONTENTS


No
     Clause
Page No
 
 
1
     DEFINITIONS
1
2
     BACKGROUND
2
3
     CONDITIONS PRECEDENT
2
4
     SUBSCRIPTION
3
5
     PRICE AND PAYMENT
4
6
     FUNDING
4
7
     DIRECTORS
5
8
     MANAGEMENT OF THE COMPANY
6
9
     CONFIDENTIALITY
6
10
     SUPPORT
7
11
     DOMICILIUM CITANDI ET EXECUTANDI
7
12
     BREACH AND TERMINATION
8
13
     ARBITRATION
9
14
     GOVERNING LAW AND JURISDICTION
10
15
     INTERPRETATION
11
16
     GENERAL
11
17
     COSTS
12
18
     WARRANTY
12



 
 
    1    DEFINITIONS
 
 
In this Agreement, unless the context indicates otherwise, the words and expressions set out below shall have the meaning assigned to them and cognate expressions shall have a corresponding meaning, namely:
 

1.1  
 
Agreement
means this subscription agreement;
1.2  
 
Auditors
means the Company’s auditors as at the Signature Date or failing that, at the election of the board of directors of the Company, Deloitte, KPMG or Ernst & Young;
1.3  
 
Business Day
means any day that is not a Saturday, Sunday or public holiday in Zimbabwe;
1.4  
 
Closing Date
means the 5 th (fifth) Business Day after the fulfilment of the suspensive conditions in clause   3 ;
1.5  
 
Directors
means the directors of the Company from time to time appointed in accordance with clause 7 ;
1.6  
 
Indigenisation
means the process and objectives contemplated in the Indigenisation Act and the Regulations;
1.7  
 
Indigenisation Act
means the Indigenisation and Economic Empowerment Act [ Chapter 14.33 ];
1.8  
 
Interest
means interest calculated monthly in arrears at 10 (ten) percentage points above the 12 (twelve) month London InterBank Offered Rate published by Thomson Reuters from time to time;
 
1.9  
 
Loan Account
means the loan account to be opened in the Subscriber's name in the books of the Company;
1.10  
 
MOU
means the memorandum of understanding concluded by Caledonia Mining Corporation, CHZ, the Company, and the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe on 20 February 2012;
 
1
1.11  
 
Parties
means CHZ, the Company, and the Subscriber and "Party" means any one of them, as the context may indicate;
1.12  
 
Regulations
means the Indigenisation and Economic Empowerment (General) Regulations, 2010;
1.13  
 
Signature Date
means the date of signature of this Agreement by the Party last in time to do so;
1.14  
 
Subscription Price
means the subscription price for the Subscription Shares as set out in clause 5.1 ; and
1.15  
 
Subscription Shares
means 4,280,000 (four million two hundred and eighty thousand) “A” class shares representing 10% (ten percent) of the issued share capital of the Company after the implementation of the transactions envisaged in the MOU.
 
    2    BACKGROUND
 
2.1  
CHZ and the Company have agreed to the Indigenisation of the Company in accordance with the provisions of the MOU.
 
2.2  
In terms of the MOU, the Company is required to issue the Subscription Shares to the Blanket Mine Employee Trust.
 
2.3  
The Company has procured the incorporation of the Subscriber for the purpose of subscribing for and holding the Subscription Shares and the Blanket Mine Employee Trust will, on its formation, acquire the entire issued share capital of the Subscriber.
 
2.4  
The Parties wish to record the terms on which the Subscriber will subscribe for the Subscription Shares.
 
 
    3    CONDITIONS PRECEDENT
 
3.1  
The implementation of this Agreement is, save for the provisions of clauses 1 , 3 and 7 to 18 , inclusive, which will be of immediate force and effect, subject to:
 
2
3.1.1  
receipt by CHZ and the Company of written confirmation from the Ministry of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe that the implementation of this Agreement and the other transactions envisaged in the MOU constitutes compliance by CHZ and the Company with the requirements of the Indigenisation Act and the Regulations;
 
3.1.2  
receipt by CHZ and the Company of the approvals, to the extent certified in writing by the Auditors to be required by law, by the Reserve Bank of Zimbabwe of the transactions contemplated in the MOU and any related transactions and/or corporate re-organisation required to give effect to the Indigenisation by CHZ of the Company; and
 
3.1.3  
receipt by CHZ and the Company of written confirmation of the unconditional withdrawal by the Zimbabwe Ministry of Mines and Mining Development of the letter sent by it to the Company dated 13 December 2011 requiring the Company to reach agreement with the Zimbabwean Mining Development Corporation regarding the Indigenisation of the Company.
 
3.2  
The Parties shall use all commercially reasonable endeavours to procure the fulfilment of the conditions precedent stipulated in clause  3.1 .
 
3.3  
The conditions in clause  3.1 above are stipulated for the benefit of CHZ and CHZ may waive any one or all of those conditions by way of written notice to the Subscriber.
 
3.4  
In the event of the conditions stipulated in clause  3.1   not being fulfilled or waived on or before 30 September 2012, or on or before such later date as CHZ and the Company agree upon in writing, this Agreement shall lapse and shall be of no further force or effect and no Party shall have any claim against the other Parties arising from the provisions of this Agreement or the termination thereof.
 
 
    4 SUBSCRIPTION
 
4.1  
The Subscriber hereby subscribes for the Subscription Shares.
 
4.2  
The Company hereby accepts the subscription for the Subscription Shares as set out in clause  4.1 , and undertakes to allot and issue the Subscription Shares to the Subscriber on the Closing Date.
 
 
3
    5    PRICE AND PAYMENT
 
5.1  
The Subscription Price for the Subscription Shares shall be the sum of US$ 7,339,024 (seven million three hundred and thirty nine thousand and twenty four US Dollars), which amount shall be debited to the Loan Account which Loan Account shall:
 
5.1.1  
bear compound Interest from the Closing Date to the date of repayment, both dates inclusive; and
 
5.1.2  
be paid in instalments on the date of payment of dividends by the Company from time to time, in an amount equal to 80% (eighty percent) of the dividends payable to the Subscriber, after deduction of withholding or any other taxes, in respect of the Subscription Shares. Each such payment shall be credited to the Loan Account in part settlement of Interest in the first instance and thereafter in settlement of capital owing in respect of the Subscription Price. Such payments shall cease once the Loan Account has been settled.
 
5.2  
The remaining 20% (twenty percent) of the dividends payable to the Subscriber shall be paid by the Company to the Subscriber after deduction of any Zimbabwean withholding or other tax or levies that may be applicable on the dividends declared by the Company.
 
5.3  
The Subscriber hereby irrevocably authorises the Company to apply dividends declared and becoming due for payment to the Subscriber, in the manner set out in clause 5.1.2 .
 
5.4  
For as long as any amounts are owed to the Company by the Subscriber in respect of the Subscription Price in terms of clause 5.1 , the Subscriber may not, without prior written consent of CHZ, cede any right, title or interest in, pledge, or otherwise encumber any Subscription Share.
 
5.5  
The amount due in respect of the Subscription Price and Interest shall be payable free of any deduction or set off and any taxes that may be levied thereon, which shall be for the account of the Subscriber.
 
 
    6    FUNDING
 
6.1  
If the Directors should at any time resolve to call on the shareholders of the Company to advance capital to the Company, either by way of share capital or loans, the Subscriber shall advance such capital pro rata to its shareholding in the Company at the date on which the Directors determine that the capital is required.
 
4
6.1.1  
If the Subscriber is unable or unwilling to provide the capital required in terms of clause  6.1 , then it shall notify the Company in writing to that effect within 30 (thirty) days of the date on which it is advised in writing (“the Finance Date”) by the Company that capital is required from it.
 
6.1.2  
If the Company should receive a notice contemplated in clause  6.1.1 , or if the Subscriber should fail to give a notice as contemplated in clause  6.1.1 and should fail to comply with its obligation to advance capital to the Company in terms of this clause  6. within 90 (ninety) days from the Finance Date, and if CHZ is prepared to provide the amount of the finance which the Subscriber was required to advance to the Company, then CHZ shall notify the Company in writing to that effect within 10 (ten) Business Days of receipt of the notice referred to in clause 6.1.1 , or of failure by the Subscriber to advance capital as required in terms of this clause  6.1 .
 
6.2  
If the Subscriber is called upon to advance an amount to the Company in terms of clause  6.1 above, and if the Subscriber has declined or, as the case may be, failed to comply with such request in accordance with the provisions of clauses  6.1.1   and   6.1.2 , then, if it shall have exercised the right to advance to the Company the amount which the Subscriber has declined to advance, CHZ shall have the right, to call upon the Subscriber to sell such number of shares at par as shall, after transfer thereof into the name of CHZ, result in CHZ holding such percentage of the issued voting capital of the Company as shall be equal to the percentage which the aggregate of loan capital and share capital contributed by CHZ to the Company constitutes of the total capital contributed by all shareholders by way of share capital and loan capital.
 
 
    7  DIRECTORS
 
7.1  
The board of Directors shall be comprised of a maximum of 8 (eight) Directors.
 
7.2  
The Parties agree that:
 
7.2.1  
the Subscriber shall be entitled to appoint 1 (one) Director, of the Company, who shall be acceptable to the majority of the board of directors of the Company whose acceptance shall not be unreasonably withheld; and
 
7.2.2  
CHZ shall be entitled to appoint 4 (four) Directors of the Company.
 
5
7.3  
The Subscriber and CHZ shall have the right, from time to time, by notice in writing to the Company, to remove a Director nominated by it in terms of clause  7.1   as a Director and to nominate, in accordance with clause 7.2   another person in the place of the Director so removed.
 
 
    8    MANAGEMENT OF THE COMPANY
 
For as long as any amounts are owed to the Company by the Subscriber on the Loan Account, the management of the Company shall continue to be undertaken by Greenstone Management Services (“Greenstone”) in terms of the existing management agreement between Greenstone and the Company on at least identical terms and conditions. The Parties undertake to vote in favour of all resolutions necessary to give effect to this clause   8 . Should the management agreement be terminated, for whatever reason, before the Loan Account has been settled, the balance of the Loan Account shall be payable by the Subscriber to the Company on demand.
 
 
    9    CONFIDENTIALITY
 
9.1  
All communications between the Parties and all information and other materials supplied to or received by a Party from any of the other Parties which relates in any way to this Agreement and to the Company shall be kept confidential by the Parties unless or until the relevant Party can reasonably demonstrate that:
 
9.1.1  
any such communication, information or material is, or part of it is, in the public domain through no fault of its own; or
 
9.1.2  
any such communication, information or material has been lawfully obtained from any third party; or
 
9.1.3  
the information is already lawfully known to the relevant Party at the time  that Party receives such information; or
 
9.1.4  
the relevant Party is obliged by law to disclose such information,
 
whereupon this obligation in respect of that information shall cease.
 
9.2  
The Parties shall use their best endeavours to procure the observance of these restrictions and shall take all reasonable steps to minimise the risk of disclosure of confidential information by ensuring that only they themselves and such of their employees, agents or consultants whose duties will require them to possess any of such information shall have access to such information, and will be instructed to treat the same as confidential.
 
6
9.3  
The obligation contained in this clause 9 shall endure, even after the termination of this Agreement, without limit in point of time, except and until such confidential information falls within any of the provisions of clauses 9.1.1 to 9.1.4 , and shall be subject to the Company's confidentiality regime at the Signature Date.
 
 
    10    SUPPORT
 
 
The Parties undertake at all times to do all such things, perform all such actions and take such steps (including in particular the exercise of their voting rights in the Company) and to procure the doing of all such things, the performance of all such actions and taking of all such steps as may be open to them and necessary for or incidental to the putting into effect the provisions of this Agreement.
 
 
    11    DOMICILIUM CITANDI ET EXECUTANDI
 
11.1  
Each Party chooses the address set out opposite its name below as its domicilium citandi et executandi at which all notices, legal processes and other communications must be delivered for the purposes of this Agreement:
 
11.1.1  
the Subscriber   
Blanket Mine, P.O.Box 4
Gwanda,
Zimbabwe
 
Fax: 263 84 2 23259
Email: CMangezi@blanketmine.com
[ For attention: Mr. Caxton Mangezi]

11.1.2  
the Company      
6 th Floor Red Bridge NE
 
Eastgate
3 rd Street and R. Mugabe Road
Harare
Zimbabwe
 
Fax: 263 284 23193
Email: PDell@caledoniazim.com
[ For attention: Mr. Caxton Mangezi]
 
11.1.3  
CHZ  
6 th Floor Red Bridge NE
 
Eastgate
3 rd Street and R Mugabe Road
Harare
Zimbabwe
 
Fax: +27 11 447 2554
Email: SCurtis@caledoniamining.com
[For attention: Mr. Steve Curtis]
 
7
11.2  
Any notice or communication required or permitted to be given in terms of this Agreement shall be valid and effective only if in writing, and delivered by hand or sent or transmitted by registered post, telefax or by email.
 
11.3  
Each Party may by written notice to the other Parties change its chosen address and/or its chosen telefax number and/or its email address to another physical address, telefax number or email, provided that the change shall become effective on the fourteenth day after the receipt of the notice by the addressee.
 
11.4   
Any notice to a Party:
 
11.4.1  
sent by prepaid registered post to it at its chosen address;
 
11.4.2  
delivered by hand to a responsible person during ordinary business hours at its chosen address;
 
11.4.3  
transmitted during ordinary office hours by facsimile to its chosen telefax number; or
 
11.4.4  
transmitted during ordinary office hours by email to its chosen email address,
 
 
unless the contrary is proved, shall be deemed to have been received, in the case of clause  11.4.1 , on the 7 th (seventh) Business Day after posting and, in the case of clauses  11.4.2 , 11.4.3 and 11.4.4 , on the day of delivery or transmission as the case may be.
 
 
    12 BREACH AND TERMINATION
 
12.1  
Should a Party (“the Defaulting Party”) commit a breach of any provision of this Agreement and fail to remedy such breach within 14 (fourteen) days from the date of written notice from any other Party to this Agreement (“the Aggrieved Party”) calling upon it to do so, the Aggrieved Party shall have the right, without prejudice to any other rights available in law, either:
 
12.1.1  
if the breach complained of can be fully remedied by the payment of money, to take whatever action may be necessary to obtain payment of the amounts required by the Aggrieved Party to remedy such breach; or
 
8
12.1.2  
if the breach complained of cannot be fully remedied by the payment of money, or, alternatively, if it can be so remedied and payment of any amounts claimed by the Aggrieved Party in terms of clause  12.1.1   is not made to the Aggrieved Party within 7 (seven) days of the date of determination through arbitration or legal process of the amount legally payable, to take whatever action may be necessary to enforce its rights under this Agreement or to terminate this Agreement,
 
 
and in either event to claim such damages as it may have suffered as a result of such breach of contract.
 
12.2  
The Defaulting Party shall be liable for all costs and expenses (calculated on an attorney and own client scale) incurred as a result of or in connection with the default.
 
12.3  
Without limiting the generality of this clause 12 , if at any time it is or becomes unlawful for the Company to perform or comply with any or all of its obligations under this Agreement or any of its obligations under this Agreement are not or cease to be legal, valid, binding and enforceable, the Company shall be entitled, without prejudice to any other rights or remedies which it may have under this Agreement or otherwise, by written notice to the Subscriber, to claim immediate payment of the balance of the Subscription Price and all Interest accrued in terms thereof regardless of whether or not such amounts are then otherwise due and payable.
 
12.4  
Should the Company terminate this Agreement in the circumstances contemplated in this clause 12 , the Company shall have the right, without prejudice to any other rights available to it, exercisable by written notice given to the Subscriber to purchase from the Subscriber all of the Subscription Shares at a value determined by the Auditors less any amounts owed by the Subscriber to the Company in terms of clause 5.1 .
 
 
    13    ARBITRATION
 
13.1  
Any dispute arising out of this Agreement or the interpretation thereof, both while in force and after its termination, shall be submitted to and determined by arbitration in accordance with the provisions of the First Schedule to the Arbitration Act, 6 of 1996, (for the purpose of this clause  13 , ("the Act"). Such arbitration shall be held in Harare unless otherwise agreed and shall be held in a summary manner with a view to it being completed as soon as possible.
 
13.2  
There shall be one arbitrator, who shall be, if the question in issue is:
 
9
13.2.1  
primarily an accounting matter, an independent chartered accountant of not less than 10 (ten) years' standing;
 
13.2.2  
primarily a legal matter, a practising Senior Counsel or commercial attorney of not less than 10 (ten) years' standing; and
 
13.2.3  
any other matter, a suitably qualified independent person.
 
13.3  
The appointment of the arbitrator shall be agreed upon between the Parties, but failing agreement between them within a period of 14 (fourteen) days after the arbitration has been demanded by a Party by notice in writing to the others, a Party shall be entitled to request the Commercial Arbitration Centre in Harare to make the appointment.
 
13.4  
The arbitrator shall have the powers conferred upon an arbitrator under the Act.
 
13.5  
A Party shall have the right to appeal against the decision of the arbitrator in accordance with the Act. The decision resulting from such appeal shall be final and binding on the Parties, and may be made an order of any court of competent jurisdiction. The Parties hereby submit to the jurisdiction of the High Court of Zimbabwe sitting at Harare should a Party wish to make the arbitrator's decision an order of Court.
 
13.6  
The fact that any dispute has been referred to or is the subject of arbitration in terms of this clause  13 , as well as any information submitted or furnished to the arbitrators or in any other manner forming part of the record of any arbitration proceedings, shall be kept confidential by the parties to such arbitration proceedings, and the parties to such proceedings shall use their reasonable endeavours to procure that all their employees, agents or advisers who are involved in or who obtain knowledge of any confidential information disclosed during such proceedings, shall be made aware of, and shall undertake in writing to be bound by, and to comply with, the provisions of this clause  13 .
 
    14 GOVERNING LAW AND JURISDICTION
 
14.1  
The interpretation of this Agreement shall be governed by the law of the Zimbabwe in all respects.
 
14.2  
Any Party shall be entitled to institute all or any proceedings against any the other Parties in connection with this Agreement in the High Court of Zimbabwe sitting at Harare.
 
10
 
    15    INTERPRETATION
 
15.1  
In this Agreement, unless the context requires otherwise :
 
15.1.1  
words importing any one gender shall include the other 2 (two) genders;
 
15.1.2  
the singular shall include the plural and vice versa ; and
 
15.1.3  
a reference to natural persons shall include created entities (corporate or unincorporated) and vice versa .
 
15.2  
In this Agreement, the headings have been inserted for convenience only and shall not be used for nor assist or affect its interpretation.
 
15.3  
If anything in a definition is a substantive provision conferring rights or imposing obligations on anyone, effect shall be given to it as if it were a substantive provision in the body of this Agreement.
 
 
    16    GENERAL
 
16.1  
This Agreement contains the entire agreement between the Parties as to the subject matter hereof.
 
16.2  
No Party shall have any claim or right of action arising from any undertaking, representation or warranty not included in this Agreement.
 
16.3  
No failure by a Party to enforce any provision of this Agreement shall constitute a waiver of such provision or affect in any way that Party’s right to require performance of any such provision at any time in the future, nor shall the waiver of any subsequent breach nullify the effectiveness of the provision itself.
 
16.4  
No agreement to vary, add to, or cancel this Agreement shall be of any force or effect unless reduced to writing and signed on behalf of all of the Parties to this Agreement.
 
16.5  
No Party may cede any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Parties to this Agreement.
 
16.6  
This Agreement may be signed in counterparts, in which event the originals together will constitute the entire agreement between the Parties.
 
11
 
    17    COSTS
 
 
Each Party shall bear its own costs to be incurred in connection with the drafting and negotiation of this Agreement.
 
 
    18    WARRANTY
 
 
The Company and CHZ warrant that the shareholder of the Company does not at the Signature Date have any liability for the unlawful conduct of the business and affairs of the Company.
 


SIGNED at
on 
2012

For:
BLANKET EMPLOYEE TRUST SERVICES (PRIVATE) LIMITED



_________________________________
 
Signatory:
Capacity:
Authority:



SIGNED at
on 
2012

For:
BLANKET MINE (1983) (PRIVATE) LIMITED



_________________________________
 
Signatory:
Capacity:
Authority:





SIGNED at
on 
2012

For:
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED


_________________________________
 
Signatory:
Capacity:
Authority:

12
 
 


SUBSCRIPTION AGREEMENT
 
between
 
GWANDA COMMUNITY SHARE OWNERSHIP TRUST
( a trust registered in Zimbabwe under registration number [●] )
("the Subscriber")
 
and
 
BLANKET MINE (1983) (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 172/69)
("the Company" )
 
and
 
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED
(a company incorporated in Zimbabwe under registration number 5/45)
("CHZ" )
 
 
CONTENTS
 
 
No
     Clause
Page No
 
 
1
     DEFINITIONS
1
2
     BACKGROUND
2
3
     CONDITIONS PRECEDENT
3
4
     SUBSCRIPTION
4
5
     DONATION
4
6
     FUNDING
4
7
     DIRECTORS
5
8
     CONFIDENTIALITY
6
9
     SUPPORT
6
10
     DOMICILIUM CITANDI ET EXECUTANDI
7
11
     BREACH AND TERMINATION
8
12
     ARBITRATION
9
13
     GOVERNING LAW AND JURISDICTION
10
14
     INTERPRETATION
10
15
     GENERAL
10
16
     COSTS
11
 
 
    1    DEFINITIONS
 
 
In this Agreement, unless the context indicates otherwise, the words and expressions set out below shall have the meaning assigned to them and cognate expressions shall have a corresponding meaning, namely:
 

1.1  
 
Agreement
means this subscription agreement;
1.2  
 
Auditors
means the Company’s auditors as at the Signature Date or failing that, at the election of the board of directors of the Company, Deloitte, KPMG or Ernst & Young;
1.3  
 
BETS
means Blanket Employee Trust Services (Private) Limited, a company registered in Zimbabwe under registration number [●], and which is a wholly owned subsidiary company of the Blanket Employee Trust ;;
1.4  
 
Business Day
means any day that is not a Saturday, Sunday or public holiday in Zimbabwe;
1.5  
 
Closing Date
means the 5 th (fifth) Business Day after the fulfilment of the suspensive conditions in clause   3 ;
1.6  
 
Directors
means the directors of the Company from time to time appointed in accordance with clause 7 ;
1.7  
 
Indigenisation
means the process and objectives contemplated in the Indigenisation Act and the Regulations;
1.8  
 
Indigenisation Act
means the Indigenisation and Economic Empowerment Act [ Chapter 14.33 ];
1.9  
 
MOU
means the memorandum of understanding concluded by Caledonia Mining Corporation, CHZ, the Company, and the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe on 20 February 2012;
 
 
1.10  
 
Parties
means CHZ, the Company, and the Subscriber and "Party" means any one of them, as the context may indicate;
1.11  
 
Regulations
means the Indigenisation and Economic Empowerment (General) Regulations, 2010;
1.12  
 
NIEEF
means the National Indigenisation Economic Empowerment Fund established in terms of section 12 of the Indigenisation Act;
1.13  
 
Signature Date
means the date of signature of this Agreement by the Party last in time to do so;
1.14  
 
Subscriber's Bank Account
means the bank account nominated by the Subscriber for the payment of the amount referred to in clause 5 , the details of which are as follows:
Bank: [•]
Branch: [•]
Branch Code: [•]
Account Number: [•];
1.15  
 
Subscription Shares
means 4,280,000 (four million two hundred and eighty thousand) B” class shares representing 10% (ten percent) of the issued share capital of the Company, which shall confer the right to receive the dividend described in clause 4.3 below; and
1.16  
 
Zimco
means Zimco (Private) Limited, a company to be incorporated in Zimbabwe.
 
    2    BACKGROUND
 
2.1  
CHZ and the Company have agreed to the Indigenisation of the Company in accordance with the provisions of the MOU.
 
2.2  
In terms of the MOU, the Company is required to issue the Subscription Shares to the Subscriber.
 
2
2.3  
The Parties wish to record the terms on which the Subscriber will subscribe for the Subscription Shares.
 
 
    3    CONDITIONS PRECEDENT
 
3.1  
The implementation of this Agreement is, save for the provisions of clauses 1 , 3.2 and 7 to 16 , inclusive, which will be of immediate force and effect, subject to:
 
3.1.1  
the following agreements being concluded and becoming unconditional according to their terms, save for the condition that this Agreement is concluded and becomes unconditional:
 
3.1.1.1  
an agreement between the Company and BETS in terms of which BETS will subscribe for 4,280,000 (four million two hundred and eighty thousand) "A" class shares representing 10% (ten percent) of the issued share capital of the Company;
 
3.1.1.2  
an agreement between the Company and Zimco in terms of which Zimco will subscribe for 6,420,000 (six million four hundred and twenty thousand) “A” class shares representing 15% (fifteen percent) of the issued share capital of the Company; and
 
3.1.1.3  
an agreement between the Company and NIEEF in terms of which NIEEF will subscribe for 6,848,000 (six million eight hundred and forty eight thousand) "A" class shares representing 16% (sixteen percent) of the issued share capital of the Company;
 
3.1.2  
receipt by CHZ and the Company of written confirmation from the Ministry of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe that the implementation of this Agreement and the agreements in clause 3.1.1 constitutes compliance by CHZ and the Company with the requirements of the Indigenisation Act and the Regulations;
 
3.1.3  
receipt by CHZ and the Company of the approvals, to the extent certified in writing by the Auditors to be required by law, by the Reserve Bank of Zimbabwe of the transactions contemplated in the MOU and any related transactions and/or corporate re-organisation required to give effect to the Indigenisation by CHZ of the Company; and
 
3
3.1.4  
receipt by CHZ and the Company of written confirmation of the unconditional withdrawal by the Zimbabwe Ministry of Mines and Mining Development to the Company of the letter sent by it to the Company dated 13 December 2011 requiring the Company to reach agreement with the Zimbabwean Mining Development Corporation regarding the Indigenisation of the Company.
 
3.2  
The Parties shall use all commercially reasonable endeavours to procure the fulfilment of the conditions precedent stipulated in clause  3.1 .
 
3.3  
The conditions in clause  3.1 above are stipulated for the benefit of CHZ and CHZ may waive any one or all of those conditions by way of written notice to the Subscriber.
 
3.4  
In the event of the conditions stipulated in clause  3.1   not being fulfilled on or before 30 September 2012, or on or before such later date as CHZ and the Company agree upon in writing, this Agreement shall lapse and shall be of no further force or effect and no Party shall have any claim against the other Parties arising from the provisions of this Agreement or the termination thereof.
 
 
    4    SUBSCRIPTION
 
4.1  
The Subscriber hereby subscribes for the Subscription Shares.
 
4.2  
The Company hereby accepts the subscription for the Subscription Shares as set out in clause  4.1 , and undertakes to allot and issue the Subscription Shares to the Subscriber on the Closing Date at a nominal value of US$ 1 (one US Dollar).
 
4.3  
The Subscription Shares shall confer on the Subscriber the right to receive a dividend in the amount of US$1,000,000 (one million US Dollars), which shall be payable by the Company to the Subscriber within 12 (twelve) months of the Closing Date.
 
 
    5    DONATION
 
The Company hereby donates, and undertakes on the Closing Date to pay to the Subscriber, an amount of US$1,000,000 (one million US Dollars) in cash, by way of electronic transfer by the Company to the Subscriber's Bank Account.
 
 
    6    FUNDING
 
6.1  
If the Directors should at any time resolve to call on the shareholders of the Company to advance capital to the Company, either by way of share capital or loans, the Subscriber shall advance such capital pro rata to its shareholding in the Company at the date on which the Directors determine that the capital is required.
 
4
6.1.1  
If the Subscriber is unable or unwilling to provide the capital required in terms of clause  6.1 , then it shall notify the Company in writing to that effect within 30 (thirty) days of the date on which it is advised in writing (“the Finance Date”) by the Company that capital is required from it.
 
6.1.2  
If the Company should receive a notice contemplated in clause  6.1.1 , or if the Subscriber should fail to give a notice as contemplated in clause  6.1.1 and should fail to comply with its obligation to advance capital to the Company in terms of this clause  6.1 within 90 (ninety) days from the Finance Date, and if CHZ is prepared to provide the amount of the finance which the Subscriber was required to advance to the Company, then CHZ shall notify the Company in writing to that effect within 10 (ten) Business Days of receipt of the notice referred to in clause 6.1.1 , or of failure by the Subscriber to advance capital as required in terms of this clause  6.1 .
 
6.2  
If the Subscriber is called upon to advance an amount to the Company in terms of clause  6.1 above, and if the Subscriber has declined or, as the case may be, failed to comply with such request in accordance with the provisions of clauses  6.1.1   and   6.1.2 , then, if it shall have exercised the right to advance to the Company the amount which the Subscriber has declined to advance, CHZ shall have the right, to call upon the Subscriber to sell CHZ such number of shares at par as shall, after transfer thereof into the name of CHZ, result in CHZ such percentage of the issued voting capital of the Company as shall be equal to the percentage which the aggregate of loan capital and share capital contributed by CHZ to the Company constitutes of the total capital contributed by all shareholders by way of share capital and loan capital.
 
 
    7    DIRECTORS
 
7.1  
The board of Directors shall be comprised of a maximum of 8 (eight) Directors.
 
7.2  
The Parties agree that:
 
7.2.1  
the Subscriber shall be entitled to appoint 1 (one) Director who shall be acceptable to the majority of the Board of Directors of the Company whose acceptance shall not be unreasonably withheld;; and
 
5
7.2.2  
CHZ shall be entitled to appoint 4 (four) Directors.
 
7.3  
The Subscriber and CHZ shall have the right, from time to time, by notice in writing to the Company, to remove a Director nominated by it in terms of clause  7.1   as a Director and to nominate, in accordance with clause 7.2   another person in the place of the Director so removed.
 
 
    8    CONFIDENTIALITY
 
8.1  
All communications between the Parties and all information and other materials supplied to or received by a Party from any of the other Parties which relates in any way to this Agreement and to the Company shall be kept confidential by the Parties unless or until the relevant Party can reasonably demonstrate that:
 
8.1.1  
any such communication, information or material is, or part of it is, in the public domain through no fault of its own; or
 
8.1.2  
any such communication, information or material has been lawfully obtained from any third party; or
 
8.1.3  
the information is already lawfully known to the relevant Party at the time  that Party receives such information; or
 
8.1.4  
the relevant Party is obliged by law to disclose such information,
 
whereupon this obligation in respect of that information shall cease.
 
8.2  
The Parties shall use their best endeavours to procure the observance of these restrictions and shall take all reasonable steps to minimise the risk of disclosure of confidential information by ensuring that only they themselves and such of their employees, agents or consultants whose duties will require them to possess any of such information shall have access to such information, and will be instructed to treat the same as confidential.
 
8.3  
The obligation contained in this clause 8 shall endure, even after the termination of this Agreement, without limit in point of time, except and until such confidential information falls within any of the provisions of clauses 8.1.1 to 8.1.4 , and shall be subject to the Company's confidentiality regime at the Signature Date.
 
 
    9    SUPPORT
 
 
The Parties undertake at all times to do all such things, perform all such actions and take such steps (including in particular the exercise of their voting rights in the Company) and to procure the doing of all such things, the performance of all such actions and taking of all such steps as may be open to them and necessary for or incidental to the putting into effect the provisions of this Agreement.
 
 
6
    10    DOMICILIUM CITANDI ET EXECUTANDI
 
10.1  
Each Party chooses the address set out opposite its name below as its domicilium citandi et executandi at which all notices, legal processes and other communications must be delivered for the purposes of this Agreement:
 
10.1.1  
 the Subscriber  
[•]
 
Fax: [•]
Email: [•]
[For attention: [•] ]


10.1.2  
the Company  
6th Floor Red Bridge NE
 
Eastgate
3 rd Street and R. Mugabe Road
Harare
Zimbabwe
 
Fax: 263 284 23193
Email: CMangezi@blanketmine.com
[ For attention: Mr. Caxton Mangezi]
 
10.1.3  
CHZ     
6 th Floor Red Bridge NE
Eastgate
3 rd Street and R Mugabe Road
Harare
Zimbabwe
 
Fax: +27 11 447 2554
Email: scurtis@caledoniamining.com
[For attention: Mr. Steve Curtis]
 
10.2  
Any notice or communication required or permitted to be given in terms of this Agreement shall be valid and effective only if in writing, and delivered by hand or sent or transmitted by registered post, telefax or by email.
 
10.3  
Each Party may by written notice to the other Parties change its chosen address and/or its chosen telefax number and/or its email address to another physical address, telefax number or email, provided that the change shall become effective on the fourteenth day after the receipt of the notice by the addressee.
 
7
10.4   
Any notice to a Party:
 
10.4.1  
sent by prepaid registered post to it at its chosen address;
 
10.4.2  
delivered by hand to a responsible person during ordinary business hours at its chosen address;
 
10.4.3  
transmitted during ordinary office hours by facsimile to its chosen telefax number; or
 
10.4.4  
transmitted during ordinary office hours by email to its chosen email address,
 
 
unless the contrary is proved, shall be deemed to have been received, in the case of clause  10.4.1 , on the 7 th (seventh) Business Day after posting and, in the case of clauses  10.4.2 , 10.4.3 and 10.4.4 , on the day of delivery or transmission as the case may be.
 
 
    11 BREACH AND TERMINATION
 
11.1  
Should a Party (“the Defaulting Party”) commit a breach of any provision of this Agreement and fail to remedy such breach within 14 (fourteen) days from the date of written notice from any other Party to this Agreement (“the Aggrieved Party”) calling upon it to do so, the Aggrieved Party shall have the right, without prejudice to any other rights available in law, either:
 
11.1.1  
if the breach complained of can be fully remedied by the payment of money, to take whatever action may be necessary to obtain payment of the amounts required by the Aggrieved Party to remedy such breach; or
 
11.1.2  
if the breach complained of cannot be fully remedied by the payment of money, or, alternatively, if it can be so remedied and payment of any amounts claimed by the Aggrieved Party in terms of clause  11.1.1   is not made to the Aggrieved Party within 7 (seven) days of the date of determination through arbitration or legal process of the amount legally payable, to take whatever action may be necessary to enforce its rights under this Agreement or to terminate this Agreement,
 
 
and in either event to claim such damages as it may have suffered as a result of such breach of contract.
 
8
11.2  
The Defaulting Party shall be liable for all costs and expenses (calculated on an attorney and own client scale) incurred as a result of or in connection with the default.
 
11.3  
Should the Subscriber institute and/or cause to be instituted, any legal action of any nature whatsoever against the Company, the Company shall have the right, exercisable by written notice given to the Subscriber at any time after the institution of any such legal action, to terminate this Agreement and purchase from the Subscriber all of the Subscription Shares at a value determined by the Auditors.
 
 
    12    ARBITRATION
 
12.1  
Any dispute arising out of this Agreement or the interpretation thereof, both while in force and after its termination, shall be submitted to and determined by arbitration in accordance with the provisions of the First Schedule to the Arbitration Act, 6 of 1996, (for the purpose of this clause  12 , ("the Act"). Such arbitration shall be held in Harare unless otherwise agreed and shall be held in a summary manner with a view to it being completed as soon as possible.
 
12.2  
There shall be one arbitrator, who shall be, if the question in issue is:
 
12.2.1  
primarily an accounting matter, an independent chartered accountant of not less than 10 (ten) years' standing;
 
12.2.2  
primarily a legal matter, a practising Senior Counsel or commercial attorney of not less than 10 (ten) years' standing; and
 
12.2.3  
any other matter, a suitably qualified independent person.
 
12.3  
The appointment of the arbitrator shall be agreed upon between the Parties, but failing agreement between them within a period of 14 (fourteen) days after the arbitration has been demanded by a Party by notice in writing to the others, a Party shall be entitled to request the High Court of Zimbabwe to make the appointment.
 
12.4  
The arbitrator shall have the powers conferred upon an arbitrator under the Act.
 
12.5  
A Party shall have the right to appeal against the decision of the arbitrator in accordance with the Act. The decision resulting from such appeal shall be final and binding on the Parties, and may be made an order of any court of competent jurisdiction. The Parties hereby submit to the jurisdiction of the High Court of Zimbabwe sitting at Harare should a Party wish to make the arbitrator's decision an order of Court.
 
9
12.6  
The fact that any dispute has been referred to or is the subject of arbitration in terms of this clause  12 , as well as any information submitted or furnished to the arbitrators or in any other manner forming part of the record of any arbitration proceedings, shall be kept confidential by the parties to such arbitration proceedings, and the parties to such proceedings shall use their reasonable endeavours to procure that all their employees, agents or advisers who are involved in or who obtain knowledge of any confidential information disclosed during such proceedings, shall be made aware of, and shall undertake in writing to be bound by, and to comply with, the provisions of this clause  12 .
 
    13  GOVERNING LAW AND JURISDICTION
 
13.1  
The interpretation of this Agreement shall be governed by the law of the Zimbabwe in all respects.
 
13.2  
Any Party shall be entitled to institute all or any proceedings against any the other Parties in connection with this Agreement in the High Court of Zimbabwe sitting at Harare.
 
 
    14 INTERPRETATION
 
14.1  
In this Agreement, unless the context requires otherwise:
 
14.1.1  
words importing any one gender shall include the other 2 (two) genders;
 
14.1.2  
the singular shall include the plural and vice versa ; and
 
14.1.3  
a reference to natural persons shall include created entities (corporate or unincorporated) and vice versa .
 
14.2  
In this Agreement, the headings have been inserted for convenience only and shall not be used for nor assist or affect its interpretation.
 
14.3  
If anything in a definition is a substantive provision conferring rights or imposing obligations on anyone, effect shall be given to it as if it were a substantive provision in the body of this Agreement.
 
 
    15    GENERAL
 
15.1  
This Agreement contains the entire agreement between the Parties as to the subject matter hereof.
 
15.2  
No Party shall have any claim or right of action arising from any undertaking, representation or warranty not included in this Agreement.
 
15.3  
No failure by a Party to enforce any provision of this Agreement shall constitute a waiver of such provision or affect in any way that Party’s right to require performance of any such provision at any time in the future, nor shall the waiver of any subsequent breach nullify the effectiveness of the provision itself.
 
15.4  
No agreement to vary, add to, or cancel this Agreement shall be of any force or effect unless reduced to writing and signed on behalf of all of the Parties to this Agreement.
 
15.5  
No Party may cede any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Parties to this Agreement.
 
15.6  
This Agreement may be signed in counterparts, in which event the originals together will constitute the entire agreement between the Parties.
 
 
    16 COSTS
 
 
Each Party shall bear its own costs to be incurred in connection with the drafting and negotiation of this Agreement.
 
SIGNED at
on 
2012

For:
GWANDA COMMUNITY SHARE OWNERSHIP TRUST

 

_________________________________
 
Signatory:
Capacity:
Authority:

 
SIGNED at
on 
2012

For:
BLANKET MINE (1983) (PRIVATE) LIMITED



_________________________________
 
Signatory:
Capacity:
Authority:
 


SIGNED at
on 
2012

For:
CALEDONIA HOLDINGS ZIMBABWE (PRIVATE) LIMITED

 

_________________________________
 
Signatory:
Capacity:
Authority:

 
 11