UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| OR | |
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2022 | |
| 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 193 |
| Date of event requiring this shell company report …………………………………………… | |
| For the transition period from ……………………………… to ……………………………… |
Commission file number 001-38164
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
B006 Millais House, Castle Quay, St Helier, Jersey, JE2 3EF
(Address of principal executive offices)
Mark Learmonth, +44 1534 679 800, mlearmonth@caledoniamining.com, B006 Millais House, Castle Quay, St Helier, Jersey Channel Islands, JE2 3EF.
(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:
| Title of Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
| Common Shares, no par value | CMCL | NYSE American LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
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 stock as of the closing of the period covered by the annual report:
12,833,126 (“Common shares” or “shares”)
Indicate by check mark if the registration is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐Yes ☒ 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 ☒ 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
☒Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
☒Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, and/or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☒ |
| Non-accelerated filer ☐ | Emerging growth company ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements ☐1
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐2
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 | ☒ | Other | ☐ |
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 ☒ No
___________________________
1 Check boxes are blank, pending adoption of the underlying rules.
2 Check boxes are blank, pending adoption of the underlying rules.
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F ("Annual Report") and the exhibits attached hereto contain "forward-looking information" and “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, the Company’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: our mineral reserve and mineral resource calculations with underlying assumptions, 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 Mining Corporation Plc and subsidiaries (“Caledonia” or “Company” or “Group”) plans and timing regarding further exploration, drilling and development, the prospective nature of exploration and development targets, the ability to upgrade and convert mineral reserves and mineral resources, 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 mineral reserves and mineral resources, 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.
Shareholders, potential shareholders and other 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; risks related to natural disasters, terrorism, civil unrest, public health concerns (including health epidemics or outbreaks of communicable diseases such as the coronavirus); 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 and mineral resources as mining occurs; global financial condition, the actual results of current exploration activities, changes to conclusions of economic evaluations, and changes in project parameters to deal with un-anticipated economic or other factors, risks of increased capital and operating costs, environmental, safety or regulatory risks, expropriation, the Company’s title to properties including ownership thereof, increased competition in the mining industry for properties, equipment, qualified personnel and their costs, risks relating to the uncertainty of timing of events including targeted production rate increase and currency fluctuations. Shareholders, potential shareholders and other prospective investors are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia reviews forward-looking information for the purposes of preparing each 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 United States 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$1,235,000,000 (as such amount is indexed for inflation every 5 years by the United States Securities and Exchange Commission (“SEC”)) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of equity securities pursuant to an effective registration statement under the United States Securities Act of 1933, as amended (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 immediate future. During 2020 Caledonia completed the first sale of equity securities under the Securities Act and may no longer qualify as an emerging growth company in 2026. Refer to note 24 in the Consolidated Financial Statements for detail on the sales of equity securities.
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 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.
SPECIAL NOTE REGARDING LINKS TO EXTERNAL WEBSITES
Links to external, or third-party websites, are provided solely for convenience. We take no responsibility whatsoever for any third-party information contained in such third-party websites, and we specifically disclaim adoption or incorporation by reference of such information into this report.
NON-IFRS FINANCIAL INFORMATION
This Annual Report contains financial statements of the Company prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). In addition, this Annual Report also contains non-IFRS financial measures (“Non-IFRS Measures”) including “on-mine 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.
CURRENCY
Unless otherwise indicated, all references to “$”, “US dollars”. “USD”, or "US$" are to United States of America dollars.
FOREIGN PRIVATE ISSUER FILINGS
We are considered a “foreign private issuer” pursuant to Rule 405 promulgated under 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 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”.
| ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
| Not applicable. |
| Not applicable. |
| Not applicable. |
An investment in our 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 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 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 infrastructure 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 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.
Our shares may not continue to be listed on the NYSE American LLC (“NYSE American”)
Failure to meet the applicable maintenance requirements of the NYSE American could result in our shares being delisted from the NYSE American. If we are delisted from the NYSE American, our shares may be eligible for trading on an over-the-counter market in the United States. In the event that we are not able to obtain a listing on another U.S. stock exchange or quotation service for our shares, it may be extremely difficult or impossible for shareholders to sell their shares in the United States. Moreover, if we are delisted from the NYSE American, but obtain a substitute listing for our shares in the United States, it may be on a market with less liquidity, and therefore potentially more price volatility, than the NYSE American. Shareholders may not be able to sell their shares on any such substitute U.S. market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our shares are delisted from the NYSE American, the price of our shares is likely to decline. In addition, a decline in the price of our shares will impair our ability to obtain financing in the future.
Future sales of our shares into the public market by holders of our options may lower the market price, which may result in losses to our shareholders.
As of April 28, 2023, we had 19,188,073 shares issued and outstanding. In addition, as of April 28, 2023, 20,000 shares were issuable upon exercise of outstanding stock options, all of which may be exercised in the future resulting in dilution to our shareholders. Awards under the incentive plan made to executives and certain other senior members of management on January 24, 2022 and April 7, 2023, consisting of a target of 130,380 and 93,035 Equity-settled Performance Units (“EPUs”) respectively, are only to be settled in shares. The PUs that vest will be subject to a performance multiplier and a maximum amount of 150% of target PUs could vest. Accordingly, providing for such a maximum amount, Caledonia could grant options on a further 1,440,284 shares as at the date of this Annual Report on the assumption that all other outstanding awards (other than the options mentioned above) are settled in cash at the request of the holders. As of April 28, 2023, our senior officers and directors beneficially owned or had an interest in, as a group, 2,904,740 shares (15.14% of our issued share capital). Sales of substantial amounts of our shares into the public market, by our officers or directors or pursuant to the exercise of options, or even the perception by the market that such sales may occur, may lower the market price of our shares.
The price of gold is subject to volatility and may have a significant effect on our future activities and profitability.
The economic viability of our revenues, operations and exploration and development projects is, and is expected to be, heavily dependent on 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. Blanket Mine (1983) (Private) Limited (“Blanket”), the company which owns the Blanket mine (“Blanket Mine”), during fiscal 2022 sold all of its gold production to Fidelity Printers and Refiners Limited (“Fidelity”), as required by Zimbabwean legislation, and received the spot price of gold less an early settlement discount of 1.25% (2.5% from October 1, 2018 to January 11, 2019).
On December 22, 2022 the Company purchased put options to hedge 16,672 ounces of gold from February 2023 to May 2023 at a strike price of $1,750. These options were purchased to protect the Company against gold prices below $1,750 for the quantity of ounces hedged.
The future impact of the put option hedge is undeterminable at the date of issue of this report and will be quantified in the Condensed Consolidated Interim Financial Statements as at March 31, 2023. Refer to note 14.1 of the Consolidated Financial Statements for more detail on the hedging agreements.
Our Business Operations and/or Activities could be impacted by the spread of contagious diseases, such as the Coronavirus.
Our business could be significantly adversely affected by the effects of a widespread global outbreak of contagious diseases, including the recent outbreak of respiratory illness caused by a novel coronavirus (“COVID-19”). We cannot accurately predict the impact that contagious diseases, such as COVID-19, will have on third parties’, including our employees’ ability to fulfil their obligations to the Company, including due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries (including those countries we rely on to conduct our business operations), resulting in an economic downturn that could negatively impact our operating results.
Currently there are no concerns over the valuation of our assets as disclosed in the Consolidated Financial Statements and the Company does not foresee any changes in the cost of capital, cash requirements or any covenant defaults in our credit agreements. At the date of the authorisation of this document management is of the opinion that the effects of COVID-19 have been considered in making significant judgements and estimates, valuations and evaluating our going concern principle. However, it must be recognised that the duration and effects of the COVID-19 pandemic are uncertain and can affect our forecasting accuracy. As of the date of this Annual Report, the severity of the effects of COVID-19 appear to be diminishing in the jurisdictions where the Company operates.
We cannot guarantee that there will not be an increase in input costs affecting our results of operations and financial performance.
Mining companies could experience higher costs of steel, reagents, labor, electricity, government levies, fees, royalties and other direct and indirect taxes. Our investment in a solar plant, efficiencies at existing operations and planned growth, should assist in curbing cost increases and/or allow the fixed cost component to be absorbed over increased production assisting in alleviating the net cash effect of any further cost increases and potentially increase revenue cash flows. 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 water and electricity supplies, that is currently available and used by us may, as a result of adverse climatic conditions, 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.
Our operations may be subject to inadequate water supply.
Blanket uses water in the metallurgical process, some of which is pumped from the deeper levels of the mine but most of which is obtained from the “Blanket dam” (which, despite its name, is neither owned nor managed by Blanket Mine) which also supplies water to the nearby town of Gwanda. Blanket Mine is situated in a semi-arid region and rainfall typically only occurs in the period November to February. Management believes that there is enough water in the Blanket Mine dam to maintain normal operations until the next rainy season. During dry periods as a precautionary measure, Blanket intends to resuscitate existing boreholes and determine their yield; conduct hydrological surveys to identify potential new boreholes; recycle water from the lower levels of unused workings and construct a pond to store water that is pumped from current workings. If, however, there is inadequate water supply, operations at Blanket Mine may become more costly or have to be curtailed, suspended or even terminated which may have serious adverse consequences to the viability of gold production from Blanket Mine that could, in turn, have a material adverse effect on our business, results of operations or financial performance.
Our operations may be subject to inadequate electricity supply.
Zimbabwe’s electricity generation is mainly from the Kariba hydro station on the Zambezi river, the Hwange coal-fired station and several other much smaller coal-fired power stations. Even if Zimbabwe’s installed generating capacity is fully operational, it cannot generate enough electricity to meet its requirements and therefore Zimbabwe imports electricity from Mozambique and South Africa. Blanket Mine has a supply agreement with the Zimbabwe Electricity Supply Authority (“ZESA”) in terms of which it pays a premium rate in return for uninterrupted power.
The generating capacity at the Kariba hydro generating station fluctuates at times when the water levels are low. In addition, the export of electricity from South Africa to Zimbabwe is also interrupted due to a lack of generating capacity in South Africa and therefore interruptions to the Blanket supply do occur. The combined effect of these are severe electricity shortages that lead to “load-shedding” or low voltage occurrences.
Power surges as experienced at Blanket, if not controlled, can cause severe damage to Blanket’s electrical equipment. Power surges are regulated by autotap transformers that are installed to normalise fluctuations up to 10MVA; current fluctuations vary to 12MVA. As a result of load-shedding and low voltage occurrences, two 10MVA autotap transformers were installed in the fourth quarter of 2021; this installation reduced the voltage fluctuations and reduced the power cost and diesel, Blanket’s use of diesel for generating electricity decreased from approximately 3,311,000 liters for the year in 2021 to 1.420,000 liters in 2022.
Blanket has addressed the issue of interrupted power supply by installing stand-by generators. These generators can supply the whole mine with electricity but is a costly and environmentally unfriendly electricity source that is reliant on fuel imports that may from time to time be in shortage in Zimbabwe.
To mitigate against the current electricity situation, Caledonia has constructed a 12.2MWac solar plant at a cost of approximately $14.3 million (including construction costs and other project planning, structuring, funding and administration costs) supplying the Blanket operations. The solar plant was fully commissioned early February 2023 and provides approximately 27% of Blanket Mine’s average daily electricity demand. The plant has been providing power to Blanket from its initial connection to the Blanket grid in November 2022.
Management is in discussion with the Zimbabwean power utility to obtain an improved supply of electricity. This may include an additional supply line that will result in fewer outages and a power supply that has a higher power factor. Blanket may potentially pay a different KWh rate for this supply line. At the date of approval of this report no agreement with ZESA had been concluded in this respect.
Management continues to engage with the Intensive Energy User Group regarding the import of electricity from power producers in Zambia and Mozambique and for this power to be wheeled via the Zimbabwe grid to Blanket. If these discussions are successful, it is expected that Blanket’s continuity of electricity supply will improve.
If an electricity shortage or outage persists, operations at the mines may become more costly or have to be curtailed, suspended or even terminated which may have serious adverse consequences to the viability of production from the mines that could, in turn, have a material adverse effect on our business, results of operations or financial performance.
We do business in countries and jurisdictions outside of the United States where different economic, cultural, regulatory, monetary 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, nullification or partisan terms of existing concessions, licenses, permits and contracts; illegal mining; changes in monetary and 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.
The current monetary situation in Zimbabwe can be summarized as follows:
| ● |
Although there continues to be a shortage of foreign currency in Zimbabwe, the business has had satisfactory access to foreign exchange to date. |
| ● |
The rate of local currency (known as “ZWL$”, “RTGS Dollars” or “RTGS$”) annual inflation increased from 61% by January 2022 to 244% by December 2022 which is the highest reading since April 2021. A high rate of RTGS$ inflation has little effect on operations because employees are paid in US Dollars. A large portion of other inputs are denominated in US Dollars. |
| ● |
Since October 2018, bank accounts in Zimbabwe have been bifurcated between Foreign Currency Accounts (“FCA”), which can be used to make international payments, and RTGS$ accounts which can only be used for domestic transactions. |
| ● |
On February 20, 2019 the Reserve Bank of Zimbabwe (“RBZ”) allowed limited inter-bank trading between currency held in the RTGS$ system and the FCA system. Prior to this, the RBZ had stipulated that a Dollar in the RTGS$ system was worth 1 US Dollar in the FCA system. The interbank exchange rate at each quarter end since the introduction of the interbank rate in February 2019 is set out below. |
| Interbank Exchange Rates (ZWL$:US$1) |
||||
| February 20, 2019 |
2.50 | |||
| March 31, 2019 |
3.00 | |||
| June 30, 2019 |
6.54 | |||
| September 30, 2019 |
15.09 | |||
| December 31, 2019 |
16.77 | |||
| March 31, 2020 |
25.00 | |||
| June 30, 2020 |
57.36 | |||
| September 30, 2020 |
81.44 | |||
| December 31, 2020 |
81.79 | |||
| March 31, 2021 |
84.40 | |||
| June 30, 2021 |
85.42 | |||
| September 30, 2021 |
87.67 | |||
| December 31, 2021 |
108.66 | |||
| March 31, 2022 |
142.42 | |||
| June 30, 2022 |
370.96 | |||
| September 30, 2022 |
621.89 | |||
| December 31, 2022 |
684.33 | |||
| March 31, 2023 |
929.86 | |||
| April 13,2023 | 963.55 | |||
| April 21,2023 | 1,000.40 | |||
| ● |
The interbank trading mechanism addressed the most pressing difficulty that emerged after the October 2018 policy implementation, being the erosion of the purchasing power of Blanket’s employees due to rapidly increasing retail prices which had an adverse effect on employee morale. In February 2020, the RBZ announced its intention to further liberalize the interbank market with the objective of increasing liquidity and transparency. However, in response to the COVID-19 pandemic, the Minister of Finance subsequently reversed this policy and re-established a fixed exchange rate of ZWL$25:US$1 with effect from March 26, 2020. On June 23, 2020, the RBZ introduced an “auction system” whereby, on a weekly basis, buyers and sellers of local currency and foreign exchange submit tenders which the RBZ uses to determine a revised interbank rate. RTGS$ denominated goods and services are typically priced using a US Dollar reference point to which the informal exchange rate is applied. The official exchange rate does not reflect the local rate of inflation. |
| ● |
Prior to May 26, 2020, 55% of sale proceeds were received in US Dollars and the balance was received in RTGS$. From May 26, 2020 gold producers received 70% of their sale proceeds in US Dollars and the balance was received in RTGS$. With effect from January 7, 2021, gold producers received 60% of their revenues in US Dollars and the balance in RTGS$. |
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After the reduction in the proportion of revenues received in US Dollars from 70% to 60% with effect from January 7, 2021, Blanket participated in the weekly auction system to access the resultant shortfall in US Dollars. From early June 2021, Blanket and other gold producers were excluded from the weekly auctions on the grounds that they are deemed to be exporters and therefore do not qualify to participate. Blanket subsequently secured allocations of foreign exchange from the RBZ to compensate for its exclusion from the auctions. As at the date of this report, Blanket has not accumulated excess local currency. |
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In June 2021 the RBZ announced that companies whose shares are listed on the VFEX will receive 100% of the revenue arising from incremental production in US Dollars. Blanket subsequently received confirmation that the “baseline” level of production for the purposes of calculating incremental production is 148.38 Kg per month (approximately 57,000 ounces per annum). In addition, the payment of the increased US Dollar proceeds for incremental production was backdated to July 1, 2021. As Blanket intended to increase its production from approximately 58,000 ounces of gold in 2020 to 80,000 ounces of gold from 2022 onwards, a listing on the VFEX meant that Blanket would receive approximately 71.5% of its total revenues in US Dollars and the balance in local currency. Accordingly in December 2021 Caledonia obtained a secondary listing on the VFEX. |
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On February 3, 2023, the RBZ issued Exchange control directive RY002/2023 stating that with effect from February 6, 2023, the US$ export retention threshold across all sectors, including companies listed on the VFEX, had been standardized to 75% of export proceeds. The incremental export incentive scheme was also discontinued with effect from February 1, 2023. The Company is awaiting a response from the RBZ as to whether the Bilboes project will be able to increase its USD revenue allocation. |
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Throughout these developments and to the date of issue of the Consolidated Financial Statements the US Dollar has remained the primary currency in which the Group’s Zimbabwean entities operate and the functional currency of these entities. |
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Up until April 2023, Blanket sold its gold production to Fidelity, which refines and on-sells the gold into the international market. During the first quarter of 2021, responsibility for making payments for gold deliveries from Blanket moved from the RBZ to its gold refining subsidiary Fidelity. This move simplified and improved the mechanism for making payments for gold and the new system is operating well. |
In April 2023 Blanket, Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”) and Bilboes Holdings (Private) Limited (“Bilboes Holdings”) commenced selling its gold production to Fidelity and Al Etihad Gold Refinery DMCC (“AEG”). Fidelity would receive, assay and refine all gold production to 95% pure gold or above. A total of 28.75% of the refined gold will be retained by Fidelity for the portion received in ZWL (after deduction of the ZWL portion of the royalty payment) and 1.25% will be retained for the government royalty payment in USD. The remaining 71.25% of the gold will be transported by Ferrari Logistics Southern Africa (Proprietary) Limited to AEG in Dubai, UAE and further refined and sold by AEG at a cost of $7 per ounce. Gold transported throughout this process is fully insured. The sales to Fidelity and AEG will be priced at the London Bullion Market Association (“LBMA”) London fixed pm price on day of delivery to AEG from Fidelity. 90% of the payment is contracted to be received upon delivery to AGK First DMCC and the remaining 10% a day later. Up to the date of approval of the Annual Report the Group has made $3,839,978 of sales, representing 1,936 ounces and has received payment in full. All payments outstanding were within contracted terms at approval date of the Annual Report. Management believes this new sales mechanism opens the sales options to more than one refiner and reduces the risk associated with selling and receiving payment from a single refining source in Zimbabwe.
Investors should recognize that Caledonia’s ability to implement its investment and operational strategies, Caledonia’s ability to sustain its operations outside Zimbabwe and pay future dividends depends, inter alia, on the ability to continue to externalize cash from Zimbabwe and receive payments for the sale of its gold proceeds.
Our operations are subject to various government approvals, permits, licenses and legal regulation for which no assurance can be provided that such approvals, permits or licenses will be obtained or if obtained will not be revoked or suspended.
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.
We face risks related to mining, exploration and mine construction on potential properties.
Our level of profitability, if any, in future years will depend on whether our mines produce 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 mineral reserves or mineral resources. Whether a mineral ore body will be commercially viable depends on several factors, and the exact effect of these factors cannot be accurately predicted. The exploration, development and production activities are subject to political, economic and other risks, including:
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cancellation or renegotiation of contracts; |
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changes in local and foreign laws and regulations; |
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changes in tax laws; |
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delays or refusal in granting prospecting permissions, mining authorizations and work permits for foreign management staff; |
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environmental controls and permitting; |
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expropriation or nationalization of property or assets; |
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foreign exchange controls and the availability of foreign exchange; |
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government mandated social expenditures; |
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import and export regulation, including restrictions on the sale of production in foreign currencies; |
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inflation of costs that is not compensated for by a currency devaluation; |
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requirement that a foreign subsidiary or operating unit has a domestic joint venture partner, which, possibly, the foreign company must subsidize; |
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restrictions on the ability of local operating companies to hold foreign currencies in offshore and/or local bank accounts; |
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restrictions on the ability of a foreign company to have management control of exploration and/or development and/or mining operations; |
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restrictions on the remittance of dividend and interest payments offshore; |
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retroactive tax or royalty claims; |
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risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism; |
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royalties and tax increases or claims by governmental entities; |
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unreliable local infrastructure and services such as power, water, communications and transport links; |
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demands or actions by native or indigenous groups; |
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other risks arising out of foreign sovereignty over the areas in which operations are conducted; and |
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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 mineral reserves to replace mineral reserves that have 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 reserves of an adequate grade and suitable metallurgical characteristics suitable for further development or production.
Refer to section 4.B – “Business Overview” for more information on our mining properties and projects.
Further development and commercial production at Blanket Mine, Bilboes oxides and acquired exploration and evaluation assets cannot be assured.
We are engaged in further development activities at Blanket Mine, exploration and evaluation activities at Blanket’s satellite properties, the Bilboes gold project in Zimbabwe (“Bilboes” or the “Bilboes Project”) (oxides and sulphides) and the Maligreen project (“Maligreen”) and we commenced oxide mining activities at the Bilboes oxide mine in December 2022. Estimates for future production, at Blanket Mine and the Bilboes oxide 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.
Refer to capital investments under Item 4.A – “History and Development of the Company”, for detail on development activities at Blanket and the Bilboes oxide mine and exploration and evaluation assets.
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 and the Bilboes oxide mine was sold to Fidelity. From April 26, 2023, at the date of approval of this document and pursuant to an arrangement with Fidelity production began to be sold to both Fidelity and AEG (see above). All payments due from Fidelity or AEG have been received in full and on time. This arrangement introduces a 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. 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.
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.
We were required to facilitate the economic participation of certain indigenous groups in our business and there can be no assurance that such required participation was at fair market value or that the terms of the agreements can be amended.
The government of Zimbabwe introduced legislation in 2012 requiring companies to facilitate participation in their shareholdings and business enterprises by the indigenous population (typically referred to as indigenization). It is not assured that such interests were paid for at full fair value. As reported, Blanket Mine complied with the requirements of the Indigenization and Economic Empowerment Act in Zimbabwe whereby indigenous shareholders legally owned 51% of Blanket Mine since September 2012 (until 2020 – see below).
Pronouncements from the Zimbabwe Government following the appointment of the new President in late 2017 announced a relaxation in the indigenization policy which, amongst other things, included the removal of an indigenization requirement for gold mining companies. These pronouncements were passed into law in March 2018.
On November 6, 2018, the Company announced that it had entered into a sale agreement with Fremiro Investments (Private) Limited (“Fremiro”) to purchase Femiro’s 15% shareholding in Blanket for a gross consideration of $16.7 million to be settled through a combination of the cancellation of the loan between the two entities which stood at $11.5 million as at June 30, 2018 and the issue of 727,266 new shares in Caledonia at an issue price of $7.15 per share. On completion of the transaction on January 20, 2020, Caledonia owned 64% in Blanket and Fremiro held approximately 6.3% of Caledonia’s shares.
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.
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 2023 through to 2025 prove incorrect, 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 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.
Our share price has been and is likely to continue to be volatile and an investment in our 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 in the U.S. on the NYSE American, depositary interests representing our shares are admitted to trading on AIM of the London Stock Exchange (“AIM”), and depositary receipts representing our shares were listed on the VFEX in December 2021 raising gross proceeds of approximately $7.8m (the use of the term “share” in this Annual Report also, where the context requires, extends to a depositary interest or depositary receipt representing a share). The Company voluntarily delisted its shares from the Toronto Stock Exchange (“TSX”) on June 19, 2020. After the delisting the Company remains a Canadian reporting issuer and has to comply with Canadian securities laws unless and until it can demonstrate that less than 2% of its beneficial shareholders are Canadian residents.
The market price of our shares may be highly volatile and subject to wide fluctuations. In addition, the trading volume of our shares may fluctuate and cause significant price variations to occur. If the market price of our shares declines significantly, you may be unable to resell your shares at or above the purchase price, if at all. We cannot assure you that the market price of our shares will not fluctuate or significantly decline in the future.
Factors affecting our share price include but are not limited to:
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actual or expected fluctuations in our operating results; |
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actual or expected changes in our growth rates or our competitors’ growth rates; |
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changes in the market price of gold; |
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changes in the demand for gold; |
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high extraction costs; |
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accidents; |
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changes in market valuations of similar companies; |
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additions to or departures of our key personnel; |
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actual or anticipated fluctuations in our quarterly operating results or those of our competitors; |
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publication of research reports by securities analysts about us or our competitors in the industry; |
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our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; |
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fluctuations of exchange rates between the US$, GBP, CAD, RTGS$ and ZAR; |
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changes or proposed changes in laws and regulations affecting the gold mining industry; |
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changes in trading volume of our shares on the NYSE American, AIM or VFEX; |
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sales or perceived potential sales of our shares by us, our directors, senior management or our shareholders in the future; |
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short selling or other market manipulation activities; |
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announcement or expectation of additional financing efforts; |
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terrorist acts, acts of war or periods of widespread civil unrest; |
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natural disasters and other calamities; |
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litigation involving us, including: shareholder litigation, investigations or audits by regulators into our operations; or proceedings initiated by our competitors or clients; |
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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; |
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the passage of legislation or other regulatory developments affecting us or our industry; |
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fluctuations in the valuation of companies perceived by investors to be comparable to us; and |
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conditions in the U.S., United Kingdom and Zimbabwe financial markets or changes in general economic conditions. |
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 mines are depleted. There is no assurance that we will always be able to locate and hire all the personnel that we may require. Where appropriate, we engage with consulting and service companies to undertake some of the work functions.
Our mineral rights 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 of title to our properties or that competing ownership claims or encumbrances respecting our properties will 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 claims 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 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 receive 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 our 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 proceedings, 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 the United States of America, South Africa, Zimbabwe, Canada, the United Kingdom, Jersey Channel Islands 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.
We face risks related to illegal mining and no assurance can be provided that such illegal mining will not have an adverse effect on our business, results of operations and financial performance.
Illegal mining activities on properties controlled by the business have been identified. This gives rise to increased security costs and an increased risk of theft and damage to equipment. The business has received adequate support and assistance from the Zimbabwean police in investigating such cases but there can be no guarantee that the support from the Zimbabwean police will continue and whether their support will stop illegal mining activities.
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 either the Associated Mine Workers Union of Zimbabwe or Zimbabwe Diamond and Allied Minerals Workers Union. 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 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 (“EH&S”) laws and regulations in the countries in which the relevant activity is being conducted.
In 2018, a training facility (called the Nyanzvi initiative) was established at Blanket using dedicated facilities and specially trained facilitators. The entire Blanket workforce participated in the programme which resulted in the general improvement in safety in the first two quarters of 2020. The Nyanzvi programme was suspended from late March 2020 due to the need to observe social distancing because of COVID-19 which contributed to the increase in reportable events. The Nyanzvi safety training initiative was resumed in the last quarter of 2021 as COVID-19 restrictions were relaxed; management believes this will help to increase general safety awareness. It is planned that the Nyanzvi initiative will be implemented for Bilboes from 2023 onwards.
Safety training is an ongoing exercise and it will remain an area of focus for the Company. There is no assurance, however, that future changes in EH&S, if any, will not adversely affect our exploration and development programs or our operations. There are no assurances that regulatory and environmental approvals required under EH&S will be obtained on a timely basis or if at all. 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.
Due to the nature of our business, our operations face extensive EH&S risks.
Gold mining is exposed to numerous risks and events, the occurrence of which may result in the death of, or personal injury, to employees. EH&S legislation applicable to us could suspend part or all of our operations. EH&S incidents could therefore lead to increased unit production costs or lower production which could negatively affect our business, operating and/or financial results.
In response to the COVID-19 pandemic, measures were introduced to safeguard our employees; e.g. protective equipment and guidelines - clothing, sanitizers, stricter safety protocols, etc. One case of COVID-19 was recorded at Blanket during 2020; 232 cases of COVID-19 were detected in 2021 of which there was, regrettably, two deaths of an employee and a dependent. Further cases have been detected at the Company’s offices in Harare, Johannesburg and St Helier. Blanket procured sufficient doses of an approved vaccine for all adult employees and their spouses; as at December 31, 2022, 2,066 of Blanket’s employees and 1,030 of the Blanket employee dependents living on the Blanket site have been vaccinated on site.
Regrettably, a fatality occurred on February 21, 2022 and another on February 16, 2023. The fatalities occurred as a result of a vehicle accident underground and a secondary blasting accident. The directors and management of Caledonia and Blanket express their sincere condolences to the family and colleagues of the deceased. Management has provided the necessary assistance to the Ministry of Mines Inspectorate Department in its enquiries into these incidents. Caledonia takes the safety of its employees very seriously and, accordingly, measures have been taken to reinforce adherence to prescribed safety procedures.
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 interests in properties such as the Bilboes oxide mining tribute, Bilboes sulphides project, Maligreen and Motapa. 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 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.
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 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 requirements under the Securities Act that apply to U.S. domestic issuers, which could limit our ability to access 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 shares less attractive to investors and, as a result, adversely affect the price of our shares and result in a less active trading market for our 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 apply to other public companies that are not emerging growth companies. For example, we have qualified for 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 require 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 shares less attractive because of our reliance on some or all these exemptions. If investors find our shares less attractive, it may adversely impact the price of our shares and there may be a less active trading market for our 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 $1,235,000,000 (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 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 |
| ● |
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 shares that are held by non-affiliates exceeds $700,000,000 as of the last day of our most recently-completed second fiscal quarter. |
During 2020, the Company sold its first equity securities under the Securities Act. This means that the Company may no longer qualify as an emerging growth company following the fifth anniversary of the completion of the equity raise. The Company may instead thereafter have to comply with Section 404(b) of the Sarbanes-Oxley Act where our registered public accountant will be required to attest to management’s assessment of its internal controls over financial reporting as presented under Item 15B of Form 20-F.
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 shares could decline and we may be subject to litigation or regulatory enforcement actions.
There is uncertainty with our mineral reserve and mineral resource estimates.
Our mineral reserve and mineral resource estimates described in this document are estimated in accordance with the requirements of Subpart 1300 of Regulation S-K (“Subpart 1300”). We believe these estimates also comply with Canada’s National Instrument 43-101 (“NI 43-101”). These estimates may not reflect actual mineral reserves and, mineral resources, or future production. Should we encounter mineralization or formations different from those predicted by past drilling, sampling and similar examinations, mineral reserve and mineral resource estimates may have to be adjusted and mining plans may have to be altered in a way that might ultimately cause our mineral reserve and mineral resource estimates to decline. Our mineral resource estimates may never be upgraded to mineral reserves. Moreover, if the gold price declines, or if our labor, consumable, electricity and other production costs increase or recovery rates decrease, it may become uneconomical to recover our mineral reserves. Under these circumstances, we would be required to re-evaluate our mineral reserves and mineral resources. Mineral reserve and mineral resource estimates are based on drilling results and because unforeseen conditions may occur, the actual results may vary from the initial estimates. These factors could result in reductions in our mineral reserve and mineral resource estimates, which could in turn adversely impact the total value of our business.
U.S. investors may not be able to enforce their civil liabilities against us or our directors and officers.
It may be difficult to bring and enforce suits against us, because we were amalgamated and exist under the laws of Jersey, Channel Islands and are situated in Jersey, Channel Islands and do not have assets located in the United States.
All our assets are located outside the United States and most of our directors and all of our officers are residents of countries other than the United States. As a result, it may be difficult for investors to effect service of process on us or these non-United States resident persons within the United States or to rely in the United States upon judgments obtained in the United States based on the civil liability provisions of the U.S. federal securities laws against us or our officers and non-United States resident directors. In addition, our U.S. shareholders should not assume that the courts of Jersey, Channel Islands (i) would enforce judgments of U.S. courts obtained in actions against us, our officers or directors predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us, our officers or directors predicated upon the U.S. federal securities laws or other laws of the United States.
We are incorporated under the laws of Jersey, Channel Islands and our principal offices are located outside of the United States which could have negative tax consequences for U.S. investors.
We are incorporated under the laws of Jersey, Channel Islands and are located outside of the United States. Accordingly, U.S. investors could be subject to negative tax consequences. If we choose to make an offering of securities in the United States, the applicable prospectus is expected to include a discussion of the material United States tax consequences relating to the purchase, ownership and disposition of any securities offered thereby, to the extent not set out in this Annual Report; however, investors should consult their own tax advisors as to the consequences of investing in Caledonia.
There is uncertainty as a result of the conflict in Ukraine
The conflict in Ukraine which began in February 2022, and the accompanying international response including economic sanctions, has been extremely disruptive to the world economy, with increased volatility in commodity markets, including higher oil and gasoline prices, international trade and financial markets, all of which have a trickle-down effect on supply chains, equipment and construction. There is substantial uncertainty about the extent to which this conflict will continue to impact economic and financial affairs, as the numerous issues arising from the conflict are in flux and there is the potential for escalation of the conflict both within Europe and globally. There is a risk of substantial market and financial turmoil arising from the conflict which could have a material adverse effect on the economics of the Company’s projects, and the Company’s ability to operate its business and advance project development.
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 and was registered at the time under the Canada Business Corporations Act.
Following the creation of Caledonia its shares were listed on the TSX 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 stock commenced trading on the OTCQX in June 2005.
Effective April 1, 2006 the Company purchased 100% of the issued shares of the Zimbabwean company, CHZ that held 100% of the shares of Blanket Mine. The purchase consideration was $1,000,000 and 20,000,000 shares of Caledonia. The Company acquired all the assets and assumed all the liabilities of CHZ.
The Company re-domiciled from Canada to Jersey using a legal process called “Continuance” on March 19, 2016. The Company operates under the Companies (Jersey) Law 1991, as amended, (the “Companies Law”). The Continuance had no effect on the Company’s listing on the TSX or on the trading facilities on AIM in London or on the OTCQX in the United States of America.
On July 24, 2017, the Company announced that its shares would be listed on the NYSE American and trading began on July 27, 2017. The trading of the Company’s shares on the OTCQX ceased upon the commencement of trading on the NYSE American.
Caledonia voluntary delisted its shares from the TSX on June 19, 2020. After the delisting, the Company remains a Canadian reporting issuer and has to comply with Canadian securities laws unless and until it can demonstrate that less than 2% of its beneficial shareholders are Canadian residents. On December 2, 2021, Caledonia issued and listed 619,783 depositary receipts representing an equivalent number of shares on the VFEX raising gross proceeds of $7.8 million.
On January 6, 2023, Caledonia completed the acquisition of Bilboes Gold, further details of which can be found in Section 4 B: Business overview of this report
As at the date of this report Caledonia’s securities trade on the NYSE American, AIM and VFEX under the ticker “CMCL”.
The addresses and telephone numbers of Caledonia’s principal offices are:
| Registered and Head Office |
African Office - South African Subsidiaries |
| Caledonia Mining Corporation Plc |
Caledonia Mining South Africa Proprietary Limited |
| B006 Millais House, Castle Quay, St Helier |
4th Floor, 1 Quadrum office park |
| Jersey, Channel Islands |
Johannesburg, Gauteng, 2198 |
| JE2 3EF |
South Africa |
| (44) 1534 679 800 |
(27) 11 447 2499 |
Indigenization of Blanket Mine
On February 20, 2012 certain companies within Caledonia’s group of companies (the “Group”) announced that they had signed a Memorandum of Understanding (“MoU”) with the Minister of Youth, Development, Indigenization and Empowerment of the Government of Zimbabwe pursuant to which the Group agreed that indigenous Zimbabweans would acquire an effective 51% ownership interest in the Blanket Mine for a transactional value of $30.09 million. Pursuant to the above, the Group entered into agreements with each indigenous shareholder to transfer 51% of the Group’s ownership interest in Blanket Mine whereby it:
| ● |
sold a 16% interest to the National Indigenisation and Economic Empowerment Fund (“NIEEF”) for $11.74 million; |
| ● |
sold a 15% interest to Fremiro, 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. |
Following completion of the underlying subscription agreements, advances were made to NIEEF and the Community Trust against their rights to receive dividends declared by Blanket Mine on their shareholdings as follows:
| ● |
a $1.8 million payment to NIEEF on or about June 21, 2012; |
| ● |
a $2 million payment to the Community Trust on or before September 30, 2012; |
| ● |
a $1 million payment to the Community Trust on or before February 28, 2013; and |
| ● |
a $1 million payment to the Community Trust on or before April 30, 2013. |
Advances made to NIEEF as an advanced dividend loan were settled through dividend repayments in 2014. Refer to note 6 of the Consolidated Financial Statements for the outstanding balance of the advanced dividend loan with the Community Trust. The final payment to settle the advance dividend loan to the Community Trust was made on September 22, 2021. Future dividends to the Community Trust will be unencumbered.
The Group facilitated the vendor funding of these transactions and the advanced dividend loans which were repaid by way of dividends from Blanket Mine. 100% of dividends declared by Blanket Mine as payable to the Community Trust were used to repay its advanced dividend loan until the beginning of 2020 when Blanket agreed that 80% of dividends declared by Blanket Mine would be used to repay such loan and the remaining 20% would unconditionally accrue to the Community Trust, which was the same arrangement that applied to the other indigenous shareholders (see below). 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. Subsequent to the indigenization transactions the facilitation loans relating to the Group were transferred as a dividend in specie to the Company.
On June 23, 2017, the Group, Blanket Mine and the indigenous shareholders of Blanket Mine reached agreement to change the interest terms of the facilitation and advanced dividend loan agreements. The agreements changed the interest rate from the previously agreed 12-month LIBOR + 10% to the lower of a fixed 7.25% per annum, payable quarterly or 80% of the Blanket Mine dividend in the quarter. The modification was considered beneficial to the indigenous shareholders and gave rise to an equity-settled share-based expense of $806,000 on June 23, 2017 when all parties reached agreement to modify the interest charged. It was agreed that the interest change was to be applied to the facilitation and advanced dividend loan balances from January 1, 2017.
Pronouncements from the Zimbabwe Government following the appointment of the new President in late 2017 declared a relaxation in the indigenization policy which, amongst other things, included the removal of an indigenization requirement for gold mining companies. These pronouncements were passed into law in March 2018. In light of the changed legislation, on November 6, 2018, the Company announced that it had entered into a sale agreement with Fremiro to purchase Femiro’s 15% shareholding in Blanket for a gross consideration of $16.667 million to be settled through a combination of the cancellation of the loan between the two entities (which stood at $11.467 million as at June 30, 2018) and the issue of 727,266 new shares in Caledonia at an issue price of $7.15 per share. On completion of the transaction on January 20, 2020, Caledonia owned 64% in Blanket and Fremiro held approximately 6.3% of Caledonia’s shares.
On February 27, 2020, the Company, Blanket Mine and the indigenous shareholders of Blanket Mine reached an agreement to change the repayment terms of the advance dividend loan to the Community Trust. The amendment allowed that 20% of the Community Trust’s share of the Blanket dividend would accrue to it on declaration of the dividend and that the remaining 80% be applied to the advance dividend loan from February 27, 2020. The modification was not considered beneficial to the other indigenous shareholders.
Blanket Mine - Capital Investment
The main capital development project is the infrastructure which will allow for production at 30 and 34 levels below the current operations; another level (38 level) is intended to be added in due course via a decline construction. Central Shaft is currently being used to hoist development waste, people and material – thereby freeing up capacity at No. 4 Shaft to hoist ore. Investment in 2022 comprised the construction of the grizzly rock passes at the ore passes on 26 and 30 levels that is 50% complete, mining of the clear and dirty water sumps at 34 level, and the completion of the raise boring return airway connecting 30 and 34 level and the conveyor and primary crushing plant on surface. Development from Central Shaft has continued northwards and southwards on 26, 30 and 34 levels towards AR South and Eroica.
In addition, work continued on the following developments:
| ● |
Eroica Decline 3: this decline will continue down to the 30 and 34 levels (990m and 1,110m below collar, respectively) and will connect to the haulages from Central Shaft. Progress in 2022 was stopped at 870 meters to allow for level development to take place; |
| ● |
930-meter haulage: this haulage was mined from the bottom of decline 4 in the Blanket section designed to facilitate the opening up and development of the BQR and 3 Orebody zones. This work has been accomplished successfully and the updip development has since linked to 870m level some 60m above. This connection has improved access and ventilation allowing for rapid strike development to take place on multiple sublevels. It is currently ongoing along the 2 orebody section. This is an area with higher than average mine grades. |
The Caledonia board has allocated approximately $3 million towards a capital program to address the remaining issues relating to the electricity supply from the grid which includes installing capacitors to improve the power utilization efficiency and installing further autotap changers to stabilize the power at Central Shaft. The table below shows spending on capital development projects for the twelve months to the end of 2022:
| Capital development |
$’m |
|||
| Central Shaft and infrastructure development |
9.7 | |||
| Capital development ends |
5.7 | |||
| Power |
5.6 | |||
| TOTAL |
21.0 | |||
Solar Investment
In 2020, the Company raised $13 million (before commission and expenses) through the sale of 597,963 shares at an average price of $21.74 per share to construct a solar plant. Caledonia initiated a tender process to identify parties to submit proposals for a solar project that would reduce Blanket’s reliance on grid and generator power and provided notice to proceed with construction in 2021. The 12.2 MWac solar plant was connected to the Blanket grid in November, 2022 and fully commissioned in early February 2023. The solar plant provides approximately 27% of Blanket’s electricity demand during daylight hours, reduces Blanket’s reliance on the utility and generator use and cost $14.3 million to complete.
Blanket continues to rely on the grid and generators to provide additional power during daylight hours and at night. Completion of the solar plant coincided with an improvement in the supply of power from the grid which has substantially reduced the amount of diesel consumed. In January 2023 Blanket consumed on average 18,000 litres of diesel per month for 2023 compared to an average of 120,000 litres per month for the whole of 2022. Whilst it is uncertain that this level of improvement will be maintained, the successful implementation of the solar plant is expected to result in a meaningful reduction in diesel usage.
In December 2022, the Caledonia board approved a proposal for Caledonia Mining Services (Private) Limited (“CMS”), which owns the solar plant, to issue loan notes (“bonds”). This decision was taken to optimise the capital structure of the Group and provide additional debt instruments to the Zimbabwean financial market. The bonds have an interest rate of 9.5% payable bi-annually and have a tenor of 3 years from the date of issue. The bond repayments are guaranteed by the Company and $7 million of bonds were in issue to the date of this report, all issued to Zimbabwean registered commercial entities.
Capital projects and expenditures are further analyzed in notes 17 and 18 of the Consolidated Financial Statements and under Item 4.B – “Business Overview”.
Available Information
The SEC maintains an internet site (http://www.sec.gov) that contains report, proxy and information statements and other information regarding issuers that file electronically with the SEC. Such information can also be found on the Company’s website (http://www.caledoniamining.com).
Description of Our Business
Blanket Mine
Caledonia’s primary focus is the operation of a gold mine and the exploration and development of mineral properties for precious metals. Caledonia’s activities are focused on Zimbabwe. The Company’s business during the last three completed fiscal years has been focused primarily on increasing production to 80,000 oz. of gold from 2022 onward through its investment plan at Blanket Mine.
Total gold production at Blanket Mine for 2022 was 80,775 oz. (2021: 67,476; 2020: 57,899). Gold producers compete globally based on their operating and capital costs. Certain gold producers benefit from their ability to produce other minerals in commercial quantities as by-products. Caledonia derives approximately 0.1% of its revenues from silver, which is insignificant. 100% of Blanket’s revenues over the last three years was derived from its operations in Zimbabwe.
Bilboes Gold
On July 21, 2022 Caledonia announced that it had signed an agreement (the “Bilboes Agreement”) to purchase Bilboes Gold Limited (“Bilboes Gold”), the parent company which owns, through its Zimbabwe subsidiary, Bilboes Holdings, the Bilboes Project for a total consideration of 5,123,044 Caledonia shares representing approximately 26.8% of Caledonia's fully diluted equity as at today’s date and a 1% net smelter royalty ("NSR") on the Bilboes Project's revenues.
Bilboes is a large, high grade gold deposit located approximately 75 km north of Bulawayo, Zimbabwe. Historically, it has been subject to a limited amount of open pit mining.
Upon Caledonia’s entry into the Bilboes Agreement, Caledonia announced a NI43-101 compliant estimate commissioned by the vendors of Bilboes Gold of proven and probable mineral reserves of 1.96 million ounces of gold in 26.64 million tonnes at a grade of 2.29 g/t and measured and indicated mineral resources of 2.56 million ounces of gold in 35.18 million tonnes at a grade of 2.26 g/t (inclusive of mineral reserves) and inferred mineral resources of 577,000 ounces of gold in 9.48 million tonnes at a grade of 1.89 g/t. These estimates were derived from a NI 43-101 technical report titled “BILBOES GOLD PROJECT FEASIBILITY STUDY" with effective date December 15, 2021 prepared by DRA Projects (Pty) Ltd and filed by the Company on SEDAR (www.sedar.com) on July 21, 2022. Caledonia is not treating these estimates as current estimates of mineral resources or mineral reserves, pursuant to Subpart 1300 because a qualified person has not done sufficient work to classify the estimate as a current estimate of mineral resources or mineral reserves under Subpart 1300.
The Company understands that the project has produced approximately 288,000 ounces of gold since 1989. The report mentioned above indicates the potential for an open-pit gold mine producing an average of 168,000 ounces per year over a 10-year life of mine.
On July 21, 2022 Caledonia also entered into tribute and mining agreements with Bilboes Holdings so that the oxide mining activities could be re-started. Restarting the oxide mining activities had the benefit of an element of pre-stripping for the main development, the Bilboes sulphide project. This tribute agreement is specific to the oxide and transitional ore mining operations of Bilboes Holdings At the date of the tribute agreement Bilboes Holdings was on care and maintenance.
On January 6, 2023 Caledonia announced that it had satisfied the conditions precedent to purchase Bilboes Gold. The total consideration was agreed at 5,123,044 Caledonia shares, representing approximately 26.8% of Caledonia's fully diluted equity as at today’s date and a 1% NSR. Following completion of the transaction in January 2023, Caledonia commissioned its own feasibility study to identify the most judicious way to commercialize the Bilboes sulphide project and optimize shareholder returns. One approach that is being considered is a phased development which would minimize the initial capital investment and reduce the need for third party funding.
Caledonia has commenced the oxide operations that is expected to be cash positive within 6 months of the commencement of work and it generated $171,000 revenue by March 31,2023. This also has the benefit of partially pre-stripping the area for the main development of the project.
Refer to note 5 in the Consolidated Financial Statements for more detail on the Bilboes Gold acquisition and tribute transaction.
Motapa-Project
On November 1, 2022 Caledonia acquired from Bulawayo Mining Company Limited (“Bulawayo Mining”) all the shares in Motapa Mining Company UK Limited (“Motapa”), which wholly owns Arraskar Investments (Private) Limited (“Arraskar”), the holder of the registered mining lease over Motapa, for $8.25 million.
Caledonia’s exploration activities are focused on Blanket Mine, Motapa and Maligreen and in due course management intends to complete a drilling plan for Motapa.
Maligreen-Project
On September 23, 2021, Caledonia announced that it had entered into an agreement to purchase the mining claims over Maligreen, a property situated in the Gweru mining district in the Zimbabwe Midlands, from Pan African Mining (Private) Limited, a privately-owned Zimbabwean company, for a total cash consideration of US$4 million. The transfer of the claims to Caledonia and the payment of the purchase price was completed during the fourth quarter of 2021.
Maligreen is a brownfield gold exploration project situated on the Nkayi-Silobela Greenstone Belt that has historically been exploited via open pit mining. The total land area of Maligreen is approximately 550 hectares comprising two historic open pit mining operations that produced approximately 20,000 ounces of gold mined from oxides between 2000 and 2002 after which the operation was closed.
Significant historical exploration and evaluation work has been conducted on the property over the last 30 years including regional geochemical and geophysical (aeromagnetic and ground) surveys and 5 tonnes of bulk metallurgical test work. A total of 755 holes, of which 113 were diamond holes, have been drilled at the property over a combined 63,463 metres. These were completed in the period 1995 to 2001.
During 2022 the Company completed a re-logging and re-sampling exercise of a representative sample of previously drilled core which have satisfied the QAQC requirements for upgrading the original Inferred Mineral Resources estimate to Measured, Indicated and Inferred Mineral Resources. Future exploration activities may be considered to further understand the strike and depth extension potential and assess the potential for a mining operation.
A Tribute Agreement is in place with Silobela Youth in Mining Syndicate for the Maligreen claims from 1 October 2020 to 30 September 2023, in terms of which Silobela Youth in Mining Syndicate may undertake mining activities over the claims. Silobela Youth in Mining Syndicate must pay to CHZ 5% of the value of minerals mined or a rental amount. The Silobela Youth in Mining Syndicate is actively mining as per the Tribute Agreement with royalty payments made as per the agreement.
Refer to note 18 of the Consolidated Financial Statements and Item 4.A - “History and Development of the Company” for more detail on Maligreen.
Connemara North
In December 2020 Caledonia announced it had entered into an option agreement which gives the Company the exclusive right to explore the Connemara North property.
Connemara North is the northern section of the currently closed Connemara mine which was previously owned by First Quantum Minerals (“First Quantum”); it was placed on care and maintenance in 2001 and subsequently disposed of in 2003. It has not been commercially mined since this time but before being placed on care and maintenance the Connemara mine produced approximately 20,000 ounces of gold per annum from an open pit heap leach operation. Previous public disclosures made by First Quantum in 2001 indicated that they had plans to expand the existing open pit operations at Connemara mine, when gold prices were approximately $300/oz.
After concluding drilling and exploration to the value of $0.5 million the Company decided not to exercise the option over Connemara North as the results of the exploration work indicated that the property does not meet Caledonia’s strategic objectives. This gave rise to an impairment of $0.5 million. No further costs or impairments in respect of the Connemara North option are anticipated.
Other
The Eagle Vulture, Mascot and Penzance satellite properties were sold in 2021. During the fourth quarter of 2020 the Company entered into option agreements that gave the Company the exclusive right to explore the Glen Hume and Connemara North properties. On conclusion of the drilling programme it was decided not to exercise the option over the Glen Hume property, resulting in an impairment of $3.8 million. After further evaluations, in March 2022 Caledonia decided that the Connemara North property did not meet the Company’s criteria for further investment and accordingly the option to acquire the mining clams was not exercised. The accumulated expenditure on the Connemara North property of $163,000 was impaired in the first quarter of 2022.
Blanket Mine is our principal gold producing mining asset and from 2023 its gold production will be supplemented by the Bilboes oxide mining activities. Assets such as Maligreen, Motapa, the Bilboes sulphides project and Blanket satellite properties are in the exploration and/or evaluation stage. Estimates on operationalizing and/or defining orebodies may change as future evidence is obtained for these assets.
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 our exploration programs, which may be affected by several 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 which a combination of careful evaluation, experience and knowledge of management may not eliminate. While the 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 several factors. Additional expenditures are required to establish reserves that are sufficient to commercially mine and to construct, complete and install mining and processing facilities in those properties that are actually mined and developed.
Mining Operations
Blanket Mine
On November 3, 2014 Caledonia announced the investment plan and production projections for the Blanket Mine. The objectives of the investment plan were to improve the underground infrastructure and logistics to allow efficient and sustainable production build-up.
There was no deep exploration drilling at Blanket Mine in 2022. Deep level exploration drilling will re-commence after the related development, in the Central Shaft area, has been completed to provide access to new drilling positions.
The review of existing data, the completion of Central Shaft with resumed drilling platforms and the migration to digital estimation protocols allowed for revised mineral resources and mineral reserves estimate. The estimate was based on data as at March 31, 2022 for mineral resources and September 1, 2022 for mineral reserves, and depleted to 31 December 2022 for declaration. Refer to section 7.1 below.
Exploration at Blanket Mine’s portfolio of satellite properties was suspended in 2016 so that minral resources could be re-deployed at Blanket. Since then, the Company has evaluated other investment opportunities in Zimbabwe and has concluded that the satellite properties other than GG are unattractive due to their relatively small size, low grade, limited exploration potential, operating complexity and metallurgical incompatibility with the existing Blanket Mine plant. The GG satellite property remains on care and maintenance.
Metallurgical Process
Metallurgical plant – Blanket Mine
The Blanket Gold Plant established on the Blanket Mine site consists of crushing, milling, carbon-in-leach and batch elution electro-winning circuits. Recoveries in 2022 were 93.8% compared to 93.9% in 2021.
The capacity constraints in the metallurgical plant that were experienced were alleviated in the fourth quarter of 2022 due to the commissioning of the new ball mill (BM10) and the repair of BM7. Power cuts and repairs and maintenance to the primary, secondary crushers and the gearbox of BM8 reduced the tonnes milled of the metallurgical plant during the fourth quarter of 2022.
The installation of BM10 and repairs increased the metallurgical production capacity to 2,400 tonnes per day. The increased milling capacity enabled Blanket to increase tonnage milled from 1,976 tonnes per day during June 2022 to 2,379 tonnes per day on August 23, 2022.
During the fourth quarter of 2022, Blanket finished construction of a conveyor and crushing system to feed ore from the Central Shaft to a primary crusher from which it will be transported to the metallurgical plant which is located approximately 800 metres away, close to the No. 4 Shaft. The project was commissioned in November 2022.
Safety, Health and Environment
The following safety statistics have been recorded for the year 2022 and the preceding two years.
| Classification |
2020 |
2021 |
2022 |
| Fatal |
- |
- |
1 |
| Lost time injury |
6 |
3 |
4 |
| Restricted work activity |
9 |
6 |
4 |
| First aid |
1 |
1 |
5 |
| Medical aid |
12 |
21 |
12 |
| Occupational illness |
- |
- |
- |
| Total |
28 |
31 |
26 |
| Incidents |
59 |
62 |
39 |
| Near misses |
24 |
22 |
18 |
| Disability Injury Frequency Rate |
0.52 |
0.26 |
0.23 |
| Total Injury Frequency Rate |
0.97 |
1.05 |
0.75 |
| Man-hours worked (thousands) |
5,789 |
6,199 |
6,947 |
Regrettably, a fatality occurred on February 21, 2022 and another on February 16, 2023. The fatalities occurred as a result of a vehicle accident underground and a secondary blasting accident. The directors and management of Caledonia and Blanket express their sincere condolences to the family and colleagues of the deceased. Management has provided the necessary assistance to the Ministry of Mines Inspectorate Department in its enquiries into the incidents. Caledonia takes the safety of its employees very seriously and, accordingly, measures have been taken to reinforce adherence to prescribed safety procedures.
Exchange Controls, Social Investment and Contribution to the Zimbabwean Economy
Exchange control approvals from the RBZ and the Reserve Bank of South Africa are required on the flow of funds in and out of Zimbabwe and South Africa. The Company obtained necessary approvals from both the RBZ and the Reserve Bank of South Africa to transfer foreign currency during the fiscal year ended December 31, 2022.
Additionally, Blanket Mine’s investment in community and social projects which are not directly related to the operation of the mine or the welfare of Blanket Mine’s employees, the payments made to the Community Trust in terms of Blanket Mine’s indigenization, and payments of royalties, taxation and other non-taxation charges to the Zimbabwe government and its agencies are set out in the table below.
| Payments to the Community and the Zimbabwe Government ($’000’s) |
||||||||||||||||
| Community and Social Investment |
Payments to GCSOT |
Payments to Zimbabwe Government |
Total |
|||||||||||||
| Year 2020 |
1,689 | 184 | 12,526 | 14,399 | ||||||||||||
| Year 2021 |
1,163 | 948 | 16,426 | 18,537 | ||||||||||||
| Year 2022 |
888 | 1,200 | 19,184 | 21,272 | ||||||||||||
General Comments
Caledonia’s activities are centered on Zimbabwe and occur year-round. 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. Caledonia has not experienced a shortage of availability of raw materials or significant price volatility.
Refer to note 4(b)(ii) of the Consolidated Financial Statements and Item 3.D – “Risk Factors”, under the subheading “We do business in countries and jurisdictions outside of the United States where different economic, cultural, regulatory, monetary and political environments could adversely impact our business, results of operations and financial condition” where the material effects of government regulations of the Company’s business are disclosed.
Investors should recognize that Blanket’s ability to implement its investment plans at its properties and interests and Caledonia’s ability to sustain its operations outside Zimbabwe and pay future dividends depends, inter alia, on the ability to externalize cash from Zimbabwe.
The sale of precious metals is recognized as revenue when the metal is accepted at the refinery by Fidelity (“Lodgement date”). Control is transferred and the receipt of proceeds is substantially assured at point of delivery. Revenue for each delivery is measured at the London Base Metal Association Tuesday PM price post-delivery less 1.25%, being the fair value receivable at the date of the transaction. On average settlement occurs within 14 days of delivery.
In respect of the gold export arrangement with AEG and Fidelity, gold is sold through a “closed pipe” mechanism starting with delivery to Fidelity and preliminary refining of Blanket’s and Bilboes’ gold production in a separate crucible. Risk in the gold vests with Fidelity until the gold is then delivered to the transport vessel (airplane) at the Robert Mugabe International Airport (Zimbabwe) for transfer to AEG in Dubai for final refining and sale. Fidelity retains 28.75% of the refined gold covering 25% required by the RBZ for conversion into ZWL and 3.75% as royalty. Caledonia will effectively receive 71.25% of the refined gold. Fidelity will pay the 25% retention proceeds in ZWL. From the ZWL amount payable to Caledonia, Fidelity will deduct 1.25% as a royalty and control of the gold is transferred as soon as payment is received. Revenue is recognized for each shipment on the Spot or London Fixing or as mutually agreed between the parties. Revenue for the refined gold retained by Fidelity will follow the same recognition process. The remaining gold will be recognized as revenue as soon as payment is received from AEG.
The Company has the following organizational structure as at April 28, 2023:
D. Property, Plant and Equipment and Exploration and evaluation assets
Overview
The Company is engaged in the exploration, development and production of gold and other precious metals from its mineral properties. The Company’s four material mineral properties, all located in Zimbabwe, are:
| ● |
the production-stage Blanket Mine (64% interest); |
| ● |
the exploration-stage Maligreen project (100% interest); |
| ● |
the oxides1 and exploration-stage (sulphides) at Bilboes (100% interest), at which we have commenced mineral extraction prior to estimating mineral reserves or mineral resources under Subpart 1300; and |
| ● |
the exploration-stage Motapa (100% interest), at which exploration and associated activities will be executed for the purpose of estimating mineral reserves or mineral resources under Subpart 1300. |
The Blanket Mine and its satellite operations are located in the Matabeleland South province, the Maligreen project is located in the Midlands province and Motapa and the Bilboes is in the Bulawayo province as illustrated below.
The Company does not have interests in any other mineral properties, following the disposition of the Company’s interests in Connemara North, Glen Hume, Eagle Vulture, Mascot and Penzance, and Eersteling.
Certain of the information set forth in this annual report is derived from the following:
| ● |
For the Blanket Mine, the Subpart 1300 technical report summary entitled “S-K 1300 Technical Report Summary on the Blanket Gold Mine, Zimbabwe”, with an effective date of December 31, 2022, prepared by Qualified Persons Messrs. U Engelmann and D van Heerden. Refer to Exhibit 15.4 in this report; and |
| ● |
For the Maligreen project, the Subpart 1300 technical report summary entitled “S-K 1300 Technical Report Summary on the Maligreen Gold Project, Zimbabwe”, with an effective date of December 31, 2022, prepared by Mr. U Engelmann. Refer to Exhibit 15.5 in this report. |
_____________________________
1 Operations on the oxides commenced on December 1, 2022.
Neither Mr. U Engelmann or Mr. D van Heerden is an employee of the Company and both are Qualified Persons as defined in accordance with Subpart 1300. Each is an employee of Minxcon (Pty) Ltd. None of Messrs. U Engelmann or D van Heerden or Minxcon (Pty) Ltd is an affiliate of the Company or any other company that has, nor do any of them have, any ownership, royalty or other interest in the respective properties.
The Blanket Mine and Bilboes (oxide project), which was acquired subsequent to December 31, 2022, are the Company’s only properties with current mineral extraction. Annual production information for the Blanket Mine for the previous three years is provided below, under “Material Properties – Blanket Mine”.
Mineral Resources
Mineral resources are stated as exclusive of mineral reserves and as attributed values. Ordinary kriging and inverse distance estimation methodology was employed and confined to the property boundaries to which we have legal rights to explore and mine.
The Blanket Mine mineral resources occur as underground resources and estimates have been depleted for mining. Measured, indicated and inferred mineral resources are declared due to the continuity of the geology and grade as well as a history of proven historical mining. The inferred mineral resources show geological continuity, while grade continuity requires improvement through additional drilling. A cut-off of 1.5 g/t was utilized for Blanket Mine based on an average real term gold price of US$1,800/oz based on a 10-to-15 year view for precious metals. No geological losses were applied to the Blanket Mine measured mineral resources, while 5% discount was applied to the indicated and inferred categories.
The mineral resources for Maligreen are reported at surface (all mineral resources <220 m from surface) and underground (>220 m from surface). The mineral resources have been depleted by means of topography and mining voids. Following confirmatory re-logging and re-sampling of historical core along with the robust geological mode, the data previous inferred mineral resources can now be declared as a measured, indicated and inferred mineral resources. A cut-off of 0.4 g/t was applied to the surface resources, while a cut-off of 1.5 g/t was applied to the underground portion based on a gold price of US$1,800/oz based on a 10-to-15 year view for precious metals. Discounts applied to the mineral resources include geological losses of 5% for measured, 10% for indicated and 15% for inferred mineral resources to account for geological, data and estimation uncertainty.
| In Situ Mineral Resources Exclusive of Mineral Reserves |
December 31, 2022 |
||||
| Tonnes |
Grade |
Gold |
|||
| Zimbabwe |
Blanket Mine |
Measured |
1.86 |
3.10 |
185 |
| Underground |
Indicated |
2.36 |
2.89 |
220 |
|
| (64% attributable) |
Measured + Indicated |
4.22 |
2.98 |
405 |
|
| Inferred |
5.76 |
2.92 |
539 |
||
| Maligreen |
Measured |
1.65 |
2.37 |
126 |
|
| Surface |
Indicated |
6.29 |
1.53 |
310 |
|
| (100% attributable) |
Measured + Indicated |
7.94 |
1.70 |
434 |
|
| Inferred |
4.58 |
1.55 |
229 |
||
| Maligreen |
Measured |
|
|
|
|
| Underground |
Indicated |
0.09 |
2.89 |
8 |
|
| (100% attributable) |
Measured + Indicated |
0.09 |
2.89 |
8 |
|
| Inferred |
1.59 |
3.75 |
192 |
||
| Total Measured | 3.51 | 2.75 | 310 | ||
| Total Indicated | 8.74 | 1.91 | 537 | ||
| Total Measured + Indicated |
12.25 |
2.15 |
847 |
||
| Total Inferred | 11.92 | 2.50 | 959 | ||
| Grand total |
24.17 |
2.33 |
1,807 |
||
As at December 31, 2022, Blanket Mine was our only property with Subpart 1300 mineral reserves. See “Material Properties – Blanket Mine” below, for a description of our mineral reserves at Blanket Mine.
For the three years ended December 31, 2022, Blanket Mine was our only property with production. See “Material Properties – Blanket Mine” below, for production data for the three years ended December 31, 2022.
Regional Geological Setting
Zimbabwe’s known gold mineralization occurs in host rocks of the Zimbabwe Craton, which is made up of Archaean rocks. The geology of the Craton is characterized by deformed and metamorphosed rocks which include high-grade metamorphic rocks, gneisses, older granitoids, greenstone belts, intrusive complexes, younger granites and the Great Dyke. 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:
| ● |
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. |
Material Properties
Blanket Mine
Property Description and Ownership
The Blanket Mine is an operating underground gold mine situated on the Gwanda Greenstone Belt (“GGB”) targeting shear zone hosted gold mineralization. The Mine complex comprises a cluster of mines extending from Lima in the north, through Eroica, Sheet, AR Main, AR South, the currently defunct Feudal, Blanket Section (Blanket 1 to Blanket 6) and Jethro over a total strike length of some 3 km. Gold has been commercially mined at the project area from several closely-spaced orebodies defining a mineralized trend via several shafts since the early 1900s. The Mine covers the operating claims of Jethro, Blanket, Feudal, Harvard, Mbudzane Rock, Oqueil, Sabiwa, Sheet, Eroica and Lima, largely encompassed in a 2,120ha Mining Lease. Ore is processed at an on-site plant. As at December 31, 2022 the net assets of Blanket Mine is $185 million. Refer to note 27 of the Consolidated Financial Statements.
The Company indirectly owns 64% of the shares of Blanket Mine, the operator of which is Blanket Mine (1983) (Private) Limited, after the purchase of Fremiro’s 15% shareholding became effective in January of 2020. The Blanket Mine is fully equipped with all the necessary plant and equipment to conduct mining operations and the production of gold from the ore mined from the mine.
As illustrated below, the Mine is located in the southwest of Zimbabwe, approximately 15 km northwest of Gwanda, the provincial capital of Matabeleland South. Gwanda is located 120 km southeast of Bulawayo, 200 km northwest of the Beitbridge Border post with South Africa, and 560 km from Harare, Zimbabwe's capital city. The Mine is centered on the coordinates (WGS84 system) 20°52' S, 28°54' E.
The table below indicates the aggregate annual production from Blanket in the last three fiscal years:
| Blanket Production Statistics |
||||||||||||||||
| Year |
Tonnes Milled (t) |
Gold Head (Feed) Grade (g/t Au) |
Gold Recovery (%) |
Gold Produced (oz) |
||||||||||||
| 2020 |
597,962 | 3.21 | 93.8 | 57,899 | ||||||||||||
| 2021 |
665,628 | 3.36 | 93.9 | 67,476 | ||||||||||||
| 2022 |
752,033 | 3.56 | 93.8 | 80,775 | ||||||||||||
Blanket Mine employs two mining methods that are well suited to the nature of the of the mineral deposits. The extreme variation within the Blanket Mine mineral deposits necessitates modification of the exact mining methods that suit the specific characteristics of each deposit. The general practice on the mine is to implement one of two tailored mining methods, determined mainly by the width of the mineral deposit.
The two mining methods utilised are:
| ● |
Long-hole stoping in wider mineral deposits (orebody widths generally more than 3 m); and |
| ● |
Underhand stoping in narrow mineral deposits (orebody widths generally less than 3 m). |
The planned thrust in development is aimed at opening up ground below 750 m Level which will be the primary production areas, as well as create the necessary exploration drilling platforms. In the Lima, ARS, Blanket and Blanket Feudal areas some mining activities will take place above 750 m Level.
Infrastructure at Blanket Mine as well as power and water supply are well-established infrastructure to support and sustain mining and processing operations. To date in excess of 1 million ounces of gold have been produced from the property.
The Blanket Gold Plant established on the Blanket Mine site consists of crushing, milling, carbon-in-leach and batch elution electro-winning circuits. The plant treats an average of 62,000 tonnes per month at a recovery of approximately 94%. The recovery performance is expected to continue, while the processing rate could be increased once planned milling upgrade has been completed. Construction of a new tailings storage facility is to begin in 2023, with a design to ensure international best practice is met whilst enabling uninterrupted production.
For a detailed breakdown of the property, plant and equipment and encumbrances thereon refer to note 17 of the Consolidated Financial Statements. The property, plant and equipment of the Group is predominantly held in Zimbabwe and the continued implementation of the investment plan is expected to increase the property, plant and equipment of the Group. Refer to note 18 of the Consolidated Financial Statements for a detailed breakdown on the exploration and evaluation properties of the Company and encumbrances thereon, as well as Item 4.A - “History and Development of the Company”.
The issuing and control of mineral rights in Zimbabwe is regulated by the Mines and Minerals Act (Chapter 21:05) of 1961 (“MMA”), administered by the Mining Commissioner of the regional mining district. The mineral resources are vested in the State through the President of Zimbabwe.
The Government of Zimbabwe does not participate in managing the projects of local or foreign firms in the private sector. Presently, government participation in mining is through Zimbabwe Mining Development Corporation (“ZMDC”) and through the Minerals Marketing Corporation of Zimbabwe (“MMCZ”). The ZMDC was formed in 1982 for government to participate in the mining sector and to save companies that were being threatened to close. It is active in exploration, mining and giving assistance to cooperatives and small-scale miners. The MMCZ was formed in 1992 and is responsible for marketing all the country's minerals and metal products except gold and silver which are sold through the Reserve Bank. It finances its operations by a commission charge of 0.875% on sales conducted for its clients.
In Zimbabwe, mining and mine development may be conducted with a mining claim, mining lease, special mining lease and special grant. A mining claim covers a small area, thus usually several claims are grouped to form a block of claims. The claim confers on the holder the exclusive right to mine the mineral resource for which the claim was registered. Mining claims are dependent on the claim holder applying to the Mining Commissioner for and obtaining an inspection certificate on an annual basis; failure to do so may result in the forfeiture of the relevant claim. A block of claims may be transformed into a mining lease for simplicity of administration.
The Blanket Mine's interests in Zimbabwe include a mining lease, operating claims (i.e., on-mine), non-operating claims and a portfolio of brownfields exploration projects (satellite projects). Blanket Mine operates under a mining lease issued by the Mining Affairs Board of Zimbabwe with registered number 40 (ML40) which was issued under the MMA to Blanket Mine (1983) (Private) Ltd, a 64% held indirect subsidiary of the Company, on May 24, 2019 and is annually renewed. The mine’s claims under the lease cover an area of 2,120 ha.
A copy of ML40 is attached hereto as Exhibit 4.9.
Blanket Mine also has several registered claims, not incorporated under the lease. The 59 claims contiguous to the mining lease comprise a total area of approximately 994 ha. Blanket Mine provided a separate list of non-operating claims located away from ML40 and the adjoining claims described above, that form a portion of their Gwanda portfolio. These non-producing claims (“satellite projects”) consist of 217 blocks of registered base metal (Ni, Cu and As) and precious metal claims covering a total area of 2,672 ha. A number of claims are subject to active tribute agreements between the mine and local small scale miners.
History
The Blanket Mine is part of the Sabiwa group of mines within the Gwanda Greenstone Belt from which gold was first extracted in the 19th 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 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 64% indirectly owned and operated by Caledonia, which initially completed the purchase of the mine from Kinross on 1 April 2006. The Blanket Mine re-started production in April 2009 after a temporary shut-down due to the economic difficulties in Zimbabwe.
Present Condition and Infrastructure
The Blanket Mine consists of a series of small shafts providing access to the underground workings of the various orebodies that are being mined. The main access and draw points are accessed by the shafts indicated in the table below.
| Name |
Description |
| Jethro Shaft |
The shaft has dimensions of 3 m x 2 m and is mainly utilised for the transport of men and material from surface to 7 Level. The shaft is equipped with a single drum winder with a 22 mm rope and capacity of 10 men. |
| 5 Winze (Sub-Shaft) |
5 Winze has dimensions of 3 m x 2 m and is a sub-shaft and is mainly used to transport men and materials between 7 Level and 22 Level. This shaft is similarly to Jethro shaft equipped with a single drum winder with a 20 mm rope and a capacity of 10 men. |
| 6 Winze (Sub-Shaft) |
6 Winze has dimensions of 3 m diameter and is a sub-shaft used mainly for the hoisting of ore from 26 Level to 22 Level from where ore is transported to No. 4 Shaft for hoisting to surface. This shaft is equipped with a 112 kW single drum winder with a 24 mm rope and a capacity of 3 t per skip or 500 tpd. At the bottom of 6 Winze shaft is a 12kW spillage pump. |
| Blanket Shaft (No. 4 Shaft) |
No. 4 Shaft was historically the main production shaft of Blanket Mine. No. 4 Shaft has dimensions of 4 m x 2 m with two compartments. This shaft is mainly used for the hoisting of ore and waste rock from 22 Level to surface. The shaft is equipped with a 560 kW thyristor driven double drum winder with a 34 mm rope and capacity of 5t per skip or 2,000 tpd. |
| Central Shaft |
The Central Shaft is not lined and has a four-compartment, 6 m diameter layout, equipped with 2 x 3,642 kW double-drum winders, one for rock and the other for men and material. The shaft reaches a depth of 1,204 meters. |
The Blanket Mine is an underground mine in the production stage, and a number of expansion projects have either been completed or are planned for the Blanket mining operations in order to increase production. The majority of the expansion projects will consist of the below 750 m Level (22 Level) expansion projects.
The first project included the sinking and construction of the Central Shaft in-between the AR Main and AR South / Blanket orebodies from surface to 1,204 m (just above 38 Level) and its associated infrastructure. Sinking and equipping of the shaft has been completed with the development of the associated ore pass system and loading station development currently in progress.
Further projects include the development of various decline shaft infrastructure targeting specific mining areas in order to increase production.
Surface infrastructure comprises mine offices, change houses, mine headgears, workshops, storerooms, a processing plant, hospital, tailings facility and an assay laboratory. 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. A total of 11 hoists are installed at the mine, three of which are used for ore handling (No. 2 incline shaft, the sub-vertical shaft and 6 Winze shaft).
The existing infrastructure at Blanket will be utilized in parallel with new infrastructure which is specifically aimed at targeting the below 22 Level mining areas. The extensions entailed the sinking of the Central Shaft from surface down to 1,204 m (just above 38 Level). 6 Winze sub-shaft located close to 5 Winze sub-shaft is used to access the Blanket complex below 22 Level and will provide secondary access to the Central Shaft.
The Central Shaft is not lined and has a four-compartment, 6 m diameter layout, equipped with 2 x 3,642 kW double-drum winders, one for rock and the other for men and material.
On surface, a 900 mm wide, 50 m long overland waste conveyor will transport waste rock to a rock dump. Additional supporting surface infrastructure will include shaft offices, change rooms, lamp rooms, etc. New housing for both senior and junior staff is also planned in anticipation of the increased production profile.
A tailings storage facility (“TSF”) is also located near the project area. The labour force and their families reside within a kilometre of the mine in accommodation provided by the mine.
Underground drilling is conducted with Seco 23, Seco 25, Seco 215 rock drills and Seco 36 (Konkola) drifters. The rock drills are used mainly for development and the drifters for production, i.e. long-hole drilling.
Similar to the underground rail-bound fleet, the same mining equipment utilized at the operational sections of Blanket Mine will be utilized once the expansion projects of the Central Shaft have been completed with some additional quantities to allow for the planned increase in production.
ZESA supplies power to Blanket Mine from their main substation in Gwanda. The main supplies are the 33 kV and the 11 kV overhead lines. The 33 kV supply feeds Lima, Reclamation and the main substation at No. 4 Shaft, adjacent to the processing plant, and Central Shaft. The 11 kV supply feeds slimes dam, Smiler shaft and the village. The 11 kV is further transformed to 550 V supply at Smiler and at slimes dam. The ZESA power allocation to No. 4 Shaft, Jethro Shaft, 5 Winze and 6 Winze Complex is 12MVA with a current nominal maximum demand of 11.5MVA.
Blanket Mine also has 4 x 2.5 MVA generators at No. 4 Shaft with total installed capacity of 10 MVA. Additional standalone diesel generators with suitable switchgear, transformers, and controls were also installed at Central Shaft to ensure that the mine can stay operational during power interruptions. This installation has a total installed capacity of 8 MVA. Total installed generator capacity at Blanket Mine is 18 MVA.
The following initiatives have been implemented or are planned to alleviate the power issues:
| ● |
Increased its diesel generating capacity to 18MW of installed capacity which was sufficient to maintain all operations and capital projects but only on a stand-by basis. |
| ● |
On the incoming ZESA supply line at the No. 4 Shaft, Blanket installed two 10MVA auto tap transformers to protect equipment at No. 4 Shaft and the main metallurgical plant from voltage fluctuations on the incoming grid supply. Following the installation of these transformers, Blanket has used less diesel in the production of gold. |
| ● |
On the incoming ZESA supply line at the Central Shaft, two 10MVA autotap transformers were installed in the fourth quarter of 2022 at a cost of $0.9 million. This installation reduced the voltage fluctuations and reduced the power cost and diesel usage allocated to capital projects during the Quarter and thereafter should reduce operational expenditure when the Central Shaft starts to hoist ore. |
| ● |
Caledonia’s 12.2 MWac solar plant, fully commissioned early February 2023, provides approximately 27% of Blanket’s average daily electricity demand. The plant has been providing power to Blanket from its initial Connection to the Blanket grid in November 2022. The project was completed at a cost of $14.3 million in 2023 (including construction costs and other project planning, structuring, funding and administration costs). |
| ● |
Management is in discussion with the Zimbabwean power utility to obtain an improved supply of electricity. This may include an additional supply line that will result in fewer outages and a power supply that has a higher power factor. Blanket may potentially pay a different KWh rate for this supply line. At the date of approval of this document no agreement with ZESA had been concluded. Management continues to engage with the Intensive Energy User Group regarding the import of electricity from power producers in Zambia and Mozambique and for this power to be wheeled via the Zimbabwe grid to Blanket. If these discussions are successful, it is expected that Blanket’s continuity of electricity supply will improve. |
The district is serviced by telecommunication services, and Blanket provides its own Wi-Fi and communication systems.
The A6 highway, forming part of the Trans-African Highway network, is orientated roughly northwest-southeast and links Bulawayo with the Beitbridge border post and Musina in South Africa. The highway runs through the town of Gwanda. A major sealed road, the Old Gwanda Road, branches off from the A6 in Gwanda and runs directly through the ML 40 area to Bulawayo. Blanket’s mining claims are all located along these major roads and are thus easily accessible. The roads are sealed and although potholing is frequent, the surfaces are navigable by all vehicles. The Beitbridge Bulawayo Railway runs roughly parallel to the A6 through Gwanda Town.
An airstrip and informal airport building are located in Gwanda along the A6. The Joshua Mqabuko Nkomo International Airport is located in Bulawayo. The mine can be accessed either via the Beitbridge-Bulawayo road, or by flying into Bulawayo and driving two hours via the Old Gwanda Road or the A6 to the site.
Permitting, Licenses and Encumbrances
The mine is compliant in terms of authorizations and adheres to all government protocols and regulations as required.
Water for the operations is sourced from the Blanket Mine Dam that is situated on the Mtshabezi River and owned by the Zimbabwe National Water Authority (“ZINWA”). The use of this water is authorized through a contract agreement between Blanket and ZINWA in terms of the Zimbabwe National Water Authority Act (Chapter 20:251).
In terms of this agreement, Blanket was allowed to extract 1,200,000 m3 of water for the period 1 April 2020 to March 31, 2021. The agreement is valid for one-year periods and is renewed annually. ZINWA annually send to Blanket the renewable agreement for signing. Blanket continues to extract water in the interim at a rate of ZWL18.00/m3.
In accordance with paragraph 178(2)(a)(b)(c) of the MMA, the owners of claims possess the right to use of any surface within the boundaries for all necessary mining purposes; the right to use, free of charge, soil, waste rock or indigenous grass situated within the claims boundaries for all necessary mining purposes; and the right to sell or dispose of recovered waste rock. The MMA Amendment Bill makes instruction for landowner compensation in case of land loss due to mining activities in the form of land reallocation or outright purchase. The activities of the Company have not triggered this compensation.
The Indigenization and Economic Empowerment Act, which was enacted in 2007, required that 51% of the equity of all commercial enterprises in Zimbabwe must be owned by indigenous Zimbabweans. Following the implementation of indigenization, Caledonia received the Certificate of Compliance from the Government of Zimbabwe which confirmed that Blanket was fully compliant with the Indigenization and Economic Empowerment Act. The requirement for gold mining companies to be indigenized was removed by a change in legislation with effect from March 2018. A 36% share of Blanket is currently held by indigenous parties.
In Zimbabwean mining legislation, an Environmental Impact Assessment (“EIA”) is not required in order to issue a mining license, and in terms of the Environmental Management Act and its First Schedule is only required prior to commencement of mining and forms part of the planning process. Blanket was established in the early 1900s, long prior to the implementation of governing mining and environmental laws. As such, it appears that an EIA is not required for the Blanket Mine. However, the mine is in constant communication with the Environmental Management Agency (“EMA”) regarding environmental permitting requirements and an EIA was completed for the mine in 1995. Should the EMA communicate that an EIA certificate for the mine be obtained, the mine will submit all relevant and associated applications to obtain such and remain fully compliant.
In order for operations to continue, the EMA has issued a number of additional environmental licences to Blanket as listed in the table below. The certificates are valid for 1 year and renewed annually. Applications for hazardous waste generation (oils, chemicals, etc.) licences have been submitted and are pending EMA review. New environmental disturbances will require additional permits further to those listed below, and currently no further disturbances have been identified.
Blanket holds EIA certificates as issued by the EMA for the solar plant, TSF and development of the additional GG and Abercorn areas.
Environmental Permits
In order for operations to continue, the EMA has issued a number of additional environmental licences to Blanket, including:
| ● |
five for air emissions (clinic incinerator, blacksmith shop, laboratory, smelter house and power plant generators); |
| ● |
four for solid waste (landfill and tailings); |
| ● |
three for effluent disposal (sewerage and car wash bay); |
| ● |
three for hazardous substances (importation, transportation and storage); and |
| ● |
one for hazardous waste generation (oils and clinical waste). |
Geological Setting, Mineralization and Deposit
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 operational mines. At Blanket Mine, the rock units strike north−south, and generally dip steeply to the west.
The local geology consists of the Felsic Unit made up of, largely, quartz and quartz-sericite schists overlain by the Mafic Unit. The lower zone of the Mafic Unit comprises ultramafic and banded iron formations which host the orebodies of the Vubachikwe mine, that is located south of Blanket Mine. The upper zone of the Mafic Unit is made up of massive to pillowed basaltic lavas with intercalations of interflow sediments now showing as cherty argillites (locally commonly referred to as Black Markers) and this hosts the Blanket Mine complex orebodies. The Blanket Mine orebodies are in an orogenic setting with hydrothermal mineralization hosted in selected shears of country basaltic metavolcanics. This package is intruded by a younger and seemingly barren olivine-gabbro sheet. The sequence is capped by an Intermediate Unit comprising andesitic lavas with amphibole feldspar schists.
The generalized stratigraphic column for the area is shown below.
The Blanket Mine complex orebodies together with those of the Vubachikwe complex comprise the north-western Mining Camp, also called the Sabiwa group of mines. Blanket Mine complex is a cluster of deposits that extend from Jethro in the south, through Blanket Mine, Feudal, AR South, AR Main, Sheet, Eroica and Lima to the north.
The local geology at Blanket Mine is depicted below including the infrastructure locations.
The Long Section of Blanket Mine showing Stopes, Drives, Haulages and Shafts is shown below.
In greenstone belts, gold mineralization 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 mineralization 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 orebodies are located.
These orogenic gold deposits are commonly associated with late syntectonic intermediate to felsic magmatism. Vein systems occur as a system of echelon veins on all scales. The Blanket mineralization is hydrothermally emplaced and associated with the regionally developed D2 deformation characterised by areas of high strain wrapping around relatively undeformed remnants of the original basaltic flows. Wider orebodies occur within the more ductile tensional high strain areas. The localisation of the mineralised shears conforms to a Riedel pattern.
Two main types of mineralization are recognized at Blanket Mine, namely disseminated sulphide reefs (“DSR”) and quartz-filled reefs and shears. A third type of mineralization may be evidenced in the form of auriferous sulphide minerals as a replacement of the iron-rich minerals along the hinges of the folds in BIF, as is present at the neighboring Vubachikwe Mine.
Disseminated Sulphide Replacement Reefs
DSRs host the best grades and comprise the majority of the ore shoots. The 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 characterizes the margins of these mineralized zones and as a result they have a lower gold content. Disseminated sulphide-replacement orebodies range up to 50 m in width with a strike of 60 m to 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 of 85% to 90% are achieved.
Quartz-Filled Reefs and Shears
Two quartz shears are mined at the Blanket Mine, namely the BQR and the Eroica Reef. These reefs have long strikes; however, they are not uniformly mineralized. Continuous pay shoots of over 100 m on strike are present. The Quartz Reef has a surface strike of approximately 500 m, but economic mineralization is restricted to three 90 m long shoots.
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 470 m. 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 mineralized bodies.
Mineral Resource and Mineral Reserve Estimates
The mineral resources reported here are estimated by the QP as at March 31, 2022 and presented in other disclosures and utilised for the updated 2022 mineral reserve estimation. The QP has depleted the 31 March 2022 mineral resources with updated mining faces to the period ending December 31, 2022. Refer to Exhibit 15.4 or the technical report summary titled “S-K 1300 Technical Report Summary on the Blanket Gold Mine, Zimbabwe”, with an effective date of December 31, 2022, for key assumptions, parameters, and methods used to estimate the mineral resources and risks that could materially affect the mineral resource.
The measured and indicated mineral resource estimates for 2022 are reported in compliance with Subpart 1300, in situ as at December 31, 2022 and exclusive of mineral reserves.
| Mineral Resource Classification |
Orebody |
Tonnes |
Au |
Ounces |
| kt |
g/t |
koz |
||
| Measured |
AR Main |
682 |
2.80 |
61 |
| AR South |
390 |
2.93 |
37 |
|
| Blanket 2 |
149 |
3.69 |
18 |
|
| Blanket 3 |
47 |
2.58 |
4 |
|
| Blanket 4 |
55 |
3.53 |
6 |
|
| Blanket 6 |
70 |
3.71 |
8 |
|
| Blanket Quartz Reef |
185 |
3.86 |
23 |
|
| Eroica |
79 |
3.66 |
9 |
|
| Lima |
85 |
2.89 |
8 |
|
| Sheet |
112 |
2.88 |
10 |
|
| Measured Total |
1,855 |
3.10 |
186 |
|
| Indicated |
AR Main |
404 |
2.30 |
30 |
| AR South |
311 |
2.68 |
27 |
|
| Blanket Feudal |
110 |
3.48 |
12 |
|
| Blanket 1 |
77 |
1.98 |
5 |
|
| Blanket 2 |
164 |
3.19 |
17 |
|
| Blanket 3 |
85 |
2.64 |
7 |
|
| Blanket 4 |
117 |
2.38 |
9 |
|
| Blanket 5 |
1 |
3.00 |
0 |
|
| Blanket 6 |
11 |
2.84 |
1 |
|
| Blanket Quartz Reef |
457 |
3.29 |
48 |
|
| Eroica |
277 |
3.80 |
34 |
|
| Jethro |
262 |
2.65 |
22 |
|
| Lima |
49 |
2.68 |
4 |
|
| Sheet |
38 |
2.40 |
3 |
|
| Indicated Total |
2,360 |
2.89 |
220 |
|
| M&I Total |
4,216 |
2.98 |
406 |
|
Notes:
| 1. |
Cut-off applied 1.5 g/t. |
| 2. |
No Geological loss applied for Measured, 5% for Indicated and Inferred. |
| 3. |
Commodity price utilised: USD1,800/oz. |
| 4. |
Mineral resources are stated exclusive of mineral reserves. |
| 5. |
Mineral resources are reported as 64% attributable to Caledonia. |
| 6. |
All orebodies are depleted for mining. |
| 7. |
Plant recovery factor of 94% applied. |
In situ inferred mineral resource tabulation for Blanket Mine as at December 31, 2022:
| Mineral Resource Classification |
Orebody |
Tonnes |
Au |
Ounces |
| kt |
g/t |
koz |
||
| Inferred |
AR Main |
214 |
2.40 |
17 |
| AR South |
433 |
3.03 |
42 |
|
| Blanket Feudal |
271 |
3.28 |
289 |
|
| Blanket 1 |
833 |
2.41 |
65 |
|
| Blanket 2 |
938 |
3.64 |
110 |
|
| Blanket 3 |
467 |
2.68 |
40 |
|
| Blanket 4 |
220 |
2.87 |
20 |
|
| Blanket 5 |
11 |
2.68 |
1 |
|
| Blanket 6 |
115 |
2.89 |
11 |
|
| Blanket Quartz Reef |
1,772 |
2.74 |
156 |
|
| Eroica |
142 |
3.86 |
18 |
|
| Jethro |
152 |
2.87 |
14 |
|
| Lima |
135 |
3.13 |
14 |
|
| Sheet |
46 |
2.61 |
4 |
|
| Inferred Total |
5,748 |
2.92 |
539 |
|
Notes:
| 1. |
Cut-off applied 1.5 g/t. |
| 2. |
No Geological loss applied for Measured, 5% for Indicated and Inferred. |
| 3. |
Commodity price utilised: USD1,800/oz. |
| 4. |
Mineral resources are stated exclusive of mineral reserves. |
| 5. |
Mineral resources are reported as 64% attributable to Caledonia. |
| 6. |
All orebodies are depleted for mining. |
| 7. |
Plant recovery factor of 94% applied. |
A comparison of the measured, indicated and inferred mineral resource estimates as at 31 December 2022 with those of 31 December 2021 are shown below. The most significant reasons for the changes are as a result of:
| ● |
42,754 sampling data points added since the 2021 estimates (32% increase). |
| ● |
Subsequent updating of domain orebody wireframes and conversions between mineral resource categories. |
| ● |
Methodology changes whereby conversion of remaining manual estimates to digital kriged block models informing the significant increase in the measured resources. |
| ● |
There is no material change due to modifying factors. |
| ● |
The commodity price used was USD1,800/oz in 2022 and USD1,600 in 2021, with no change to the cut-off of 1.5g/t. |
| ● |
There is no material change in the inferred category as the 2021 inferred blocks were already in digital format and minimal new data points were added due to the hiatus in exploration drilling. |
| December 31, 2022 |
December 31, 2021 |
% Variance |
|||||||
| Mineral Resource Classification |
Tonnes |
Au |
Ounces |
Tonnes |
Au |
Ounces |
Tonnes |
Au |
Ounces |
| kt |
g/t |
koz |
kt |
g/t |
koz |
kt |
g/t |
koz |
|
| Measured Total |
1,855 |
3.10 |
185 |
554 |
2.80 |
48 |
235% |
11% |
282% |
| Indicated Total |
2,363 |
2.89 |
220 |
1,585 |
2.78 |
142 |
49% |
4% |
55% |
| M&I Total |
4,218 |
2.98 |
405 |
2,139 |
2.77 |
190 |
97% |
8% |
113% |
| Inferred Total |
5,748 |
2.92 |
539 |
5,419 |
3.17 |
552 |
6% |
-8% |
-2% |
| Grand total |
9,967 |
2.94 |
944 |
7,558 |
3.06 |
743 |
32% |
-4% |
27% |
Notes:
| 1. |
Cut-off applied 1.5 g/t (2022 and 2021). |
| 2. |
No geological loss applied for measured, 5% for indicated and inferred (2022 and 2021). |
| 3. |
Commodity price of $1,800/oz and $1,600/oz used for 2022 and 2021 respectively. |
| 3. |
Mineral resources are reported as 64% attributable to Caledonia (2022 and 2021). |
| 4. |
All orebodies are depleted for mining (2022 and 2021). |
| 5. |
Mineral resources are stated exclusive of Mineral reserves (2022 and 2021). |
| 6. |
Commodity price utilised: USD1,800/oz. |
| 7. |
Plant recovery Factor of 94% applied. |
Refer to Exhibit 15.4 or the technical report summary titled “S-K 1300 Technical Report Summary on the Blanket Gold Mine, Zimbabwe”, with an effective date of December 31, 2022 for further key assumptions, parameters, and methods giving rise to the changes above.
Mineral reserve estimates in this Annual Report are reported in accordance with the requirements of Subpart 1300. Accordingly mineral resources in the measured and indicated categories have been converted to proven and probable mineral reserves respectively, by applying applicable modifying factors and are planned to be mined out under the life of mine plan within the period of our existing rights to mine, or within the time period of assured renewal periods of our rights to mine.
In addition, as of the date of this Annual Report, all mineral reserves are covered by required permits and governmental approvals. The updated mineral reserve estimation as at December 31, 2022, is detailed in the table below. Mineral reserves are stated as delivered to plant.
| Mineral Reserve Classification |
Tonnes |
Grade |
Au Content |
|||||||||||||
| kt |
g/t |
kg |
oz |
|||||||||||||
| Proven |
1,191 | 3.23 | 3,842 | 123,534 | ||||||||||||
| Probable |
1,300 | 2.92 | 3,801 | 122,205 | ||||||||||||
| Total |
2,491 | 3.07 | 7,643 | 245,7 | ||||||||||||
Notes:
| 1. |
Mineral reserve cut-off of 2.1 g/t applied. |
| 2. |
The gold price that has been utilised in the economic analysis (as (as included in the S-K 1300 Technical Report Summary on the Blanket Gold Mine (refer to Exhibit 15.4)) to convert diluted measured and indicated mineral resources in the life of mine plan to mineral reserves is an average real term price of USD1,655/oz over the life of mine, using the forecast prices as per economic analysis included in the S-K 1300 Technical Report Summary on the Blanket Gold Mine. |
| 3. |
Metallurgical recovery of 94% applied. |
| 4. |
The mineral reserve estimation utilises the depleted 2022 mineral resource estimation, the December 31, 2022 mine designand life of mine plan. |
| 5. |
Mineral reserves are reported as 64% attributable to Caledonia. |
An uneconomical tail containing 125.5 koz of gold has been excluded from the mineral reserve, since it is not economical on its own.
The mineral reserves for the estimate as at 31 December 2022 compared with that of 31 December 2021 is presented below.
| December 31, 2022 |
December 31, 2021 |
% Variance |
||||||||||
| Mineral Reserve Classification |
Tonnes |
Grade |
Au Content |
Tonnes |
Grade |
Au Content |
Tonnes |
Grade |
Au Content |
|||
| kt |
g/t |
kg |
oz |
kt |
g/t |
kg |
oz |
kt |
g/t |
kg |
oz |
|
| Proven |
1,191 |
3.23 |
3,842 |
123,534 |
656 |
3.11 |
2,042 |
65,651 |
82% |
4% |
88% |
88% |
| Probable |
1,300 |
2.92 |
3,801 |
122,205 |
1,751 |
3.30 |
5,774 |
185,652 |
-26% |
-12% |
-34% |
-34% |
| Total |
2,491 |
3.07 |
7,643 |
245,739 |
2,408 |
3.25 |
7,816 |
251,304 |
3% |
-6% |
-2% |
-2% |
On a total mineral reserve basis, there is no material change in the estimates. There is however a material change in individual categories of proven and probable mineral reserves. The reason for this is as follows:
| ● |
Changes in the mineral resource estimation methodology from manual to digital resulting in the increase in measured and indicated mineral resources described above. This subsequently influenced the conversion to proven and probable mineral reserves. |
| ● |
The uneconomic tail cut was the single largest contributor to the changes in mineral reserves, with an additional 99,649 oz being cut in the 2022 estimate, with 37,272 from measured and 62,377 from indicated mineral resources which were not converted to proven and probable mineral reserves respectively. A detailed review of rock engineering pillar designs is required to determine eligibility of pillars within this tail which can be targeted for eventual extraction either partially or in totality. |
| ● |
Commodity price of USD1,650/oz in 2022 versus USD1,622/oz in 2021 did not have a material effect on the economic analysis or the cut-off which remained at 2.1g/t. |
| ● |
The total operating costs varied between USD 82/t in 2022 and USD 76/t in 2021 with no influence on the planning cut-off grade of 2.1g/t and hence no influence on the mineral reserves. |
Refer to Exhibit 15.4 or the technical report summary titled “S-K 1300 Technical Report Summary on the Blanket Gold Mine, Zimbabwe”, with an effective date of December 31, 2022 for key assumptions, parameters, and methods used to estimate the mineral reserves and risks that could materially affect the potential development of the mineral reserves.
Our mineral reserve figures are estimates, which may not reflect actual reserves or future production. These figures are prepared in accordance with industry practice, converting mineral deposits to reserves through the preparation of a mining plan. The mineral reserve estimates contained herein inherently include a degree of uncertainty and depend to some extent on statistical inferences. Reserve estimates require revisions based on actual production experience or new information. Should we encounter mineralization or formations different from those predicted by past drilling, sampling and similar examinations, mineral reserve estimates may have to be adjusted and mining plans may have to be altered in a way that might adversely affect our operations. Moreover, if the price of gold declines, stabilizes at a price that is lower than break-even level, if our production costs increase or recovery rates decrease, it may become uneconomical to recover mineral reserves with lower grades of mineralization.
Exploration and Planned Work
The Blanket Mine is a producing operation. Ordinarily, 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 lateral and depth extension of the known ore bodies which are being mined, as well as searching for potential additional orebodies. The exploration platforms were exhausted in 2019. Due to the tonnes throughout ramp-up, preference was given to ore hoisting and no drilling was conducted in 2020 and 2021. The completion of the Central Shaft enabled the re-establishment of new exploration platforms in 2022.
This drilling may confirm and improve the down-dip inferred mineral resource. An electromagnetic survey may be considered; potentially delineating additional surface structural features and targets, which can be used in conjunction with and refinement of the geological concept being proposed.
The combination of the exploration drilling, geophysical survey and conceptual geological model (based on the sampling database) may increase the exploration targets and ultimately assist in increasing the mineral resource.
Underground exploration drilling resumed in June 2022 with 13,072m budgeted for. Only 5,312m were drilled in 2022 due to delays in drilling platform availability and drill contractor non-performance. The failure of the contractor in solving technical challenges resulted in the termination of the contract. To continue with exploration, the mine rapidly refurbished old in-house drilling rigs and drilling resumed in mid-June. There was no surface drilling conducted in 2022.
Future exploration work will be focused primarily on the depth extensions of the Blanket orebodies with both long hole drilling and short hole drilling. Due to the availability of the Central Shaft, five crosscuts are budgeted for development in 2023, totaling 805m at a cost of US$742,230. For 2023, 18,510m are budgeted for at a cost of US$994,467, using in-house rigs.
The appropriate QAQC procedures were applied to satisfy best practice guidelines including the use of blanks, standards and duplicates. These procedures with respect to sample preparation, analyses, security and data validation and verification are detailed in Exhibit 15.4 titled “S-K 1300 Technical Report Summary on the Blanket Gold Mine, Zimbabwe”, with an effective date of December31, 202.
Maligreen
Property Description and Ownership
On September 23, 2021, Caledonia announced that it had entered into an agreement to purchase 100% ownership of mining claims over Maligreen, a property situated in the Gweru mining district in the Zimbabwe Midlands, for a total cash consideration of US$4 million. The claims were purchased to further explore and the exploration and evaluation asset is disclosed in note 18 of the Consolidated Financial Statements. No production activities have taken place while under the control of the Company. As at December 31, 2022, the exploration and evaluation cost, as included in note 18 of the Consolidated Financial Statements, is $5.6 million.
Maligreen is a brownfield gold exploration project situated on the Nkayi-Silobela Greenstone Belt that has historically been exploited via open pit mining. The Maligreen property is envisioned as a combination open pit and underground operation. Appropriate work has to be completed to determine the extent and economic viability of an underground operation. This will be informed by future exploration drilling.
Maligreen is located in central Zimbabwe, approximately 73 km due west-southwest of Kwekwe, Midlands Province. Zimbabwe's capital city, Harare, lies 235 km northeast of Maligreen. The town of Nkayi lies 25 km west of the project along the Kwekwe-Lupane Highway. The location of the project is indicated below.
Source: Minxcon (2022)
Maligreen is centered on the following coordinates:
| ● |
Latitude 19°1'51"S |
| ● |
Longitude 29°6'5"E |
Maligreen is held under a portfolio of 41 adjacent mining claims in the Midlands Mining District. Of these, 40 encompass an area of 10 ha each and are issued for gold. Claim AMT 97 (claim number 11219BM) encompasses 150 ha and is issued for copper. This latter claim has not been the focus of exploration to date. Should future exploration reveal substantial gold mineralization, application will be made to include gold ore in the claim. The claims are all up to date, with next inspections due in 2023. The claims were all held in the name of Maligreen Mining Company (Pvt) Ltd, which entered into an Agreement of Sale with |CHZ on September 22, 2021 to acquire the claims.
The total land area of Maligreen is approximately 550 hectares comprising two historic open pit mining operations that produced approximately 20,000 ounces of gold mined from oxides between 2000 and 2002 after which the operation was closed. No exploration activities are currently active at the project, but the Company is planning to undertake additional exploration to fully understand the strike extension and depth extension potential.
History
The Maligreen deposit was discovered by Reunion Mining (Zimbabwe) Limited (“Reunion”) in October 1995 over a number of Exclusive Prospecting Orders. The property was purchased by Cluff Mineral Resources Limited (“Cluff”) in April 1998. In December 1999, Pan African (Pvt) Ltd (“Pan African”) entered into an agreement with Cluff to acquire a 50% interest in Maligreen. The acquisition was completed in April 2000 and a new joint-venture company MMC was registered (Trashliev, 2007).
As described by Trashliev (2007), four years of integrated regional geochemical and geophysical exploration led to the discovery of the Maligreen mineralization by Reunion in 1995. A north-south, 3.3 km long geochemical signature along structural targets was identified. For the next two and a half years, Reunion drilled 107 diamond drillholes over 28,272 m and 526 percussion drillholes over 29,110 m, the results of which were utilised to define a gold mineral resource. Only the southern 1 km of the geochemical anomaly has been drilled. Limited geochemical data is however available. The area has been mapped and geological data relogged. No further exploration work was undertaken under Cluff ownership, but the company did revise the mineral resources to quantify the potential and guide mine planning.
Work commenced in January 2000 under MMC ownership to develop two open pits (North Pit and South Pit) to exploit the orebody. A crushing, sizing and floatation plant was also constructed. Pan African completed 35 reverse circulation (“RC”) drillholes over 1,038 m to guide mine planning at North Pit. The first bullion was poured in July 2000. All available data for the project area was consolidated in 2003 and all 107 diamond drillholes were relogged. Mining ceased in September 2002, but the reason for this is uncertain. It is however assumed that they were targeting the oxides only.
Present Condition and Infrastructure
Infrastructure on site is minimal. There are two open pits, namely North Pit and South Pit, that were historically mined, as well as the heap leach pad and possible elution room that serviced the operations. An office block is occupied and maintains the care and maintenance of the historic operation. A basic process plant is erected and utilised by the Syndicate for their mining activities. All required infrastructure for exploration activities is in place.
The Maligreen project is in the exploration phase and the area is accessible by car via the Kwekwe-Lupane Road, approximately 80 km west of Kwekwe. From this road, the Mahlathini Road can be taken southwards for some 3.8 km, from which point a westwards gravel road provides direct access to the project area after 1.8 km. The journey from Kwekwe takes approximately 2 hours by car.
Permitting, Licensing, and Encumbrances
The Maligreen mineral resource occurs within a claims area covering a total of 550 ha. The project is held under a portfolio of 41 adjacent mining claims in the Midlands Mining District. Of these, 40 encompass an area of 10 ha each and are issued for gold. Claim AMT 97 (claim number 11219BM) encompasses 150 ha and is issued for copper. A conversion application to convert Claim AMT 97 to gold was accepted and registered on August 5, 2022 by the office of the Provincial Mining Director, Gweru. The claims are all up to date, with next inspections due in 2023.
Location of the existing claims are shown below.
Source: Minxcon (2022)
Geological Setting, Mineralization and Deposit
The Maligreen gold deposit occurs in a northeast-trending section of greenstone near the convergence (triple junction) of the Midlands, Bubi and Silobela greenstone belts. The Shangani granite-gneiss terrain occurs to the southeast of the project.
Although the area and its immediate surroundings are covered by a thin layer (0-40 m) of surface deposits that include Kalahari sands, the position of the area within the regional stratigraphy and structure can be deduced from aeromagnetic data linked to outcrops SW and NE of the area. On this basis it is assumed that the Maligreen deposit is hosted in rocks assigned to the Maliyami Formation of the Upper Bulawayan Group (Harrison, 1981).
Maliyami Formation rocks comprise andesitic lava flows that are locally amygdaloidal or porphyritic, and interbedded with basalt, volcaniclastic rocks (tuff, agglomerate, ignimbrite), felsic volcanic material and porphyry intrusions, as well as phyllitic rocks and chert. All units have been intruded by metadolerite and gabbro bodies (Harrison, 1981). To the southeast the Maliyami Formation rocks are assumed to stratigraphically overlie older rocks belonging to the Upper Bulawayan Group (Leo Hurst Formation andesitic and dacitic flows; Ntobe Formation basalt) and Lower Bulawayan and Sebakwean Groups (dacite and serpentinite). Contacts between most units are strongly sheared. The greenstone pile in the Maligreen area was intruded by a number of tonalitic bodies with narrow contact metamorphic aureoles, assigned to the Sesombi Suite.
The regional structural trend around Maligreen is northeast, parallel to the contact between the greenstone pile and the Shangani granite-gneiss terrain to the southeast. Two major northeast trending shear zones have been described to the southeast of the project using Landsat TM data (Campbell and Pitfield, 1994). These shears are positioned near formational contacts between the Leo Hurst and Ntobe Formations (the Leo Hurst shear zone) and the Ntobe Formation and Lower Bulawayan rocks respectively. They have been interpreted as large dextral shear systems and linked to the Munyati Shear Zone in the Midlands Greenstone Belt (Campbell and Pitfield, 1994).
A stratigraphic column depicting the regional lithological units is provided in figure below.
Source: Minxcon (2022)
Numerous small gold workings occur in the area around Maligreen. Larger mines (>500 kg production) include the Jena Group of mines to the north-northeast of Maligreen and the Turtle Mine and associated reefs to the northwest.
The country rocks at Maligreen consist of metamorphosed andesitic pyroclastics (grading from lapilli tuff to agglomerate), intermediate lavas (dacite/andesite) and mafic lavas (basalt/gabbro). The pyroclastics are interbedded with quartz-eye-porphyry (“QEP”) and intruded by feldspar porphyry (“FP”) dykes. Andesitic volcanics are porphyritic and amygdaloidal in places. A mafic (“marker”) dyke has intruded along the contact between pyroclastics and dacitic volcanics, within a broad shear zone. The strongly altered and sheared zone known as the quartz-sericite-zone (“QSZ”), forms the core of deformation and alteration at Maligreen (Mtetwa, 2007).
The andesitic-dacitic lava is a fine to medium grained, grey green rock. Amygdaloidal and porphyroidal textures are found in places. Quartz-porphyry is characterised by sparse, whitish calcite (after feldspar) amygdales with rectangular (feldspar pseudomorph) shape, in fine grained siliceous matrix. Pyroclastics grade from very fine grained, grey green lapilli tuff to coarse grained agglomerates with large, usually felsic, bombs up to a few centimetres across. The bombs are often amygdaloidal. Quartz and carbonate veining is common. QEP is massive, brittle, grey green (seldom pink) rock with siliceous matrix and spheroidal quartz porphyroblasts, usually 2-3 mm across. It is sericitized and deformed into strongly developed S-C fabric and mineralised in places pressure shadows around the quartz porphyroblasts often indicate the sense of movement during deformation. QSZ is a strongly deformed and intensely altered unit composed of white quartz with yellow sericite and/or green chlorite bands usually forming S-C fabric along the chlorite/sericite bands. When the chlorite rather than sericite is dominant, it is called the quartz-chlorite-zone. Fuchsite and epidote are sometimes present.
The mafic dyke has a green medium grained matrix with dark green hornblende phenocrysts up to 5mm across. It has chilled margins and is found within or on the margin of the QSZ. The FP is pale grey to pink felsic unit with white subhedral to euhedral feldspar phenocrysts up to 5mm across. It is often intensely sheared, altered (sericite after feldspar) and mineralised. The FP in the main shear zone, to the north, has QSZ xenoliths in it, suggesting that it is post Phase 1 deformation. In addition, the FP is often found unsheared within the QSZ. The same applies to the mafic dyke. Basalt is fine grained green to dark green and fairly brittle. It has black magnetite rich patches which are very magnetic. Patchy siliceous and epidote alteration associated with specks of pyrite is common. Dolerite is medium to coarse gained rock with a pale green matrix and dark green hornblende phenocrysts. It is weak to strongly magnetic. The gabbro has very pale green matrix with large dark green phenocrysts which give it a coarse-grained texture. Minor sericite alteration is found in places. Kalahari sands, Karoo sediments and black hydromorphic clays 3m to 7m thick cover the Maligreen deposit.
The low-grade greenschist facies metamorphism of the country rock is marked by the assemblage of chlorite-epidote-actinolite-plagioclase. Three different types of alteration are recognised. The first type of alteration is observed in the intensely sericitized and silicified QSZ and is related to the phase 1 deformation. Epidote and minor fuchsite are also present. Low temperature Na-micas (illite and paragonite) were picked up by Pima spectral analysis. The second type of alteration (related to phase 2 deformation) is found in gold mineralised zones, which are also intensely sericitized and silicified. Other alteration minerals present are carbonate, tourmaline, chlorite and leucoxene. Fuchsite and epidote are seldom present. The Pima spectral analysis on core from diamond drill hole MG45 suggests that gold mineralization is associated with K-mica (muscovite) introduced by “high” temperature hydrothermal fluids. The third type of alteration is pervasive silicification and carbonatization of the country rock. It has a bleaching effect on the wall rocks, forming a broad envelope to mineralization (Mtetwa, 2007). The alteration minerals are usually associated with shear zones and pyrite mineralization.
The deposit lies in a major north-south structure interpreted from the aeromagnetic data and observed in the core as the 50 m wide QSZ. This dominant structure (phase 1 deformation) is usually barren of gold. Narrow shears splay-off the QSZ (phase 2) deformation and are associated with gold mineralization. A NW oblique trend appears to belong to phase 2 deformation as it has brittle fractures and hosts grey sulphide with gold mineralization. Silicified ENE trending faults are barren of gold and are probably post mineralization.
Detailed mapping and structural measurements were taken by Professor Paul Dirks (2001).
The calculated stress field indicates that during the formation of the shear zones;
| ● |
WNW and NW trending sinistral shears formed within a tensional field, |
| ● |
NE trending dextral shears formed in a compressional field, |
| ● |
N trending sinistral shears formed close to the boundary of the compressional and tensional fields. |
This suggests that maximum fluid infiltration can be expected along the NW and WNW trending shears, and especially along the intersections of WNW, NW and N trending shears. The intensity of infiltration is partly dependent on the fluid pressure at the time of mineralization.
The widest zones of wall rock alteration in the South Pit occur in areas where NW, WNW and N shear zones merge into each other. Where such zones coincide with quartz porphyry rock, extensive stock works of quartz-sulphide veinlets have developed within the porphyry.
This is especially the case along the massive porphyry exposed at the bottom of the South Pit as indicated in the Local Geology of the Maligreen South Area figure below.
N-S trending shears away from intersections with NW trending shears, and SW trending shears parallel to S1 show less alteration and are not associated with significant mineralization although a narrow mineralised zone can be traced along the main N-trending shear zone to the N of the pit.
It is clear that the main zones of fluid infiltration occur along the intersection points of N-, NW- and WNW-trending shears within a sinistral shear system. Within such a system, these areas are clearly dilatant allowing more effective fluid impregnation. The intersection lineation between the three shear zone sets plunges steeply to the south. This orientation is near parallel to the L1 mineral lineation, this suggests that the mineralization plunges steeply S to SSW.
Where fault intersections coincide with quartz porphyry rocks, better mineralization occurs. This appears to happen because, the porphyry undergoes extensive, stock-work like fracturing with associated sulphide impregnation, a feature not observed to be as well developed in other lithologies. All quartz porphyries in the South Pit contain S1 and therefore were emplaced before gold was introduced along the younger brittle-ductile shear zones. A direct genetic relationship between the porphyries and mineralization is therefore not expected.
The feldspar porphyry observed in drill core below the N-pit intruded after the development of D1 and before or during the mineralising events in an N-S trend and may have a genetic relationship with the gold. The same may be true for the mafic dyke that has intruded into the main shear zone after D1, but before shearing associated with mineralization, which locally affects the dyke.
The figure below shows a schematic cross section of the geology at the project.
Source: Minxcon (2022)
Gold mineralization at Maligreen is generally associated with pyrite. Pyrite occurs mainly in association with argillic and quartz-sericite hydrothermal alteration and occasionally with propylitic and mylonitic style of hydrothermal alteration. Although the pyrite content increases towards the ore channel, gold and pyrite are not sympathetically related. Both stockwork and breccia pipe-type mineralization have been recognised. The breccia type is very limited and consists of rock fragments cemented with silicates and ore minerals.
Pyrite generally occurs as fracture filling, or as vein, veinlets, and dissemination. Dissemination of pyrite with visible fractures and healed micro cracks implies that some of the mineralization is a result of wall rock alteration by permeating fluids.
Based on the textural appearance, early clean pyrite and late “dirty” pyrite are the two dominant pyrite at Maligreen. The dirty pyrite is most likely “contaminated” by abundant magnetite due to the superimposed deep argillic alteration. However, the black colour could also be a result of the presence of molybdenite, arsenopyrite or sphalerite. Nevertheless, it is believed that the dirty pyrite is a result of late supergene enrichment due to the pervasive argillic alteration marked by the introduction of clay and magnetite (Mtetwa, 2007).
The relative proportion of dirty pyrite and clean pyrite varies significantly, but total pyrite content within the ore zones can reach 20-25%. Pyritised zones within the pyroclastic unit show clean pyrite as veins and veinlets which are always parallel to the bedding of the bedded tuff. Some of them are auriferous but generally do not show extreme grades. This could represent the formation of an early exhalative mineralization (Mtetwa, 2007).
The possible mechanism for the Maligreen gold deposition is likely a fluid flow, aided and abetted by high level rhyolitic intrusions, and redistributed through permeable secondary shear zones due to late dextral duplex-like segmentation.
Mineral Resources Estimate
The mineral esources have been depleted by means of the topography and mining voids. Discounts applied to the mineral resources include geological losses of 5% for Measured, 10% for Indicated and 15% for Inferred mineral resources to account for geological, data as well as estimation uncertainty. The gold content conversion calculations utilise a conversion of 1 kg = 32.15076 oz and all tonnages are reported in metric tonnes. Inferred mineral resources have a low level of confidence and while it would be reasonable to expect that the majority of Inferred mineral resources would upgrade to Indicated mineral resources with continued exploration, due to the uncertainty of Inferred mineral resources, it should not be assumed that such upgrading will occur.
The mineral resources are declared as the portion of the Resource that is potentially mineable from open pit as well as from underground, as part of the reasonable prospects for eventual economic extraction. An optimised pit was generated to evaluate the depth to which surface mining could occur. Based on this analysis a depth of 220 m was defined as the level to which surface mining can occur and is reported at a 0.4 g/t cut-off (Table: Surface Mineral Resource for Maligreen Gold Mine as at December 31, 2022). Below this all mineral resources are declared as underground, with a 1.5 g/t cut-off.
Surface Mineral Resource Tabulation for Maligreen as at December 31, 2022.
| Domain |
Mineral Resource Category |
Tonnes (Less Geological Losses) |
Gold Grade |
Gold Content |
| Mt |
g/t |
koz |
||
| North |
Measured |
0.30 |
0.87 |
8.3 |
| Indicated |
3.01 |
1.38 |
133.1 |
|
| Total Measured and Indicated |
3.30 |
1.33 |
141.4 |
|
| Inferred |
1.01 |
1.09 |
35.5 |
|
| South |
Measured |
1.35 |
2.70 |
117.2 |
| Indicated |
0.75 |
4.17 |
101.9 |
|
| Total Measured and Indicated |
2.10 |
3.23 |
218.2 |
|
| Inferred |
0.49 |
6.05 |
95.3 |
|
| SplayNW |
Indicated |
1.68 |
0.80 |
43.1 |
| Total Measured and Indicated |
1.68 |
0.80 |
43.1 |
|
| Inferred |
2.08 |
0.81 |
54.0 |
|
| SplaySW |
Indicated |
0.85 |
1.15 |
31.4 |
| Total Measured and Indicated |
0.85 |
1.15 |
31.4 |
|
| Inferred |
1.00 |
1.37 |
44.0 |
|
| Total Measured and Indicated |
7.94 |
1.70 |
434.1 |
|
| Total Inferred |
4.58 |
1.55 |
228.8 |
|
Notes:
| 1. |
Mineral resource Cut-off of 0.4 g/t Au applied. |
| 2. |
A gold price of USD1,800/oz was used for the cut-offs. |
| 3. |
Columns may not add up due to rounding. |
| 4. |
Mineral resources are reported as total Mineral resources and 100% attributable to Caledonia. |
| 5. | Plant recovery factor of 80% applied. |
Underground Mineral Resource Tabulation for Maligreen as at December 31, 2022.
| Domain |
Mineral Resource Category |
Tonnes (Less Geological Losses) |
Gold Grade |
Gold Content |
| Mt |
g/t |
koz |
||
| North |
Indicated |
0.09 |
2.88 |
8.2 |
| Total Measured and Indicated |
0.09 |
2.88 |
8.2 |
|
| Inferred |
1.13 |
2.42 |
87.7 |
|
| South |
Indicated |
0.00 |
12.57 |
0.0 |
| Total Measured and Indicated |
0.00 |
12.57 |
0.0 |
|
| Inferred |
0.33 |
8.69 |
93.5 |
|
| SplayNW |
Inferred |
0.13 |
2.51 |
10.3 |
| SplaySW |
Inferred |
0.00 |
1.58 |
0.0 |
| Total Measured and Indicated |
0.09 |
2.89 |
8.2 |
|
| Total Inferred |
1.59 |
3.75 |
191.5 |
|
Notes:
| 1. |
Mineral resource Cut-off of 1.5 g/t Au applied. |
| 2. |
A gold price of USD1,800/oz was used for the cut-offs. |
| 3. |
Columns may not add up due to rounding. |
| 4. |
Mineral resources are reported as total mineral resources and 100% attributable to Caledonia. |
| 5. | Plant recovery factor of 80% applied. |
The combined surface and underground mineral resource is shown in the below table, this shown at 0.4 g/t and 1.5 g/t for surface and underground respectively.
Total Mineral Resource Tabulation for Maligreen as at December 31, 2022.
| Domain |
Mineral Resource Category |
Tonnes (Less Geological Losses) |
Gold Grade |
Gold Content |
| Mt |
g/t |
koz |
||
| North |
Measured |
0.30 |
0.87 |
8.3 |
| Indicated |
3.09 |
1.42 |
141.3 |
|
| Total Measured and Indicated |
3.39 |
1.37 |
149.6 |
|
| Inferred |
2.14 |
1.79 |
123.2 |
|
| South |
Measured |
1.35 |
2.70 |
117.2 |
| Indicated |
0.75 |
4.17 |
101.0 |
|
| Total Measured and Indicated |
2.10 |
3.23 |
218.2 |
|
| Inferred |
0.82 |
7.12 |
188.8 |
|
| SplayNW |
Indicated |
1.68 |
0.80 |
43.1 |
| Total Measured and Indicated |
1.68 |
0.80 |
43.1 |
|
| Inferred |
2.21 |
0.91 |
64.3 |
|
| SplaySW |
Indicated |
0.85 |
1.15 |
31.4 |
| Total Measured and Indicated |
0.85 |
1.15 |
31.4 |
|
| Inferred |
1.00 |
1.37 |
44.0 |
|
| Total Measured | 1.65 | 2.37 | 125.5 | |
| Total Indicated | 6.37 | 1.55 | 316.8 | |
| Total Measured and Indicated |
8.03 |
1.71 |
442.3 |
|
| Total Inferred |
6.17 |
2.12 |
420.3 |
|
Notes:
| 1. |
Mineral resource Cut-off of 0.4 g/t Au for surface and 1.5 g/t Au for underground applied. |
| 2. |
A gold price of USD1,800/oz was used for the cut-offs. |
| 3. |
Columns may not add up due to rounding. |
| 4. |
Mineral resources are reported as total mineral resources and 100% attributable to Caledonia. |
| 5. | Plant recovery factor of 80% applied. |
A comparison of the mineral resources estimate as at 31 December 2022 with that of 31 December 2021 is shown below. The reason for the change is due to the completion of the relogging and resampling exercise, with the adequate application of QAQC to the database, resulting in an increased confidence in the estimate as at 31 December 2022. The subsequent resource estimation changed from inferred mineral resource in 2021 to measured, indicated and inferred mineral resources as at 31 December 2022.
| December 31, 2022 |
December 31, 2021 | % Variance | |||||||
| Mineral Resource Category |
Tonnes |
Gold |
Gold |
Tonnes (Less |
Gold |
Gold |
Tonnes (Less |
Gold |
Gold |
| Mt |
g/t |
koz |
Mt |
g/t |
koz |
Mt |
g/t |
koz |
|
| Total Measured |
1.65 |
2.37 |
126 |
- | - | - | - | - | - |
| Total Indicated |
6.37 |
1.55 |
317 |
- | - | - | - | - | - |
| Total Measured and Indicated |
8.03 |
1.71 |
442 |
- | - | - | - | - | - |
| Total Inferred |
6.17 |
2.12 |
420 |
15.59 |
1.88 |
940 |
-60% |
13% |
-55% |
| Grand total |
14.20 |
1.89 |
863 |
15.59 |
1.88 |
940 |
-9% |
1% |
-8% |
Exploration and Planned Work
Planned exploration activities of relogging and resampling of historic core holes at Maligreen have been completed for the near term.
Caledonia’s geologists re-sampled the historical half core located in the core yard. The half core was quartered, and the samples were taken in the same intervals as the historical logging and sample intervals so that the sample correlation would be as close as possible. The samples were given unique identification numbers and bagged with QAQC samples also being inserted into the sample sequence. The QAQC samples were inserted so that every 14 samples would contain a blank, duplicate and a CRM (certified reference material). In addition to this, for every drillhole the first and last sample was also a blank sample. There was a high grade, medium and low grade CRM. The samples were submitted to the Antech laboratory in Kwekwe, which is an accredited laboratory. Antech Laboratory is located at 6 KM PEG, Mvuma Road, Kwekwe, Zimbabwe. Antech Laboratory is a Southern African Development Community Cooperation in Accreditation (“SADCA”) accredited testing laboratory (facility accreditation number TEST-5 0030), and the laboratory operates a quality system according to the ISO/IEC 17025:2017. Antech laboratory’s original date of accreditation is 1 December 2017. African Mineral Standards “AMIS” reference material was used in the re-sampling exercise. The results of the QAQC show that there is an overall pass rate of 74% with minimal reference materials such as AMIS0519, AMIS0559 and AMIS0777 not performing well. The reason for this is not clear. The protocol was however that if a batch QAQC failed, the batch would be re-assayed and the re-assayed result and original result were averaged. A total of 472 blank QAQC samples were inserted into the sample sequence with a 96% pass rate below the three times the detection limit of 0.06 g/t. 228 duplicate samples were inserted into the re-sampling sampling sequence. The duplicate samples have a 94% correlation. Based on the overall results of the QAQC for the re-sampling exercise the QP deems the QAQC of the confirmatory re-sampling exercise to be acceptable. The QAQC samples for the results received for the update was 738 for the 2,572 re-sampled samples. This equates to 22% QAQC samples.
A project revision is underway to determine next steps and budget requirements for infill drilling as well as determining the depth and strike extension by further phased drilling.
Future work will be conducted in line with QAQC protocols as described in the Technical Report Summary for Maligreen, Exhibit 15.5.
Motapa
Property Description and Ownership
The Motapa project is an exploration-stage project at which no Subpart 1300 mineral reserves or mineral resources have been identified. The registered mining lease held by Arraskar (the “Motapa Mining Lease”) covers an area of 2,224 ha located in a brownfield exploration and mining area in the Inkosikazi resettlement area, Matabeleland North. The Motapa Mining Lease covers a geological strike close to 5 km. Motapa is accessed by wide tar road from Bulawayo for the first 40 km followed by a poorly maintained narrow-width tarred section for 65 km. An extensive gravel road network links various sites at the Motapa Mining Lease area. As at December 31, 2022, the exploration and evaluation cost of the Motapa project was $7.8 million.
Three lineament zones have been identified namely the Northern, Central and Southern zones, commonly referred to as Motapa North, Motapa Central and Motapa South, respectively. Several pits have been mined in each zone. The regional strike and lithological contacts trend north-east to south-west and are dominated by the Peter Pan and the Courtleigh fault systems.
When Motapa was acquired by Metallon Corporation in December 2003 no mining activities had taken place since the year 2000 and its closure by Anglo American Corporation. At the time of acquisition, mining activities had ceased and remnant infrastructure included two shafts and a residential compound.
Below is the location of Motapa on the Zimbabwean Map.
The figure below illustrates the open pits, oxide targets, core holes and infrastructure.
The oxides are amenable to heap-leach extraction of gold. However, the arsenical sulphide ore is refractory. Several bench-scale and laboratory tests at Bilboes’ Isabella and Bubi before the year 2000 showed that good recoveries (90+%) are likely from bio-oxidation of a sulphide concentrate.
However, some of the work initiated by AMZIM (the gold operating subsidiary of Anglo American Corporation in Zimbabwe) was not completed and a priority will be to finalize potential extraction routes for the sulphides while exploiting the remaining oxides.
History
Historically, we understand that over 3 million tonnes were mined from underground operations down to 11 level and processed through a 25,000 tonnes per month plant between 1949-1959. Total gold production for the mine until 1990 was approximately 300,000 ounces from 2.4 million tonnes of ore, averaging 5.4 g/t.
When Motapa mine was acquired by Metallon Corporation in December 2003 no mining activities had taken place since the year 2000 closure by Anglo American Corporation.
On November 2, 2022 Caledonia announced that it had purchased Motapa Mining Company UK Limited, the parent company of a Zimbabwe subsidiary (Arraskar) which holds the Motapa Mining Lease.
Present Conditions and Infrastructure
The area is generally flat and covered by woodland interspersed with patches of grass and a major river (Mdutshana) flows through the property. The direction of flow is NE to SW. The location is at an altitude of about 1,148m above sea level.
The erratic and low rainfall makes the area unsuitable for cultivation and agricultural activities are restricted to ranching.
There are no obvious topographic, climatic, land use or other constraints that could materially affect production or exploration activities.
The property is accessible from Bulawayo by a tarred road, and by gravel roads within the Mining Mining Lease area. It is connected to the national power grid and obtains sufficient water from old pits and boreholes.
Permitting, Licenses and Encumbrances
Motapa is compliant in terms of authorizations and adheres to all government protocols and regulations as required.
The Motapa Mining Lease is registered with Number 22, issued on October 13, 1994, and covers 2,224 ha and is current. The lease is renewed annually and an inspection must be performed by the Ministry of Mines and requisite fees paid. A mining lease comprises claims consolidated into one mining unit. The Company ensures that the lease is up to date.
Geological Setting, Mineralization and Deposit
The Motapa deposit comprises three identified discrete, parallel shear-hosted mineralized zones, namely:
| 1. |
Motapa North: with four sub-zones Pluvius and Jupiter. Pluvius is split into two named Pluvius123 and Pluvius5 with an information gap between them that assumes the possible existence of Pluvius4. |
| 2. |
Motapa Central: with three subzones Club, Britwell and Britwell East. There is Fossicker sub- parallel to Club and Britwell, but no data is available for evaluation, except that its existence is evidenced by a historical pit. |
| 3. |
Motapa South: with two subzones Halfday and Trail. |
Exploration and Planned Work
Further geological evaluation plans at Motapa are underway.
Bilboes
Property Description and Ownership
Bilboes owns three groups of claims that consists of four open pit mining properties in Matabeleland North Province of Zimbabwe. These open pits are referred to as Isabela North; Isabela South; McCays and Bubi (“Isabella McCays-Bubi”), as shown in the location map below. The first three are situated 80 km due north of Bulawayo whilst Bubi is 100 km due north east of Bulawayo and about 32 km northeast of Isabella. The Isabella McCays-Bubi properties comprise 131 claim blocks covering an area of 3,114.7 ha. A summary for each of the three groups of claims is contained in the table below. Additional ground is held at When, Sandy, Eastnor and Ferroro (3,935 ha). The Bilboes properties are considered exploration-stage properties because the Company has not yet identified a Subpart 1300 mineral reserve or mineral resource on any of the properties. The Company has commenced economic extraction activities prior to identifying any such reserves or resources. As at January 6, 2023, the date on which the Company completed its acquisition of Bilboes, the total cost of the Bilboes project was $65.677 million plus 1% NSR.
Odzi Resources Zimbabwe (Private) Limited is a subsidiary of Bilboes Holdings. It is a dormant company that holds certain of Bilboes’ mining claims that were not considered necessary for the Bilboes sulphide project. The previous owners of Bilboes Holdings agreed a sale and purchase agreement between Bilboes Holdings and the buyer Mingchang Sino-Africa Mining Investments (Private) Limited on April 4, 2022 for the sale and purchase of the entire issued share capital of Odzi Resources Zimbabwe (Private) Limited for a total deferred consideration of US$3m cash. Most of the consideration has been paid up to date of the annual report; US$142,774 is still outstanding.
Location Map of Bilboes Properties
Source: DRA
Bilboes claims:
| Group of Claims |
Mining District |
Province |
No. of Blocks |
Area (ha) |
Coordinate X1 |
Coordinate Y1 |
| Calcite and Kerry (Isabella Mine) |
Bulawayo |
Matabeleland North |
51 |
2,314.4 |
662,106 |
7,846,712 |
| Ruswayi (McCays Mine) |
Bulawayo |
Matabeleland North |
33 |
330 |
666,339 |
7,849,975 |
| Chikosi (Bubi Mine) |
Bulawayo |
Matabeleland North |
47 |
470 |
684,838 |
7,865,515 |
| Total |
131 |
3,114.70 |
||||
Isabella McCays-Bubi are approximately 80 km and 100 km directly north and north east of Bulawayo, the second largest city of Zimbabwe with an approximate population of 655,675 (2013). All the mines are accessed via public roads and although these are of variable quality, they are accessible by all types of vehicles. Isabella is 110 km (1.5 hours) whilst Bubi is 140 km (2 hours) by road from Bulawayo. Bubi can also be accessed by road from Isabella (70 km in 1 hour).
Average daily temperatures range from 24°C in June to 32°C in October and apart from the occasional heavy downpour in the rainy season, there are no climatic conditions that prevent all year-round exploration and mining.
The properties lie between 1,150 m and 1,200 m above sea level and are covered by red and grey soils of the greenstone rocks in the area. The area is generally flat and covered by woodland interspersed with scrubby vegetation. Agricultural activities are mainly small-scale ranching.
History
Anglo American Corporation of Zimbabwe Ltd (“AMZIM”), a company that formed Bilboes Holdings, held the Isabella, McCays and Bubi claims. AMZIM acquired the Isabella claims in 1982.
Initial exploration allowed the estimation of a small oxide resource and an open-pit; a heap leach mine was commissioned in 1989. Subsequent exploration extended Isabella and new discoveries were made at Bubi and McCays, which yielded 8,592 kg of gold (276,256 oz) over the past 26 years, 78,497 oz of this being produced since the management buyout of Bilboes Holdings in 2003. All mining has been from open pit oxide ore utilizing the heap leach extraction processing method.
Exploration for sulphide mineral resources began in 1994/95, with a sum of 17,650 m of exploratory drilling being completed by 1999, covering a strike length of 3,440 m. A maiden mineral resource estimate for the sulphide mineral resources was completed by SRK in 2009.
On January 6, 2023 Caledonia announced that it had satisfied the conditions precedent to purchase Bilboes Gold.
Present Conditions and Infrastructure
The overall site plan is shown in the below figure and includes major facilities of the Bilboes Project including the Isabella North and South, McCays and Bubi open pit mines, gold processing plan, Tailings Storage Facility, Waste Stockpiles, demarcated areas for mine buildings and accommodation facilities, main power line internal mine roads and access public roads.
Grid power will be supplied from the Zimbabwe National Grid by constructing a 70 km 132 kV Lynx line from Shangani Substation. To feed the line, a line bay will be constructed at Shangani. A mine substation will be constructed at Isabella. The estimate received is for a 132-kV substation, equipped with a 50 MVA 132 / 33 kV step-down transformer.
Raw water will be provided from open pit dewatering and the wellfield boreholes located across the mining claims area.
Overall site plan
Source: DRA
Permitting, Licenses and Encumbrances
Bilboes is compliant in terms of authorizations and adheres to all government protocols and regulations as required.
Bilboes’ mining claims cover a total area of 2,664.4 ha. The Bilboes Project is held under a portfolio of 131 adjacent mining claims in the Bulawayo Mining District. Of these, 125 encompass an area of 10 ha each and are issued for gold. Claims 11014 BM and 11015 BM encompass 150 ha each and are issued for tungsten. Claim SITEE 772 encompasses 1,1128 ha and is issued for the new sulphide project. Claims EASTNOR A, EASTNOR BASE A and EASNOR BASE B encompasses 150 ha each and are issued for limestone.
The mining claims are renewed annually and an inspection must be performed by the Ministry of Mines and requisite fees paid. The Company ensures that all the mining claims are up to date.
Geological setting, Mineralization and Deposit
The Bubi Greenstone Belt (Archean) covering the Bilboes Project consists of volcanic rocks of the Upper Bulawayan Group and capped by sedimentary sequences of the Shamvaian Group, all of which have been metamorphosed into felsic and mafic schists. Gold deposits are concentrated at the interface between these two groups, where major structural breaks and splays provide pathways for hydrothermal vein mineralization.
Gold is associated with sulphides that are commonly found in hydrothermal systems. These include pyrite and arsenopyrite as major components, but copper, lead, zinc, antimony, are also present in some deposits. Common alteration associated with gold mineralization is silicification, with lesser sericite and chlorite alteration.
Mineralization is hydrothermal and consists of silicified stockworks that host pyrite and arsenopyrite. The stockworks are characterised by a series of subparallel en echelon zones. The gold is very finely dispersed within the sulphides and is refractory.
All the deposits are oxidized with the sulphide interface occurring between 6 m and 50 m below surface.
Exploration and Planned Work
Plans are commissioned to complete the Caledonia feasibility study on the Bilboes sulphide project to estimate the funding requirements and commence development of the sulphides project.
Not applicable.
The following Operating and Financial Review and Prospects section is intended to help the reader understand the factors that have affected the Company's financial condition and results of operations for the historical period covered by the financial statements and management's assessment of factors and trends which are anticipated to have a material effect on the Company's financial condition and results in future periods. This section is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the other financial information contained elsewhere in this document. Our Consolidated Financial Statements have been prepared in accordance with IFRS. Our discussion contains forward-looking information based on current expectations that involve risks and uncertainties, such as our plans, objectives and intentions. Our actual results may differ from those indicated in such forward-looking statements.
The key drivers of our operating results and principal activities are:
| ● |
revenue, which is influenced by: |
| o |
the price of gold, which fluctuates in terms of the realized USD gold price obtained; and |
| o |
our production tonnages and gold content thereof, impacting on the amount of gold we produce at our operations; |
| ● |
our cost of producing gold; and |
| ● |
other significant matters affecting profitability. |
Revenue
Revenue increased to $142,082,000 in fiscal year 2022 from $121,329,000 in fiscal year 2021 (2020: $100,002,000). Gold produced was 80,775 oz. (2021: 67,476 oz.; 2020: 57,899). The increase in revenue was due to an increase in the average realized gold price received to $1,772 per oz. (2021: $1,766 per oz.; 2020: $1,749 per oz.) and an increase in quantity of gold sold (see below).
Gold price
Average realized gold price per ounce is a non-IFRS measure which management believes assists the stakeholders in understanding the average price obtained for an ounce of gold.
Our revenues are derived from the sale of gold produced by Blanket Mine. As a result, our revenues are directly influenced by the average realized gold price obtained from the sale of gold. The gold prices obtained may fluctuate widely and are influenced by factors beyond the control of the Company. The table below indicates the average realized gold price per ounce obtained for the 2022, 2021 and 2020 fiscal years.
| $’000 |
2020 |
2021 |
2022 |
|||||||||
| Revenue (IFRS) |
100,002 | 121,329 | 142,082 | |||||||||
| Revenue from silver sales |
(86 | ) | (122 | ) | (116 | ) | ||||||
| Revenue from gold sales |
99,916 | 121,207 | 141,966 | |||||||||
| Gold ounces sold |
57,137 | 68,617 | 80,094 | |||||||||
| Average realized gold price per ounce |
1,749 | 1,766 | 1,772 | |||||||||
Gold produced
Tonnes milled, average grades, recoveries and gold produced are shown in the table below.
| Blanket Mine Production Statistics | |||||||||||||||||
| Year |
Tonnes Milled (t) |
Gold Head (Feed) Grade (g/t Au) |
Gold Recovery (%) |
Gold Produced (oz.) |
|||||||||||||
| Quarter 1 |
2020 |
140,922 | 3.35 | 93.8 | 14,233 | ||||||||||||
| Quarter 2 |
2020 |
143,210 | 3.13 | 93.9 | 13,499 | ||||||||||||
| Quarter 3 |
2020 |
157,343 | 3.19 | 93.9 | 15,155 | ||||||||||||
| Quarter 4 |
2020 |
156,487 | 3.19 | 93.5 | 15,012 | ||||||||||||
| Year |
2020 |
597,962 | 3.21 | 93.8 | 57,899 | ||||||||||||
| Quarter 1 |
2021 |
148,513 | 2.98 | 93.0 | 13,197 | ||||||||||||
| Quarter 2 |
2021 |
165,760 | 3.34 | 93.8 | 16,710 | ||||||||||||
| Quarter 3 |
2021 |
179,577 | 3.48 | 94.2 | 18,965 | ||||||||||||
| Quarter 4 |
2021 |
171,778 | 3.57 | 94.3 | 18,604 | ||||||||||||
| Year |
2021 |
665,628 | 3.36 | 93.9 | 67,476 | ||||||||||||
| Quarter 1 |
2022 |
165,976 | 3.69 | 94.1 | 18,515 | ||||||||||||
| Quarter 2 |
2022 |
179,118 | 3.71 | 93.9 | 20,091 | ||||||||||||
| Quarter 3 |
2022 |
198,495 | 3.53 | 93.6 | 21,120 | ||||||||||||
| Quarter 4 |
2022 |
208,444 | 3.37 | 93.7 | 21,049 | ||||||||||||
| Year |
2022 |
752,033 | 3.56 | 93.8 | 80,775 | ||||||||||||
Ounces produced increased by 19.7% mostly due to the increased tonnes milled and higher grade. Tonnes milled in the year were 13% higher than 2021. Production for 2022 was a new record and exceeded the Company’s revised guidance for 2022.
An ore stockpile of approximately 2,500 tonnes (December 2021: 1,714 tonnes) existed at year end due to the rate of mining and hoisting exceeding the milling capacity for much of 2022.
Production cost
Production cost includes salaries and wages, on mine administration, consumable materials and electricity and other related costs incurred in the production of gold. Production cost for 2022, 2021 and 2020 is summarized below.
| $ ‘000 |
2020 |
2021 |
2022 |
|||||||||
| Salaries and wages* |
16,122 | 20,609 | 23,037 | |||||||||
| Consumable materials – Operations* |
14,938 | 17,375 | 23,601 | |||||||||
| Consumable materials – COVID-19 |
824 | 297 | 311 | |||||||||
| Electricity costs* |
8,312 | 10,407 | 9,634 | |||||||||
| Safety |
708 | 774 | 998 | |||||||||
| Cash-settled share-based expense (note 12.1(a)) |
634 | 692 | 853 | |||||||||
| On mine administration* |
1,304 | 1,806 | 2,736 | |||||||||
| Security costs |
496 | 826 | 1,093 | |||||||||
| Obsolete inventory (note 20) |
- | 36 | 563 | |||||||||
| Pre-feasibility exploration costs |
373 | 304 | 172 | |||||||||
| 43,711 | 53,126 | 62,998 | ||||||||||