UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

Of the Securities Exchange Act of 1934

 

For the month of May 2023

 

Commission File Number: 001-38164

 

CALEDONIA MINING CORPORATION PLC

(Translation of registrant's name into English)

 

B006 Millais House
Castle Quay
St Helier
Jersey JE2 3EF

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F

 

Form 20-F      X       Form 40-F ______

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ______

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ______

 

 

INCORPORATION BY REFERENCE

 

Exhibits 99.1 to 99.4 included with this report on Form 6-K are expressly incorporated by reference into this report and are hereby incorporated by reference as exhibits to the Registration Statement on Form F-3 of Caledonia Mining Corporation Plc (File No. 333-255500), as amended or supplemented.

 

 

 

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

CALEDONIA MINING CORPORATION PLC

  (Registrant)  
       
  By: /s/ Steve Curtis  
Dated: May 15, 2023

Name:

Steve Curtis  
  Title:

CEO and Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit Index

 

Exhibit Description
   
99.1 Interim Financial Statements/Report
99.2 Interim MD&A
99.3 52-109F2 - Certification of Interim Filings - CEO
99.4 52-109F2 - Certification of Interim Filings - CFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.1

 

Caledonia Mining Corporation Plc

 

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION

 

To the Shareholders of Caledonia Mining Corporation Plc:

 

Management has prepared the information and representations in this interim report. The unaudited condensed consolidated interim financial statements of Caledonia Mining Corporation Plc and its subsidiaries (the “Group”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and, where appropriate, these statements include some amounts that are based on best estimates and judgment. Management has determined such amounts on a reasonable basis in order to ensure that the unaudited condensed consolidated interim financial statements are presented fairly, in all material respects.

 

The accompanying Management Discussion and Analysis (“MD&A”) also includes information regarding the impact of current transactions, sources of liquidity, capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.

 

The Group maintains adequate systems of internal accounting and administrative controls, within reasonable cost. Such systems are designed to provide reasonable assurance that relevant and reliable financial information are produced.

 

Management is responsible for establishing and maintaining adequate internal controls over financial reporting (“ICOFR”). Any system of ICOFR, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

At March 31, 2023 management evaluated the effectiveness of the Group’s ICOFR and concluded that such ICOFR was effective based on the criteria set forth in the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organisations of the Treadway Commission.

 

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Audit Committee is composed of three independent non-executive directors. This Committee meets periodically with management, the external auditor and internal auditor to review accounting, auditing, internal control and financial reporting matters.

 

These unaudited condensed consolidated interim financial statements have not been audited by the Group’s independent auditor.

 

The unaudited condensed consolidated interim financial statements for the period ended March 31, 2023 were approved by the Board of Directors and signed on its behalf on May 15, 2023.

 

 

(Signed) J.M. Learmonth (Signed) C.O. Goodburn
   
Chief Executive Officer Chief Financial Officer

 

 

1

 

 

Caledonia Mining Corporation Plc

Consolidated statements of profit or loss and other comprehensive income

(in thousands of United States Dollars, unless indicated otherwise)

 

For the     Three months ended
      March 31,
Unaudited   Note    2023    2022 
                
Revenue        29,435    35,072 
Royalty        (1,480)   (1,758)
Production costs   7    (19,850)   (14,359)
Depreciation   13    (2,255)   (2,063)
Gross profit        5,850    16,892 
Other income        18    2 
Other expenses   8    (640)   (793)
Administrative expenses   9    (5,938)   (2,371)
Cash-settled share-based expense   10.1    (280)   (367)
Equity-settled share-based expense   10.2    (110)   (82)
Net foreign exchange gain   11    1,533    909 
Net derivative financial instrument expense        (434)   (1,738)
Operating (loss) profit        (1)   12,452 
Finance income   12    5    1 
Finance cost   12    (772)   (117)
(Loss) profit before tax        (768)   12,336 
Tax expense        (3,502)   (4,719)
(Loss) profit for the period        (4,270)   7,617 
                
Other comprehensive (loss) income               
Items that are or may be reclassified to profit or loss               
Exchange differences on translation of foreign operations        (369)   693 
Total comprehensive (loss) income for the period        (4,639)   8,310 
                
(Loss) profit attributable to:               
Owners of the Company        (5,030)   5,940 
Non-controlling interests        760    1,677 
(Loss) profit for the period        (4,270)   7,617 
                
Total comprehensive (loss) income attributable to:               
Owners of the Company        (5,399)   6,633 
Non-controlling interests        760    1,677 
Total comprehensive (loss) income for the period        (4,639)   8,310 
                
(Loss) earnings per share               
Basic (loss) earnings per share ($)        (0.30)   0.45 
Diluted (loss) earnings per share ($)        (0.30)   0.45 

 

The accompanying notes on pages 6 to 31 are an integral part of these consolidated financial statements.

 

On behalf of the Board: “J.M. Learmonth”- Chief Executive Officer and “C.O. Goodburn”- Chief Financial Officer.

 

2

 

 

Caledonia Mining Corporation Plc

Consolidated statements of financial position

(in thousands of United States Dollars, unless indicated otherwise)

 

Unaudited        March 31,    December 31, 
As at   Note    2023    2022 
                
Assets               
Property, plant and equipment   13    179,824    178,983 
Exploration and evaluation assets   14    89,129    17,579 
Deferred tax asset        116    202 
Total non-current assets        269,069    196,764 
                
Inventories   15    18,477    18,334 
Derivative financial assets        6    440 
Income tax receivable        82    40 
Prepayments   16    3,356    3,693 
Trade and other receivables   17    9,957    9,185 
Cash and cash equivalents   18    19,021    6,735 
Total current assets        50,899    38,427 
Total assets        319,968    235,191 
                
Equity and liabilities               
Share capital   19    156,230    83,471 
Reserves        137,542    137,801 
Retained loss        (55,879)   (50,222)
Equity attributable to shareholders        237,893    171,050 
Non-controlling interests        21,657    22,409 
Total equity        259,550    193,459 
                
Liabilities               
Provisions   20    3,698    2,958 
Deferred tax liabilities        4,834    5,123 
Cash-settled share-based payment - long term portion   10.1    386    1,029 
Loan note instruments - long term portion   21    4,111    - 
Lease liabilities - long term portion        167    181 
Total non-current liabilities        13,196    9,291 
                
Cash-settled share-based payment - short term portion   10.1    482    1,188 
Lease liabilities - short term portion        136    132 
Income tax payable        2,210    1,324 
Trade and other payables   22    26,048    17,454 
Loan note instruments - short term portion   21    2,514    7,104 
Overdraft   18    15,832    5,239 
Total current liabilities        47,222    32,441 
Total liabilities        60,412    41,732 
Total equity and liabilities        319,968    235,191 

 

The accompanying notes on pages 6 to 31 are an integral part of these consolidated financial statements.

 

3

 

 

Caledonia Mining Corporation Plc

Consolidated statements of changes in equity

(in thousands of United States Dollars, unless indicated otherwise)

 

Unaudited   Note    Share capital    Foreign currency translation reserve    Contributed surplus    Equity-settled share-based payment reserve    Retained loss    Total    Non-controlling interests (NCI)    Total equity 
Balance December 31, 2021        82,667    (9,325)   132,591    14,513    (59,150)   161,296    19,260    180,556 
Transactions with owners:                                             
Dividends declared        -    -    -    -    (1,788)   (1,788)   -    (1,788)
Shares issued:                                             
- Shares issued on settlement of incentive plan awards   10.1    804    -    -    -    -    804    -    804 
- Equity-settled share-based expense   10.2    -    -    -    82    -    82    -    82 
Total comprehensive income:                                             
Profit for the period        -    -    -    -    5,940    5,940    1,677    7,617 
Other comprehensive income for the period        -    693    -    -    -    693    -    693 
Balance at March 31, 2022        83,471    (8,632)   132,591    14,595    (54,998)   167,027    20,937    187,964 
                                              
Balance December 31, 2022        83,471    (9,787)   132,591    14,997    (50,222)   171,050    22,409    193,459 
Transactions with owners:                                             
Dividends declared        -    -    -    -    (627)   (627)   (1,512)   (2,139)
Share-based payments:                                             
- Shares issued on settlement of incentive plan awards   10.1    351    -    -    -    -    351    -    351 
- Equity-settled share-based expense   10.2    -    -    -    110    -    110    -    110 
Shares issued:                                             
- Equity raise (net of transaction cost)   19    10,014    -    -    -    -    10,014    -    10,014 
- Bilboes acquisition   5    62,394    -    -    -    -    62,394    -    62,394 
Total comprehensive income:                                             
Loss for the period        -    -    -    -    (5,030)   (5,030)   760    (4,270)
Other comprehensive loss for the period        -    (369)   -    -    -    (369)   -    (369)
Balance at March 31, 2023        156,230    (10,156)   132,591    15,107    (55,879)   237,893    21,657    259,550 
    Note    19                                    

 

The accompanying notes on pages 6 to 31 are an integral part of these consolidated financial statements.

 

 

4

 

 

Caledonia Mining Corporation Plc

Consolidated statements of cash flows

(in thousands of United States Dollars, unless indicated otherwise)

 

Unaudited    

Three months ended

March 31,

    Note    2023    2022 
                
Cash inflow from operations   23    664    11,844 
Interest received        5    1 
Finance costs paid        (200)   (31)
Tax paid        (1,345)   (1,659)
Net cash (outflow)/ inflow from operating activities        (876)   10,155 
                
Cash flows used in investing activities               
Acquisition of property, plant and equipment        (4,593)   (9,734)
Acquisition of exploration and evaluation assets        (144)   (224)
Net cash used in investing activities        (4,737)   (9,958)
                
Cash flows from financing activities               
Dividends paid        (2,424)   (1,788)
Payment of lease liabilities        (37)   (40)
Shares issued – equity raise (net of transaction cost)   19    10,823     
Loan note instruments - Motapa payment   21    (5,399)    
Loan note instruments - Solar bond issue receipts   21    4,500     
Net cash  inflow/(outflow) from financing activities        7,463    (1,828)
                
Net increase/(decrease) in cash and cash equivalents        1,850    (1,631)
Effect of exchange rate fluctuations on cash and cash equivalents        (157)   (204)
Net cash and cash equivalents at the beginning of the period        1,496    16,265 
Net cash and cash equivalents at the end of the period        3,189    14,430 

 

The accompanying notes on pages 6 to 31 are an integral part of these consolidated financial statements.

 

 

 

5

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

1       Reporting entity

 

Caledonia Mining Corporation Plc (“Caledonia” or the “Company”) is a company domiciled in Jersey, Channel Islands. The Company’s registered office address is B006 Millais House, Castle Quay, St Helier, Jersey, Channel Islands.

 

These unaudited condensed consolidated interim financial statements as at and for the three months ended March 31, 2023 are of the Company and its subsidiaries (the “Group”). The Group’s primary involvement is in the operation of a gold mine and the exploration and development of mineral properties for precious metals.

 

Caledonia’s shares are listed on the NYSE American LLC stock exchange (symbol – “CMCL”). Depository interests in Caledonia’s shares are admitted to trading on AIM of the London Stock Exchange plc (symbol – “CMCL”). Caledonia listed on the Victoria Falls Stock Exchange (“VFEX”) (symbol – “CMCL”) on December 2, 2021. Caledonia voluntary delisted from the Toronto Stock Exchange (the “TSX”) on June 19, 2020. After the delisting the Company remains a Canadian reporting issuer and has to comply with Canadian securities laws until it demonstrates that Canadian shareholders represent less than 2% of issued share capital.

 

2       Basis of preparation

 

i)Statement of compliance

 

These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all the information required for full annual financial statements. Accordingly, certain information and disclosures normally included in the annual financial statements prepared in accordance with IFRS as issued by the IASB have been omitted or condensed. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended December 31, 2022.

 

ii)Basis of measurement

 

These unaudited condensed consolidated interim financial statements have been prepared on the historical cost basis except for:

 

·cash-settled share-based payment arrangements measured at fair value on grant and re-measurement dates;

 

·equity-settled share-based payment arrangements measured at fair value on the grant date; and

 

·derivative financial assets and derivative financial liabilities measured at fair value. (The put options included in derivative financial assets were classified as level 1 in the fair value hierarchy.)

 

iii)                Functional currency

 

These unaudited condensed consolidated interim financial statements are presented in United States Dollar (“$” or “US Dollars” or “USD”), which is also the functional currency of the Company. All financial information presented in US Dollars has been rounded to the nearest thousand, unless indicated otherwise. Refer to note 11 for changes to Zimbabwean real-time gross settlement, bond notes or bond coins (“RTGS$”) and its effect on the consolidated statement of profit or loss and other comprehensive income.

 

6

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

3       Use of accounting assumptions, estimates and judgements

 

In preparing these unaudited condensed consolidated interim financial statements, management has made accounting assumptions, estimates and judgements that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recognised prospectively.

 

(a)       Judgement

 

Judgement is required when assessing whether the Group controls an entity or not. Controlled entities are consolidated. Further information is given in notes 4 and 5.

 

4       Significant accounting policies

 

The same accounting policies and methods of computation, except as included below, have been applied consistently to all periods presented in these unaudited condensed consolidated interim financial statements as compared to the Group’s annual consolidated financial statements for the year ended December 31, 2022. In addition, the accounting policies have been applied consistently throughout the Group.

 

(a)Exploration and evaluation assets

 

Qualifying exploration costs are capitalised as incurred. Costs incurred before the legal rights to explore are obtained are recognised in profit or loss. The costs related to speculative drilling on unestablished orebodies at the Blanket Mine, general administrative or overhead costs are expensed as incurred. Exploration and evaluation costs capitalised are disclosed under Exploration and evaluation assets. Qualifying direct expenditures include such costs as mineral rights, options to acquire mineral rights, materials used, surveying costs, drilling costs, payments made to contractors, direct administrative costs and depreciation on property, plant and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the period they occur. Once the technical feasibility and commercial viability of the mining project have been determined, the property is considered to be a mine under development and moved to the mine development, infrastructure and other asset category within property, plant and equipment. Capitalised direct costs related to the acquisition, exploration and development of mineral properties remain capitalised, at their initial cost, until the properties to which they relate are ready for their intended use, sold, abandoned or management has determined there to be impairment. Exploration and evaluation assets are tested for impairment before the assets are transferred to mine development, infrastructure and other assets or when an indicator of impairment is identified. Exploration and evaluations assets are not depreciated.

 

The Group also makes assumptions and estimates regarding the technical feasibility and commercial viability of the mineral project and the possible impairment of E&E assets by evaluating whether it is likely that future economic benefits will flow to the Group, which may be based on assumptions about future events or circumstances e.g. such as the completion of a feasibility study indicating construction, funding and economic returns that are sufficient. Assumptions and estimates made may change if new information becomes available. If information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalised is written off in profit or loss in the period the new information becomes available. The recoverability of the carrying amount of exploration and evaluation assets depends on the availability of sufficient funding to bring the properties into commercial production, the price of the products to be recovered and the undertaking of profitable mining operations. As a result of these uncertainties, the actual amount recovered may vary significantly from the carrying amount.

 

 

7

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

4       Significant accounting policies (continued)

 

(b)Asset and liability acquisition

 

In determining whether an acquisition should be accounted for as a business combination or asset acquisition, the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is not deemed to be a business, and is instead deemed to be an asset. If this is not the case, the Company then further evaluates whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the Company includes that the single identifiable asset or group of similar identifiable assets and activities is a business.

 

The Company accounts for business combinations using the acquisition method of accounting. Application of this method of accounting requires that:

 

(a)Identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognised at fair value of the acquisition date; and

 

(b)The excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be allocated to Exploration and evaluation assets.

 

Transaction costs related to business combinations are expensed as incurred.

 

5       Tribute Arrangement and Mining Agreement and Bilboes Gold Limited acquisition

 

On July 21, 2022 Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”) entered into a Tribute Arrangement, and related Mining Agreement with Bilboes Holdings (Private) Limited (“Bilboes Holdings”) to mine its oxide and transitional ore (“tribute agreement”). This tribute agreement was specific to the Bilboes oxide mine and Bilboes Holdings was in care and maintenance at date of agreement.

 

In terms of the tribute agreement, Bilboes Holdings granted CHZ the right to mine the Bilboes oxide mine operations for the purpose of winning gold. In terms of this right, CHZ could operate the Bilboes oxide mine using a combination of Bilboes resources and their own, to extract oxides ore and dispose of the products for CHZ’s account.

 

Subject to the stipulation in the tribute agreement, CHZ assumed all responsibility in connection with the oxide mining claims as if CHZ were the owner thereof and Bilboes Holdings remained the registered holder of the mining claims until ownership passes in terms of the Sale and Purchase Agreement, mentioned below.

 

In terms of the tribute agreement, CHZ had the right to provide instructions over the scope of works for the Bilboes oxide mine in terms of an operational plan and also has the right to terminate the tribute agreement. CHZ, therefore, had the ability to affect the variable returns of the Bilboes oxide mine and to ensure its returns are in line with the expectation of recouping its “investment” (all funds provided) at a 25% internal rate of return.

 

The Tribute agreement became effect on August 1, 2022, when the Ministry of Mines approval was received, control was obtained through contractual arrangement.

 

The Bilboes oxide mine did not have sufficient processes in place to operate the oxide mining operations and was reliant on CHZ to provide instructions on the mining operations to create the necessary outputs. The Bilboes oxide mine was assessed as an asset and liability acquisition and not a business combination in terms of IFRS 3 Business Combinations. Directly attributable costs of bringing the Bilboes oxide mine to the location and condition necessary for it to be capable of operating in the manner intended by CHZ amounted to $872 and was accounted for as Property, plant and equipment in the December 31, 2022 Consolidated Financial statements. At the date of approval of the Unaudited condensed consolidated financial statements the tribute agreement remained in effect.

 

 

8

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

5       Tribute Arrangement and Mining Agreement and Bilboes Gold Limited acquisition (continued)

 

In addition to the Tribute arrangement, Caledonia signed a conditional agreement (the “Sale and Purchase Agreement”) to purchase 100% of Bilboes Gold Limited on July 21, 2022. Bilboes Gold Limited, is the holding company of Bilboes Holdings that owns high-grade sulphide resources and the mentioned mining claims to the oxide mine deposit. It was agreed that Caledonia would purchase Bilboes Gold Limited for a consideration to be settled by issue to the sellers of 5,123,044 new shares in Caledonia, comprising initial consideration shares, escrow consideration shares and deferred consideration shares. In addition to the shares, the agreement was also to grant a 1 percent net smelter royalty (“NSR”) on the Bilboes sulphide mine’s revenues to one of the sellers, Baker Steel Resources Trust Limited (“Baker Steel”), essentially instead of a number of shares that they would have been entitled to should they have agreed to accept all of their consideration in shares. The Sale and Purchase Agreement would give Caledonia the rights to the sulphide project in addition to the right to mine the Bilboes oxide mine as a result of the tribute agreement. On January 6, 2023, the Company announced that, following the satisfaction of conditions precedent, it completed the acquisition of Bilboes Gold Limited that gave right to further evaluate the sulphide resources in addition to the oxide mining activities agreed in the tribute agreement.

 

The acquisition of Bilboes Gold Limited was classified an asset and liability acquisition and not a business combination in terms of IFRS 3 Business Combinations. Refer to note 4(b) for the accounting policy on an asset and liability acquisition.

 

Upon completion of the transaction on January 6, 2023, the initial consideration shares were issued, in the amount of 4,425,797 common shares, to the three sellers of Bilboes Gold Limited and the NSR agreement was signed.

 

The escrow consideration shares of 441,095 common shares of Caledonia were issued to one of the sellers in settlement of a separate commercial arrangement between its subsidiary and the holding company of another seller, and upon receipt by the Company of a “share adjustment notice” instructing the issue of the shares. The share adjustment notice was only issued once approval has been obtained from the Reserve Bank of Zimbabwe for such commercial arrangement. On March 30, 2023, 441,095 escrow shares were issued after the share adjustment notice was received.

 

Deferred consideration shares of 256,152 common shares of Caledonia were admitted to trading on the AIM on April 14, 2023. The deferred consideration shares were accounted for as a liability at March 31, 2023 as the number of shares could be adjusted to take into account changes in the financial position of Bilboes Gold from signing the Sale and Purchase Agreement to completion. This liability (Bilboes deferred shares payable) is classified as level 1 in the fair value hierarchy as it is based on the publicly available share price. Total consideration shares issued for the acquisition of Bilboes Gold amounted to 5,497,293 shares with the value of the consideration shares set at US$65.677 million. The value of the initial considerations shares issued based on the last trading day's closing share price on NYSE American LLC before completion of US$12.82 per share.

 

Consideration paid (January 6, 2023)     
      
Equity issues   $’000 
Initial consideration shared (4,425,797 at $12.82 per share)   56,739 
Escrow shares issued (441,095 at $12.82 per share)   5,655 
Deferred consideration shares (256,152 at $12.82 per share)   3,283 
Total gross consideration   65,677 
Bilboes oxide mine assets (pre-acquisition)   (872)
Prepayments - Bilboes pre-effective date costs   877 
Total net consideration   65,682 

 

 

9

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

5       Tribute Arrangement and Mining Agreement and Bilboes Gold Limited acquisition (continued)

 

Recognised amounts of identifiable assets and  liabilities assumed (January 6, 2023)     
Exploration and evaluation assets (note 14)   71,406 
Inventories   68 
Prepayments (note 16 )   5 
Trade and other receivables   804 
Cash and cash equivalents   54 
Provisions   (704)
Trade and other payables - external   (5,913)
Lease liabilities   (28)
Income tax payable   (10)
    65,682 

 

Acquisition-related costs

 

Included in administrative costs is an amount of $3.1 million payable to advisors on the successful completion of the Bilboes Gold Limited acquisition. In 2022 $3.1 million was incurred on advisory services fees related to the transaction.

 

6       Blanket Zimbabwe Indigenisation Transaction

 

On February 20, 2012 the Group announced it had signed a Memorandum of Understanding (“MoU”) with the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe pursuant to which the Group agreed that indigenous Zimbabweans would acquire an effective 51% ownership interest in the Zimbabwean company owning the Blanket Mine (also referred to herein as “Blanket” or “Blanket Mine” as the context requires) for a paid transactional value of $30.09 million. Pursuant to the above, members of the Group entered into agreements with each indigenous shareholder to transfer 51% of the Group’s ownership interest in Blanket Mine whereby it:

 

sold a 16% interest to the National Indigenisation and Economic Empowerment Fund (“NIEEF”) for $11.74 million;

 

sold a 15% interest to Fremiro Investments (Private) Limited (“Fremiro”), which is owned by indigenous Zimbabweans, for $11.01 million;

 

sold a 10% interest to Blanket Employee Trust Services (Private) Limited (“BETS”) for the benefit of present and future managers and employees for $7.34 million. The shares in BETS are held by the Blanket Mine Employee Trust (“Employee Trust”) with Blanket Mine’s employees holding participation units in the Employee Trust; and

 

donated a 10% ownership interest to the Gwanda Community Share Ownership Trust (“Community Trust”). In addition, Blanket Mine paid a non-refundable donation of $1 million to the Community Trust.

 

The Group facilitated the vendor funding of these transactions which is repaid by way of dividends from Blanket Mine. 80% of dividends declared by Blanket Mine are used to repay such loans and the remaining 20% unconditionally accrues to the respective indigenous shareholders. Following a modification to the interest rate on June 23, 2017, outstanding balances on these facilitation loans attract interest at a rate of the lower of a fixed 7.25% per annum payable quarterly or 80% of the Blanket Mine dividend in the quarter. The timing of the loan repayments depends on the future financial performance of Blanket Mine and the extent of future dividends declared by Blanket Mine. The Group-related facilitation loans were transferred as dividends in specie intra-group and now the loans and most of the interest thereon is payable to the Company.

 

 

10

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

6       Blanket Zimbabwe Indigenisation Transaction (continued)

 

Accounting treatment

 

The directors of Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”), a wholly-owned subsidiary of the Company, performed an assessment using the requirements of IFRS 10: Consolidated Financial Statements (IFRS 10). It was concluded that CHZ should continue to consolidate Blanket Mine after the indigenisation. The subscription agreements with the indigenous shareholders have been accounted for accordingly as a transaction with non-controlling interests and as a share-based payment transaction.

 

The subscription agreements, concluded on February 20, 2012, were accounted for as follows:

 

Non-controlling interests (“NCI”) were recognised on the portion of shareholding upon which dividends declared by Blanket Mine will accrue unconditionally to equity holders as follows:
   
  (a)       20% of the 16% shareholding of NIEEF;
  (b)       20% of the 15% shareholding of Fremiro; and
  (c)       100% of the 10% shareholding of the Community Trust.

 

This effectively means that NCI was initially recognised at 16.2% of the net assets of Blanket Mine, until the completion of the transaction with Fremiro, whereby the NCI reduced to 13.2% (see below).

 

The remaining 80% of the shareholding of NIEEF and Fremiro was recognised as NCI to the extent that their attributable share of the net asset value of Blanket Mine exceeds the balance on the facilitation loans, including interest. At March 31, 2023 the attributable net asset value did not exceed the balance on the respective loan account and thus no additional NCI was recognised.

 

The transaction with BETS is accounted for in accordance with IAS 19 Employee Benefits (profit sharing arrangement) as the ownership of the shares does not ultimately pass to the employees. The employees are entitled to participate in 20% of the dividends accruing to the 10% shareholding in Blanket Mine if they are employed at the date of such distribution. To the extent that 80% of the attributable dividends exceeds the balance on the BETS facilitation loan, they will accrue to the employees at the date of such declaration.

 

BETS is an entity effectively controlled and consolidated by Blanket Mine. Accordingly, the shares held by BETS are effectively treated as treasury shares in Blanket Mine and no NCI is recognised.

 

Fremiro purchase agreement

 

On November 5, 2018 the Company and Fremiro entered into a sale agreement for Caledonia to purchase Fremiro’s 15% shareholding in Blanket Mine. On January 20, 2020 all substantive conditions to the transaction were satisfied. The Company issued 727,266 shares to Fremiro for the cancellation of their facilitation loan and purchase of Fremiro’s 15% shareholding in Blanket Mine. The transaction was accounted for as a repurchase of a previously vested equity instrument. As a result, the Fremiro share of the NCI of $3,600 was derecognised, shares were issued at fair value, the share-based payment reserve was reduced by $2,247 and the Company’s shareholding in Blanket Mine increased to 64% on the effective date.

 

 

11

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

6       Blanket Zimbabwe Indigenisation Transaction (continued)

 

Accounting treatment (continued)

 

Blanket Mine’s indigenisation shareholding percentages and facilitation loan balances

 

         

Effective

interest

    

NCI

subject to

    

Balance of facilitation

loan #

 
    Shareholding    

& NCI

recognised

    

facilitation l

oan

    

March 31,

2023

    

December 31,

2022

 
NIEEF   16%   3.2%   12.8%   8,489    9,414 
Community Trust   10%   10.0%   0.0%        
BETS ~   10%   -*   -*   4,908    5,612 
    36%   13.2%   12.8%   13,397    15,026 

 

* The shares held by BETS are effectively treated as treasury shares (see above).

 

~ Accounted for under IAS19 Employee Benefits.

 

# Facilitation loans are accounted for as equity instruments and are accordingly not recognised as loans receivable.

 

The balance on the facilitation loans is reconciled as follows:

 

    2023    2022 
           
Balance at January 1   15,026    16,712 
Interest incurred   259     
Dividends used to repay loan   (1,888)    
Balance at March 31   13,397    16,712 

 

Advance dividend loans and balances

 

In anticipation of completing the underlying subscription agreements, Blanket Mine agreed to advance dividend arrangements with NIEEF and the Community Trust. Advances made to the Community Trust against their right to receive dividends declared by Blanket Mine on their shareholding were as follows:

 

a $2 million payment on or before September 30, 2012;

 

a $1 million payment on or before February 28, 2013; and

 

a $1 million payment on or before April 30, 2013.

 

These advance payments were debited to a loan account bearing interest at a rate at the lower of a fixed 7.25% per annum, payable quarterly or the Blanket Mine dividend in the quarter to the advanced dividend loan holder. The loan is repayable by way of set-off of future dividends on the Blanket Mine shares owned by the Community Trust. Advances made to NIEEF as an advanced dividend loan before 2013 have been settled through Blanket Mine dividend repayments in 2014. The advance dividend payments were recognised as distributions to shareholders and they are classified as equity instruments. The loans arising are not recognised as loans receivables, because repayment is by way of uncertain future dividends. The final payment to settle the advance dividend loan to the Community Trust was made on September 22, 2021. Future dividends to the Community Trust will be unencumbered from date the loan was settled in full.

 

12

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

7       Production costs

 

    2023    2022 
           
Blanket - salaries and wages*   6,319    5,532 
Bilboes - salaries and wages   849     
Blanket - consumable materials*   5,743    5,126 
Bilboes - consumable materials   1,862     
Blanket - electricity costs*   2,934    2,277 
Bilboes - electricity costs   338     
Safety   261    231 
Cash-settled share-based expense (note 10.1(a))   394    513 
Blanket - On mine administration*   316    366 
Bilboes - On mine administration   297     
Security   239    276 
Solar operations and maintenance services   279     
Pre-feasibility exploration costs   19    38 
    19,850    14,359 

 

*Gold work in progress included in production cost amounts above were:

 

    2023    2022 
           
Salaries and wages   (197)   (134)
Consumable materials – Operations   (137)   (165)
Electricity costs   (138)   (96)
On mine administration   (43)    
    (515)   (395)

 

8       Other expenses

 

    2023    2022 
           
           
Intermediated Money Transaction Tax*   382    174 
Community and social responsibility cost   258    152 
Impairment of exploration and evaluation assets – Connemara North and Glen Hume (note 14)       467 
    640    793 

 

* Intermediated Money Transfer Tax ("IMTT”) is tax chargeable in Zimbabwe on transfer of physical money, electronically or by any other means, between two or more persons. The presidential announcement made on May 7, 2022 increased the IMTT charges on all domestic foreign currency transfers from 2% to 4%,

 

9       Administrative expenses

 

    2023    2022 
           
Investor relations   163    125 
Audit fee   69    68 
Advisory services fees   3,427    295 
Listing fees   239    155 
Directors fees – Company   172    127 
Directors fees – Blanket   15    14 
Employee costs   1,380    1,151 
Other office administration cost   67    49 
Information Technology and Communication cost   29    51 
Management liability insurance   243    241 
Travel costs   134    95 
    5,938    2,371 

 

 

13

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

10       Share-based payments

 

10.1       Cash-settled share-based payments

 

(a)       Restricted Share Units and Performance Units

 

Certain management and employees within the Group are granted Restricted Share Units (“RSUs”) and Performance Units (”PUs”) pursuant to provisions of the 2015 Omnibus Equity Incentive Compensation Plan (“OEICP”). All RSUs and PUs were granted and approved at the discretion of the Compensation Committee of the Board of Directors.

 

RSUs vest three years after grant date given that the service conditions of the relevant employees have been fulfilled. The value of the vested RSUs is the number of RSUs vested multiplied by the fair market value of the Company’s shares, as specified by the OEICP, on the date of settlement.

 

PUs have a performance condition based on gold production and a performance period of one up to three years. The number of PUs that vest will be the relevant portion of the PUs granted multiplied by the performance multiplier, which will reflect the actual performance in terms of the performance conditions compared to expectations on the date of the award.

 

RSU holders are entitled to receive dividends over the vesting period. Such dividends will be reinvested in additional RSUs at the then applicable share price. PUs have rights to dividends only after they have vested.

 

RSUs and PUs allow for settlement of the vesting date value in cash or, subject to conditions, shares issuable at fair market value or a combination of both at the discretion of the unitholder.

 

The fair value of the RSUs at the reporting date was based on the Black Scholes option valuation model less the fair value of the expected dividends during the vesting period multiplied by the performance multiplier expectation. The fair value of the PUs at the reporting date was based on the Black Scholes option valuation model. At the reporting date it was assumed that there is a 93%-100% probability that the performance conditions will be met and therefore a 93%-100% (2022: 93%-100%) average performance multiplier was used in calculating the estimated liability.

 

The liability as at March 31, 2023 amounted to $868 (December 31, 2022: $2,217). Included in the liability as at March 31, 2023 is an amount of $394 (2022: $513) that was expensed and classified as production costs; refer to note 7. The cash-settled share-based expense (excluding production cost) for the period amounted to $280 (2022: $367). During the period PUs to the value of $351 were settled in share capital (net of employee tax) (2022: $804). On April 7, 2023, 79,894 PUs were granted.

 

 

14

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

10       Share-based payments (continued)

 

10.1       Cash-settled share-based payments (continued)

 

(a)       Restricted Share Units and Performance Units (continued)

 

The following assumptions were used in estimating the fair value of the cash-settled share-based payment liability on March 31:

 

   March 31, 2023  December 31, 2022
    RSUs    PUs    RSUs    PUs 
Risk free rate   3.48%   3.48%   3.88%   3.88%
Fair value (USD)   15.03    15.20    12.52    12.42 
Share price (USD)   15.03    15.20    12.40    12.42 
Performance multiplier percentage       93-100%        93-100% 
Volatility       0.91    1.29    0.91 
                     
Share units granted:   RSUs     PUs     RSUs     PUs  
Grant - January 11, 2019       95,740        95,740 
Grant - March 23, 2019       28,287        28,287 
Grant - June 8, 2019       14,672        14,672 
Grant - January 11, 2020   17,585    114,668    17,585    114,668 
Grant - March 31, 2020       1,971        1,971 
Grant - June 1, 2020       1,740        1,740 
Grant - September 9, 2020       1,611        1,611 
Grant - September 14, 2020       20,686        20,686 
Grant - October 5, 2020       514        514 
Grant - January 11, 2021       78,875        78,875 
Grant - April 1, 2021       770        770 
Grant - May 14, 2021       2,389        2,389 
Grant - June 1, 2021       1,692        1,692 
Grant - June 14, 2021       507        507 
Grant - August 13, 2021       2,283        2,283 
Grant - September 1, 2021       553        553 
Grant - September 6, 2021       531        531 
Grant - September 20, 2021       526        526 
Grant - October 1, 2021       2,530        2,530 
Grant - October 11, 2021       500        500 
Grant - November 12, 2021       1,998        1,998 
Grant - December 1, 2021       936        936 
Grant - January 11, 2022       96,359        96,359 
Grant - January 12, 2022       825        825 
Grant - May 13, 2022       2,040        2,040 
Grant - June 1, 2022       1,297        1,297 
Grant - July 1, 2022       2,375        2,375 
Grant - October 1, 2022       2,024        2,024 
RSU dividends reinvested   7,032        1,980     
Settlements/terminations   (24,617)   (377,089)       (254,491)
Total awards       101,810    19,565    224,408 

 

15

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

10       Share-based payments (continued)

 

10.2       Equity-settled share-based payments

 

(a)       EPUs

 

EPUs have a performance condition based on gold production, average normalised controllable cost per ounce of gold and a performance period of up to three years. The number of EPUs that vest will be the relevant portion of the EPUs granted multiplied by the performance multiplier, which will reflect the actual performance in terms of the performance conditions compared to expectations on the date of the award.

 

EPUs have rights to dividends only after they have vested.

 

The shares issued are subject to a minimum holding period of until at least the first anniversary of the EPUs vesting date.

 

The fair value of the EPUs at the reporting date was based on the Black Scholes option valuation model less the fair value of the expected dividends during the vesting period multiplied by the performance percentage. At the reporting date it was assumed that there is a 100% probability that the performance conditions will be met and therefore a 100% performance multiplier was used in calculating the expense. The equity-settled share-based expense for EPUs as at March 31, 2023 amounted to $110 (2022: $82). On April 7, 2023, 93,035 EPUs were granted.

 

The following assumptions were used in estimating the fair value of the equity-settled share-based payment liability on:

 

Grant date   January 24, 2022 
Number of units - granted date and reporting date   130,380 
Share price (USD) - grant date   11.50 
Fair value (USD) - grant date   10.15 
Performance multiplier percentage at December 31, 2023   100%

 

11       Net foreign exchange gain

 

On October 1, 2018 the RBZ issued a directive to Zimbabwean banks to separate foreign currency from RTGS$ in the accounts held by their clients and pegged the RTGS$ at 1:1 to the US Dollar. On February 20, 2019 the RBZ issued a further monetary policy statement, which allowed inter-bank trading between RTGS$ and foreign currency. The interbank rate was introduced at 2.5 RTGS$ to 1 US Dollar and traded at 929.86 RTGS$ to 1 US Dollar as at March 31, 2023 (December 31, 2022: 684.33 RTGS$). On June 24, 2019 the Government issued S.I. 142 which stated, “Zimbabwe dollar (“RTGS$”) to be the sole currency for legal tender purposes for any transactions in Zimbabwe”. Throughout these announcements and to the date of issue of these financial statements the US dollar has remained the primary currency in which the Group’s Zimbabwean entities operate and the functional currency of these entities.

 

 

16

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

11       Net foreign exchange gain (continued)

 

In June 2021 the RBZ announced that companies that are listed on the Victoria Falls Stock Exchange (“VFEX”) will receive 100% of the revenue arising from incremental production in US Dollars. Blanket has subsequently received confirmation that the “baseline” level of production for the purposes of calculating incremental production is 148.38 Kg per month (approximately 57,000 ounces per annum). The payment of the increased US Dollars proceeds for incremental production was applied from July 1, 2021. In December 2021, Caledonia obtained a secondary listing on the VFEX and Blanket received all amounts due in terms of that revised policy. The CMCL listing on the VFEX enabled Blanket to receive approximately 71.5% of its total revenue in US Dollars and the balance in RTGS$.

 

The Company participated in the foreign currency auction introduced by the Zimbabwean Government to exchange RTGS$ for US Dollars up to June 15, 2021

 

The table below illustrates the effect the weakening of the RTGS$ and other foreign currencies had on the consolidated statement of profit or loss and other comprehensive income.

 

    2023    2022 
           
Unrealised foreign exchange gain   1,749    1,948 
Realised foreign exchange loss   (216)   (1,039)
Net foreign exchange gain   1,533    909 

 

12       Finance income and finance cost

 

    2023    2022 
           
Finance income received - Bank   5    1 
           
Unwinding of rehabilitation provision (note 20)   66    77 
Finance cost - Leases   6    9 
Finance cost - Overdraft   200    31 
Finance cost - Motapa loan note payable (note 21)   475     
Finance cost - Solar loan note payable (note 21)   25     
    772    117 

 

 

 

17

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

13       Property, plant and equipment

 

Cost   

Land

and Buildings

    

Right of

use assets

    Mine development, infrastructure and other    Assets under construction and decommissioning assets*    

Plant

and equipment

    

Furniture and

fittings

    Motor vehicles    

Solar

Plant&

    Total 
                                              
Balance at January 1, 2022   14,435    543    73,914    35,476    64,319    1,342    3,169    1,940    195,138 
Additions               31,711    3,049    243    147    12,198    47,348 
Impairments@           (8,518)       (998)               (9,516)
Reallocations between asset classes #   759        15,886    (20,734)   4,089                 
Acquisition of Bilboes oxide assets (Tribute)           872                        872 
Foreign exchange movement       (18)           26    (22)   (2)       (16)
Balance at December 31, 2022   15,194    525    82,154    46,453    70,485    1,563    3,314    14,138    233,826 
Additions           92    2,813    110    80        16    3,111 
Reallocations between asset classes           5,646    (5,812)   166                 
Foreign exchange movement       (14)           (3)   (20)   (2)       (39)
Balance at March 31, 2023   15,194    511    87,892    43,454    70,758    1,623    3,312    14,154    236,898 

 

* Included in additions is the change in estimate for the decommissioning asset of  ($30) (2022: ($468))
@ Included in the 2022 impairments are development asset costs of $8,518 that predominantly relates to prospective areas above 750 meters at Blanket which are not included in the LoMP.  Also included in the 2022 impairments are generator cost of $791 and loader bottom decks at a cost of $101, these assets were no longer in working condition.  The carrying amount for these impaired assets were impaired to $Nil.
& The solar plant was fully commissioned on February 2, 2023 and the sale agreement between Caledonia Mining Corporation Plc and Caledonia Mining Services (Private) Limited was concluded for the sale of the solar plant.  Depreciation on the solar plant commenced on February 2, 2023 and the power purchase agreement, between Caledonia Mining Services (Private) Limited and Blanket Mine, became effective. In December 2022, the Caledonia board approved a proposal for Caledonia Mining Services (PvT) Ltd (which owns the solar plant) to issue loan note instruments (“bonds”) up to a value of $12 million. The decision was taken in order to optimise the capital structure of the Group and provide additional debt instruments to the Zimbabwean financial market.  Refer to note 21.2 for more information on these loan note instruments.

 

 

 

18

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

13       Property, plant and equipment (continued)

 

Accumulated depreciation and Impairment losses   Land and Buildings    

Right of

use assets

    Mine development, infrastructure and other    Assets under construction and decommissioning assets    Plant and equipment    Furniture and fittings    Motor vehicles    Solar Plant     Total 
                                              
Balance at January 1, 2022   7,335    97    8,910    600    25,505    958    2,631        46,036 
Depreciation for the year   1,015    137    3,990    93    4,527    163    216        10,141 
Accumulated depreciation for impairments           (532)       (775)               (1,307)
Foreign exchange movement       (4)               (21)   (2)       (27)
Balance at December 31, 2022   8,350    230    12,368    693    29,257    1,100    2,845        54,843 
Depreciation for the period   252    32    789    22    850    44    58    208    2,255 
Foreign exchange movement       (5)               (18)   (1)       (24)
Balance at March 31, 2023   8,602    257    13,157    715    30,107    1,126    2,902    208    57,074 
                                              
Carrying amounts                                             
At December 31, 2022   6,844    295    69,786    45,760    41,228    463    469    14,138    178,983 
At March 31, 2023   6,592    254    74,735    42,739    40,651    497    410    13,946    179,824 

 

 

 

 

 

19

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

14       Exploration and evaluation assets

 

    Bilboes Gold Limited    Motapa    Maligreen    Connemara North    GG    Sabiwa    Abercorn    Valentine    Total 
                                              
Balance at January 1, 2022           4,196    463    3,618    290    16    65    8,648 
Acquisition costs:                                             
- Mining claims acquired       7,844                            7,844 
Exploration costs:                                             
- Consumables and drilling           1,170        36                1,206 
- Contractor               4                    4 
- Labour           260        37        11        308 
- Power                   32    4            36 
Impairment *               (467)                   (467)
Balance at December 31, 2022       7,844    5,626        3,723    294    27    65    17,579 
Acquisition costs:                                             
- Bilboes Gold Limited   71,406                                71,406 
Exploration costs:                                             
- Consumables and drilling           86                        86 
- Labour           58                        58 
Balance at March 31, 2023   71,406    7,844    5,770        3,723    294    27    65    89,129 

 

* Caledonia has completed sufficient work to establish that the potential orebody at the Connemara North properties will not meet Caledonia’s requirements in terms of size, grade and width.  Accordingly, Caledonia will not exercise the option to acquire the property.

 

 

20

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

14       Exploration and evaluation assets (continued)

 

(a)Bilboes Gold Limited

 

Refer to note 5 for more information on the acquisition of the Bilboes Gold Limited sulphide exploration and evaluation project.

 

(b)Motapa

 

On November 1, 2022 Caledonia entered into a Share Purchase Agreement with Bulawayo Mining Company Limited (“Bulawayo Mining”) to acquire all the shares of Motapa Mining Company UK Limited (“Motapa”), along with its wholly owned subsidiary Arraskar Investments (Private) Limited (“Arraskar”).

 

Caledonia considers Motapa to be highly prospective and strategically important to its growth ambitions in Zimbabwe in terms of both location and scale. Motapa is a large exploration property which is contiguous to the Bilboes gold project.

 

The Motapa asset has been mined throughout most of the second half of the 20th century, Caledonia understands that during this period the region produced as much as 300,000 ounces of gold. Whilst none of the mining infrastructure remains, the evidence of historical mining will provide guidance to our exploration team in best understanding the prospectivity of the region.

 

The acquisition was accounted for as an asset acquisition as the net assets acquired do not meet the definition of a business. The purchase price of the net assets acquired was allocated to Exploration and evaluation assets based on management’s estimation of the fair value at acquisition.

 

The initial purchase price of $1 million was paid on November 1, 2022. Stamp duties of $41 were paid on November 9, 2022. There were no liabilities assumed with the acquisition of Motapa and Arraskar. The remainder of the purchase price is to be settled by way of loan notes (refer to note 21.1).

 

(c)Maligreen

 

On November 3, 2021 the mining claims had been transferred to Caledonia over the Maligreen project (“Maligreen”), a property situated in the Gweru mining district in the Zimbabwe Midlands, for a total cash consideration of US$4 million. The property is estimated to contain a NI 43-101 compliant inferred mineral resource of approximately 940,000 ounces of gold.

 

Maligreen is a substantial brownfield exploration opportunity with significant historical exploration and evaluation work having been conducted on the property over the last 30 years including:

 

·An estimated 60,000 meters of diamond core and percussion drilling

 

·3.5 tonnes of bulk metallurgical test work

 

·Aeromagnetic and ground geophysical surveys

 

The total land area of Maligreen is approximately 550 hectares comprising two historic open pit mining operations which produced approximately 20,000 oz of gold mined from oxides between 2000 and 2002 after which the operation was closed.

 

 

21

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

14       Exploration and evaluation assets (continued)

 

(c)Maligreen (continued)

 

On November 7, 2022 the Company published an announcement and an updated technical report on SEDAR updating the estimated mineral resources at Maligreen. The report has an effective date of September 30, 2022 and estimates measured and indicated mineral resources of 8.03 million tonnes at a grade of 1.71g/t containing approximately 442,000 ounces of gold and inferred mineral resources of 6.17 million tonnes at a grade of 2.12g/t containing approximately 420,000 ounces of gold. The upgrade to the mineral resources at Maligreen improves the geological confidence of approximately half the mineral resources from inferred to measured and indicated mineral resources from the previous mineral resources statement.

 

Since Caledonia acquired the Maligreen claims in November 2021 it has been focused on reviewing the geological work conducted at the property with a view to upgrading the Mineral Resources in 2022.

 

15       Inventories

 

    2023    

December 31,

2022

 
           
Consumable stores*   17,298    17,645 
Gold in progress and Ore stock-pile   1,179    689 
    18,477    18,334 

 

* Included in consumables stores is an amount of ($1,510) (2022: ($1,510)) for provision for obsolete stock.

 

16       Prepayments

 

    2023    

December 31,

2022

 
           
Suppliers - South Africa   288    254 
                 - Zimbabwe   2,814    1,494 
                 - Bilboes   5    802 
Solar prepayments       104 
Bilboes pre-effective date costs (oxide)       877 
Other prepayments   249    162 
    3,356    3,693 

17       Trade and other receivables

 

    2023    

December 31,

2022

 
           
Bullion sales receivable   6,726    7,383 
VAT receivables   2,414    1,001 
Solar - VAT and duty receivables   720    720 
Deposits for stores, equipment and other receivables   97    81 
    9,957    9,185 

 

The carrying value of trade receivables is considered a reasonable approximation of fair value and are short term in nature. No provision for expected credit losses was recognised in the current or prior period as none of the debtors were past due (i.e., the gross bullion sales receivable balance is comprised of performing debt). Up to the date of approval of these financial statements all scheduled payments have been received.

 

 

 

22

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

18       Cash and cash equivalents

 

    2023    

December 31,

2022

 
           
Bank balances   17,058    4,737 
Restricted cash*   1,963    1,998 
Cash and cash equivalents   19,021    6,735 
Bank overdrafts used for cash management purposes   (15,832)   (5,239)
Net cash and cash equivalents   3,189    1,496 

 

*

The restricted cash amount of $963 (2022: $998) (denominated in RTGS$) held by Blanket Mine which has been earmarked by Stanbic Bank Zimbabwe as a letter of credit in favour of Caledonia Mining South Africa (Proprietary) Limited (“CMSA”). The letter of credit was issued by Stanbic Bank Zimbabwe on February 13, 2023 and has a 120-day tenure to settlement. The cash on maturity will be transferred to CMSA’s bank account, denominated in South African Rands.

 

Caledonia shall retain at least $1 million as the penalty sum, in a bank account held in its name in Jersey for so long as any amounts remain outstanding on the Loan note payable. Refer to notes 14 and 21 for more information.

 

  Date drawn Expiry Repayment term Principal value

Balance

drawn

at

March 31,

2023

Overdraft facilities          
Stanbic Bank - RTGS$ denomination January 2023 February 2024 On demand $350 million $Nil
Stanbic Bank - USD denomination January 2023 February 2024 On demand $4 million $4 million
CABS Bank of Zimbabwe - USD denomination April 2022 November 2023 On demand $2 million $1.3 million
Ecobank - USD denomination November 2022 October 2023 On demand $7 million $6.5 million
Nedbank Zimbabwe - USD denomination December 2022 October 2023 On demand $3.5 million $2.8 million

 

Subsequent to the period end Nedbank Zimbabwe extended an additional unsecured US$3,5 million term loan facility to Blanket.

 

 

 

23

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

19       Share capital

 

Authorised

 

Unlimited number of ordinary shares of no par value.

 

Unlimited number of preference shares of no par value.

 

Issued ordinary shares

 

    Number of fully paid shares    Amount 
           
January 1, 2022   12,756,606    82,667 
Shares issued:          
- share-based payment - employees (note 10.1(a))   76,520    804 
December 31, 2022   12,833,126    83,471 
Shares issued:          
- share-based payment - employees (note 10.1(a))   24,389    351 
- equity raise*   1,205,700    10,014 
- Bilboes Gold Limited acquisition (note 5)   4,836,892    62,394 
March 31, 2023   18,900,107    156,230 

 

*

Gross proceeds of $10,770 with a transaction cost of $756 were raised by issuing depository interests on the AIM of the London Stock Exchange in March 2023

 

Mark Learmonth, Chief Executive Officer, and Toziyana Resources Limited, a company affiliated with Victor Gapare, executive Director of the Company, subscribed for 3,587 placing shares and 11,000 placing shares respectively on the AIM of the London Stock Exchange, at the same price that were offered to other market participants. 

 

A further $5.85 million of Zimbabwe Depository Receipts (“ZDRs”) on the VFEX were issued post March 31, 2023 of which $809 were paid before March 31, 2023 and included in Trade and other payables. Total share issues (less transaction cost) from January 1, 2023 to date of the approval of the condensed consolidated interim financial statements amounted to $5.645 million and total shares outstanding was 425,765.

 

 

20       Provisions

 

Site restoration

 

Site restoration relates to the estimated cost of closing down the mines and represents the site and environmental restoration costs, estimated to be paid throughout the period up until closure due to areas of environmental disturbance present at the reporting date as a result of mining activities. Regarding Blanket Mine the costs of site restoration are discounted based on the estimated life of mine. Site restoration costs at Blanket Mine are capitalised to mineral properties on initial recognition and depreciated systematically over the estimated life of the mine. Site restoration at Maligreen and Bilboes Gold Limited are capitalised to the exploration and evaluation assets on initial recognition.

 

 

 

24

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

20       Provisions (continued)

 

Reconciliation of site restoration provision   2023    

December 31,

2022

 
           
Balance January 1   2,958    3,294 
Unwinding of discount   66    132 
Change in estimate - adjustment capitalised in Property, plant and equipment   (30)   (468)
Acquisition - Bilboes   704     
Balance March 31   3,698    2,958 
           
Current        
Non-current   3,698    2,958 

 

The discount rates currently applied in calculating the present value of the Blanket Mine provision is 3.81% (2022: 4.14%), based on a risk-free rate and cash flows estimated at an average 3.10% inflation (2022: 2.40%). The gross rehabilitation costs, before discounting, amounted to $3,137 (2022: $3,137) for Blanket Mine, 135,478 for Maligreen and $704 for Bilboes Gold Limited as at March 31, 2023.

 

21       Loan note instruments

 

Loan note instruments - finance costs        2023    2022 
                
Motapa loan notes   21.1    475     
Solar loan notes   21.2    25     
         500     

 

Loan note instruments - Financial liabilities        2023    

December 31,

2022

 
                
Motapa loan notes   21.1    2,180    7,104 
Solar loan notes   21.2    4,445     
         6,625    7,104 

 

 

 

25

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

21       Loan note instruments (continued)

 

21.1       Motapa loan note instruments payable

 

On November 1, 2022 Caledonia, in connection with the Share Purchase Agreement, entered into a Loan note Instrument agreement (“Loan note” or “Notes”) with Bulawayo Mining to acquire all the shares of Motapa Mining Company UK Limited (“Motapa”), along with its wholly owned subsidiary Arraskar Investments (Private) Limited (“Arraskar”). The purchased shares are with full title guarantee and free from all Encumbrances, together with all rights attached or accruing to them. The Loan note certificates were also issued by Caledonia on November 1, 2022.

 

The aggregate principal amount of the Loan notes were limited to US$7.25 million. Interest on the Loan notes is compounded monthly an interest rate of 13% per annum. Interest shall be payable on the principal amount of the Loan notes outstanding from time to time from the issue date of the Loan notes until the date of redemption of the Loan notes at the interest rate. $5 million of the loan notes was paid on March 31, 2023 and $2.25 million is payable on June 30, 2023.

 

In each case, a later date may be agreed, in writing, between Caledonia and each of the noteholders.

 

All notes repaid by Caledonia shall be automatically and immediately cancelled and shall not be reissued.

 

If Caledonia fails to pay Bulawayo Mining any principal amount or any interest due on the notes on the date on which such amount becomes due and payable, Caledonia shall pay default interest at a rate of 10% per annum on such overdue amount from the date of such failure up to the date of actual payment (after as well as before judgment), calculated and accruing on a daily basis for so long as the amount remains unpaid.

 

Caledonia shall retain at least $1 million as the penalty sum, in a bank account held in its name in Jersey for so long as any amounts remain outstanding on the notes. No default interest shall be payable on the penalty sum.

 

The fair value of the Loan notes payable at inception was estimated to be $6,802 using the market approach method. The effective interest rate on the Loan note was estimated to be 12.75% per annum. The loan notes were subsequently measured at amortised cost.

 

A summary of the Loan notes payable were as follows:

 

Fair value November 1, 2022   6,802 
Finance cost   302 
December 31, 2022   7,104 
Finance cost   475 
Repayment   (5,399)
March 31, 2023   2,180 

 

21.2       Solar loan note instruments

 

Following the commissioning of Caledonia’s wholly owned solar plant on February 2, 2023, the decision was taken to optimise the capital structure of the Group and provide additional debt instruments to the Zimbabwean financial market by way of issuing loan note instruments (“bonds”). The bonds were issued by the Zimbabwean registered entity owning the solar plant, Caledonia Mining Services (PvT) Limited. The bonds carry 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. $7 million of bonds were in issue at the date of approval of these financial statements. All bonds were issued to Zimbabwean registered commercial entities.

 

 

26

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

21       Loan note instruments (continued)

 

21.2       Solar loan note instruments (continued)

 

A summary of the bonds are as follows:

 

January 1, 2023    
Amounts received   4,500 
Transaction costs   (80)
Finance cost   25 
March 31, 2023   4,445 

 

22       Trade and other payables

 

    2023    December 31, 2022 
           
Trade payables   5,753    3,502 
Electricity accrual   1,468    2,386 
Audit fee   266    284 
Shareholders for dividend (Non-controlling interest)   1,598    1,883 
Voltalia accrual   1,851    1,852 
Bilboes oxide project payable*       872 
Bilboes deferred shares payable (note 5)   3,284     
VFEX equity raise payable@   809     
Other payables   1,471    651 
Financial liabilities   16,500    11,430 
           
Production and management bonus accrual - Blanket Mine   323    287 
Other employee benefits   1,006    982 
Leave pay   2,794    2,462 
Bonus provision   130    1,025 
Accruals   5,295    1,268 
Non-financial liabilities   9,548    6,024 
Total   26,048    17,454 

 

* On August 1, 2022, the purchase price to acquire the Bilboes oxide mine represented the cost to repair the plant and equipment and would have been recovered from the mining of the Bilboes oxides mine.
@ In April 2023 Caledonia raised approximately gross proceeds of $5,851 by issuing 425,765 ZDRs on the VFEX.  Net proceeds to the value of $809 were received in March 2023 but the shares were not issued until after the end of the period. The remainder of the proceeds were received after period end and all of the VFEX shareholders received voting rights after period end.

 

 

 

27

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

23       Cash flow information

 

Non-cash items and information presented separately on the Statements of cash flows statement:

 

    2023    2022 
           
Operating (loss) profit   (1)   12,452 
Adjustments for:          
Impairment of exploration and evaluation assets (note 14)       467 
Unrealised foreign exchange gains (note 11)   (1,749)   (1,948)
Cash-settled share-based expense (note 10.1)   280    367 
Cash-settled share-based expense included in production costs (note 10.1)   394    513 
Cash portion of cash-settled share-based expense   (1,672)   (1,468)
Equity-settled share-based expense (note 10.2)   110    82 
Depreciation (note 13)   2,255    2,063 
Fair value loss on derivative instruments   434    942 
Cash generated from operations before working capital changes   51    13,470 
Inventories   (71)   1,045 
Prepayments   738    (3,651)
Trade and other receivables   (59)   780 
Trade and other payables   5    200 
Cash generated from operations   664    11,844 

 

24       Operating Segments

 

The Group's operating segments have been identified based on geographic areas. The strategic business units are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. Blanket mine, Bilboes oxide mine, Exploration and evaluation assets (“E&E projects”) and South Africa describe the Group's reportable segments. The Blanket operating segment comprise Caledonia Holdings Zimbabwe (Private) Limited, Blanket Mine (1983) (Private) Limited, Blanket’s satellite projects and Caledonia Mining Services (Private) Limited (“CMS solar”). The Bilboes oxide mine segment comprise the oxide mining activities. The E&E projects segment, the exploration and evaluation activities of the Bilboes sulphide resources as well as the Motapa and Maligreen projects. The South African segment represents the sales made by Caledonia Mining South Africa Proprietary Limited to the Blanket Mine. The holding company (Caledonia Mining Corporation Plc) and Greenstone Management Services Holdings Limited (a UK company) responsible for corporate administrative functions within the Group are taken into consideration in the strategic decision-making process of the CEO and are therefore included in the disclosure below and combined with reconciling amounts that do not represent a separate segment. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax or exploration and evaluation costs, as included in the internal management report that are reviewed by the Group's CEO. Segment profit or exploration and evaluation cost is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

 

 

28

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

24       Operating Segments (continued)

 

Information about reportable segments

 

For the three months ended March 31, 2023   Blanket mine    South Africa    Bilboes oxide mine    E&E projects    Inter-group eliminations adjustments    Corporate and other reconciling amounts    Total 
                                    
Revenue   29,263        172                29,435 
Inter-segmental revenue       2,109            (2,109)        
Royalty   (1,471)       (9)               (1,480)
Production costs   (16,079)   (2,111)   (3,346)       1,686        (19,850)
Depreciation   (2,794)   (36)           585    (10)   (2,255)
Other income   5    13                    18 
Other expenses   (638)       (2)               (640)
Administrative expenses   (39)   (676)   (216)           (5,007)   (5,938)
Management fee   (560)   560                     
Cash-settled share-based expense                   394    (674)   (280)
Equity-settled share-based expense                       (110)   (110)
Net foreign exchange gain (loss)   859    (65)   (4)       354    389    1,533 
Fair value loss on derivative liabilities                       (434)   (434)
Net finance cost   (518)   117    (1)           (365)   (767)
(Loss) profit before tax   8,028    (89)   (3,406)       910    (6,211)   (768)
Tax expense   (2,992)   (73)           (137)   (300)   (3,502)
(Loss) profit after tax   5,036    (162)   (3,406)       773    (6,511)   (4,270)

 

As at March 31, 2023   Blanket mine    South Africa    Bilboes oxide mine    E&E projects    Inter-group eliminations adjustments    Corporate and other reconciling amounts    Total 
                                    
Geographic segment assets:                                   
Current (excluding intercompany)   32,620    2,012        3,081    (11)   13,197    50,899 
Non-Current (excluding intercompany)   181,191    713    872    85,020    (6,685)   7,958    269,069 
Expenditure on property, plant and equipment (note 13)   16,346    27            (1,824)   (11,438)   3,111 
Expenditure on evaluation and exploration assets (note 14)   -            71,550            71,550 
Intercompany balances   43,984    13,135            (139,737)   82,618     

 

 

29

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

24       Operating Segments (continued)

 

As at March 31, 2023   Blanket    South Africa    Bilboes oxides    E&E projects    Inter-group eliminations adjustments    Corporate and other reconciling amounts    Total 
Geographic segment liabilities:                                   
Current (excluding intercompany)   (30,079)   (2,234)       (2,879)       (12,030)   (47,222)
Non-current (excluding intercompany)   (11,902)   (69)       (730)   (37)   (458)   (13,196)
Intercompany balances   (22,930)   (34,673)       (6,296)   139,737    (75,838)    

 

For the three months ended March 31, 2022   Blanket    South Africa    Inter-group eliminations adjustments    Corporate and other reconciling amounts    Total 
                          
Revenue   35,072                35,072 
Inter-segmental revenue       4,436    (4,436)        
Royalty   (1,758)               (1,758)
Production costs   (13,723)   (4,316)   3,680        (14,359)
Depreciation   (2,551)   (39)   542    (15)   (2,063)
Other income   2                2 
Other expenses   (326)           (467)   (793)
Administrative expenses   (47)   (642)   13    (1,695)   (2,371)
Management fee   (970)   970             
Cash-settled share-based expense           513    (880)   (367)
Equity-settled share-based expense               (82)   (82)
Net foreign exchange gain (loss)   1,283    322    (124)   (572)   909 
Fair value loss on derivative instruments               (1,738)   (1,738)
Net finance cost   (244)   (7)       135    (116)
Profit before tax   16,738    724    188    (5,314)   12,336 
Tax expense   (4,362)   (114)   (83)   (160)   (4,719)
Profit after tax   12,376    610    105    (5,474)   7,617 

 

 

30

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

 

24       Operating Segments (continued)

 

As at March 31, 2022   Blanket    South Africa    Inter-group eliminations adjustments    Corporate and other reconciling amounts    Total 
Geographic segment assets:                         
Current (excluding intercompany)   38,395    3,564    (11)   8,280    50,228 
Non-Current (excluding intercompany)   166,379    850    (4,733)   5,567    168,063 
Expenditure on property, plant and equipment (note 13)   9,036    (1,111)   4,440        12,365 
Expenditure on evaluation and exploration assets (note 14)   220            4    224 
Intercompany balances   33,085    11,186    (93,032)   48,761     
                          
Geographic segment liabilities:                         
Current (excluding intercompany)   (12,164)   (1,246)       (5,288)   (18,698)
Non-current (excluding intercompany)   (10,667)   (200)   175    (937)   (11,629)
Intercompany balances   (12,554)   (35,114)   93,032    (45,364)    

 

Major customer

 

Revenues from Fidelity amounted to $29,435 (2022: $35,072) for the three months ended March 31, 2023.

 

In April 2023 the Company successfully implemented a mechanism whereby gold produced by Blanket is exported directly by Caledonia to a refiner outside Zimbabwe, which makes payment directly into Caledonia's bank account in Zimbabwe. Unrefined gold continues to be processed at Fidelity a subsidiary of the RBZ, on a toll-treatment basis, in accordance with requirements of the Zimbabwe government for in-country refining and to allow the Zimbabwe authorities full visibility over the gold produced and exported by Caledonia. The resultant gold is exported under the gold dealing licence that is held by FGR to a refinery outside Zimbabwe which undertakes the final refining process and sells the gold on behalf of Caledonia.  Caledonia receives the proceeds of the gold sales directly into its bank account in Zimbabwe within a few days of delivery to the final refiner. This arrangement in respect of production from Blanket Mine complies with the current requirements to pay a 5 per cent royalty and that Blanket continues to receive 75 per cent of its revenues in US dollars and the balance in local currency. In due course, Caledonia expects that the production from Bilboes and any of its other operations in Zimbabwe will be subject to the same export arrangement. Up to the date of approval of the Condensed consolidated interim financial statements the Group has made $3.8 million of sales to Al Etihad Gold Refinery DMCC (“AEG” an accredited Dubai Good Delivery refinery), representing 1,936 ounces and has received payment in full. Management believes this new sales mechanism reduces the risk associated with selling and receiving payment from a single refining source in Zimbabwe. It also creates the opportunity to use more competitive offshore refiners and it may allow for the Company to raise debt funding secured against offshore gold sales.

 

 

31

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

Additional information

 

DIRECTORS AND OFFICERS at May 15, 2023

 

 BOARD OF DIRECTORS OFFICERS

J. L. Kelly (2) (3) (4) (6) (8)

Chairman of the Board

M. Learmonth (5) (6) (7) (8)

Chief Executive Officer

Non-executive Director Jersey, Channel Islands
Connecticut, United States of America  
   
S. R. Curtis (5) (6) (8) D. Roets (5) (6) (7) (8)

Non-executive Director

Johannesburg, South Africa

 

Chief Operating Officer

Johannesburg, South Africa

 

   
J. Holtzhausen (1) (2) (4) (5) (6) C.O. Goodburn (6) (7)

Chairman Audit Committee

Non-executive Director,

Cape Town, South Africa

Chief Financial Officer

Johannesburg, South Africa

 

   
M. Learmonth (5) (6) (7) (8) A. Chester (7) (8)

Chief Executive Officer

Jersey, Channel Islands

General Counsel, Company Secretary and Head of Risk and Compliance

Jersey, Channel Islands

 

N. Clarke (3) (4) (5) (6) (8)  
Non-executive Director BOARD COMMITTEES

East Molesey, United Kingdom

 

(1)  Audit Committee
(2)  Compensation Committee
G. Wildschutt (1) (3) (4) (6) (8) (3)  Corporate Governance Committee
Non-executive Director (4)  Nomination Committee
Johannesburg, South Africa (5)  Technical Committee
  (6)  Strategic Planning Committee
D. Roets (5) (6) (7) (8) (7)  Disclosure Committee
Chief Operating Officer (8)  ESG Committee
Johannesburg, South Africa  
   
G. Wylie (1) (2) (4) (5) (6)  
Non-executive Director  
Malta, Europe  
   
V. Gapare (5) (6) (8)  
Executive Director  
Harare, Zimbabwe  

 

 

32

Caledonia Mining Corporation Plc

Notes to the Condensed Consolidated Interim Financial Statements

For the period ended March 31, 2023 and 2022

(in thousands of United States Dollars, unless indicated otherwise)

Additional information

 

CORPORATE DIRECTORY as at May 15, 2023

 

CORPORATE OFFICES SOLICITORS
Jersey Mourant Ozannes (Jersey)
Head and Registered Office 22 Grenville Street
Caledonia Mining Corporation Plc St Helier
B006 Millais House Jersey
Castle Quay Channel Islands
St Helier  
Jersey JE2 3NF Borden Ladner Gervais LLP (Canada)
  Suite 4100, Scotia Plaza
South Africa 40 King Street West
Caledonia Mining South Africa Proprietary Limited Toronto, Ontario M5H 3Y4
Constantia Boulevard Canada

Floracliffe

 
South Africa Memery Crystal LLP (United Kingdom)
165 Fleet Street
  London EC4A 2DY
Zimbabwe United Kingdom
Caledonia Holdings Zimbabwe (Private) Limited  
P.O. Box CY1277 Dorsey & Whitney LLP (US)
Causeway, Harare TD Canada Trust Tower
Zimbabwe Brookfield Place
  161 Bay Street
Capitalisation (May 15, 2023) Suite 4310
Authorised:             Unlimited     71 Queen Victoria Street Toronto, Ontario
Shares, Warrants and Options Issued: M5J 2S1
Shares:           19,188,073 Canada
Options:           20,000  
  Gill, Godlonton and Gerrans (Zimbabwe)
SHARE TRADING SYMBOLS Beverley Court
NYSE American - Symbol “CMCL” 100 Nelson Mandela Avenue
AIM - Symbol “CMCL” Harare, Zimbabwe
VFEX - Symbol “CMCL”  
  Bowman Gilfillan Inc (South Africa)
BANKER 11 Alice Lane
Barclays Sandton
Level 11 Johannesburg
1 Churchill Place 2196
Canary Wharf  
London E14 5HP AUDITOR
  BDO South Africa Incorporated
NOMINATED ADVISOR Wanderers Office Park
Cenkos Securities Plc 52 Corlett Drive
6.7.8 Tokenhouse Yard Illovo 2196
London South Africa
EC2R 7AS Tel: +27(0)10 590 7200
   
MEDIA AND INVESTOR RELATIONS REGISTRAR AND TRANSFER AGENT
BlytheRay Communications Computershare
4-5 Castle Court 150 Royall Street,
London EC3V 9DL Canton,
Tel: +44 20 7138 3204 Massachusetts, 02021
 

Tel: +1 800 736 3001 or +1 781 575 3100

 

 

 

 

 

Exhibit 99.2

 

CALEDONIA MINING CORPORATION PLC   May 15, 2023

 

Management’s Discussion and Analysis

 

This management’s discussion and analysis (“MD&A”) of the consolidated operating results and financial position of Caledonia Mining Corporation Plc (“Caledonia” or the “Company”) is for the quarter ended March 31, 2023 (“Q1 2023” or the “Quarter”). It should be read in conjunction with the Unaudited Condensed Consolidated Interim Financial Statements of Caledonia for the Quarter (the “Unaudited Condensed Consolidated Interim Financial Statements”) which are available from the System for Electronic Data Analysis and Retrieval at www.sedar.com or from Caledonia’s website at www.caledoniamining.com. The Unaudited Condensed Consolidated Interim Financial Statements and related notes have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. In this MD&A, the terms “Caledonia”, the “Company”, the “Group”, “we”, “our” and “us” refer to the consolidated operations of Caledonia Mining Corporation Plc and its subsidiaries unless otherwise specifically noted or the context requires otherwise.

 

Note that all currency references in this document are in thousands of US Dollars (also “$”, “US$” or “USD”), unless stated otherwise.

 

 

 

TABLE OF CONTENTS

 

Table of Contents

 

1.   OVERVIEW 3
2.   CONSOLIDATED HIGHLIGHTS 3
3.   SUMMARY FINANCIAL RESULTS 8
4.   OPERATIONS 16
4.1   Safety, Health and Environment - Blanket 16
4.2   Social Investment and Contribution to the Zimbabwean Economy - Blanket 17
4.3    Gold Production - Blanket 18
4.4    Underground - Blanket 18
4.5   Metallurgical Plant 18
4.6   Production Costs 19
4.7   Capital Projects - Blanket 20
4.8   Indigenisation 21
4.9   Bilboes 21
4.10   Zimbabwe Commercial Environment 22
4.11   Opportunities and Outlook 25
4.13   Solar project 26
5   EXPLORATION 27
6.   INVESTING 28
7.   FINANCING 29
8.   LIQUIDITY AND CAPITAL RESOURCES 30
9.   OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL COMMITMENTS AND CONTINGENCIES 30
10.   NON-IFRS MEASURES 31
11.   RELATED PARTY TRANSACTIONS 33
12.   CRITICAL ACCOUNTING ESTIMATES 34
13.   FINANCIAL INSTRUMENTS 36
14.   DIVIDEND POLICY 38
15.   MANAGEMENT AND BOARD 38
16.   SECURITIES OUTSTANDING 39
17.   RISK ANALYSIS 39
18.   FORWARD LOOKING STATEMENTS 41
19.   CONTROLS 42
20.   QUALIFIED PERSON 43

 

 

 

2

 

 

 

1.       OVERVIEW

 

Caledonia is a Zimbabwean focussed exploration, development and mining corporation. Caledonia owns a 64% stake in the gold-producing Blanket Mine (“Blanket”), and 100% stakes in the Bilboes oxide mine, the Bilboes sulphide project, and the Motapa and Maligreen gold mining claims, all situated in Zimbabwe. Caledonia’s shares are listed on the NYSE American LLC (“NYSE American”), depositary interests in Caledonia’s shares are admitted to trading on AIM of the London Stock Exchange plc and depositary receipts in Caledonia’s shares are listed on the Victoria Falls Stock Exchange (“VFEX”) (all under the symbols “CMCL”).

 

2.       CONSOLIDATED HIGHLIGHTS

 

  Q1 2023 Q1 2022 Comment
Gold produced (oz) 16,141 18,515 Gold produced in the Quarter was 12.8% lower than the first quarter of 2022 (the “comparative quarter”) mainly due to lower grade and lower than budget tonnes milled. Gold production, other than 105 ounces produced at the Bilboes oxide mine, was derived from Blanket where production was adversely affected by several individually insignificant mechanical breakdowns and logistical issues. Production from the restart of the Bilboes oxide mine has been slower than anticipated and was adversely affected by inconsistent grades, mechanical breakdowns and the poor availability of spare parts and alternative equipment.
On-mine cost per ounce ($/oz)1 1,196 698 On-mine cost per ounce in the Quarter increased by 71.4%. Approximately 59% of the increase was due to the high cost per ounce at the Bilboes oxide mine where production only commenced in the last week of the Quarter, but operating costs (primarily the cost of waste) were incurred for much of the Quarter. The remainder of the increase was due to higher on-mine costs at Blanket where lower production meant that fixed costs were spread across fewer production ounces. On-mine costs at Blanket were also affected by higher electricity costs which contributed approximately $116/oz to the overall increase in on-mine costs per ounce versus the comparative quarter.

 

 

3

 

 

  Q1 2023 Q1 2022 Comment
All-in sustaining cost (“AISC”)1 1,412 848 The AISC per ounce in the Quarter increased by 66.5% compared to the comparative quarter due to the higher on-mine cost per ounce. AISC also increased due to higher administrative expenses and sustaining capital expenditure. AISC deducted the benefit of the solar plant electricity ($27.47 per ounce) in the Quarter compared to the previous quarter displacing the external utility and generator expenses in the comparable quarter.
Average realised gold price ($/oz)1 1,863 1,848 The average realised gold price reflects international spot prices.
Gross profit2 5,850 16,892 Gross profit for the Quarter decreased due to lower revenue and increased production costs.
Net profit (loss) attributable to shareholders (5,030) 5,940 Net loss for the Quarter includes a lower gross profit of $11m and $3.1m paid for advisory fees on conclusion of the acquisition of Bilboes Gold Limited.
Basic IFRS (loss) earnings per share (“EPS”) (cents) (30.3) 44.6 IFRS EPS reflects the movement in IFRS profit attributable to shareholders.
Adjusted EPS (cents)1 (29.1) 62.5 Adjusted EPS excludes net foreign exchange gains, inventory write-down, deferred tax and fair value movements on derivative financial instruments.
Net cash from operating activities (876) 10,155 Net cash from operating activities in the Quarter decreased predominantly due to lower gross profit.

Net cash and cash equivalents:

-Beginning of the period Jan 1

-End of the period March 31

 

1,496

3,189

Net cash increased due to the equity raises and the loan notes issued offset partly by the payment of deferred consideration for Motapa, cash outflows from operating activities at the Bilboes oxide mine and reduced inflows from Blanket mine due to low production levels.

 

1 Non-IFRS measures such as “On-mine cost per ounce”, “AISC”, “average realised gold price” and “adjusted EPS” are used throughout this document. Refer to section 10 of this MD&A for a discussion of non-IFRS measures.

2 Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses, other income, interest and finance charges and taxation.

 

Safety

 

Regrettably, a fatality occurred on February 16, 2023. The fatality occurred as a result of 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 incident. Caledonia takes the safety of its employees very seriously and, accordingly, measures have been taken to reinforce adherence to prescribed safety procedures. Safety is discussed further in section 4.1.

 

 

4

 

 

Bilboes Gold Limited acquisition

 

On January 6, 2023 Caledonia announced that it had satisfied the conditions precedent to purchase Bilboes Gold Limited (“Bilboes Gold” or “Bilboes”), the parent company that owns, through its Zimbabwe subsidiary, Bilboes Holdings (Private) Limited (“Bilboes Holdings”) the Bilboes oxide mine and Bilboes sulphide project (“Bilboes”). Bilboes is a large, high-grade gold (sulphide and oxide) deposit located approximately 75 km north of Bulawayo, Zimbabwe. The total share consideration payable amounted to 5,123,044 shares.

 

Caledonia and Bilboes Holdings entered into a net smelter royalty agreement with Baker Steel Resources Trust Limited (“Baker Steel”), one of the Bilboes Gold shareholders, whereby Bilboes Holdings will pay a 1 % net smelter royalty to Baker Steel on the sale of products produced from the sulphide resource areas as well as the oxides areas to Baker Steel quarterly in cash.

 

Bilboes has Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) compliant 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 and inferred mineral resources of 577,000 ounces of gold in 9.48 million tonnes at a grade of 1.89 g/t3. The NI 43-101 had 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. Caledonia is not treating these estimates as current estimates of mineral resources or mineral reserves for purposes of the United States Securities and Exchange Commission’s Subpart 1300 of Regulation S-K (“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 main objective at Bilboes is to construct a large, open-pit operation to extract sulphide mineralization. A feasibility study in respect of the Bilboes sulphide project was prepared by the previous owners. Caledonia has commissioned its own feasibility study for the sulphide project reflecting the prevailing economic environment and to identify the most judicious way to commercialise the project in terms of maximising the uplift in value for Caledonia shareholders. Work on the updated feasibility study commenced in the Quarter.

 

Equity raises

 

The Company conducted equity raises by way of placings in the Quarter and shortly after the end of the Quarter which targeted institutional investors in the UK, Europe, South Africa and Zimbabwe. The equity raises were over-subscribed; depositary interests in respect of 781,749 shares were issued to investors in the UK, Europe and South Africa on March 30, 2023 and Zimbabwe depositary receipts in respect of 425,765 shares were issued on April 14, 2023. The placings raised $16.6 million before expenses.

 

The proceeds are expected to be used for the Bilboes sulphide project feasibility study, a shared services centre in Zimbabwe, the establishment of an international procurement arm to supply future operations and for exploration drilling at Motapa and Maligreen.

 

Quarterly Production at Blanket Mine and the Bilboes oxide mine

 

Blanket Mine

 

Quarterly gold production at Blanket Mine was 16,036 ounces, 13.4% lower than the 18,515 ounces produced in the comparative quarter. Production was lower due to several individually insignificant mechanical breakdowns and logistical issues which have both now been resolved. 5,194 ounces of gold were produced in April. The daily rate of production achieved in April equates to an annualised production rate of approximately 80,000 ounces of gold per annum. Production guidance for Blanket for the year to December 31, 2023 of between 75,000 and 80,000 ounces of gold is maintained; on-mine cost guidance at Blanket of between $770 and $850 per ounce is also maintained.

 

____________________________

 

3 Refer to the technical report entitled "BILBOES GOLD PROJECT FEASIBILITY STUDY" with effective date December 15, 2021 prepared by DRA Projects (Pty) Ltd filed by the Company on SEDAR (www.sedar.com) on July 21, 2022. 8 On-mine cost per ounce, all-in sustaining cost per ounce and all-in cost per ounce are non-IFRS measures. Refer to section 10 for a reconciliation of these amounts to IFRS.

 

 

 

5

 

 

Bilboes oxide mine

 

In the fourth quarter of 2022, a small operation was restarted to mine and process oxide mineralization under a tribute agreement at the Bilboes oxide mine. The oxide mining activities were restarted predominantly with the objective to generate cash flows to pay for the existing cost structures taken over at Bilboes Holdings. The oxide mine was expected to produce between 12,500 and 17,000 ounces of gold in 2023 at an on-mine cost of between $1,200 and $1,320 per ounce. The oxide mine produced 105 ounces of gold in the Quarter, however, the ramp-up in oxide production was slower than expected due to inconsistent grades, mechanical breakdowns and the poor availability of spares and other equipment (refer to section 4.9 for further information). The Company continues to review the commercial viability of the oxides mining activities. This review includes an assessment of the scope to mine and process oxide material from the Motapa property, which is immediately adjacent to Bilboes. In light of this uncertainly, the Company has withdrawn production and cost guidance for the oxide mine and in future it will report actual production achieved each quarter at the Bilboes oxides mine.

 

Commissioning of the solar project

 

The 12.2 MWac solar plant was fully commissioned on February 2, 2023. The plant, which cost approximately $14.2 million, was funded and is 100% owned by Caledonia. The plant provides power to Blanket mine at a price per kilowatt/hour cost which reflects Blanket's historic blended cost per unit. The economic benefit of the solar project is therefore recognised by Caledonia, rather than by Blanket and the benefit ($27.47) per ounce in the two months of February and March 2023) is reflected in the AISC rather than the on-mine cost. The solar plant generates slightly more power than anticipated and has contributed to a substantial reduction in the amount of diesel consumed at Blanket.

 

Loan notes to refinance the solar plant (“bonds")

 

The solar plant was broadly funded entirely by Caledonia the cost of $14.2 million was funded by the proceeds of a $12.5 million (net of transaction cost) equity raise on the NYSE American in 2020, and the balance of the project was funded from internal cashflows.

 

Following the commissioning of the solar plant and in the interests of optimising the capital structure for the solar project, bonds have been issued to institutional investors in Zimbabwe. The bonds were issued by Caledonia Mining Services (Private) Limited (“CMS”), a 100%-owned, Zimbabwe-registered subsidiary of the Company which owns the solar plant. The bonds have an interest rate of 9.5% payable bi-annually and 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 at the date of this document. The bonds were all issued to Zimbabwean registered commercial entities.

 

Revised marketing arrangements for gold

 

Since listing on the Victoria Falls Stock Exchange and following completion of the Bilboes acquisition, Caledonia has been looking into various avenues to achieve the direct export of its gold. Unrefined gold continues to be processed at Fidelity Gold Refinery (Private) Limited ("FGR"), a subsidiary of the Reserve Bank of Zimbabwe ("RBZ"), on a toll-treatment basis, in accordance with requirements of the government of Zimbabwe for in-country refining; and to allow the Zimbabwean authorities full visibility over the gold produced and exported by Caledonia. The exportation of the gold is facilitated by FGR as the holder of a gold dealing licence. The refined gold held by FGR is exported to a refinery outside Zimbabwe, which undertakes the final refining process and sells the final gold on behalf of Caledonia. Caledonia receives the proceeds of the gold sales directly into its bank account in Zimbabwe within a few days of delivery to the final refinery. This arrangement in respect of production from Blanket Mine complies with the current requirements to pay a 5 per cent royalty and that Blanket continues to receive 75 per cent of its revenues in US dollars and the balance in local currency.

 

 

6

 

 

Strategy and Outlook: increased focus on growth opportunities

 

The immediate strategic focus is to:

 

maintain production at Blanket at the targeted range of 75,000 - 80,000 ounces for 2023;
   
re-commence deep level drilling at Blanket with the objective of further upgrading inferred mineral resources, thereby extending the life of mine;
   
complete the Caledonia feasibility study on the Bilboes sulphide project to determine the best implementation strategy and estimate the funding requirements and commence development of the larger sulphides project; and
   
complete the review of evidence obtained from the initial oxide mining activities at Bilboes and consider the potential for future oxide mining activities at Bilboes and Motapa. Caledonia will continue geological evaluations at Maligreen and complete a geological evaluation plan for Motapa.

 

The strategy and outlook of Caledonia is further discussed in section 4.10 of this MD&A.

 

 

 

 

 

 

 

 

 

 

7

 

 

3.       SUMMARY FINANCIAL RESULTS

 

The table below sets out the consolidated profit or loss for the Quarter and comparative quarter prepared under IFRS.

 

Condensed Consolidated Statements of profit or loss and Other comprehensive income (Unaudited)     
      
    

3 months ended Mar 31

 
    2023    2022 
Revenue   29,435    35,072 
Royalty   (1,480)   (1,758)
Production costs   (19,850)   (14,359)
Depreciation   (2,255)   (2,063)
Gross profit   5,850    16,892 
Other income   18    2 
Other expenses   (640)   (793)
Administrative expenses   (5,938)   (2,371)
Net foreign exchange gain   1,533    909 
Cash-settled share-based expense   (280)   (367)
Equity-settled share-based expense   (110)   (82)
Net derivative financial instrument expenses   (434)   (1,738)
Operating (loss) profit   (1)   12,452 
Net finance costs   (767)   (116)
(Loss) profit before tax   (768)   12,336 
Tax expense   (3,502)   (4,719)
(Loss) profit for the period   (4,270)   7,617 
           
Other comprehensive (loss) income          
Items that are or may be reclassified to profit or loss          
Exchange differences on translation of foreign operations   (369)   693 
Total comprehensive (loss) income for the period   (4,639)   8,310 
           
(Loss) profit attributable to:          
Owners of the Company   (5,030)   5,940 
Non-controlling interests   760    1,677 
(Loss) profit for the period   (4,270)   7,617 
           
Total comprehensive (loss) income attributable to:          
Owners of the Company   (5,399)   6,633 
Non-controlling interests   760    1,677 
Total comprehensive (loss) income for the period   (4,639)   8,310 
           
(Loss) earnings per share (cents)          
Basic   (30.3)   44.6 
Diluted   (30.2)   44.6 
Adjusted (loss) earnings per share (cents)7          
Basic   (29.1)   62.5 
Dividends paid per share (cents)   14.0    14.0 

 

7 Non-IFRS measures such as “adjusted EPS” are used throughout this document. Refer to section 10 of this MD&A for a discussion of non-IFRS measures.

 

 

8

 

 

Revenue in the Quarter was 16.1% lower than the comparative quarter due to a 16.6% decrease in the quantity of gold sold. There was little change in the average realised price of gold sold.

 

The royalty rate payable to the Zimbabwe Government was unchanged at 5%.

 

Production costs

 

Production costs increased by 38.2% in the Quarter compared to the comparative quarter and the on-mine cost per ounce increased by 71.5% in the Quarter from the comparative quarter.

 

The on-mine cost per ounce and the AISC per ounce increased in the Quarter compared to the comparative quarter as illustrated in the graphs below.

 

 

 

 

 

9

 

 

 

The cost of oxide mining at Bilboes contributed $293 per ounce to the overall increase in the on-mine cost per ounce. Gold production from the oxides commenced in the last week of the Quarter and 105 ounces were produced in the Quarter. However, $3.3 million of operating costs were incurred at the project in the Quarter. The ramp-up of production was lower than expected due to inconsistent grades, mechanical breakdowns on the drill-rigs and the poor availability of spares and other equipment for the drill rigs. The Company continues to review the commercial viability of the oxide mining activities. This review includes an assessment of the scope to mine and process oxide material from the Motapa property, which is immediately adjacent to Bilboes. This discussed further in section 4.9.

 

Costs at Blanket for the Quarter increased from the comparative quarter by 17% ($2.4 million). Production costs at Blanket increased predominantly due to the higher than anticipated use of electricity and increases in the tariff charged by the Zimbabwean power utility. The higher than anticipated electricity use was partly due to the continued heavy use of infrastructure such as the No. 4 Shaft which had been expected to be used more sparingly following the commissioning of the Central Shaft. In April 2023 Blanket mine concluded a power supply agreement with the Intensive Energy User Group (“IEUG") and the Zimbabwean power utility to allow the IEUG to obtain power outside Zimbabwe which will be "wheeled” to the IEUG members. It is anticipated that Blanket will pay less for IEUG sourced energy and the incidence of power outages at Blanket will be reduced, thereby further reducing the use of diesel. The benefit of the solar plant is not recognised in on-mine costs because the solar plant, which is 100%-owned by Caledonia, sells power to Blanket at a price per kilowatt/hour which reflects Blanket's historic blended cost per unit. The economic benefit of the solar plant is therefore recognised by Caledonia, rather than by Blanket and the benefit (approximately $27.47 per ounce of gold produced) is reflected in the AISC rather than the on-mine cost. Labour costs at Blanket increased because of the increased employment numbers at Blanket compared to the comparative quarter. Labour costs further increased due to inflationary increases and an increase in the government minimum wage that ensures an adequate compensation to our employees.

 

10

 

 

Various government service payments increased in the Quarter compared to the comparative quarter which increased on-mine costs by $17 per ounce compared to the comparative quarter.

 

Administrative expenses are detailed in note 9 to the Unaudited Condensed Consolidated Interim Financial Statements and include the costs of Caledonia’s offices and personnel in Johannesburg, the UK and Jersey which provide the following functions: technical services, finance, procurement, investor relations, corporate development, legal and company secretarial. Administrative expenses in the Quarter were 150.5% higher than the comparative quarter predominantly due to a once off $3.1 million payable to advisors on the successful conclusion of the Bilboes Gold acquisition in January 2023. Total administrative expenses increased AISC by 13.4% against the comparative quarter.

 

The depreciation charge in the Quarter increased because of increase in the depreciable cost base following the commissioning and use of the central shaft and the solar plant. This was somewhat offset by the lower production ounces in the Quarter over which a large part of the cost base is depreciated.

 

Other expenses are detailed in note 8 to the Unaudited Condensed Consolidated Interim Financial Statements.

 

Net foreign exchange movements relate to gains and losses arising on monetary assets and liabilities that are held in currencies other than the USD. Large foreign exchange gain arose due to the significant devaluation gain to the USD which is discussed in section 4.9 of this MD&A. The net foreign exchange movement in the Quarter was higher than in the comparative quarter due to further devaluation in the RTGS$ to the USD.

 

The tax expense comprised of the following:

 

Analysis of consolidated tax expense/(credit) for the Quarter
($’000’s)   Zimbabwe    South Africa    UK    Total 
Income tax   1,852    (44)   -    1,808 
Withholding tax                    
Management fee   -    41    -    41 
Deemed dividend   85    -    -    85 
CHZ dividends to GMS-UK   -    -    300    300 
Deferred tax   1,192    76    -    1,268 
    3,129    73    300    3,501 

 

The overall effective taxation rate for the Quarter was -456% (2022: 38%). The effective tax rate bears little relationship to reported consolidated loss before tax for the following reasons:

 

·Operating expenses incurred at the Bilboes oxide mine cannot be offset against profits arising elsewhere in the group – thus they depress profit before tax, with no commensurate reduction in the tax expense;

 

·Zimbabwean taxable income is calculated in RTGS$, whereas the group reports in US dollars. Large devaluations in the RTGS$ against the USD result in substantial foreign exchange movements which have a significant effect on the income tax calculation;

 

·100% of capital expenditure is tax deductible in the year in which it is incurred for tax purposes, whereas depreciation only commences when a project enters production, timing differences can alter the effective tax rate based on the capital expenditure for a quarter; and

 

·The rate of income tax in Jersey, which is the tax domicile of the parent company of the Group (i.e., the Company), is zero which means there is no benefit to be realised by offsetting such expenses against taxable profits.

 

The effective taxation rate for Blanket mine was 33% (2022: 25%). Zimbabwe income tax payments are made in the same proportion of RTGS$ and USD as revenue is received. Deferred tax predominantly comprises the difference between the accounting and tax treatments of capital investment. The enacted income tax rate in Zimbabwe remained unchanged at 24.72% (2022: 24.72%). Most of the tax expense comprised income tax and deferred tax incurred in Zimbabwe.

 

South African income tax arises on intercompany profits arising at Caledonia Mining South Africa Proprietary Limited (“CMSA”).

 

Zimbabwe withholding tax arose on the management fees paid to CMSA and on dividends paid from Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”) to the Company’s subsidiary in the UK Greenstone Management Services Holdings Limited (“GMS-UK”).

 

 

11

 

 

IFRS basic EPS for the Quarter decreased by 156.9% from a profit of 44.6 cents in the comparative quarter to a 25.4 cents loss. Adjusted EPS for the Quarter excludes inter alia the effect of foreign net exchange movements and deferred tax. Adjusted EPS reduced by 146.3% from a profit of 62.5 cents in the comparative quarter to a loss of 29.1 cents loss for the Quarter due to lower revenue, higher production costs and an increase in the effective tax rate. A reconciliation from IFRS EPS to adjusted EPS is set out in section 10.3.

 

A dividend of 14 cents per share was paid in the Quarter. Caledonia’s dividends are discussed further in section 14.

 

Risks that may affect Caledonia’s future financial condition are discussed in sections 4.9 and 17.

 

The table below sets out the consolidated statements of cash flows for the Quarter and the comparative quarter prepared under IFRS.

 

Condensed Consolidated Statements of Cash Flows (Unaudited)      
($’000’s)          
    3 months ended
March 31
 
    2023    2022 
           
Cash inflow from operations   664    11,844 
Interest received   5    1 
Net finance costs paid   (200)   (31)
Tax paid   (1,345)   (1,659)
Net cash (outflow) inflow from operating activities   (876)   10,155 
           
Cash flows from investing activities          
Acquisition of property, plant and equipment   (4,593)   (9,734)
Acquisition of exploration and evaluation assets   (144)   (224)
Net cash outflow from investing activities   (4,737)   (9,958)
           
Cash flows from financing activities          
Dividends paid   (2,424)   (1,788)
Payment of lease liabilities   (37)   (40)
Shares issued - equity raise (net of transaction cost)   10,823    - 
Loan note instruments - Motapa payment   (5,399)   - 
Loan note instruments - Solar bond issue receipts   4,500    - 
Net cash inflow (outflow) from financing activities   7,463    (1,828)
           
Net increase (decrease) in cash and cash equivalents   1,850    (1,631)
Effect of exchange rate fluctuations on cash and cash equivalents   (157)   (204)
Net cash and cash equivalents at beginning of the period   1,496    16,265 
Net cash and cash equivalents at end of the period   3,189    14,430 

 

Cash flows from operating activities are detailed in note 23 to the Unaudited Condensed Consolidated Interim Financial Statements, showing that cash inflows from operations before working capital changes in the Quarter was $0.05 million, compared to $13.5 million in the comparative quarter.

 

 

12

 

 

Cash flows from operations before working capital changes were negatively affected during the Quarter by lower production and higher costs at Blanket, although Blanket still made a positive cash contribution of $8 million. The Bilboes oxide mine contributed a negative cash outflow of $3.2 million, $3.1 million was paid in advisory fees upon successful completion of the Bilboes Gold acquisition and the remainder of the cash outflow was due to general group related administrative expenditure in the Quarter. Working capital changes included in note 23 to the Unaudited Condensed Consolidated Interim Financial Statements includes $1.6 million of payments to legacy creditors taken on in the Bilboes Gold acquisition on January 6, 2023. Working capital was also adversely affected by the accumulation in the last few weeks of the Quarter of 1,463 ounces of gold with a realisable value of approximately $2.8 million pending the successful implementation of the revised export mechanism in early April.

 

The acquisition of property plant and equipment relates to the continued investment at Blanket as discussed further in section 4.7; the investment in exploration and evaluation assets relates to the ongoing work at the Maligreen claims. The exploration and evaluation assets acquired pursuant to the completion of the Bilboes Gold acquisition in January 2023 was a non-cash share acquisition and is discussed in section 5.

 

Dividends for the Quarter comprise $2.4 million paid to shareholders of the Company. A dividend of 14 cents per share was announced on April 3, 2023.

 

In March and April 2023, the Company conducted equity raises by way of placings targeting institutional investors in the UK, Europe, South Africa and Zimbabwe. This gave rise to an inflow in the Quarter of $10.8 million, after expenses in respect of depositary interests that were issued to investors in the UK, Europe and South Africa. A further $5.85 million was received mostly after the end of the Quarter in respect of the Zimbabwe investors with $0.8 million received before March 31, 2023.

 

The $5.4 million loan note payment represented the settlement of part of the outstanding amount to acquire the Motapa exploration and evaluation project in 2022, part of the consideration of which was provided in loan notes.

 

Bonds have been issued by CMS, the entity that owns the solar plant. Solar bond issue receipts to the value of $4.5 million were issued by CMS. 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 all are issued to Zimbabwean registered commercial entities. An additional $2.5 million of bonds were issued after the end of the Quarter.

 

The effect of exchange rate fluctuations on cash held reflects gains or losses on cash balances held in currencies other than the US Dollar. The effect on cash balances forms part of an overall foreign exchange gain or loss arising on all affected financial assets and liabilities.

 

 

13

 

 

The table below sets out the consolidated statements of Caledonia’s financial position at the end of the Quarter and December 31, 2022 prepared under IFRS.

 

Summarised Consolidated Statements of Financial Position (Unaudited)
($’000’s)   As at    Mar 31    Dec 31 
         2023    2022 
Total non-current assets        269,069    196,764 
Inventories        18,477    18,334 
Prepayments        3,356    3,693 
Trade and other receivables        9,957    9,185 
Income tax receivable        82    40 
Cash and cash equivalents        19,021    6,735 
Derivative financial assets        6    440 
Total assets        319,968    235,191 
Total non-current liabilities        13,196    9,291 
Loan notes payable – short term portion        2,514    7,104 
Lease liabilities – short term portion        136    132 
Trade and other payables        26,048    17,454 
Income tax payable        2,210    1,324 
Overdraft        15,832    5,239 
Cash-settled share-based payments - short term portion        482    1,188 
Total liabilities        60 412    41,732 
Total equity        259,550    193,459 
Total equity and liabilities        319 968    235,191 

 

The acquisition of Bilboes Gold in the Quarter increased the exploration and evaluation assets by $71.4 million as explained in section 5 of the MD&A. Property, plant and equipment additions at Blanket amounted to $2.6 million and predominantly related to infrastructure development at 30 and 34 level and the construction of the new Blanket tailings storage facility (“TSF”).

 

Inventories include 1,463 ounces of gold work-in-progress (December 2022: 1,123 ounces) which was realised in April 2023.

 

Prepayments represent deposits and advance payments for goods and services. $1.1 million of prepayments related to construction work on the new TSF which is discussed in section 4.7.

 

Trade and other receivables are detailed in note 17 to the Unaudited Condensed Consolidated Interim Financial Statements and include $6.7 million (December 31, 2022: $7.4 million) due from FGR in respect of gold deliveries prior to the close of business on March 31, 2023. All outstanding amounts due from FGR were received in full after the end of the Quarter, $2.4 million (December 31, 2022: $1 million) was due from the Zimbabwe Government in respect of VAT refunds.

 

Trade and other payables at Quarter end increased from December 31, 2022 due to trade payables acquired following the completion of the acquisition of Bilboes Gold amounting to $4.5 million, amounts payable in respect of transaction advisory services of $3.1 million, deferred shares payable to the Bilboes Gold vendors of $3.3 million and some of the proceeds of the equity raise from Zimbabwe investors of $0.8 million which were received before end of the Quarter.

 

Overdrafts increased due to short term funding requirements. Expiration dates and terms of the overdrafts are described in section 7 Financing.

 

Most cash-settled share-based payments due to staff as at Dec 31, 2022 were settled in the Quarter. On April 7, 2023 the Company made awards of 79,894 PUs and 93,035 EPUs to certain management and employees within the Group pursuant to the provisions of the 2015 Omnibus Equity Incentive Compensation Plan (“OEICP”).  

 

 

14

 

 

The table below illustrates the distribution of the consolidated cash across the jurisdictions where the Group holds its cash:

 

Geographical location of cash ($’000’s)

 

As at   Jun 30,    Sep 30,    Dec 31,    Mar 31,    Apr 30, 
   2022    2022    2022    2023    2023 
Zimbabwe   8,868    883    (2,160)   (9,749)   (12,072)
South Africa   878    932    694    1,107    2,413 
UK/Jersey   1,116    4,352    2,962    11,831    14,355 
Total net cash and cash equivalents   10,862    6,167    1,496    3,189    4,696 

 

Included in the cash and cash equivalents is a restricted cash amount of US$1.9 million (denominated in RTGS$) held by Blanket Mine of which US$0,9 million has been earmarked by Stanbic Bank Zimbabwe as a letter of credit in favour of CMSA. The letter of credit was issued by Stanbic Bank Zimbabwe on February 13, 2023 in RTGS$ and has a 120-day conversion tenure. US$1 million is held as a minimum cash balance in Jersey until the final payment of the Motapa loan note instrument.

 

The short-term portion of the cash-settled share-based payment liability is in respect of awards made to certain employees at Caledonia, CMSA and Blanket in terms of the OEICP. The awards (other than those made to the NEOs in 2023 which only settle in shares) can be settled in cash or, subject to conditions, shares at the option of the recipient.

 

The following information is provided for each of the eight most recent quarterly periods ending on the dates specified. The amounts are extracted from underlying financial statements that have been prepared using accounting policies consistent with IFRS.

 

($’000’s except per share amounts)   Jun 30,    Sep 30,    Dec 31,    Mar 31,    Jun 30,    Sep 30,    Dec 31,    Mar 31, 
   2021    2021    2021    2022    2022    2022    2022    2023 
Revenues   29,977    33,496    32,136    35,072    36,992    35,840    34,178    29,435 
Profit/(loss) attributable to owners of the Company   2,694    6,939    4,222    5,940    11,378    8,614    (8,029)   (5,030)
EPS – basic (cents)   21.1    56.8    33.3    44.6    87.7    63.3    (62.2)   (30.3)
EPS – diluted (cents)   21.1    56.7    33.3    44.6    87.7    63.3    (62.2)   (30.2)
Net cash and cash equivalents   16,669    34,178    16,265    14,430    10,862    6,167    1,496    3,189 

 

Fluctuations in profit attributable to owners of the Company on a quarterly and annual basis are due to, inter alia, substantial foreign exchange profits, inventory write-downs and other non-cash items as discussed in the relevant MD&A’s and financial statements.

 

 

15

 

 

4.       OPERATIONS

 

4.1Safety, Health and Environment - Blanket

 

The following safety statistics have been recorded for the Quarter and the preceding seven quarters.

 

Blanket Mine Safety Statistics                        
Classification   

Q2

2021

    

Q3

2021

    

Q4

2021

    

Q1

2022

    

Q2

2022

    

Q3

2022

    

Q4

2022

    

Q1

2023

 
Fatal   0    0    0    1    0    0    0    1 
Lost time injury   1    0    2    0    2    1    1    0 
Restricted work activity   0    1    1    0    1    1    2    6 
First aid   0    1    0    2    3    0    0    1 
Medical aid   5    6    8    6    3    1    2    4 
Occupational illness   0    0    0    0    0    0    0    0 
Total   6    8    11    9    9    3    5    12 
Incidents   9    26    10    9    10    14    6    14 
Near misses   3    6    2    4    7    6    1    4 
Disability Injury Frequency Rate   0.14    0.12    0.24    0.12    0.36    0.22    0.33    0.80 
Total Injury Frequency Rate   0.85    0.98    1.58    1.07    1.08    0.34    0.56    1.36 
Man-hours worked (000’s)   1,418    1,629    1,643    1,686    1,672    1,788    1,801    1,760 

 

The Nyanzvi safety training initiative was resumed in the previous quarter as COVID-19 restrictions were relaxed.

 

Regrettably, a fatality occurred on February 16, 2023. The fatality occurred due to a secondary blasting accident. After the end of the Quarter, a further fatality occurred underground due to natural causes. The directors and management of Caledonia and Blanket express their sincere condolences to the families and colleagues of the deceased. Management has provided the necessary assistance to the Ministry of Mines Inspectorate Department in its enquiries into the incident, which gave rise to some interruptions to normal production. Caledonia takes the safety of its employees very seriously and, accordingly, measures have been taken to reinforce adherence to prescribed safety procedures.

 

 

16

 

 

4.2Social Investment and Contribution to the Zimbabwean Economy - Blanket

 

Blanket’s investment in community and social projects which are not directly related to the operation of the mine or the welfare of Blanket’s employees, the payments made to the Gwanda Community Share Ownership Trust (“GCSOT”) in terms of Blanket’s indigenisation, and payments of taxation and other non-taxation charges to the Zimbabwe Government and its agencies are set out in the table below.

 

Payments to the Community and the Zimbabwe Government
($’000’s)
 Period    Year    CSR Investment    Payments to GCSOT    Payments to Zimbabwe Government (excl. royalties)    Royalties    Total 
 Year    2013    2,147    2,000    15,354    4,412    23,913 
 Year    2014    35    -    12,319    3,522    15,876 
 Year    2015    50    -    7,376    2,455    9,881 
 Year    2016    12    -    10,637    2,923    13,572 
 Year    2017    5    -    11,988    3,498    15,491 
 Year    2018    4    -    10,140    3,426    13,570 
 Year    2019    47    -    10,357    3,854    14,258 
 Year    2020    1,689    184    12,526    5,007    19,406 
 Year    2021    1,163    948    16,426    6,083    24,620 
 Year    2022    888    1,200    19,184    7,124    28,396 
 Q1