UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 20-F
ANNUAL REPORT
| [ ] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| [x] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2014 |
For the fiscal year ended December 31, 2016
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| [ ] | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report …………………………………………… |
| For the transition period from ……………………………… to ……………………………… |
Commission file number 000-13345
CALEDONIA MINING CORPORATION |
Caledonia Mining Corporation Plc(Exact name of Registrant as specified in its charter) |
(Exact name of Registrant as specified in its charter)
Jersey Channel Islands
(Jurisdiction of incorporation or organization)
Caledonia Mining Corporation Plc
(“Previously Caledonia Mining Corporation”)
3rd Floor, Weighbridge House, St Helier, Jersey, JE2 3NF
(Address of principal executive offices)
Mark Learmonth, +44 1534 679 800, marklearmonth@caledoniamining.com, 3rd Floor, Weighbridge House, St Helier, Jersey Channel Islands, JE2 3NF
(Name, telephone, email and/or facsimile number and address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None
Securities registered or to be registered pursuant to Section 12(g) of the Act
Canada | Common Shares, without par value | 52,787,428 | |
(Jurisdiction of incorporation or organization) |
Greenstone Management Services Proprietary Limited |
24 Ninth Street, Lower Houghton, Johannesburg, Gauteng 2198, South Africa |
(Address of principal executive offices) |
Steven Curtis, +27 11 447 2499, scurtis@caledoniamining.com, 24 Ninth Street, Lower Houghton, Johannesburg, Gauteng 2198, South Africa
|
(Name, telephone, email and/or facsimile number and address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act: None |
Securities registered or to be registered pursuant to Section 12(g) of the Act |
Common Shares, without par value 52,117,908
(Title of Class)
| Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the closing of the period covered by the annual report: 52,117,90852,787,428 (Common shares or shares)
Indicate by check mark if the registration is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [X][X] No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
[ ] Yes [X][X] No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP [ ]
International Financial Reporting Standards as issued by the International Accounting Standards Board [X]
Other [ ]
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow
Item 17 [ ]Item 18 [ ]
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X][X] No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court: N/A
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F ("Annual Report") and the exhibits attached hereto contain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation that involve risks and uncertainties relating, but not limited to, Caledonia’sCaledonia Mining Corporation Plc’s (“Caledonia” or the “Company”) current expectations, intentions, plans, and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “target”, “intend”, “estimate”, “could”, “should”, “may” and “will” or the negative of these terms or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Examples of forward-looking information in this Annual Report include: production guidance, estimates of future/targeted production rates, planned mill capacity increases, estimates of future metallurgical recovery rates and the ability to maintain high metallurgical recoverrecovery rates, timing of commencement of operations and Caledonia’s plans and timing regarding further exploration, drilling and development, the prospective nature of exploration and development targets, the ability to upgrade and convert mineral resources to mineral reserves, capital costs, our intentions with respect to financial position and third party financing and future dividend payments. This forward-looking information is based, in part, on assumptions and factors that may change or prove to be incorrect, thus causing actual results, performance or achievements to be materially different from those expressed or implied by forward-looking information. Such factors and assumptions include, but are not limited to: failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, success of future exploration and drilling programs, reliability of drilling, sampling and assay data, assumptions regarding the representativeness of mineralization being inaccurate, success of planned metallurgical test-work, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, changes in government regulations, legislation and rates of taxation, inflation, changes in exchange rates and the availability of foreign exchange, fluctuations in commodity prices, delays in the development of projects and other factors.
PotentialShareholders, potential shareholders and other prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Such factors include, but are not limited to: risks relating to estimates of mineral reserves and mineral resources proving to be inaccurate, fluctuations in gold price, risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, power outages, explosions, landslides, cave-ins and flooding), risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards, employee relations; relationships with and claims by local communities and indigenous populations; political risk; availability and increasing costs associated with mining inputs and labor; the speculative nature of mineral exploration and development, including the risks of obtaining or maintaining necessary licenses and permits, diminishing quantities or grades of mineral reserves as mining occurs; global financial condition, the actual results of current exploration activities, changes to conclusions of economic evaluations, and changes in project parameters to deal with un-anticipated economic or other factors, risks of increased capital and operating costs, we are affected by environmental, safety or regulatory risks, expropriation, the Company’s title to properties including ownership thereof, increased competition in the mining industry for properties, equipment, qualified personnel and their costs, risks relating to the uncertainty of timing of events including targeted production rate increase and currency fluctuations. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia reviews forward-looking information for the purposes of preparing each Annual Report,annual report, however Caledonia undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
STATUS AS AN EMERGING GROWTH COMPANY
RecentlyWe are an “emerging growth company” as defined in Section 3(a) of the United States Congress passedSecurities Exchange Act of 1934, as amended (the “Exchange Act”) by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), which provides forand we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are reporting companies but not "emergingemerging growth companies." We are an "emerging growth company" as defined in section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and we will continue to qualify as an "emerging growth company" until the earliest to occur of: (a) the last day of the fiscal year during which we had total annual gross revenues of US$1,000,000,000 (as such amount is indexed for inflation every 5 years by the SEC)United States Securities and Exchange Commission (“SEC”)) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer", as defined in Exchange Act Rule 12b-2. Therefore, weWe expect to continue to be an emerging growth company for the foreseeable future.
Generally, a registrant that registers any class of its securities under section 12 of the Exchange Act is required to include in the second and all subsequent annual reports filed by it under the Exchange Act, a management report on internal control over financial reporting and, subject to an exemption available to registrants that are neither an "accelerated filer" or a "larger accelerated filer" (as those terms are defined in Exchange Act Rule 12b-2), an auditor attestation report on management's assessment of internal control over financial reporting. However, for so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report on management’s assessment of internal controls over financial reporting in its annual reports filed under the Exchange Act, even if we were to qualify as an "accelerated filer" or a "larger accelerated filer". In addition, Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) has been amended by the JOBS Act to provide that, among other things, auditors of an emerging growth company are exempt from any rules of the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the company.
CHANGE OF DOMICILE
CURRENCY
All referencesOn February 18, 2016 a special meeting of Caledonia’s shareholders voted to dollar amountsapprove the re-domicile of the Company from Canada to Jersey, Channel Islands by a process called continuance (the “Continuance”). Caledonia’s board of directors subsequently resolved to proceed with the Continuance which became effective on March 19, 2016 whereupon the Company also adopted new charter documents and changed its name to Caledonia Mining Corporation Plc. Following the Continuance, Caledonia is domiciled in Jersey, Channel Islands, for legal and tax purposes; Caledonia’s shares continue to be listed and traded on the Toronto Stock Exchange, depositary interests representing the shares are expressedadmitted to trading on AIM of the London Stock Exchange plc (“AIM”) and its shares continue to be traded on the OTCQX in the lawful currencyUnited States of Canada, unless otherwise specifically stated. Per share amounts are expressed in Canadian dollars.
America.
NON-IFRS FINANCIAL INFORMATION
This Annual Report contains financial statements of the Company prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.Board (“IFRS”). In addition, this Annual Report also contains non-IFRS financial measures (“Non-IFRS Measures”Measures”) including “on-mine cash cost per ounce”, “all-in sustaining cost per ounce”, “all-in cost per ounce”, “average realized gold price” and “adjusted earnings per share” as we believe these are useful metrics for measuring our performance. However, these Non-IFRS Measures do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS.
FOREIGN PRIVATE ISSUER FILINGS
We are considered a “foreign private issuer” pursuant to Rule 405 promulgated under the Securities Act of 1933, as amended (the “AsSecurities Act”). In our capacity as a foreign private issuer, registered under section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), we are subject to section 13 of the Exchange Act, and we are required to file Annual Reports on Form 20-F and Reports of Foreign Private Issuer on Form 6-K with the SEC. However, we are exempt from the proxycertain rules under sectionthe Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the short-swing profit rules under section 16the Exchange Act with respect to their purchases and sales of our shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.
For as long as we are a “foreign private issuer” we intend to file our annual financial statements on Form 20-F and furnish our quarterly financial statements on Form 6-K to the SEC for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information we file or furnish may not be the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a domestic issuer.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by United States residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are United States citizens or residents; (2) more than 50% of our assets are located in the United States; or (3) our business is administered principally in the United States. If we lose our “foreign private issuer status” we would be required to comply with Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirement for “foreign private issuers”.
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING RESOURCE AND RESERVE ESTIMATES
This Annual Report has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws. The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in United States Securities and Exchange Commission (“SEC”) Industry Guide 7 under the United States Securities Act of 1993, as amended (the “Securities Act”).Act. Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.
Accordingly, information contained in this Annual Report and the documents incorporated by reference herein contain descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
thereunder. All references in this Annual Report to the terms “we”, “our”, “us”, “the Company” and “Caledonia” refer to the consolidated operations of Caledonia Mining Corporation.Corporation Plc and its subsidiaries unless otherwise specifically noted or the context requires otherwise.
ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not Applicable.
ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE |
Not Applicable.
| A. | Selected Financial Data |
Table 3 A shows the applicableThe following tables present our selected consolidated financial data for 2010, 2011, 2012, 2013data. You should read these tables in conjunction with our audited Consolidated Financial Statements and 2014 pursuant to IFRS.accompanying notes included in Item 18 of this Annual Report and “Operating and Financial Review and Prospects” included in Item 5 of this Annual Report.
Table 3 A (ii) showsThe selected consolidated financial information set forth below has been derived from our audited Consolidated Financial Statements that are prepared in accordance with IFRS, which differ in certain respects from the US$ exchange rates against the Canadian $ for each of the 5-year periods indicated, for the period endprinciples we would have followed had our Consolidated Financial Statements been prepared in accordance with U.S. GAAP. The selected consolidated financial information should be read in conjunction with our Consolidated Financial Statements and average exchange rate and the range of high and low rates for each year and the high and low exchange rates for the individual months ended March 27, 2015.related notes thereto.
Table 3A - Selected Financial Information prepared for 2014, 2013, 2012, 2011 and 2010 pursuant to IFRS - the figures presented being for the year ended or as of the end of each such year as applicable in the circumstances.
| Financial – All in C$ 000’s unless otherwise indicated | 2014 | 2013 | 2012 | 2011 | 2010 | |
| Financial – All in USD’000’s unless indicated otherwise | | 2016 | 2015 | 2014(2) | 2013(2) | 2012(2) |
| Revenue | 59,082 | 65,113 | 75,221 | 55,705 | 22,388 | 61,992 | 48,977 | 53,313 | 63,217 | 75,236 |
| Gross Profit | 20,473 | 29, 881 | 40,915 | 29,115 | 6,360 | 23,492 | 13,181 | 18,543 | 29,010 | 40,923 |
| Expense - (General and administration, interest and foreign exchange including provisions and impairments) | (7,304) | (20,474) | (20,658) | (8,359) | (3,866) | |
| Net Income /(Loss) – after income taxes from operations | 6,565 | (490) | 7,358 | 12,130 | 1,455 | |
| Net Income /(Loss) – after income taxes from continuing operations | 6,565 | (490) | 7,358 | 12,130 | 1,455 | |
| Cash and cash equivalent | 26,838 | 25,222 | 27,942 | 9,686 | 1,145 | |
| Net Income /(Loss) – after tax from operations | | 11,085 | 5,590 | 5,946 | (477) | 7,122 |
| Net Income /(Loss) – after tax from continuing operations | | 11,085 | 5,590 | 5,946 | (477) | 7,122 |
| Profit attributable to owners of the Company | | 8,526 | 4,779 | 4,435 | (2,967) | 8,515 |
| Net cash and cash equivalent | | 14,335 | 10,880 | 23,082 | 21,901 | 28,125 |
| Current Assets | 36,908 | 36,154 | 35,294 | 18,159 | 6,176 | 25,792 | 23,562 | 31,743 | 33,800 | 35,525 |
| Total Assets | 77,296 | 69,602 | 71,827 | 52,402 | 38,159 | 90,709 | 72,838 | 66,479 | 65,072 | 72,297 |
| Current Liabilities | 5,781 | 7,534 | 9,280 | 4,566 | 4,629 | 9,832 | 8,397 | 4,972 | 7,044 | 9,341 |
| Long Term Liabilities | 12,980 | 10,094 | 6,928 | 7,822 | 7,050 | 21,560 | 14,080 | 11,164 | 9,437 | 6,973 |
| Working Capital | 31,127 | 28,620 | 26,014 | 13,588 | 1,547 | 15,960 | 15,165 | 26,771 | 26,756 | 26,184 |
| Net Assets | 58,535 | 51,974 | 55,619 | 40,014 | 26,480 | 59,317 | 50,361 | 50,343 | 48,591 | 55,983 |
| Total Capital Expenditures including Mineral Properties | 6,786 | 11,738 | 7,909 | 8,528 | 7,304 | |
| Financing Raised(repaid) | (1,796) | 2,266 | 544 | (279) | 159 | |
| Total Capital Expenditures (Cash) | | 19,885 | 16,567 | 6,150 | 11,396 | 7,910 |
Dividend per share – cents (1) | | 4.9 | 4.8 | 5.4 | 9.8 | - |
Earnings/(loss) per share – cents (1) | | 15.9 | 8.9 | 8.4 | (5.4) | 17.2 |
Diluted earnings/(loss) per share – cents (1) | | 15.8 | 8.9 | 8.4 | (5.4) | 17.2 |
Share Information
| | 2014 | 2013 | 2012 | 2011 | 2010 |
| Market Capitalization (USD Thousands) at December 31 | 31,791 | 39,088 | 46,301 | 55,060 | 80,021 |
Shares Outstanding (Thousands)(1) | 52,117 | 52,117 | 51,446 | 50,549 | 50,169 |
Options Outstanding (Thousands)(1) | 2,565 | 2,848 | 3,330 | 4,254 | 3,258 |
| Basic and diluted net income (loss) per share for continuing operations | $ 0,093 | $ (0,061) | $0.172 | $0.24 | $0.03 |
| Basic and diluted net income (loss) per share for the year | $ 0,093 | $ (0,061) | $0.172 | $0.24 | $0.03 |
| | 2016 | 2015 | 2014 | 2013 | 2012 |
Market Capitalization (Thousands) at December 31 (3) | 60,178 | 32,209 | 31,791 | 39,088 | 46,301 |
Shares Outstanding (Thousands)(1) | 52,787 | 52,078 | 52,117 | 52,117 | 51,446 |
Options Outstanding (Thousands)(1) | 461 | 2,241 | 2,565 | 2,848 | 3,330 |
(1) | All dividend per share, earnings per share, diluted earnings per share and option numbers are stated on the basis of the 1:10 reverse split that took place in 20132013. |
Table 3A (ii) - Summary of Exchange Rates for the 5-year Period - 2010 to 2014
The following table sets forth, for each of the years indicated, the exchange rate of the United States dollar into Canadian currency at the end of such year, the average exchange rate during each such year and the range of high and low rates for each such year as supplied by the Bank of Canada.
On March 27, 2015, the exchange rate in effect for Canadian dollars exchanged for US dollars, expressed in terms of Canadian dollars was $0.8019. This exchange rate is based on the noon buying rates of the Bank of Canada, as obtained from the website www.bankofcanada.ca.
Exchange Rate | 2014 | 2013 | 2012 | 2011 | 2010 |
Rate at 31 December (1) | 0.0862 | 1.0696 | 0.9935 | 0.9767 | 0.9999 |
Average Rate (2) | 0.9054 | 1.0300 | 0.9998 | 0.9892 | 1.03 |
High Rate (1) | 0.8589 | 1.0707 | 1.0414 | 1.0468 | 1.0766 |
Low Rate (1) | 1.0164 | 0.9836 | 0.9676 | 0.9748 | 0.9966 |
Notes:(2) | All amounts before January 1, 2015 have been restated to United States Dollar (“USD”) or (“$”). |
(1) (3) | The rate of exchange isBased on the Bank of Canada closing rate for the period 1 C$ to US$.OTCQX share price quoted in USD. |
(2) | The average rate means the average of the exchange rates during the year. |
The high and low rates of exchange for each of the months from December 2014 to March 27, 2015 are as follows:
| | Sept 2014 | Oct 2014 | Nov 2014 | Dec 2014 | Jan 2015 | Feb 2015 | March 2015 |
Closing | 0.8929 | 0.8872 | 0.8741 | 0.8620 | 0.7867 | 0.7998 | 0.8019 |
Average | 0.9826 | 0.8917 | 0.8827 | 0.8672 | 0.8260 | 0.7800 | 0.7934 |
Hi | 0.9826 | 0.8885 | 0.8741 | 0.8650 | 0.8226 | 0.7960 | 0.7901 |
Low | 0.9109 | 0.8948 | 0.8799 | 0.8694 | 0.8294 | 0.8035 | 0.7969 |
| B. | Capitalization and Indebtedness |
Caledonia financed all its operations using funds on hand, those generated by its operations and by an increase in its debt facilities. No equity financing took place in 2016 (other than the receipt of proceeds from the exercise of share options). Blanket Mine (1983) (Private) Limited (“Blanket” or “Blanket Mine”, being the company or, as the context requires, the mine (the “mine”) owned by the company) has an unsecured $2 million overdraft facility in Zimbabwe which is repayable on demand. At December 31, 2016, the facility was undrawn. In October 2016, Blanket drew down a $3 million two-year term facility all of which remained payable as at December 31, 2016, with the first repayment falling due and being duly paid in January 2017.
| C. | Reasons for the Offer and Use of Proceeds |
Not Applicable.
An investment in our common shares involves a high degree of risk and should be considered speculative. You should carefully consider the following risks set out below and other information before investing in our common shares. If any event arising from these risks occurs, our business, prospects, financial condition, results of operations or cash flows could be adversely affected, the trading price of our common shares could decline and all or part of any investment may be lost.
Our operations are highly speculative due to the high-risk nature of our business, which include the acquisition, financing, exploration, development of mineral propertiesinfrastructure and operation of mines. The risks and uncertainties set out below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial, may also impair our operations. If any of the risks actually occur, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our common shares could decline and investors could lose part or all of their investment. Our business is subject to significant risks and past performance is no guarantee of future performance.
Industry CompetitionThe price of gold is subject to volatility and may have a significant effect on our future activities and profitability.
The mining industry is a highly diverse
Our revenues, operations and competitive international business. The selection of geographic areas of interestexploration and development projects are, only limitedand are expected to be, heavily derived from and influenced by the degree of risk a company is willing to accept by the acquisition of properties in emerging or developed markets and/or prospecting in explored or virgin territory. Mining, by its nature, is a competitive business with the search for fresh ground with good exploration potential and the raising of the requisite capital to move projects forward to production. Globally the mining industry is prone to cyclical variations in the price of the commodities producedgold, which is particularly subject to fluctuation and has fluctuated significantly in recent years. The price of gold is affected by it, as dictated bynumerous factors beyond our control including, but not limited to: international economic and political conditions; expectations of inflation; international currency exchange rates; interest rates; global or regional consumption patterns; speculative activities; levels of supply and demanddemand; increased production due to new mine developments and improved mining and production methods; availability and costs of metal substitutes and; inventory carrying costs. The effect of these factors on the price of gold, and therefore the economic viability of our operations cannot be accurately predicted. In February 2016, the Company entered into a hedge in respect of 15,000 ounces of gold over a period of 6 months. The hedge protected the Company if the gold price fell below $1,050 per ounce and gave the Company full participation if the price of gold exceeded $1,079 per ounce. The derivative financial instrument was entered into by the Company for economic hedging purposes and not as a speculative factorsinvestment and industry-controlled marketing cartels. Nature provideswas closed out in August 2016. The derivative contract resulted in a loss of $435,000 included in profit or loss. The Company settled the ultimate uncertainty with geological and occasionally climatic surprises. Commensurateloss with the acceptance$435,000 margin call deposited at the inception of this risk profile is the potential for high rewards.hedge transaction. During the year Blanket continued to sell all of its gold production to Fidelity Printers and Refiners Ltd (“Fidelity”), as required by Zimbabwean legislation, and received the spot price of gold less an early settlement discount of 1.25%. No gold hedge was in place as at December 31, 2016 giving the Company full exposure to gold price fluctuations.
We cannot guarantee that there will not be an increase in input costs affecting our results of operations and financial performance.
Country RiskMining companies generally have experienced higher costs of steel, reagents, labor and electricity and from local and national government for levies, fees, royalties and other direct and indirect taxes. Our planned growth at Blanket Mine should allow the fixed cost component to be absorbed over increased production, thereby helping to alleviate somewhat the effect of any further price increases. However, there can be no assurance that we will be able to control such input costs and any increase in input costs above our expectations may have a negative result on our results of operations and financial performance.
Our operations may be subject to increased costs or even suspended or terminated as a result of any loss of required infrastructure in our operations.
Infrastructure, including electricity supplies, that is currently available and used by us may, as result of natural disaster, incorrect or inadequate maintenance, sabotage or for other reasons, be destroyed or made unavailable or available in a reduced capacity. Were this to occur, operations at our properties may become more costly or have to be curtailed or even terminated, potentially having serious adverse consequences to our financial condition and viability that could, in turn, have a material adverse effect on our business, results of operations or financial performance. Blanket also has a combined 16MW of installed stand-by diesel generating capacity which is sufficient to allow all mining and processing activities and shaft-sinking work at the central shaft to continue if there are any interruptions to the Zimbabwe Electricity Supply Authority (“ZESA”) supply.
We do business in countries and jurisdictions outside of the United States where different economic, cultural, regulatory and political environments could adversely impact our business, results of operations and financial condition.
The jurisdictions in which the Company operateswe operate are unpredictable. Assets and investments in these foreign jurisdictions are subject to risks that are usually associated with operating in a foreign country and any of these could result in a material adverse effect on theour business, results of operations or financial performance of the Company.performance. These risks include, but are not limited to, access to assets, labourlabor disputes and unrest; arbitrary revocation of government orders, approvals, licenses and permits; corruption; uncertain political and economic environments; bribery; war; civil disturbances and terrorist actions; sudden and arbitrary changes to laws and regulations; delays in obtaining government permits; limitations on foreign ownership; more onerous foreign exchange controls; currency devaluations; import and export regulations; inadequate, damaged or poorly maintained infrastructure; and endemic illnesses. There can be no guarantee that governments in these jurisdictions will not unilaterally expropriate the property of companies that are involved in mining or that have a majority foreign ownership or for any other reason.mining.
SignificantCaledonia’s mining operations of Caledonia are currently conducted in Zimbabwe and, as such, these operations are exposed to various levels of political, economic and other risks and uncertainties in addition to those set out above. These risks and uncertainties include, but are not limited to, expropriation and nationalization, or mandatory levels of Zimbabwean ownership beyond currently mandated levels; renegotiation, nullification or nullificationpartisan terms of existing concessions, licences, permits and contracts; illegal mining; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political conditions, currency controls and governmental regulations that favourfavor or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.
ExplorationIn 2009, the government of Zimbabwe made foreign currencies legal tender in Zimbabwe and Development
Exploration, developmentabolished the Zimbabwe dollar. However, there is no guarantee that the Zimbabwe government will not reintroduce the local currency. The approval of the Reserve Bank of Zimbabwe (“RBZ”) is required for all flows of money into and production activities are subject to political, economicout of Zimbabwe. Caledonia and other risks, including:
- cancellation or renegotiationits subsidiaries have not encountered difficulty in obtaining the necessary approval from the RBZ. Zimbabwe is experiencing a shortage of contracts;
- changescurrency inflows, which means that foreign payments from Zimbabwe may encounter delays in local and foreign laws and regulations;
- changes in tax laws;
- delays or refusal in granting prospecting permissions, mining authorizations and work permits for foreign management staff;
- environmental controls and permitting;
- expropriation or nationalization of property or assets;
- foreign exchange controls;
- government mandated social expenditures;
- import and export regulation, including restrictions on the sale of their production in foreign currencies;
execution.
- industrial relations and the associated stability thereof;
- inflationIf one of cost that is not compensated for by a currency devaluation;
- requirement that a foreign subsidiary or operating unitmore of these risks occur, it could have a domestic joint venture partner, which, possibly, the foreign company must subsidize;
- restrictionsmaterial and adverse effect on the abilityour business, results of local operating companies to sell their production for foreign currencies, and on the ability of such companies to hold these foreign currencies in offshore and/operations or local bank accounts;
- restrictions on the ability of a foreign company to have management control of exploration and/or development and/or mining operations;
- restrictions on the remittance of dividend and interest payments offshore;
- retroactive tax or royalty claims;
- risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism;
- royalties and tax increases or claims by governmental entities;
- unreliable local infrastructure and services such as power, communications and transport links;
- demands or actions by native or indigenous groups;
- other risks arising out of foreign sovereignty over the areas in which operations are conducted;
- lack of uninterrupted power supplies; and
- lack of investment funding;
Such risks could potentially arise in any country in which Caledonia operates.financial performance.
Furthermore, the royalty rate in Zimbabwe is subject to change. Effective January 1, 2012, Zimbabwe increased the gross royalty payable to the Zimbabwe Governmentgovernment from 4.5% to 7% of the gross revenues received by mining companies operating in Zimbabwe from gold sales. Effective January 1, 2014, there was a change in the regulations which means that the royalty payable to the Zimbabwe government was no longer allowable as a deduction for the purposes of calculating income tax. With effect from October 1, 2014 the royalty rate was reduced to 5%. Changes to Zimbabwean legislation in January 2014 required all Zimbabwean gold producers to sell their production to Fidelity Printers and Refiners Limited (“Fidelity”) for a sale value which represents 98.5%98.75% of the value of the gold contained. Prior to this change, Blanket Mine sold its gold to a non-Zimbabwean refiner and received 100% of the value of the gold contained. Effective February 2015 the realised gold price in 2014 represents 98.5% of the value of the gold that is received by Blanket in terms of its sale agreement to Fidelity. With effect from February 3, 2015, Blanket receives 98.75% of the value of the gold it delivers to Fidelity. In an attempt to stimulate increased gold production, the Government of Zimbabwe reduced the royalty rate applicable to large scale gold producers in Zimbabwe from 5% to 3% for sales in 2016 that exceed the sales made in 2015. In 2016 Blanket sold 7,326 more ounces than it sold in 2015, which resulted in a reduction in the royalty charge of approximately $181,000.
Our operations are subject to various government approvals, permits, licenses and legal regulation for which no assurance can be provided that if such approvals, permits or licenses will be obtained or if obtained will not be revoked or suspended or any continued compliance with applicable laws or regulations thereunder.
Government approvals, permits and licenses are required in connection with a number of our activities and additional approvals, permits and licenses may be required in the future. The duration and success of our efforts to obtain approvals, permits and licenses are contingent upon many variables outside of our control. Obtaining governmental approvals, permits and licenses can increase costs and cause delays depending on the nature of the activity and the interpretation of applicable requirements implemented by the relevant authority. While we and our affiliates currently hold the necessary licenses to conduct operations there can be no assurance that all necessary approvals, permits and licenses will be maintained or obtained or that the costs involved will not exceed our estimates or that we will be able to maintain such permits or licenses. To the extent such approvals, permits and licenses are not obtained or maintained, we may be prohibited from proceeding with planned drilling, exploration, development or operation of properties which could have a material adverse effect on our business, results of operations and financial performance.
In January 2008addition, failure to comply with applicable laws, regulations and requirements in the Zambiancountries in which we operate may result in enforcement action, including orders calling for the curtailment or termination of operations on our property, or calling for corrective or remedial measures requiring considerable capital investment. Although we believe that our activities are currently carried out in all material respects in accordance with applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of our properties or otherwise have a material adverse effect on our business, results of operations and financial performance.
We face risks related to mining, exploration and mine construction, if warranted, on potential properties.
Our level of profitability, if any, in future years will depend on whether the Blanket Mine produces at forecasted rates and whether any exploration stage properties can be brought into production. The mining, exploration and development of mineral deposits involves significant risks. It is impossible to ensure that any current and future exploration programs will establish reserves. Whether a mineral ore body will be commercially viable depends on a number of factors, and the exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us receiving an adequate return on invested capital. The exploration, development and production activities are subject to political, economic and other risks, including:
-cancellation or renegotiation of contracts;
-changes in local and foreign laws and regulations;
-changes in tax laws;
| - | delays or refusal in granting prospecting permissions, mining authorizations and work permits for foreign management staff; |
-environmental controls and permitting;
-expropriation or nationalization of property or assets;
-foreign exchange controls;
- government announced the following changes to its tax laws that would have had a bearing on the Nama Project. The key changes were:mandated social expenditures;
| - | import and export regulation, including restrictions on the sale of production in foreign currencies; |
· Increase in mineral royalty from 0.6% to 3%11
·- Increase in profit tax rate from 25% to 30%industrial relations and the associated stability thereof;
·- Introductioninflation of variable profit tax of 15%cost that is not compensated for net profit above 8%by a currency devaluation;
· Introduction of a windfall profit tax for copper and cobalt mines
· Capital allowances reduced from 100% to 25%
These measures were highly controversial with mining companies, many of which invested in the country under specific tax incentives and formalized their business models accordingly. Various representations were made by the mining companies both directly and through the Chamber of Mines to the government following the budget announcement at the end of January 2008. The Zambian government in January 2009 announced improvements to the taxation of mining companies, in particular:
| - | · | requirement that a foreign subsidiary or operating unit have a domestic joint venture partner, which, possibly, the abolition of windfall taxforeign company must subsidize; |
| - | · | restrictions on the returnability of capital allowances backlocal operating companies to 100%.sell their production for foreign currencies, and on the ability of such companies to hold these foreign currencies in offshore and/or local bank accounts; |
| - | restrictions on the ability of a foreign company to have management control of exploration and/or development and/or mining operations; |
Whilst these changes are welcome, the royalty remains unchanged at 3% during 2014 and we make the observation that at low cobalt prices, the royalty can give rise to a very significant tax burden-restrictions on the project.
remittance of dividend and interest payments offshore;-retroactive tax or royalty claims;
-risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism;
-royalties and tax increases or claims by governmental entities; 12-unreliable local infrastructure and services such as power, water, communications and transport links;
-demands or actions by native or indigenous groups;| - | other risks arising out of foreign sovereignty over the areas in which operations are conducted; and |
| - | lack of investment funding; |
Subsequent to the evaluation of the latest drilling results at Nama
Such risks could potentially arise in 2013, the Board has decided to impair the full carrying value of the Nama development assets and no further exploration funds will be allocated to the projects.any country in which we operate.
As a result of the foregoing, Caledonia’sour exploration, development and production activities in Zimbabwe may be substantially affected by factors beyond Caledonia’sour control, any of which could materially adversely affect Caledonia’sour financial position or results from operations. Furthermore, in the event of a dispute arising from such activities, Caledoniawe may be subject to exclusive jurisdiction of courts outside North America or may not be successful in subjecting persons to the jurisdiction of the courts in North America, which could adversely affect the outcome of a dispute.
The Company needsWe will need to identify new resources to replace ore which has been depleted by mining activities and to commence new projects. No assurance can be given that exploration conductedactivities by the Companyus will be successful in identifying sufficient mineral resources of an adequate grade and suitable metallurgical characteristics suitable for further development or production.
Other than the Blanket Mine is our principal mining asset. In addition, Blanket Mine has title to numerous but smaller satellite properties in the Company’ssurrounding Gwanda greenstone terrain. These satellite properties are in the exploration stage and are without any known bodies of commercial ore. Further development of the properties will only proceed upon obtaining satisfactory exploration results. There is no assurance that the Company’sour mineral exploration activities will result in any discoveries of commercial bodies of mineral reserves. The long-term profitability of the Company’sour operations will, in part, be directly related to the costs and success of itsour exploration programs, which may be affected by a number of factors.
Government Approvals, Permits and Licenses
Government approvals, permits and licenses are required in connection with a number of the Company’s activities and additional approvals, permits and licenses may be required in the future. The duration and success of the Company’s efforts to obtain approvals, permits and licenses are contingent upon many variables outside of the Company’s control. Obtaining governmental approvals, permits and licenses can increase costs and cause delays depending on the nature of the activity and the interpretation of applicable requirements implemented by the relevant authority. While the Company or its affiliates currently hold the necessary licenses to conduct its operations there can be no assurance that all necessary approvals, permits and licenses will be maintained or obtained or that the costs involved will not exceed the Company’s estimates or that the Company will be able to maintain such permits or licenses. To the extent such approvals, permits and licenses are not obtained or maintained, the Company may be prohibited from proceeding with planned drilling, exploration, development or operation of properties which could have a material adverse effect on the Company’s business, results of operations and financial performance.
History of Losses; Accumulated Deficit; No Assurance of Revenue or Operating Profit
Since inception in February 1992, Caledonia has recorded a loss in every year except 1994, 2000, 2010, 2011, 2012 and 2014. As at December 31, 2014, the consolidated accumulated deficit was $159,459,000. Failure to achieve and maintain profitability may adversely affect the market price of our common shares. There can be no assurance, even when an economic deposit of minerals is located, that weany of our property interests can be commercially mined. The exploration and development of mineral deposits involve a high degree of financial risk over a significant period of time which a combination of careful evaluation, experience and knowledge of management may not eliminate. While discovery of additional ore-bearing structures may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish reserves by drilling and to construct mining and processing facilities at a particular site. It is impossible to ensure that our current exploration programs will achieveresult in profitable commercial mining operations. The profitability of our operations will be, in part, directly related to the future or at all.cost and success of its exploration and development programs which may be affected by a number of factors. Additional expenditures are required to establish reserves which are sufficient to commercially mine and to construct, complete and install mining and processing facilities in those properties that are actually mined and developed.
Write-downs on capital assetsFurther development and mineralcommercial production at Blanket Mine and the other surrounding properties are typical for the mining industry. Caledonia’s policy is to review the assets relative to current market conditions on an annual basis.cannot be assured.
Development Risk
The Company isWe are engaged in further development activities at Blanket Mine and its surrounding properties. Construction and development of projects are subject to numerous risks including, but not limited to: obtaining equipment, permits and services; changes in regulations; currency rate changes; labor shortages; fluctuations in metal prices; and the loss of community support.
Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract metal(s) from ore and to develop the mining, processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities or grades, or the estimated operating costs of the mining venture are sufficient, to justify development of the deposit, or that the funds required for development can be obtained on a timely and economically acceptable basis.
The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond the Company’s control and which cannot be predicted, such as metal price and market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. Depending on the price of minerals produced, the Company may determine that it is not commercially feasible to commence or continue commercial production.
Production Estimates
Estimates for future production, including those at Blanket Mine, are based on mining plans and are subject to change. Production estimates are subject to risk and no assurance can be given that future production estimates will be achieved. Actual production may vary from estimated production for a variety of reasons including un-anticipated variations in grades, mined tonnages and geological conditions, accident and equipment breakdown, changes in metal prices and the cost and supply of inputs and changes to government regulations.
Fluctuating Minerals Prices and Foreign Currency Exchange Rates
As Caledonia’s activities primarily relate to the exploration, development and production of minerals, the fluctuating world prices for such minerals have a significant potential effect on the Company’s future activities and the profitability of any of its minerals production activities. There is never any assurance, when activities are undertaken, or production operations are commenced, that the World price of the minerals involved will continue at a sufficiently high price to justify the ongoing activities or the continuation of the production.
The Company’s revenues, operations and exploration Construction and development of projects are and are expected to be, heavily derived from and influenced by the price of gold, which is particularly subject to fluctuation and has fluctuated significantly in recent years. The price of gold is affected by numerous factors beyond the Company’s controlrisks including, but not limited to: internationalobtaining equipment, permits and services; changes in regulations; currency rate changes; labor shortages; fluctuations in metal prices; and the loss of community support.
Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract gold from ore and to develop the mining, processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be capable of economic and political conditions; expectations of inflation; international currency exchange rates; interest rates; globalextraction by metallurgical process, or regional consumption patterns; speculative activities; levels of supply and demand; increased production due to new mine developments and improved mining and production methods; availability anddiscovered in sufficient quantities or grades, or the estimated operating costs of the mining venture are sufficient, to justify development of the deposit, or that the funds required for development can be obtained on a timely and economically acceptable basis.
The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be predicted, such as metal substitutes and; inventory carrying costs. The effectprice and market fluctuations, the proximity and capacity of thesemilling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. Depending on the price of gold, and thereforeminerals produced, the economic viability of the Company’s operations cannot be accurately predicted. Caledonia hasCompany may determine that it is not adopted any strategiescommercially feasible to control the effect of mineral price fluctuations because the Company’s cash resources currently exceed its planned and foreseeable commitments.commence or continue commercial production.
Most costs incurred by the Company in its exploration, developmentWe face credit risk exposure from counterparties to certain contractual obligations and production activities in southern Africa have to be paid in local currencies. However, mineral prices are generally quoted in United States dollars. The profitability of any production operations of the Company and the potential profitability of its exploration and development activities will therefore be seriously affected by adverse changes in the currency exchange rates.
The operating results and financial position of Caledonia are reported in Canadian dollars in the consolidated financial statements. The fluctuation of the Canadian dollar in relation to other currencies will consequently have an impact upon the profitability of Caledonia and may also affect the carrying amount of Caledonia’s assets and the amount of shareholders’ equity. Caledonia does not use any derivative instruments to reduce its foreign currency risks.
In 2009, the government of Zimbabwe made foreign currencies legal tender in Zimbabwe and abolished the Zimbabwe dollar. However, there is no guaranteeassurance that the Zimbabwe government willany such counterparty may not reintroduce the local currency.default in such obligation causing us to incur a financial loss.
Credit Risk Exposure
Credit risk is the risk that a party with a contractual obligation to Caledoniawith us will default causing a loss to Caledonia.loss. New regulations introduced by the Zimbabwean Ministry of Finance in January 2014 require that all gold produced in Zimbabwe must be sold to Fidelity, a company which is controlled by the Zimbabwean authorities. Accordingly, all of Blanket’sour production from Blanket Mine is sold to Fidelity. To date, Blanket has received all payments due from Fidelity in full and on time. This arrangement introduces a new credit risk, beyond theour control, of Caledonia or Blanket, that receivables and contractual performance due from Fidelity will not be paid or performed in a timely manner, or at all.
In 2009, gold bonds were issued by the Reserve Bank of Zimbabwe to Blanket Limited as a result of non-payment for gold previously sold by Blanket Mine to the Reserve Bank of Zimbabwe since 2008. The Reserve Bank of Zimbabwe has failed to redeem the gold bonds and also failed to give any reliable verification of when Blanket Mine would be paid. As a result of this failure, Caledonia was required to write off the gold bonds to $nil value.
Further, if If Fidelity or the Zimbabwean government were unable or unwilling to conduct business with the Company,us, or satisfy obligations to the Company, the Companyus, we could experience a material adverse effect upon itsour operations and financial performance.
From May 2016 the RBZ announced a 2.5% export incentive for large scale gold producers. In terms of the directive the Blanket Mine will receive an additional 2.5% on all proceeds of gold sales to Fidelity. As at March 30, 2017 all export incentive payments outstanding as at December 31, 2016 were received in USD. In January 2017, Blanket Mine was awarded an additional export incentive credit of 1% of sale proceeds, thus the total export incentive in 2017 is expected to be 3.5% of revenues.
The mining industry is highly competitive and there is no guarantee we will always be able to compete effectively.
The mining industry is a highly diverse and competitive international business. The selection of geographic areas of interest are only limited by the degree of risk a company is willing to accept by the acquisition of properties in emerging or developed markets and/or prospecting in explored or virgin territory. Mining, by its nature, is a competitive business with the search for fresh ground with good exploration potential and the raising of the requisite capital to move projects forward to production. There is aggressive competition within the mining industry for the discovery and acquisition of properties considered to have commercial potential. We will compete with other interests, many of which have greater financial resources than we will have, for the opportunity to participate in promising projects. Such competition may have better access to potential resources, more developed infrastructure, more available capital, have better access to necessary financing, and more knowledgeable and available employees than us. We may encounter competition in acquiring mineral properties, hiring mining professionals, obtaining mining resources, such as manpower, drill rigs, and other mining equipment. Such competitors could outbid us for potential projects or produce gold at lower costs. Increased competition could also affect our ability to attract necessary capital funding or acquire suitable properties or prospects for gold exploration or production in the future. Significant capital investment is required to achieve commercial production from successful exploration and development efforts. Globally, the mining industry is prone to cyclical variations in the price of the commodities produced by it, as dictated by supply and demand factors, speculative factors and industry-controlled marketing cartels. Nature provides the ultimate uncertainty with geological and occasionally climatic surprises. Commensurate with the acceptance of this risk profile is the potential for high rewards. If we are unable to successfully compete for properties, capital, customers or employees it could have a materially adverse effect on our results of operations.
We are required to facilitate the economic participation of certain indigenous groups in our business and there can be no assurance that such required participation will be at fair market value.
Indigenization
The government of Zimbabwe has introduced legislation (typically referred to as indigenisation) requiring companies to facilitate participation in their shareholdings and business enterprises by the indigenous population. InIt is not all instances is it assured that such interests will have to be paid for at full fair value, which may result in increased political and economic risks of operating in that area. As reported the Blanket Mine in Zimbabwe has complied with the requirements of the Indigenisation and Economic Empowerment Act in Zimbabwe whereby indigenous shareholders legally own 51% ownership of Blanket Mine (1983) (Pvt) Ltd insince September 2012. Refer to note 5 of the Consolidated Financial Statements for additional information on the indigenisation transaction.
Government Regulation
FailureWe currently do not depend on our ability to comply with applicable laws, regulations and requirements insuccessfully access the countries in which Caledonia operates may result in enforcement action, including orders calling for the curtailment or termination of operations on its property, or calling for corrective or remedial measures requiring considerable capital investment. Although the Company believes that its activities are currently carried out in all material respects in accordance with applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of the Company’s properties or otherwise have a material adverse effect on the Company’s business, results of operations and financial performance.markets. However, should our financial position change any inability to access the capital or financial markets may limit our ability to execute our business plan or pursue investments that we may rely on for future growth.
Need for Additional Funds
The Company expectsWe expect that, for at least 2015, 2016 andfiscal years 2017 itthrough to 2021, we can fund all of itsour current exploration, development and production operations from internalcash on hand, overdraft and debt facilities and cash generated from operating activities.
Depending on our ability to generate income from our operations, we may require further financing for current and future exploration and development. Should our projections for fiscal years 2017 through to 2021 prove incorrect, in order to finance our working capital needs, we may have to raise funds –through the issuance of additional equity or debt securities. Depending on the type and the terms of any financing we pursue, shareholders’ rights and the value of their investment in our shares could be reduced. Any additional equity financing will dilute shareholdings, and new or additional debt financing, if available, may involve restrictions on financing and operating activities. In addition, if we issue secured debt securities, the holders of the debt would have a claim to our assets that itwould be prior to the rights of shareholders until the debt is paid. Interest on these debt securities would increase costs and negatively impact operating results.
If we are unable to obtain additional financing, as needed, at competitive rates, our ability to implement our business plan and strategy may be affected, and we may be required to reduce the scope of our operations and scale back our exploration and development programs as the case may be. There is, however, no guarantee that we will be able to secure any additional funding or be able to secure funding which will provide us with sufficient funds to meet our objectives, which may adversely affect our business and financial position.
Our share price has been and is likely to continue to be volatile and an investment in our shares could suffer a decline in value.
Market prices for mining company securities, by their nature, are volatile. Factors, such as rapidly changing commodity prices, political unrest globally and in countries where we operate, speculative interest in mining stocks etc. are but a few factors affecting the volatility of the share price. Our shares are listed on the Toronto Stock Exchange and depository interests representing our shares are admitted to trading on AIM. Our shares are also quoted in the U.S. on the OTCQX. (The use of the term “share” in this Annual Report also, where the context requires, extends to a depositary interest representing a share.)
You should consider an investment in our shares as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. The market price of our shares may be highly volatile and subject to wide fluctuations. In addition, the trading volume of our shares may fluctuate and cause significant price variations to occur. If the market price of our shares declines significantly, you may be unable to resell your shares at or above the purchase price, if at all. We cannot assure you that the market price of our shares will not have to seek externally sourced funding for those years. However there can be no guarantees andfluctuate or significantly decline in the situation will be consistently monitored.future. Factors affecting our share price include but are not limited to:
Dependence upon Key Personnel| · | actual or expected fluctuations in our operating results; |
Caledonia’s| · | actual or expected changes in our growth rates or our competitors’ growth rates; |
| · | changes in the market price of gold; |
| · | changes in the demand for gold; |
| · | changes in market valuations of similar companies; |
| · | additions to or departures of our key personnel; |
| · | actual or anticipated fluctuations in our quarterly operating results or those of our competitors; |
| · | publication of research reports by securities analysts about us or our competitors in the industry; |
| · | our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; |
| · | fluctuations of exchange rates between the USD and the South African rand; |
| · | changes or proposed changes in laws and regulations affecting the gold mining industry; |
| · | changes in trading volume of our shares on the TSX, AIM or the OTCQX; |
| · | sales or perceived potential sales of our shares by us, our directors, senior management or our shareholders in the future; |
| · | short selling or other market manipulation activities; |
| · | announcement or expectation of additional financing efforts; |
| · | terrorist acts, acts of war or periods of widespread civil unrest; |
| · | natural disasters and other calamities; |
| · | litigation involving us, including: shareholder litigation, investigations or audits by regulators into our operations; or proceedings initiated by our competitors or clients; |
| · | strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; |
| · | the passage of legislation or other regulatory developments affecting us or our industry; |
| · | fluctuations in the valuation of companies perceived by investors to be comparable to us; and |
| · | conditions in the U.S., Canadian and United Kingdom financial markets or changes in general economic conditions. |
We are dependent on key management employees.
Our success depends (i) on the continued contributions of itsour directors, executive officers, management and consultants, and (ii) on Caledonia’sour ability to attract new personnel whenever Caledonia seekswe seek to implement itsour business strategy. The loss of the services of any of these persons could have a materially adverse effect on the Company’sour business, prospects results of operations and financial performance. The limited availability of mining and other technical skills and experience in Zimbabwe and the difficulty of attracting appropriately skilled employees to Zimbabwe creates a risk that appropriate skills may not be available if, for whatever reason, the current skills base at the Blanket Mine is depleted. There is no assurance that the Companywe will always be able to locate and hire all of the personnel that itwe may consider that it requires. The Company, where it considers itrequire. Where appropriate, engageswe engage with consulting and service companies to undertake some of the work functions. Mr. S.E. Hayden resigned as President and Chief Executive Officer on November 18, 2014 and resigned as a Director on 6 December, 2014. Mr. S.R. Curtis was appointed as a suitable candidate with the necessary experience and skills to act in his new role as President and Chief Executive Officer to replace Mr. S.E Hayden.
Possible Volatility of Share Price
Market prices for mining company securities, by their nature, are volatile. Factors, such as rapidly changing commodity prices, political unrest globally andOur mineral rights may be subject to defects in countries where Caledonia operates, speculative interest in mining stocks etc. are but a few factors affecting the volatility of the share price. Caledonia’s shares are listed on the Toronto Stock Exchange, listed its shares on the London Stock Exchange’s Alternative Investment Market (“AIM”) in June 2005 – and secured the quotation of its shares in the U.S. on the OTCQX commencing October 10, 2011.title.
Mineral Title
The Company isWe are not currently aware of any significant competing ownership claims or encumbrances respecting title to itsour properties. There canHowever, the ownership and validity or title of unpatented mining claims and concessions are often uncertain and may be contested. We also may not have, or may not be able to obtain, all necessary surface rights to develop a property. Although we have taken reasonable measures to ensure proper title to our properties, there is no guarantee however,of title to our properties or that there are no competing ownership claims or encumbrances respecting itsour properties or that challenges to title will not be made in the future.
Increasing input Title insurance is generally not available for mineral properties and our ability to ensure that we have obtained secure claims to individual mineral properties or mining concessions may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. We may incur significant costs
Mining companies generally related to defending the title to our properties. A successful claim contesting our title to a property may cause us to compensate other persons or perhaps reduce our interest in the affected property or lose our rights to explore and, if warranted, develop that property. This could result in us not being compensated for our prior expenditures relating to the property. Also, in any such case, the investigation and resolution of title issues would divert our management’s time from ongoing exploration and, if warranted, development programs. Any impairment or defect in title could have experienced higher costs of steel, reagents, labor and electricity and from local and national government for levies, fees, royalties and other direct and indirect taxes. Blanket’s planned growth should allow the fixed cost component to be absorbed over increased production, thereby helping to alleviate somewhat the effect of any further price increases.a negative impact on us.
InfrastructureWe are subject to operational hazards and Related Risks
Infrastructure, including electricity supplies,risks that may be currently available and used by Caledonia may, as result of natural disaster, incorrect or inadequate maintenance, sabotage or for other reasons, be destroyed or made unavailable or available in a reduced capacity. Were this to occur, operations at the Company’s properties may become more costly or have to be curtailed or even terminated, potentially having serious adverse consequences to the Company’s financial condition and viability that could in turn, have a material adverse effect on the Company’sour business, results of operations orand financial performance.
Operational Hazards and Risks
The Company isWe are subject to risks typical in the mining business. These include, but are not limited to, operational issues such as unexpected geological conditions or earthquakes causing unanticipated increases in the costs of extraction or leading to falls of ground and rock bursts, particularly as mining moves into deeper levels. Major cave-ins, flooding or fires could also occur under extreme conditions. Although equipment is monitored and maintained and all staff receivesreceive safety training, accidents caused by equipment failure or human error could occur. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. As a result, the Companywe may incur significant liabilities and costs that could have a material adverse effect upon itsour business, results of operations and financial performance.
Lawsuits may be filed against us and an adverse ruling in any such lawsuit could have a material adverse effect on our business, results of operations and financial performance.
Legal Risks
CaledoniaWe may become party to legal claims arising in the ordinary course of business. There can be no assurance that unforeseen circumstances resulting in legal claims will not result in significant costs or losses. The outcome of outstanding, pending or future proceedings cannot be predicted with certainty and may be determined adversely to us and as a result, could have a material adverse effect on our assets, liabilities, business, financial condition and results of operations. Even if we prevail in any such legal proceedings, the proceedings could be costly and time-consuming and may divert the attention of management and key personnel from our business operations, which could adversely affect our financial condition. In the event of a dispute arising in respect of Caledonia’sour foreign operations, Caledoniawe may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in the United States of America, Canada, the United Kingdom, Jersey or international arbitration. The legal and political environments in which the Company operateswe operate may make it more likely that laws will not be enforced and that judgments will not be upheld. If Caledonia iswe are unsuccessful in enforcing itsour rights under the agreements to which it is awe are party to or judgments that have been granted, or if laws are not appropriately enforced, it could have a material adverse effect on Caledonia’sour business, results of operations and financial performance.
We face risks related to illegal mining at Blanket Mine and no assurance can be provided that such illegal mining will not have a material adverse effect on our business, results of operations and financial performance.
Illegal mining
There has been an increase in illegal mining activities on properties controlled by Blanket.Blanket have been identified. This gives rise to increased security costs and an increased risk of theft and damage to equipment. Blanket has received adequate support and assistance from the Zimbabwean police in investigating such cases.cases but there can be no guarantee that the support from the Zimbabwean police will continue and whether their support will stop illegal mining activities.
Labor RelationsMost of our employees are members of the Associated Mine Workers Union of Zimbabwe and any work stoppage or industrial action implemented by the union may affect our business, results of operations and financial performance.
Most of the employees are members of the Associated Mine Workers Union of Zimbabwe. Pay rates for all wage-earning staff are negotiated on a Zimbabwe industry-wide basis between the union and representatives of the mine owners. Any industrial action called by the Unionunion may affect the Company’sour operations even though the Company’sour operations may not be at the root cause of the action.
Strikes, lockouts or other work stoppages could have a material adverse effect on the Company’sour business, results of operations and financial performance. In addition, any work stoppage or labor disruption at key customers or service providers could impede the Company’sour ability to supply products, to receive critical equipment and supplies for itsour operations or to collect payment from customers encountering labor disruptions. Work stoppages or other labor disruptions could increase the Company’sour costs or impede itsour ability to operate one or more of its operations.operate.
Environmental, HealthThere can be no assurance that changes to any environmental, health and Safety Factorssafety laws to which we are currently subject would not adversely affect our exploration and development programs.
The Company’s
Our exploration, development and operations are subject to environment, health and safety laws and regulations (“EH&S”&S”) in the countries in which the relevant activity is being conducted. There is no assurance that future changes in EH&S, if any, will not adversely affect the Company’sour exploration and development programs or itsour operations. There is no assurance that regulatory and environmental approvals required under EH&S will be obtained on a timely basis or if at all.
A breach of EH&S may result in the temporary suspension of operations, the imposition of fines, other penalties (including administrative penalties and regulatory prosecution), and government orders, which could potentially have a material adverse effect on operations.
Future AcquisitionsWe may enter into acquisitions or other material transactions at any time.
Caledonia
We continually seeksseek to replace and expand itsour reserves through the exploration of itsour existing properties and may expand through acquisitions of interests in new properties or of interests in companies which own such properties. Acquisitions involve a number of risks, including: the possibility that the Company,we, as a successor owner, may be legally and financially responsible for liabilities of prior owners; the possibility that the Companywe may pay more than the acquired company or assets are worth; the additional expenses associated with completing an acquisition and amortizing any acquired intangible assets; the difficulty of integrating the operations and personnel of an acquired business; the challenge of implementing uniform standards, controls, procedures and policies throughout an acquired business; the inability to integrate, train, retain and motivate key personnel of an acquired business; and the potential disruption of the Company’sour ongoing business and the distraction of management from its day-to-day operations. These risks and difficulties, if they materialize, could disrupt the Company’sour ongoing business, distract management, result in the loss of key personnel, increase expenses and otherwisemay have a material adverse effect on the Company’sour business, results of operations and financial performance.
As a foreign private issuer, we are permitted to file less information with the SEC than a company that is not a foreign private issuer or that files as a domestic issuer.
As a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose disclosure requirements as well as procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as a company that files as a domestic issuer whose securities are registered under the Exchange Act, nor are we generally required to comply with the SEC’s Regulation FD, which restricts the selective disclosure of material non-public information. For as long as we are a “foreign private issuer” we intend to file our annual financial statements on Form 20-F and furnish our quarterly financial statements on Form 6-K to the SEC for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information we file or furnish is not the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a domestic issuer.
We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur additional legal, accounting and other expenses.
We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. In order to maintain our current status as a foreign private issuer, either (1) a majority of our shares must be either directly or indirectly owned of record by non-residents of the United States or (2) (a) a majority of our executive officers or directors must not be U.S. citizens or residents, (b) more than 50 percent of our assets cannot be located in the United States and (c) our business must be administered principally outside the United States. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We would also be subject to additional restrictions on offers and sales of securities outside the United States and would have to comply with the generally more restrictive Regulation S requirements under the Securities Act that apply to U.S. domestic companies, which could limit our ability to access capital markets in the future. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies may make our shares less attractive to investors and, as a result, adversely affect the price of our shares and result in a less active trading market for our shares.
We are an emerging growth company as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. For example, we have elected to rely on an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act relating to internal control over financial reporting, and we will not provide such an attestation from our auditors.
We may avail ourselves of these disclosure exemptions until we are no longer an emerging growth company. We cannot predict whether investors will find our shares less attractive because of our reliance on some or all of these exemptions. If investors find our shares less attractive, it may adversely impact the price of our shares and there may be a less active trading market for our shares.
We will cease to be an emerging growth company upon the earliest of:
| · | the last day of the fiscal year during which we have total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every five years by the SEC or more); |
| · | the last day of our fiscal year following the fifth anniversary of the completion of our first sale of equity securities pursuant to an effective registration statement under the Securities Act; |
| · | the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non- convertible debt; or |
| · | the date on which we are deemed to be a “large accelerated filer”, as defined in Rule 12b–2 of the Exchange Act, which would occur if the market value of our shares that are held by non-affiliates exceeds $700,000,000 as of the last day of our most recently-completed second fiscal quarter. |
If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
Section 404(a) of the Sarbanes-Oxley Act requires that our management assess and report annually on the effectiveness of our internal controls over financial reporting and identify any material weaknesses in our internal controls over financial reporting. Although Section 404(b) of the Sarbanes-Oxley Act requires our independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal controls over financial reporting, we have opted to rely on the exemptions provided to us by virtue of being a foreign private issuer and an emerging growth company, and consequently will not be required to comply with SEC rules that implement Section 404(b) of the Sarbanes-Oxley Act until we lose our emerging growth company status.
If either we are unable to conclude that we have effective internal controls over financial reporting or, at the appropriate time, our independent auditors are unwilling or unable to provide us with an unqualified report on the effectiveness of our internal controls over financial reporting as required by Section 404(b) of the Sarbanes-Oxley Act, investors may lose confidence in our operating results, the price of our shares could decline and we may be subject to litigation or regulatory enforcement actions.
ITEM 4 - INFORMATION ON THE COMPANY |
| A. | History and Development of the Company |
Caledonia Mining Corporation Plc (previously Caledonia Mining Corporation) was incorporated, effective February 5, 1992, by the amalgamation of three predecessor companies. It exists pursuant tocompanies, it was registered at the time under the Canada Business Corporations Act.
Following the creation of Caledonia its shares were listed for trading on the Toronto Stock Exchange and quoted on the NASDAQ small caps market. On October 16,th 1998, Caledonia announced that NASDAQ would no longer quote Caledonia’sits securities for trading. Caledonia’s common stock then commenced trading on NASDAQ’s OTC Bulletin Board system.OTCQX. In June 2005, Caledonia was admitted to the London Stock Exchange’s AIM market under the ticker symbol “CMCL”. ItsOur Toronto Stock Exchange trading symbol is “CAL”. Effective October 10, 2011 the shares commenced trading in the U.S. on the OTCQX under the ticker symbol CALVF.
Effective March 19, 2016, the Company re-domiciled from Canada to Jersey using a legal process called “Continuance”. The Continuance had no effect on the Company’s listings in Toronto and trading on AIM in London, or the trading facility on the OTCQX in the USA.
The addresses and telephone numbers of Caledonia’s principal offices are:
| Registered and Head Office | African Office - South Africa |
Representational Offices - CanadaCaledonia Mining Corporation Plc | Caledonia Mining South Africa Proprietary Limited |
3rd Floor, Weighbridge House, St Helier | | 4th Floor, 1 Quadrum office park |
| Greenstone Management Services Proprietary Limited | Suite 4009, 1 King Street West |
| 24, 9th Street, Lower Houghton | Toronto, Ontario, Canada |
| Jersey, Channel Islands | Johannesburg, Gauteng, 2198 | M5H 1A1 |
| JE2 3NF | South Africa | (1)(416) 369-9835 |
| (44) 1534 679 9800 | (27) 11 447 2499 | |
In 1995 the Company acquired ownership of the shares of the companies which owned the Barbrook and Eersteling Mines in South Africa. The original acquisition was of only 96.4% of the issued shares of Eersteling Gold Mining Company Limited with the remaining 3.6% being acquired in mid-2004. On May 31, 2008 an agreement to sell Barbrook Mine was concluded and Caledonia was paid the full purchase price of $9,130,000 by Eastern Goldfields SA Proprietary Limited.18
Background
Effective April 1, 2006 the Company purchased 100% of the issued shares of the Zimbabwean company, Caledonia Holdings Zimbabwe (Private) Ltd.Ltd (“CHZ”), which held the shares of Blanket Mine (1983) (Private) Limited, the owner of the operating Blanket Gold Mine. The purchase consideration was $1,000,000 (U.S.) and the issuance to the vendor of 20,000,000 shares in the capital of Caledonia. Because the Company bought the shares of the company owning the Blanket Mine it thereby acquired all of the assets of that company and assumed all of its liabilities.
Description of Our Business
Caledonia’s activities are focused on Blanket Mine in Southern Africa.Zimbabwe. The Company’s business during the past three completed fiscal years has been focused primarily on: (i)on the operation of the Blanket Mine; (ii)Mine and increasing gold production at Blanket Mine; and (iii) achieving the indigenisation of the Blanket Mine as described below.
The Company has, during the past three completed fiscal years, conducted exploration activities in Zimbabwe and Zambia. The Company’s main exploration efforts have been focused on: (i) gold exploration in the vicinity of the Blanket Mine in Zimbabwe; and (ii) Nama Project in Zambia.Mine.
Generally, gold mining, development and exploration in Southern Africa is not seasonal, except where heavy seasonal rainfall can affect surface mining or exploration.
Total gold production at Blanket Mine in: (i)for 2016 was 50,351oz (2015: 42,804 oz.; 2014 was : 41,771 ounces (ii) 2013, was 45,530 ounces; (iii) 2012, was 45,464 ounces.oz.). The aggregate production at Blanket Mine from January 1, 20152017 to February 28, 20152017 was 6,796 ounces.8,013 oz.
IndigenizationIndigenisation of Blanket Mine (1983) (Private) Limited
In 2008, theDuring 2012, to comply with Zimbabwean parliament passed the Indigenisation and Economic Empowerment Act 2007, which stipulatedlaw that requires indigenous Zimbabwean citizens must holdZimbabweans own at least 51% of all Zimbabwean companies.
On February 20, 2012, Caledonia announced it had signedBlanket Mine, CHZ entered into agreements to transfer a Memorandum of Understanding with the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe, pursuant to which Caledonia agreed that indigenous Zimbabweans would acquire an effective 51% ownership interest in Blanket Mine (1983) (Private) Limited at a transactional value of US$30.09 million. Accordingly, Caledonia entered into agreements with each ofwhich did the following indigenous shareholders to allow them to subscribe for an aggregate 51% ownership interest in Blanket Mine (1983) (Private) Limited as follows:following:
| · | sold a 16% interest was sold to the National Indigenisation and Economic Empowerment Fund (“NIEEF”) for US$11.74$11.74 million; |
| · | sold a 15% interest was sold to Fremiro Investments (Private) Limited (“Fremiro”), which is owned by indigenous Zimbabweans, for US$11.01$11.01 million; |
| · | sold a 10% interest was sold to Blanket Employee Trust Services (Private) Limited (“BETS”) for the benefit of present and future managers and employees of Blanket Mine for US$7.34$7.34 million. The shares in BETS are held by the Blanket Mine Employee Trust (“Employee(the “Employee Trust”) with Blanket’sBlanket Mine’s employees holding participation units in the Employee Trust; and |
| · | donated a 10% ownership interest was donated to the Gwanda Community Share Ownership Trust (“Community Trust”). In addition Blanket Mine paid a non-refundable donation of US$1$1 million to the Community Trust. |
Caledonia facilitated the vendor funding of these transactions which is repaid by way of dividends from Blanket Mine. 80% of dividends declared by Blanket Mine are used to repay such loans and the remaining 20% unconditionally accrues to the respective indigenous shareholders.
Outstanding balances on the facilitation loans attract interest at a rate of 10% over the 12-month LIBOR. The timing of the repayment of the loans depends on the future financial performance of Blanket Mine and the extent of future dividends declared by Blanket Mine.
Blanket Mine suspended dividend payments in December 2014 so that it could fund the capital projects in terms of the Investment Plan (see below) and had a moratorium of interest on the facilitation and advanced dividend loans from December 31, 2014 to July 31, 2016. Blanket Mine resumed dividend payments on August 1, 2016 as a result of which the moratorium of interest on the facilitation and advance dividend loans ended.
The facilitation loans were declared by CHZ (Blanket Mine’s parent company) to a wholly-owned subsidiary of Caledonia, as a dividend in specie.
Effective November 14, 2012, four Zimbabweans were appointed to the Board of Directors of Blanket Limited, each representing one of the four entities to whom the 51% of the shares of Blanket were issued. The other four directors of Blanket Limited are appointed by Caledonia.
Although a 51% shareholding in Blanket Mine was acquired by the Indigenisation Shareholders. 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), to determine whether Blanket Mine should continue to be consolidated by CHZ. Following the IFRS 10 assessment, it was concluded that CHZ retained control and should continue to consolidate Blanket Mine.19
Employees
As of December 31, 2014,2016, the Company’s employees comprised of 721782 permanent employees and 307521 contractors. Of this number, Blanket Mine has 707764 permanent employees and 303518 contractors.
Significant Acquisitions or Developments
Caledonia did not complete any significant dispositions or significant acquisitions for which disclosure is required since the end of the most recently completed financial year.
Subsequent Events
There were no material or significant events from December 31, 2014 to the date of the document.
| Mining and On-Mine Exploration Activities: |
Gold Production
Blanket Mine (1983) Private Limited (“Blanket”)Background
Blanket currently sells its gold production to Fidelity in Harare Zimbabwe and in 2014 received 98.5% of the value of the gold contained in US dollars within 7 days of sale in full settlement. This sales arrangement came into effect in January 2014, prior to this gold was sold to Metalor in Switzerland. As from February 3, 2015, Blanket will receive 98.75% of the value of the gold sold to Fidelity Printers and Refiners: all other terms of sale remain unchanged.
In terms of the regulations, from January 1, 2014 to September 30, 2014 Blanket Mine paid a 7% royalty on gold sales revenue to the Zimbabwe Government on a monthly basis. With effect from October 1, 2014, the royalty rate was reduced to 5%. Blanket Mine also pays an annual fee to protect the various claims amounting to approximately $120,000 pa. All fees and royalties are paid up to date.
Background
The mine is located approximately 560 km south of Harare, the capital city of Zimbabwe and 150 km south of Bulawayo, the country’s second largest city. The town of Gwanda, the provincial capital of Matabeleland South, is located 16 km southeast of the mine and is approximately 197 km north north-west of the South African border post of Beit Bridge. The mine is situated in the Gwanda Greenstone Belt from which gold was first produced in the 1800’s. Blanket Mine holds extensive exploration properties throughout this belt. The Blanket Mine property was first staked in 1904 with mining and metallurgical plant operations starting in 1906 and has since produced over a million ounces of gold.
Geological Setting
Like most of the gold mines in Zimbabwe, Blanket Mine is situated in a typical Archaean greenstone terrain, the 70 km long by 15 km wide Gwanda Greenstonegreenstone belt. This terrain comprises supra crustal metavolcanic rocks similar to those found in the Barberton area of South Africa and the Abitibi area of Canada. The Blanket Mine property is the largest of the three remaining large gold producers fromin a gold resource areagreenstone belt that has given rise to no less thanapproximately 268 gold mines.
Property Geology
Blanket Mine is part of the group of mines that makes up the North Western Mining campCamp also called the Sabiwa groupGroup of mines. Blanket’sBlanket Mine consists of 9 deposits forming a north-south trend, extending from Sabiwa and Jethro in the south, through Blanket itself to the Feudal, AR South, AR Main, Sheet, Eroica and Lima ore bodies. The geological sequence strikes north-south, dips verticallynear-vertically and consists, from east to west, of three main units, a lower Felsic Unit overlain by a Mafic Unit which is in turn capped by an Intermediate Unit to the west. The basal felsic unit whichFelsic Unit consists of quartz-sericite schist and is not known to be mineralized. ItThe overlying central Mafic Unit is generally on this lithology type that the various mine tailings disposal sites have been located. Above this basal felsic unit is thecomprised of a lower sequence of ultramafic unit that includes the(komatiitic) lava flows interlayered with banded iron formations hosting the eastern ‘dormant’ clusterformation and an upper mafic lava sequence of minesmassive and pillowed lavas. The banded iron formation layers host the mineralized bodies of the adjacent Vubachikwe Mine complex. Thecomplex to the south while the Mafic Unit hosts the active Blanket Mine ore bodies (sections) are found onin the overlying unit, the mafics and annorthern section. The andesitic unitIntermediate Unit which lies to the west, caps this whole stratigraphy.stratigraphy and in not gold-bearing. A sub-horizontal regional dolerite sill cuts the entire sequence from Blanket through to Vubachikwe throughMine.
Characteristics of the Blanket to the Smiler prospect. Mine deposits
Ore bodies at Blanket Mine are epigeneticof hydrothermal origin and are associated with a syn-metamorphic regionally developed transgressive deformation zone in the Mafic Unit lavas up to 500 metres wide. The deformation zone is characterized by areas of high strain,sheared rock wrapping around relatively un-deformedunsheared remnants of the original basaltic lava flows. It is within the higher strain regime (highlyhighly sheared rocks)zones that the majority of the ore bodies occur. Two main types of gold mineralization are located.
Production Operations
Mining Operations
Followingrecognized, viz. disseminated sulphide replacement reefs which are massive to pipe-like bodies, and quartz reefs and shears which are tabular. At Vubachikwe Mine gold mineralization is hosted within the completionlower zone of the No. 4 Shaft Expansion ProjectMafic Unit, which comprises ultramafic rocks and banded iron formations. Gold-bearing sulphide minerals occur as a replacement of iron-rich minerals in late 2010, the underground mining areas can produce up to 1,200 tons of ore daily using predominately long-hole open stoping methods. Blanket Mine now produces approximately 42,000 ounces of gold per year. In November 2014 Blanket embarked on a Revised Investment Plan (“Revised Plan”) the objectives of which are to improve the underground infrastructure and logistics and allowfold hinge zones. Ore bodies occurs in near-vertical shoots along an efficient and sustainable production build-up. In addition to the completion of the existing No. 6 Winze project, the infrastructure improvements will include the development of a “Tramming Loop” and the sinking of a new 6-meter diameter Central Shaft from surface to 1,080 meters. The increased investment pursuant to the Revised Plan is expected to give rise to production from inferred resources of approximately 70-75,000 ounces in 2021, this being in addition to projected production in 2021 from proven and probable mineral reserves of approximately 6,000 ounces. The Revised Plan is also expected to improve Blanket’s long term operational efficiency, flexibility and sustainability.
A preliminary economic assessment (the “PEA”) has been prepared in respect of the inferred resources which is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be classified as mineral reserves. There is no certainty that the PEA will be realised. The PEA was published on December 2, 2015 and is available on the System for Electronic Data Analysis and Retrieval at www.sedar.com and Caledonia’s website (www.caledoniamining.com).
approximate north−south axis.
Disseminated Sulphide Replacement Type Mineralization: Most of the ore shoots at Blanket Mine are of the disseminated sulphide replacement (DSR) type mineralization. The ore shoots displaying DSR type mineralization have a siliceous core with fine-grained arsenopyrite towards the periphery. These fine sprays of disseminated arsenopyrite host the best gold grades. Surrounding the massive siliceous zone is a lower grade aureole of biotite-chlorite schist. The outermost chlorite-carbonate schist zone shows a further decline in grade. Disseminated sulphide replacement ore bodies range in width up to 30 m in the case of the AR ore bodies which are lensoid in plan and have a strike to maximum width ratio of about 2:1. The remaining DSR bodies have widths up the 10 m and strike between 60 m and 90 m in length.
Metallurgical Process
In terms of Blanket’s Revised PlanQuartz Reef Mineralization: Two quartz-filled shear zones are mined at Blanket Mine, viz. the crushingBlanket Quartz Reef and milling circuits will be expanded to handle 3,000 tonsthe Eroica Reef. These reefs have long strike lengths but are not uniformly mineralized. Grade fluctuations are more extreme in the quartz reefs than in the DSR type reefs but on average these quartz shears have higher grades and are used as a sweetener of ore per day capacity by additionsto the mill. The Quartz Reef at Blanket has a surface strike of some 500 m and improvementswidth up to them. Their throughput capacity is more than sufficient5 m, diminishing with depth, with an average dip of 55° to handle the planned increases in mine production from the No. 6 Winze Project and the Central Shaft.west.
All run of mine ore is crushed underground to minus 150mm, hoisted to surface and crushed to minus 12mmGold: Of the total gold content in the surface 2-stage crushing circuit. This materialore, about 50% is then currently fed into two 1.8m by 3.6m rod mills where itfree-milling while the remainder is milled down to approximately 70% passing 75 microns, after which the milled slurry is pumped through two 30 inch Knelson Gravity Gold Concentrators where approximately 49%occluded within arsenopyrite. Blanket ores are not refractory and plant recoveries of total mill gold production is recovered as ‘gravity’ concentrate. The Knelson Concentrator tails93% are pumped through cyclones whose underflow reports to the open-circuit regrind ball mill. The product from the Knelson tails cyclone overflow and the regrind mill discharge are pumped into a carbon-in-leach (“CIL”) plant consisting of eight, 600 cubic meter leach tanks where alkaline-cyanide leaching and simultaneous absorption of dissolved gold onto granular activated carbon takes place. During 2014 the Pressure Swing Absorption (“PSA”) plant which produces oxygen was re-commissioned and produces oxygen at approximately halftypically achieved. Silver constitutes about 10% of the cost of purchased liquid oxygen. Oxygen from the PSA plantgravity gold, which is now sparged in the CIL system, which has improved recovery and also reduced cyanide consumption. Elution of thenormal for greenstone gold from the loaded carbon and subsequent electro-winning are done on site. During electro winning the gold is deposited on steel wool cathodes, the loaded cathodes are acid-digested and the resultant gold solids from this acid digestion together with the re-dressed gold concentrate from Knelson Concentrators are smelted into Dore bars. The granular activated carbon is kiln regenerated before it is re-circulated back to the CIL section. The CIL plant has an overall design capacity of 3,800 tons of milled ore per day.
The Dore bars are delivered and sold, as required by Zimbabwean law, to Zimbabwe Government-operated Fidelity. In 2014, Blanket received 98.5% of the value of the gold sold to Fidelity. With effect from February 3, 2015, Blanket receives 98.75% of the value of the gold delivered and sold to Fidelity. Blanket gets paid in US dollars into its Zimbabwean bank account within 7 days of delivery.deposits.
Mineral Resource and Mineral Reserve Calculations
A technical report entitled “AThe Technical Report on the Blanket Mine in the Gwanda Area, Zimbabwe” (the “Technical Report”)dated December 1, 2014 relating to the Blanket Mine with an effective date of December 1, 2014, was prepared by Minxcon Proprietary Limited,Pty Ltd (“Minxcon”), in compliance with National Instrument 43-101 - Standards for Disclosure of Mineral Projects of the Canadian Securities Administrators (“NI 43-101”), and was published on December 2, 2014.
43-101. Minxcon is a mining industry consulting company based in South Africa. Minxcon reviewed the mineral reserve and mineral resource calculation procedures for the Blanket Mine as at August 31, 2014. Minxcon’s mineral resource and mineral reserve estimates are set out in the following tables:
MINERAL RESOURCES – August 31, 2014(August 2014)
| Mineral Resource Category | Tonnes (metric) | Grade (Au g/t) | Gold Content (ounces) | | Tonnes (metric) | | | Grade (Au g/t) | | | Gold Content (ounces) | |
| Measured Resources | 1,572,700 | 3.91 | 197,600 | | | 1,572,733 | | | | 3.91 | | | | 197,606 | |
| Indicated Resources | 2,478,900 | 3.77 | 300,300 | | | 2,478,902 | | | | 3.77 | | | | 300,288 | |
| Total Measured and Indicated | 4,051,600 | 3.82 | 497,900 | | | 4,051,635 | | | | 3.82 | | | | 497,895 | |
| Inferred Resources* | 3,344,800 | 5.11 | 550,000 | | | 3,344,831 | | | | 5.11 | | | | 549,963 | |
Notes:
Mineral Resources are reported inclusive of Mineral Reserves**.| 1. | Resource estimate is based on a gold price of US$1,300/oz. |
Resource estimate is based on a gold price of US$1,300/oz| 2. | Mineral Resources are stated at a 1.96 g/t cut-off. |
Mineral Resources are stated at a 1.96 g/t cut-off.| 3. | Tonnages are stated at an in-situ relative density of 2.86 t/m3. |
Tonnages and ounces are rounded to the nearest 100.| 4. | Inferred Resources are expressed separately from the Measured and Indicated category. |
Tonnages are stated at an in-situ relative density of 2.86 t/m3.
Inferred Resources are expressed separately from the Measured and Indicated category.
Note*Inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically or legally.economically. It cannot be assumed that all or any part of the inferred resource will be upgraded to a higher resource or reserve category.
MINERAL RESERVES – August 31, 2014(October, 2014)
| Mineral Reserve Category | Tonnnes (metric) | Grade (Au g/t) | Gold Content (ounces) | | Tonnes (metric) | | | Grade (Au g/t) | | | Gold Content (ounces) | |
| Proven Reserves | 856,000 | 3.40 | 93,640 | | | 856,005 | | | | 3.40 | | | | 93,638 | |
| Probable Reserves | 2,077,800 | 3.78 | 252,760 | | | 2,077,828 | | | | 3.78 | | | | 252,758 | |
| Total Proven & Probable Reserves | 2,933,800 | 3.67 | 346,400 | | | 2,933,833 | | | | 3.67 | | | | 346,396 | |
Notes:
Mineral Resources are reported inclusive of Mineral Reserves**.| 1. | As noted above, Mineral Reserves are also included in the above table of Mineral Resources. |
Reserve estimate is based on a gold price of US$1,250/oz and a cash cost of US$71/tonnes| 2. | Reserve estimate is based on a gold price of US$1,250/oz. and a cash cost of US$71/tonne milled. |
| 3. | Blanket Mine’s pay limit (cut-off grade) is 2.03 g/t. |
Reserve tonnages have been diluted by 7.5%| 4. | Reserve tonnages have been diluted by 5 to 10% at zero grade to yield RoM tonnages (delivered to mill). |
Tonnages and ounces are rounded to the nearest 100.
Note ** Prior to the preparation of the Minxcon Technical Report, Blanket Mine reported resources exclusive of reserves. However, as the mine matured an increasing proportion of the “reserve” accumulated in pillars which are unlikely to be mined in the immediate future. In order to distinguish between the currently available reserves and pillar blocks which are not immediately available, Blanket Mine’s Technical Department has elected to report mineral resources inclusive of mineral reserves. Accordingly, these pillar tonnages are now reported under the Measured Resource category until they are scheduled in the mine plan.21
Cautionary note to U.S. Investors concerning estimates of Inferred and Indicated Resources.
The above tables use the terms “inferred resources” and “indicated resources.” While these terms are recognized and required by Canadian regulations, the US Securities and Exchange CommissionSEC does not recognize them. They have a great amount of uncertainty as to their existence, and great uncertainty as to their economic feasibility. It cannot be assumed that all or any part of an Inferred or Indicated Mineral Resource will ever be upgraded to a higher category. Investors are cautioned not to assume that part or all of an inferred or indicated resource exists or is economically mineable.
The full Technical Report can be viewed on the Company’s website – www.caledoniamining.com or under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.
Since the calculation of the above resource estimates as at August 31, 2014, figures, the Company has mined 131,500 tons1,082,242 tonnes with an average recovered gold grade of 3.16 grams per ton,tonne, the majority of which has been from within the reserve blocks to produce 13,349106,513 ounces of gold at a recovery of 93.2%93.0%. An updated internal estimate of Blanket’sBlanket Mine’s mineral reserves and resources as at December 31, 20142016 has been prepared by Blanket Mines’Mine’s Technical Department following the standards and procedures required by NI 43-101.43‑101. In preparing the Mineral Resource and Mineral Reserve estimates, the following assumptions and modifying factors were applied. A cut-off grade (pay limit) of 2.031.81 g/t based on a gold price of US$1,250/oz, was applied.1,300/oz. and a cash cost of US$65/t, were applied for both the Mineral Resources and Mineral Reserves. Tonnages were increased by 7.5%between 5% and 10% to allow for dilution at zero grade and the grade adjusted accordingly. A metallurgical recovery of 93% was applied, marginally less thanequivalent to the 3 year historical 93.3%current achieved recovered grade. The Mineral Reserve and Mineral Resource estimates included in this reportAnnual Report have been reviewed and approved by Dr Trevor Pearton, Caledonia’s Qualified Personqualified person (within the meaning of NI 43-101) and the results are presented in the following tables:
MINERAL RESOURCES – December 31, 20142016
| Mineral Resource Category | Tonnes (metric) | Grade (Au g/t) | Gold Content (ounces) | | Tonnes (metric) | | | Grade (Au g/t) | | | Gold Content (ounces) | |
| Measured Resources | 1,547,400 | 3.89 | 193,700 | | | 1,532,000 | | | | 4.04 | | | | 198,800 | |
| Indicated Resources | 2,493,400 | 3.75 | 300,250 | | | 3,408,700 | | | | 4.31 | | | | 472,600 | |
| Total Measured and Indicated | 4,040,800 | 3.80 | 493,950 | | | 4,940,700 | | | | 4.23 | | | | 671,400 | |
| Inferred Resources* | 3,344,800 | 5.11 | 550,000 | | | 3,764,000 | | | | 4.99 | | | | 604,000 | |
Notes:
Mineral Resources are reported inclusive of Mineral Reserves**.
| 1. | Resource estimate is based on a gold price of US$1,300/ozMineral Resources are stated at a 1.96 g/t cut-off.
Tonnages and ounces are rounded to the nearest 100.
Tonnages are stated at an in-situ relative density of 2.86 t/m3.
Inferred Resources are expressed separately from the Measured and Indicated category.
Note * Inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically or legally. It cannot be assumed that all or any part of the inferred resource will be upgraded to a higher resource or reserve category.
MINERAL RESERVES – December 31, 2014
| Mineral Reserve Category | Tonnnes (metric) | Grade (Au g/t) | Gold Content (ounces) | | Proven Reserves | 872,900 | 3.33 | 93,550 | | Probable Reserves | 2,034,000 | 3.60 | 235,650 | | Total Proven & Probable Reserves | 2,906,900 | 3.52 | 329,200 |
Notes:
Mineral Resources are reported inclusive of Mineral Reserves**.
Reserve estimate is based on a gold price of US$1,250/oz and a cash cost of US$71/tonnes milled.
Blanket pay limit is 2.03 g/t.
Reserve tonnages have been diluted by 7.5% at zero grade to yield RoM tonnages (delivered to mill).
Tonnages and ounces are rounded to the nearest 100.
Relative to the independent estimate of mineral resources and mineral reserves as at August 31, 2014, the Reserves have decreased by 0.9% in terms of tonnage. Resources expressed in terms of tonnage have declined by 0.3% over the same period.
While Blanket Mine has generally recorded 100% conversion of resources to reserves (past 10 years), this high rate of conversion cannot be assumed to occur in future. Blanket Mine is situated in a country which is widely considered to be politically unstable, and this may impact on the reserve life of the mine which at present is estimated at between 7 and 8 years based on the current mine plan. However, Blanket Mine is fully indigenized and compliant with all legislation within Zimbabwe and as such is expected to be able to operate within normal business parameters for the foreseeable future.
Dr. Trevor Pearton, B.Sc. Eng. (Mining Geology), Ph.D. (Geology), Pr.Sci.Nat., F.G.S.S.A., VP Exploration is the Company’s Qualified Person as defined by NI 43-101. Dr. Pearton has reviewed the scientific and technical information included in this document and has approved the disclosure of this information for the purposes of the Form 20-F to be filed with the SEC.
MINE UNDER CARE AND MAINTENANCE
Eersteling Gold Mining Company Limited
This mine remains under care and maintenance. Interested parties continue to investigate the merits of purchasing the mine and the Company continues to seek a suitable purchaser.
MARKETING
From 2009 until December 2014, Blanket was entitled to export and sell its entire gold production in its own name. However since January 2014 Blanket is required to deliver and sell its entire gold production to Fidelity which is an organization controlled by the Zimbabwe authorities. To date, Blanket has received all payments due from Fidelity in full and on time.
KEY PERFORMANCE FACTORS
Following completion of the No. 4 Shaft Expansion Project in late 2010, the underground mining areas can produce up to 1,200 tons of ore daily using predominately long-hole open stoping methods. The Revised Plan provides for proposed investment of approximately US$50 million between 2015 and 2017 and a further US$20 million in the period 2018 to 2020. The increased investment pursuant to the Revised Plan is expected to give rise to an increasing production profile that is expected to result in additional production from resources currently in the inferred category of approximately 70-75,000 ounces in 2021, this being in addition to projected production in 2021 from current mineral reserves of approximately 6,000 ounces. The Revised Plan is also expected to improve Blanket’s long term operational efficiency, flexibility and sustainability.
A PEA has been prepared in respect of the inferred resources which is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be classified as mineral reserves. There is no certainty that the PEA will be realized. The PEA was published on December 2 2015 and is available on the System for Electronic Data Analysis and Retrieval at www.sedar.com and Caledonia’s website (www.caledoniamining.com).
OPERATIONAL REVIEW AND RESULTS OF OPERATIONS
Safety, Health and Environment (“SHE”)
The following safety statistics have been recorded for the quarter and the preceding six quarters.
Blanket Mine Safety Statistics | Incident Classification | Q2 2013 | Q3 2013 | Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | | Fatal | 0 | 1 | 0 | 0 | 0 | 0 | 0 | | Lost time injury | 1 | 7 | 2 | 1 | 2 | 2 | 1 | | Restricted work activity | 7 | 5 | 9 | 6 | 4 | 12 | 9 | | First aid | 2 | 2 | 0 | 2 | 2 | 4 | 0 | | Medical aid | 3 | 2 | 3 | 3 | 2 | 2 | 1 | | Occupational illness | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Total | 13 | 17 | 14 | 12 | 10 | 20 | 11 | | Incidents | 12 | 11 | 17 | 10 | 6 | 4 | 19 | | Near misses | 4 | 7 | 3 | 2 | 2 | 4 | 1 | Disability Injury Frequency Rate (i) | 0.25 | 1.75 | 0.46 | 0.24 | 0.49 | 0.49 | 0.24 | Total Injury Frequency Rate (ii) | 3.25 | 4.00 | 3.20 | 2.86 | 2.46 | 4.94 | 4.32 | | Man-hours worked (thousands) | 801 | 800 | 865 | 840 | 812 | 810 | 833 | (i) A measurement of total injuries, deaths and permanent disability occurring per 200,000 man-hours worked. (ii) A measurement of all accidents that have occurred regardless of injury or not expressed per 200,000 man-hours worked. This includes accidents that could have caused injuries. |
The number of injuries incurred in Q4 was 45% lower than in the preceding quarter and reflects the intensive focus on the area of safety and health by Blanket management in recent quarters. Management continues to be concerned at the relatively high proportion of reportable injuries compared to total incidents and the relatively low number of reported Near Misses, which may be symptomatic of a failure by workers to report minor incidents which did not result in an injury. It is only by full and transparent reporting of all incidents, no matter how minor, that management can identify areas where systems and procedures should be improved or where adherence to approved procedures needs to be reinforced. NOSA, an occupational health and safety specialist, continues to be involved in training staff on SHE auditing.
During the Quarter, in addition to the usual training courses, 154 personnel received induction training and 238 employees were trained on incident investigation and the implementation of the SHE management systems.
There were no significant adverse environmental issues during 2014.
Social Investment and Contribution to the Zimbabwean Economy
Blanket’s investment in community and social projects which are not directly related to the operation of the mine or the welfare of Blanket’s employees, the payments made to the Gwanda Community Share Ownership Trust (“GCSOT”) in terms of Blanket’s indigenisation, and payments of royalties, taxation and other non-taxation charges to the Government of Zimbabwe and its agencies are set out in the table below.
Payments to the Community and the Zimbabwe Government (US$’000’s) | | Period | Year | Community and Social Investment | Payments to GCSOT | Payments to Zimbabwe Government | Total | | Year 2011 | 2011 | 306 | - | 13,614 | 13,920 | | Quarter 1 | 2012 | 147 | - | 3,353 | 3,500 | Quarter 2 | 2012 | 38 | 1,000 | 5,042 | 6,080 | Quarter 3 | 2012 | 108 | 2,000 | 6,366 | 8,474 | Quarter 4 | 2012 | 123 | - | 5,808 | 5,931 | | Year 2012 | 2012 | 416 | 3,000 | 20,569 | 23,985 | Quarter 1 | 2013 | 5 | 1,000 | 4,584 | 5,589 | Quarter 2 | 2013 | 2,135 | 1,000 | 3,555 | 6,690 | Quarter 3 | 2013 | 7 | - | 3,646 | 3,653 | Quarter 4 | 2013 | - | - | 3,569 | 3,569 | | Year 2013 | 2013 | 2,147 | 2,000 | 15,354 | 19,501 | | Quarter 1 | 2014 | - | - | 3,026 | 3,026 | | Quarter 2 | 2014 | 5 | - | 3,617 | 3,622 | | Quarter 3 | 2014 | - | - | 3,090 | 3,090 | | Quarter 4 | 2014 | 30 | - | 2,586 | 2,616 | | Year 2014 | 2014 | 35 | - | 12,319 | 12,354 |
The final installment of the advance dividend payments that were payable to GCSOT in terms of Blanket’s indigenisation transaction was made in the second quarter of 2013. No further dividends will be payable to GCSOT until the advance dividends have been repaid by the offset of future dividends on Blanket shares that are owned by GCSOT. From January 1, 2014, Blanket has sold its gold production to Fidelity, a subsidiary of the Reserve Bank of Zimbabwe. Blanket was paid 98.5% of the value of the gold it delivers to Fidelity, the balance of 1.5% is retained by Fidelity and is included in the payments shown above. With effect from February 3, 2015 Blanket is expected to receive 98.75% of the value of the gold it delivers to Fidelity.
Tonnes milled, average grades, recoveries and gold produced and the average realised price per ounce during the Quarter, the preceding 7 quarters and January and February 2015 are shown in the table below.
Blanket Mine Production Statistics | | | Year | Tons Milled (t) | Gold Head (Feed) Grade (g/t Au) | Gold Recovery (%) | Gold Produced (oz) | Average Realised Price per Ounce of Gold Sold (US$/oz) | | Quarter 1 | 2012 | 83,353 | 3.67 | 93.2 | 9,164 | 1,689 | | Quarter 2 | 2012 | 90,315 | 4.24 | 93.9 | 11,560 | 1,597 | | Quarter 3 | 2012 | 93,049 | 4.59 | 94.1 | 12,918 | 1,673 | | Quarter 4 | 2012 | 96,598 | 4.08 | 93.3 | 11,821 | 1,711 | | Year | 2012 | 363,315 | 4.16 | 93.7 | 45,464 | 1,666 | | Quarter 1 | 2013 | 86,502 | 4.04 | 93.3 | 10,470 | 1,600 | | Quarter 2 | 2013 | 101,174 | 3.82 | 93.2 | 11,588 | 1,373 | | Quarter 3 | 2013 | 99,386 | 4.03 | 93.6 | 12,043 | 1,330 | | Quarter 4 | 2013 | 105,258 | 3.63 | 93.1 | 11,429 | 1,277 | | Year | 2013 | 392,320 | 3.88 | 93.3 | 45,530 | 1,402 | | Quarter 1 | 2014 | 92,846 | 3.67 | 93.6 | 10,241 | 1,269 | | Quarter 2 | 2014 | 99,229 | 3.74 | 94.1 | 11,223 | 1,271 | | Quarter 3 | 2014 | 98,575 | 3.34 | 93.4 | 9,890 | 1,256 | | Quarter 4 | 2014 | 100,085 | 3.47 | 93.2 | 10,417 | 1,260 | | Year | 2014 | 390,735 | 3.55 | 93.4 | 41,771 | 1,265 | | January | 2015 | 38,582 | 3.10 | 92.9 | 3,573 | 1,268 | | February | 2015 | 33,308 | 3.25 | 92.7 | 3,223 | 1,212 |
Gold production in the Quarter increased from the preceding quarter due to the higher grade and increased tonnes processed the effects of which were partially offset by a slight reduction in gold recovery. Combined production in January and February 2015 was on target.
A narrow focus on the direct costs of production (mainly labour, electricity and consumables) does not fully reflect the total cost of gold production. Accordingly, cost per ounce data for the Quarter, the Year and the comparative quarter and year have been prepared in accordance with the Guidance Note issued by the World Gold Council on June 23, 2013 and is set out in the table below on the following bases:
i. | On-mine Cost per ounce(i), which shows the on-mine cash costs of producing an ounce of gold;
|
ii. | All-in Sustaining Cost per ounce(i), which shows the On-mine Cost per ounce plus additional costs incurred outside the mine (i.e. at offices in Harare, Johannesburg and Toronto) and the costs associated with maintaining the operating infrastructure and resource base that are required to maintain production at the current levels; and
|
iii. | All-in Cost per ounce(i), which shows the All-in Sustaining Cost per ounce plus the additional costs associated with activities that are undertaken with a view to increasing production.
|
| | Blanket Mine: Cost per Ounce of Gold Sold (US$/oz) | | | | | Year 2012 | | | | Q4 2013 | | | Year 2013 | | | | Q4 2014 | | | Year 2014 | | On-Mine Cost (i) | | | 570 | | | | 666 | | | | 613 | | | | 704 | | | | 652 | | Royalty(i) | | | 116 | | | | 89 | | | | 98 | | | | 59 | | | | 82 | | | Permitting costs related to current operations | | | 5 | | | | 3 | | | | 3 | | | | 3 | | | | 3 | | 3rd party smelting, refining and transport costs | | | 6 | | | | 6 | | | | 7 | | | | - | | | | - | | | Operating cost per ounce | | | 698 | | | | 766 | | | | 721 | | | | 766 | | | | 736 | | | Corporate general and administrative costs (incl. share based remuneration) | | | 90 | | | | 207 | | | | 167 | | | | 265 | | | | 173 | | | Community costs included in G&A not related to current production | | | | | | | | | | | (44 | ) | | | | | | | | | | Reclamation and remediation of operating sites | | | 2 | | | | 5 | | | | 2 | | | | 2 | | | | 2 | | | Exploration and study costs | | | - | | | | 5 | | | | 2 | | | | 3 | | | | 3 | | | Capital expenditure | | | 67 | | | | 213 | | | | 125 | | | | 82 | | | | 55 | | All-in Sustaining Cost per ounce (i) | | | 857 | | | | 1,196 | | | | 973 | | | | 1,118 | | | | 969 | | | Costs not related to current production | | | | | | | | | | | | | | | | | | | | | | Community costs | | | 25 | | | | - | | | | 47 | | | | - | | | | - | | | Permitting costs | | | 17 | | | | 1 | | | | 2 | | | | 1 | | | | 1 | | | Exploration and study costs | | | - | | | | 4 | | | | 3 | | | | 2 | | | | 2 | | | Capital expenditure | | | 29 | | | | 97 | | | | 78 | | | | 76 | | | | 89 | | All-in Cost per ounce (i) | | | 929 | | | | 1,298 | | | | 1,103 | | | | 1,198 | | | | 1,062 | | | | |
Per-ounce costs are calculated on the basis of sales and not production, so that an accurate value can be ascribed to the royalty. The ounces of gold sold in 2014 were 4.7% and 5.0% lower than in 2013 and 2012 respectively. Approximately 60% of Blanket’s costs are fixed, therefore lower production and sales results in a higher cost per ounce for 2014 when compared to 2013 and 2012. The average grade of ore milled in 2014 was 3.55g/t compared to 3.88 g/t in 2013 and 4.16 g/t in 2012 as discussed further below. Unit mining and processing costs are determined by the tonnage of material processed, irrespective of the gold contained. Thus the lower grades tend to increase the cost per ounce of gold produced. The On-Mine Cost per ounce in the Quarter and the Year remained within the anticipated range, given the actual level of sales and the actual grade of the material processed. Certain changes to the mining method at the AR Main body have tended to increase On-Mine Costs in Quarter 4. The incidence of working capital at the end of Q4 in each year has the effect of increasing the Q4 cost per ounce.
The royalty is payable to the Zimbabwean government. The reduction in the royalty cost per ounce in Q4 of 2014 reflects the reduction in the royalty rate from 7% to 5% with effect from October 1, 2014. The lower royalty per ounce in 2014 compared to previous years reflects the lower gold price. Third party smelting and refining costs have reduced significantly since Blanket commenced sales of gold to Fidelity Printers and Refiners in Zimbabwe. From January 1, 2014, such charges have been absorbed into revenues and are therefore shown as a reduction in the realised price of gold.
Corporate general and administrative costs increased in the quarter due to higher legal and consulting fees, a significant proportion of which were incurred in respect of events and activities which are not expected to recur. Management has taken measures which are expected to progressively reduce the dollar-cost of general and administrative costs over the course of 2015. Thereafter, the general and administrative cost per ounce is expected to decrease further as production increases from 2016 onwards in terms of the revised life of mine plan.
Sustaining capital expenditure varies from quarter to quarter depending on the timing of the purchase of specific higher value items of equipment. Over the course of 2014, sustaining capital investment was close to the target of approximately $50 per ounce.
Expansion capital investment includes investment in respect of Blanket’s capital projects. In terms of Blanket’s Revised Plan, which was announced on November 3, 2014, capital investment is expected to increase significantly in 2015, 2016 and 2017 before the resultant increases in production materialise. Thus the expansion capital investment cost per ounce of gold sold is expected to increase substantially in future years.
Cost per ounce
Non-IFRS performance measures such as “On-Mine Cost per ounce”, “All-in Sustaining Cost per ounce” and “All-in Cost per ounce” are used in this document. Management believes these measures assist investors and other stakeholders in understanding the economics of gold mining over the life-cycle of a mine. These measures are calculated on the basis set out by the World Gold Council in a Guidance Note published on June 23, 2013 and accordingly differ from the previous basis of calculation. The table below reconciles “On-mine Cost per ounce”, “All-in Sustaining Costs per ounce” and “All-in Cost per ounce” to the production costs shown in the financial statements which have been prepared under IFRS.
Reconciliation of IFRS Production Costs | | | | | | | | | Production costs (IFRS) (C$’000’s) | 25,653 | 5,919 | 27,412 | 7,082 | 30,812 | | Less site restoration costs (C$’000’s) | (43) | (78) | (151) | 41 | (32) | | Less exploration costs (C$’000’) | (831) | (121) | (393) | (89) | (379) | | Reversal of claim fee provision (C$’000’s) | - | 970 | 970 | - | - | | Reallocated admin costs | (247) | (65) | (337) | (508) | (466) | | Realisation charges (i) | - | (284) | (284) | - | - | | Non-Blanket production costs | (121) | (27) | (102) | 317 | - | | Inter company profit elimination | 1,353 | 331 | 1,332 | 599 | 727 | | Adjusted production costs (C$’000’s) | 25,764 | 6,645 | 28,447 | 7,443 | 30,662 | | Exchange rate (US$1 to C$) | 1.00 | 1.06 | 1.03 | 1.10 | 1.10 | | On-mine Production costs (US$’000’s ) | 25,769 | 6,301 | 27,619 | 6,766 | 27,969 | | Gold Sales (oz) | 45,181 | 9,454 | 45,048 | 9,604 | 42,927 | | On-mine Cost (US$/oz) | 570 | 666 | 613 | 704 | 652 | | Royalty (US$’000’s) | 5,262 | 845 | 4,412 | 568 | 3,521 | | Permitting costs (US$’000’s) | 225 | 33 | 135 | 25 | 110 | Refining and 3rd party smelting (US$’000’s) (i) | 290 | 60 | 301 | - | - | | Administrative expenses (C$’000’s) (ii) | 4,055 | 2,067 | 7,772 | 2,687 | 8,157 | | Exchange rate (US$1 to C$) | 1.00 | 1.06 | 1.03 | 1.10 | 1.10 | | Administrative expenses (US$’000’s) | 4,056 | 1,960 | 7,532 | 2,446 | 7,441 | | Community cost not related to current production | | | (2,000) | | | | Reclamation and remediation of operating sites (US$’000) | 90 | 45 | 107 | 19 | 75 | | Exploration and study costs (US$’000’s) | 3 | 43 | 85 | 26 | 120 | | Sustaining capital investment (US$’000’s) | 3,044 | 2,017 | 5,653 | 785 | 2,348 | | All-in Sustaining cost (US$’000) | 38,739 | 11,303 | 43,844 | 10,634 | 41,485 | | Gold sales (oz) | 45,181 | 9,454 | 45,048 | 9,604 | 42,927 | | All-in Sustaining Cost per ounce (US$/oz) | 857 | 1,196 | 973 | 1,118 | 969 | | Costs not related to current production | | | | | | | Community costs (US$’000’s) | 1,137 | - | 2,100 | - | - | | Permitting (US$’000’s) | 785 | 14 | 106 | 14 | 55 | | Exploration (US$’000’s) | 15 | 38 | 120 | 23 | 106 | | Capital investment (US$’000’s) | 1,306 | 917 | 3,530 | 733 | 3,833 | | All-in Costs (US$’000’s) | 41,981 | 12,272 | 49,701 | 11,403 | 45,479 | | Gold Sold (oz) | 45,181 | 9,454 | 45,047 | 9,604 | 42,927 | | All-in Cost per ounce (US$/oz) | 929 | 1,298 | 1,103 | 1,198 | 1,062 |
| (i) | Third party smelting and refining costs have reduced significantly since Blanket commenced sales of gold to Fidelity Printers and Refiners in Zimbabwe. From January 1, 2014, such charges have been absorbed into revenues and are therefore shown as a reduction in the realised price of gold.US$1,300/oz. and a cash cost of US$65/t. |
| 2. | (ii) | In 2013 the Administrative expenses were shown in the reconciliation net of the US$2 million community cost not related to current production. The 2013 administrative expense for 2013 in the reconciliation is now shown inclusive of this amount which corresponds to the Administrative expense set out in the Consolidated Financial Statements for 2013. This amount, in addition toMineral Resources are stated at a further amount of US$100,000, is shown as a community cost not related to current production in the reconciliation. |
Low grades continue to be encountered at AR Main due to internal waste and this situation is expected to continue for several quarters. The average head grade achieved over the entire mining operations in the Quarter was 3.47 g/t, which compares to target grade of 3.83 g/t. To minimise dilution at AR Main and improve grade control, the mining method at AR Main has been changed from long-hole stoping to short-hole sub-level benching and this contributed to a slight improvement in the average achieved head grade from 3.34 g/t, which was achieved in the previous quarter.
Production early in the Quarter was adversely affected by the introduction of capital equipment onto 22-Level to commence work on the Tramming Loop. Tonnes hoisted in the quarter were approximately 4% lower than target. By the end of the quarter, the situation had improved following the introduction of an additional locomotive on 22-Level.
To address the lower grades and reduced mining rate at AR Main, new production areas have been opened up at Lima and Eroica. The new production areas are further away from the No. 4 Shaft, which is the main rock-hoisting shaft, and this has put further pressure on the single-track underground haulage system. This constraint is being addressed by the development of the Tramming Loop, which is part of the Revised Plan, and will, when complete in mid-2015, significantly improve the ability to haul mineralised material and waste.
On November 3, 2014 Caledonia announced the Revised Plan for Blanket Mine. The objectives of the Revised Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up. The infrastructure improvements include the development of a “Tramming Loop” parallel to the existing 22 Level haulage, which allows one-way travel and facilitates tramming efficiency.
Blanket’s installed compressor capacity during 2014 was only just sufficient to provide the required amount of compressed air. Any breakdowns of this equipment meant there was insufficient compressed air to carry out production as well as development work: in these circumstances development work was suspended in order to maintain production. Installation of the new Centac compressor remained stalled due to the continued inability of the Zimbabwe Electricity Transmission and Distribution Corporation, the state-owned electricity distribution company, to service their faulty transformer and equipment. Blanket has therefore purchased its own transformer which was commissioned in January 2015 and has significantly improved the supply of compressed air with the Centac now operational.
Blanket’s 2015 budget includes provision for the recruitment of additional workers so that leave requirements can be accommodated without a resultant loss in shifts.
During 2014 the metallurgical plant continued to operate at budgeted efficiency – recovery was 93.2%, compared to the target of 93.3%. Throughput was 47.5 tonnes per hour compared to the planned throughput of 51.0 tonnes per hour. All equipment operated to expectations and no significant unplanned downtime was experienced.
Capital Projects
The main capital developments are:
| · | the Tramming Loop;1.81 g/t cut-off. |
| 3. | · | the No. 6 Winze Project - Shaft Deepening from 750 to the 930 meter level; andMineral Resources are reported inclusive of Mineral Reserves. |
| 4. | · | Tonnages are rounded to the haulage extension on 22 Level from AR Mainnearest 100 and ounces to Lima;the nearest 100. |
Further information on these Projects is set out below.
Tramming Loop
The Tramming Loop is being developed on 22 Level to improve underground logistics by increasing the amount of mineralized material and waste that can be transported to the No. 4 Shaft. Work on the Tramming Loop commenced at the end of October 2014. Of the 800 meters required to complete the loop, 16 meters had been completed at November 7, 2014. As at the end of February 2015, 450 meters had been completed and this project is on schedule for completion as planned.
No. 6 Winze Project - Shaft deepening to 930 meters
The No. 6 Winze Project will provide access to the four Blanket resource bodies below 22 Level, viz. Blanket 1 Ore Body, Blanket 2 Ore Body, Blanket 4 Ore Body and Blanket Quartz Reef. The pre-production capital cost of this project is estimated to be US$5 million, which will be funded from Blanket’s internal cash flows. Progress on sinking was hampered by the continued inability to clear waste rock using mechanical cleaning. Removal of waste is now done manually and sinking progress is now at an acceptable rate. The shaft reached 890 meters below surface, which will be the main production level and the main station has been mined at this level. A further 40 meters remains to be sunk to accommodate rock handling facilities. This project is expected to be completed according to the revised schedule at the end of July 2015.
22 Level Haulage Extension
The 22 Level haulage extension will eventually complete the link between all sections of the Blanket Mine, from the Blanket Section to the Lima section in the north over a distance of 2,000 meters on the 22 Level (750 meters below surface). Work on the 22 Level haulage has been temporarily suspended so that work can progress with the Tramming Loop. To date, the haulage has advanced as far as Eroica where reef development is taking place between 750m and 630m. This work will provide access to the depth continuity of Eroica where an inferred resource of 300,000 tonnes at a gold grade of 3.5g/t has been outlined.
Central Shaft
The Central Shaft is the main component of the Revised Plan. Sinking work on the Central Shaft is scheduled to commence in July 2015. The shaft sinking methodology has been amended: instead of the shaft being sunk in two simultaneous phases, the shaft will now be sunk in one single continuous phase from surface to 1,080 meters. The estimated completion date of the shaft has been moved from mid-2017 to early 2018. This change has no effect on the projected timing for the start of production from the Central Shaft and no adverse effect on economic return arising from the project as set out in the PEA. Early in 2015 work commenced on clearing the ground so that pre-sink work can commence in late March, 2015. Also in 2015, two 3,100 kW double-drum winders have been purchased which, once refurbished, will be adequate for the sinking phase and eventual production and have the capability to reach a depth of 2,000 meters below surface.
Outlook
On November 3, 2014 Caledonia announced the Revised Plan and production projections for the Blanket Mine. The objectives of the Revised Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up. The infrastructure improvements will include the development of a “Tramming Loop” and the sinking of a new 6-meter diameter Central Shaft from surface to 1,080 meters.
The Revised Plan provides for proposed investment of approximately US$50 million between 2015 and 2017 and a further US$20 million in the period 2018 to 2020. The increased investment pursuant to the Revised Plan is expected to give rise to an increasing production profile that is expected to result in additional production from resources currently in the inferred category of approximately 70-75,000 ounces in 2021, this being in addition to projected production in 2021 from current mineral reserves of approximately 6,000 ounces. The Revised Plan is also expected to improve Blanket’s long term operational efficiency, flexibility and sustainability.
The Revised Plan includes a revised life of mine plan for the Blanket Mine (the “LOM Plan”) in terms of which it is anticipated that the approximate production from existing proven and probable mineral reserves above 750 m level will be as set out below.
| Approximate production from proven and probable mineral reserves above 750m (per LOM Plan) | | | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | Tonnes milled (‘000) | 430 | 460 | 430 | 380 | 230 | 100 | 50 | | Gold production (koz) | 42 | 45 | 43 | 39 | 23 | 10 | 6 |
The new Central Shaft and the deepening of No 6 winze will provide access to the current inferred mineral resources below 750 meters and allow for further exploration, development and mining in these sections along the known Blanket strike, which is approximately 3 kilometers in length. The PEA has been prepared in respect of the inferred mineral resources below 750 meters. Based on the PEA, additional approximate production from current inferred mineral resources (excluding the projected production set out above) may be achieved in the following indicative ranges:
Possible production from inferred mineral resources below 750m (per PEA) | | | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | Tonnes milled (‘000) | 0 | 35 | 160 | 215 | 390 | 550 | 600 | | Gold production (koz) | 0 | 4-5 | 20-22 | 27-30 | 46-50 | 63-67 | 70-75 |
Canadian regulations do not allow planned production from inferred resources to be added to those from proven and probable reserves for disclosure purposes.
Minxcon completed a scoping level study on Blanket’s revised LOM Plan in the form of a PEA, a summary of which is included in the Technical Report. The key conclusions arising from the PEA are as follows:
| · | the IRR arising from the Revised Plan was calculatedTonnages are stated at 267 per cent;an in-situ relative density of 2.86 t/m3. |
| 6. | · Inferred Resources are expressed separately from the Measured and Indicated category. |
| the NPV for the Blanket Mine arising from reserves* | Inferred Resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically or legally. It cannot be assumed that all or any part of the inferred resources used in the Revised Plan was calculated at US$147 million; andresource will be upgraded to a higher resource or reserve category.
|
| · | of the gold that will need to be produced so that the cumulative cash flow arising from the Revised Plan becomes positive (i.e. the “Payback Area”), only 3 per cent will come from resources that are currently classified as inferred. |
The Technical Report was authored by Daan van Heerden, Uwe Englemann, Dario Clemente, Johan Odendaal and Jaco Burger of Minxcon, each of whom is a qualified person who is independent of Caledonia for the purposes of National Instrument 43-101. The Technical Report, which includes the PEA, is available for download on the System for Electronic Data Analysis and Retrieval at www.sedar.com or from Caledonia’s website at www.caledoniamining.com
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA will be realized. Diamond drilling and development will continue with the objective of increasing confidence in order to upgrade the categorization of the resources. The most important assumptions on which the PEA is based include, a gold price of US$1,250 per ounce, achievement of the targeted production set out above and the accuracy of the projected capital costs.
EXPLORATION AND PROJECT DEVELOPMENT
Caledonia’s primary exploration activities are focused on the growth and development of Blanket Mine and its satellite properties.
Blanket Exploration
Exploration activities on Blanket Mine target the depth extensions of the current Blanket ore bodies as well as the AR Main and AR South ore bodies and involves drilling downhole from chambers on 18 and 22 Levels to intersect the depth continuation of these ore bodies. Drilling activities in 2014 were hampered by numerous machine breakdowns.
Caledonia has adopted a conservative approach to accruing new resources: only resource blocks with an estimated grade in excess of the current pay limit are taken into account.resource inventory. Resources that are below the pay limit are reviewed on an annual basis. MINERAL RESERVES – December 31, 2016 | Mineral Reserve Category | | Tonnnes (metric) | | | Grade (Au g/t) | | | Gold Content (ounces) | | | Proven Reserves | | | 798,900 | | | | 3.70 | | | | 95,000 | | | Probable Reserves | | | 2,061,000 | | | | 3.64 | | | | 241,300 | | | Total Proven & Probable Reserves | | | 2,859,900 | | | | 3.66 | | | | 336,300 | |
Notes: | 1. | Mineral Resources are reported inclusive of Mineral Reserves. |
| 2. | Reserve estimate is based on a gold price of US$1,300/oz. and a cash cost of US$65/t milled. |
| 3. | Blanket Mine’s pay limit (cut-off) is 1.81 g/t. |
| 4. | Reserve tonnages have been diluted by 5 to 10% at zero grade to yield RoM tonnages (delivered to mill). |
| 5. | Tonnages are rounded to the nearest 100 and ounces to the nearest 100. |
Blanket Mine’s Measured and Indicated Resources as at December 31, 2016 have increased by 193,800 tonnes or 33,000 ounces (5%) compared to December 31, 2015. Proven and Probable Reserves have increased by 230,000 tonnes or 39,000 ounces (13%) over the same period. Relative to the independent estimate of mineral resources and mineral reserves as at August 31, 2014, the Reserves have decreased by 2.5% in terms of tonnage after replenishing the 1.08 million tonnes that has been mined subsequent to the report date. Resources (measured and indicated) expressed in terms of tonnage have increased by 22% over the same period. Blanket Mine has reported a conversion of resources to reserves of 106% for the Year. While Blanket Mine has recorded a conversion of resources to reserves of approximately 100% over the past 10 years, this high rate of conversion cannot be assumed to occur in future.
Production Operations Mining Operations On November 3, 2014 Caledonia announced the Investment Plan and production projections for the Blanket Mine. The objectives of the Investment Plan are to improve the underground infrastructure and logistics to allow an efficient and sustainable production build-up. The infrastructure improvements include the development of a tramming loop, deepening the No.6 Winze and sinking a new 6-meter diameter Central Shaft from surface to 1,080 meters. The Investment Plan is proceeding on schedule and within budget: the tramming loop and the sinking of the No. 6 Winze were both completed slightly ahead of target and work on the Central Shaft is proceeding according to plan. Following the completion of various aspects of the Investment Plan, the underground mining areas can produce and hoist up to 1,800 tonnes of ore daily using both long-hole open stoping and underhand benching extraction methods. Blanket Mine produced 50,351 ounces of gold in 2016 (2015: 42,804 oz.; 2014: 41,771 oz.) and is expected to ramp up production to approximately 80,000 ounces of gold in 2021. In addition to the projects that form the Investment Plan, Blanket Mine has also completed Phase 1 of the AR South decline which gives access to the AR South ore body below 750 metres. The AR South Decline is currently being extended to 870 metres to give early access to further mineral deposits below the 750 metre level. The Investment Plan provides for proposed investment of approximately US$ 17.9 million in 2017 and a further US$ 35.2 million in the period 2018 to 2020. The Investment Plan includes a revised life of mine plan for the Blanket Mine (the “LOM Plan”) in terms of which it is anticipated that the production from proven and probable mineral reserves will be extracted below 750 metre Level. The Investment Plan is also expected to improve Blanket Mine’s long-term operational efficiency, flexibility and sustainability.
Metallurgical Process In terms of the Investment Plan, the crushing and milling circuits will be expanded to handle 3,000 tonnes of ore per day by 2021. The planned throughput capacity is more than sufficient to handle the planned increases in mine production from the No. 6 Winze Project and the Investment Plan. Average plant recovery was 93% for fiscal year 2016, compared to 93% in 2015 (2014: 93.4%). Recoveries were lower than the planned level of 93.5% due to continued difficulties with the very old oxygen plant. It is intended to replace the existing oxygen plant with a new plant or by using liquid oxygen to improve recoveries. The commissioning of a new larger cluster of cyclones over the re-grind mill should result in a more consistent product being fed into the CIL plant which should improve mixing efficiencies and help to increase recovery. Plant throughput was adversely affected by interruptions to the ZESA power supply which was subject to numerous surges and dips in voltage that adversely affected the mine’s electrical equipment. As ZESA’s equipment is unable to maintain a reliable voltage, Blanket Mine intends to install equipment to regulate the incoming electricity supply and thereby protect its own electrical equipment.
Metallurgical process capital development projects completed in 2016 included:
| · | the new conveyor system from the secondary crushers to the new fine ore bin was commissioned in September 2016; |
| · | the new No.8 ball mill was installed and commissioned in October 2016, increasing the milling capacity to 90 tph, which is sufficient to mill the 650,000 tonnes per annum which will be required to produce 80,000 ounces of gold per annum in 2021 in terms of the Investment Plan; and |
| · | the refurbishment of the CIL tanks. |
Mine under care and maintenance
Eersteling Gold Mining Company Limited
In 2016, Caledonia reached agreement for the sale of its 100% interest in the Eersteling Gold Mining Company Limited (“EGM”), including the rehabilitation liability. EGM is located in South Africa and has been held on care and maintenance since 1997 and accordingly has recorded no production since then. The total agreed consideration is approximately $3.4 million payable in cash, which comprises $3.0 million of sale proceeds and a non-refundable deposit of ZAR5.0 million ($0.4m, approx). Completion of the transaction is conditional only on receipt by Caledonia of the consideration in full. At the date of issue of the Annual Report, Caledonia has received approximately $145,000 (ZAR2 million) in respect of the non-refundable deposit, of which $120,000 (ZAR 1,65 million) was included as “Other Income” in the Statement of profit or loss for the year to December 31, 2016. The purchaser is an unlisted South African entity which is currently raising capital to fund, inter alia, the consideration. Caledonia has received a non-binding letter of comfort from the financial adviser to the purchaser as to the nature and timing of the fund-raising by the purchaser, but this does not amount to an underwriting of the purchase consideration. Due to the uncertainty relating to the receipt of the consideration, the sale proceeds and the de-recognition of EGM will be recognized when received.
Blanket Mine Satellite Prospects
Blanket Mine has exploration title holdings in the form of registered mining claims in the Gwanda Greenstone Belt totalling 7893 claims, including a small number under option, covering properties with a total area of about 2,500 hectares. Included within these claim areas are 18 previously operated small gold workings which warrant further exploration, i.e. the Satellite Projects. Blanket’ssatellite projects. Blanket Mine’s main exploration efforts on these satellite properties arewere focused at this stage on the GG Project and the Mascot Project Area which, based on past production records, are likelywere believed to have the greatest potential. Work at GG and Mascot was suspended in the fourth quarter of 2016 and resources were re-deployed at the Blanket Mine where it is expected there will be better returns on the Investment Plan. Management performed an impairment assessment on these satellite properties as at December 31, 2016 and the assessment indicated that the recoverable amount exceeded the carrying amount. (Refer to note 13 of the Consolidated Financial Statements for assumptions used).
Safety, Health and Environment
The following safety statistics have been recorded for fiscal year 2016 and the preceding two years. Classification | | 2014 | | | 2015 | | | 2016 | | | Fatal | | | - | | | | 1 | | | | - | | | Lost time injury | | | 6 | | | | 8 | | | | 6 | | | Restricted work activity | | | 31 | | | | 31 | | | | 20 | | | First aid | | | 8 | | | | 15 | | | | 8 | | | Medical aid | | | 8 | | | | 5 | | | | 9 | | | | | | | | | | | | | | | | | Occupational illness | | | - | | | | - | | | | - | | | Total | | | 53 | | | | 60 | | | | 43 | | | Incidents | | | 39 | | | | 47 | | | | 42 | | | Near misses | | | 9 | | | | 14 | | | | 22 | | | Disability Injury Frequency Rate | | | 0.69 | | | | 0.508 | | | | 0.300 | | | Total Injury Frequency Rate | | | 3.415 | | | | 3.403 | | | | 2.198 | | | Man-hours worked (thousands) | | | 3,201 | | | | 3,532 | | | | 3,975 | |
Social Investment and Contribution to the Zimbabwean Economy
Blanket Mine’s investment in community and social projects which are not directly related to the operation of the mine or the welfare of Blanket Mine’s employees, the payments made to the Community Trust in terms of Blanket Mine’s indigenisation, and payments of royalties, taxation and other non-taxation charges to the Zimbabwe government and its agencies are set out in the table below.
Payments to the Community and the Zimbabwe Government (US$’000’s) | | | | Community and Social Investment | Payments to the Community Trust | Payments to Zimbabwe Government | Total | | Year 2014 | | 35 | - | 12,319 | 12,354 | | Year 2015 | | 58 | - | 7,376 | 7,434 | | Year 2016 | | 12 | - | 10,637 | 10,649 |
Investment Plan to Increase Production On November 3, 2014, Caledonia announced the Investment Plan and production projections for the Blanket Mine. The objectives of the Investment Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up. The Investment Plan includes a revised LOM Plan in terms of which it is anticipated that the approximate production from existing proven and probable mineral reserves above 750m (22 level) will be as set out below. | Approximate production from proven and probable mineral reserves above 750m (per LOM Plan) | | | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | Tonnes milled (‘000) | 430 | 460 | 430 | 380 | 230 | 100 | 50 | | Gold production (koz) | 42 | 45 | 43 | 39 | 23 | 10 | 6 |
Based on the Preliminary Economic Analysis (“PEA”), additional approximate production from the inferred mineral resources that existed at the date of the PEA (excluding the projected production set out above) may be achieved in the following indicative ranges: | Possible production from inferred mineral resources below 750m (as per PEA) | | | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | Tonnes milled (‘000) | 0 | 35 | 160 | 215 | 390 | 550 | 600 | | Gold production (koz) | 0 | 4-5 | 20-22 | 27-30 | 46-50 | 63-67 | 70-75 |
Canadian regulations do not allow planned production from inferred resources to be added to those from proven and probable reserves for disclosure purposes. There is no certainty that the PEA will be realised. The Technical Report, performed on December 1, 2014, was authored by Daan van Heerden, Uwe Engelmann, Dario Clemente, Johan Odendaal and Jaco Burger of Minxcon, each of whom is a qualified person who is independent of Caledonia. GG ProjectEXPLORATION AND PROJECT DEVELOPMENT
Caledonia’s primary exploration activities are focused on the growth and development of the Blanket Mine orebodies. Blanket Exploration Exploration and evaluation activities on Blanket Mine are targeting the depth extensions of all the known Blanket Mine ore bodies, viz. Blanket 1 Ore Body, Blanket 2 Ore Body, Blanket 4 Ore Body, Blanket Quartz Reef, AR Main, AR South, Eroica and Lima sections. This involves drilling downholes from chambers on 18 and 22 Levels to intersect the depth continuation of these ore bodies. Drilling continued in 2016 with 22,172 metres drilled in the year compared to 14,330 metres in 2015. The GG Project is located approximately seven kilometers southeastincrease in metres drilled was due to the purchase and commissioning of new drill machines in the first six months of 2016. Drilling during 2016 was targeted at Blanket, Mine. SurfaceAR Main and Eroica. Drilling at Blanket and AR Main was focussed on infill drilling programs havewith the objective of increasing the confidence level of the existing inferred resources at the Blanket and AR Main orebodies. Drilling at Eroica was more exploratory and targeted the depth extension of the Eroica southern shoot below 22 level. The focus of the deep drilling programme in 2017 will move to AR South where only limited drilling below 22 level has been carried out atto date. The geometry of the GG Project overorebody with an East-West limb and a North-South limb necessitates the past eight years consistingdevelopment of 24 diamond-cored holes totaling 6,360 meterstwo sets of drilling. Two zonesdrilling infrastructure from which to drill and evaluate the depth extensions of gold mineralization have been established downthe two limbs. With the completion of the first two drill chambers in the first quarter of 2017, drilling will take place simultaneously from these two sites targeting both limbs of AR South to a depth of 900 metres below surface. Development of an additional two chambers to extend coverage to 1000 metres depth will be completed in the second quarter of 2017. Drilling at least 300 meters, each with aBlanket orebody will continue and be focussed mainly on the southern extension of Blanket 4 Ore Body where there remains potential strike length of up to 150 meters. Current activities involveadd to the definitioncurrent resources significantly. Drilling at AR Main will continue and be focussed on the southern extension of the extentorebody where mineralisation remains open at depth and characteristics of this mineralization by way of a prospect shaft and level development.on strike. During Q1 2014A surface drilling programme is underway to investigate the development on the 120 meter level was completed to approximately 160 meters eastpotential of the shaft and four drill cubbies were completed from which horizontal and inclined holes were drilled into the two zones (North and South zones) that were identified by surface drilling. The horizontal and inclined drilling intersected the identified zones,“near mine” targets with the North zone hostingaim of scoping out new resources within easy reach of Blanket Mine plant. Initial drilling has been carried out along the more extensive mineralization. In Q2 2014, development reached the North Zone where the mineralisation that had been identified by drilling in previous quarters was opened up exposing a mineralised zone over anorthern strike of 50 meters over which chip sampling returned an average value of 3.9g/t over an average width of 4 meters. Locally the mineralisation reaches a width of 10 metersLima, at Old Lima and it is open on strike. Based on this encouraging result further horizontal development has been suspended so that the shaft can be deepened to 240 meters. In Q3 2014 the shaft was sunk from 120 meters to 150 meters; in Q4 2014, the shaft was sunk further to 180 meters and development of the station on that level is in progress.
As notedSmiler. Drilling in the previous quarters, metallurgical test work continuesfirst quarter of 2017 will be focussed on fresh material from this zone. The test work has confirmed that the mineralized material is refractorySabiwa and test work is ongoing to optimise recovery.
Mascot Project Area
The Mascot Project Area includes three sections, viz. the Mascot prospect, the Penzance prospectJean prospects which are located between Blanket and the Eagle Vulture prospect. Mascot was previously mined to a depth of approximately 250 meters, exploiting an east-west trending mineralised body the strike extent of which decreased at depth but which was accompanied by a doubling in width. Previous surface drilling undertaken by Blanket has indicated the existence of two further mineralised zones, oneneighbouring Vubachikwe Mine to the north and one to the south of the mined out area.
Underground development on Levels 1 and 2 (60m and 90m below surface respectively) confirmed the existence of potentially payable mineralisation on the North Parallel. In Q2 and Q3 of 2014 development continued along the North Parallel on the 150m level. This development has provided access to the mineralized area over a strike extent of 80 meters and a vertical extent of 90 meters. In Q4 development on the North zone reached the 180 meter level.
Mine de-watering to below 180 meter level has continued, with the objective of accessing higher grade material below the current workings in 2015. The mine has now been de-watered and the bottom of the shaft is now being cleaned to expose the shaft bottom, with the possibility to deepen the shaft by a further 120 meters. This would allow access to the Main Shear at depth which, based on old mine records, had a substantially higher grade than the associated North Parallel and South Shear and, if successful, would improve the economic potential of this project.
Environmental Policy
Caledonia is committed to maintaining the highest environmental standards such that its operations and/or its products do not present an unacceptable risk to its employees, its customers, the public or the environment. Caledonia and its subsidiaries operate under Caledonia’s Environmental Policy which encompasses the following:
| · | Caledonia directs its employees and its subsidiary companies to conduct their exploration and operational activities in a professional, environmentally responsible manner, in compliance with or above the standards of all applicable legislation and policies in the jurisdictions in which they undertake business. |
| · | Caledonia liaises closely with the applicable government regulatory bodies and the public to optimize communication and an understanding of the Caledonia’s activities in relation to environmental protection. |
| · | Caledonia is committed to the diligent application of technically proven, economically feasible, environmental protection measures throughout its exploration, development, mining, processing and decommissioning activities. |
| · | Caledonia, on a regular basis, monitors its environmental protection management programs to ensure their compliance at or above the standards of applicable national and international regulatory requirements. |
It is the responsibility of all the employees and management of Caledonia and its subsidiaries to carry out their employment activities in accordance with this code of practice. Operational line management personnel have the direct responsibility for regular environmental protection management.
Matters relating to safety, health and environment are a regular agenda item at the Company’s board meetings.south.
General Comments
Caledonia’s activities are centered inon Zimbabwe. Caledonia is not dependent, to any material extent, on patents, licenses, contracts, specialized equipment or new manufacturing processes at this time. However, there may be occasions that Caledonia may wish to adopt such patents, licenses, specialized equipment, etc. if these are economically beneficial to its operations. All mining and exploration activities are conducted under the various Economic, Miningeconomic, mining and Environmental Regulationsenvironmental regulations of the country where the operations are being carried out. It is always Caledonia’s standard that these regulations are complied with by Caledonia. Otherwise its activities risk being suspended.Blanket Mine.
| C. | Organizational Structure |
The Company has the following subsidiaries, all of which are wholly-owned by the Company, (unless otherwise indicated) and whose assets or revenues exceed 10% of the consolidated assets or revenues of the Company:
| Subsidiaries of the Company | Country of Incorporation | Percentage held by Company | Greenstone Management ServicesCaledonia Mining South Africa Proprietary Limited | South Africa | (1)100 | Greenstone Management Services Limited | United Kingdom | 100 | Blanket Mine (1983) (Private) Limited(1)(2) | Zimbabwe | 49 | |
|
(1) During 2016 Caledonia Mining South Africa Proprietary Limited was sold to a wholly owned subsidiary of Caledonia named Greenstone Management Services Holdings Limited (United Kingdom) (“GMS UK”).
(2) Blanket Mine (1983) (Private) Limited does not have any subsidiary companies.
| D. | Property, Plant and Equipment |
(a)South Africa:
The Eersteling gold mineEGM is indirectly owned by the Company through its ownership of 100% of the shares of Eersteling Gold Mining Company Limited. Eerstelingequity shares. It has been under care and maintenance since September 1994.1997. Due to the lengthy period of care and maintenance at EerstelingEGM there has been some deterioration in the facilities which will require rehabilitation work before operations could be recommenced. The underground workings at EerstelingEGM were allowed to flood and will require dewatering before mining access can be resumed. The Company has no plans to expend further amounts on plant or equipment or to in any way expand or improve the facilities.
(b)Zimbabwe:
The Blanket Mine, in Zimbabwe, which the Company indirectly owns 49% of through its ownership of 49% of the shares of Blanket Mine (1983) (Private) Limited.Mine. It is a fully equipped mine with all of the necessary plant and equipment to conduct mining operations and the production of gold from the ore mined from the Mine.mine.
For a detailed breakdown of the property, plant and equipment and encumbrances thereon refer to note 13 of the Consolidated Financial Statements. The property, plant and equipment of Caledonia is predominantly held in Zimbabwe. The implementation of the Investment Plan is expected to increase the property, plant and equipment of Caledonia. The Investment Plan is expected to be funded with existing cash, a term loan and an overdraft facility as well as cash generated from operating activities. The project is expected to be completed in 2021.
ITEM 4A - UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5- OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following Operating and Financial Review and Prospects section is intended to help the reader understand the factors that have affected the Company's financial condition and results of operations for the historical period covered by the financial statements and management's assessment of factors and trends which are anticipated to have a material effect on the Company's financial condition and results in future periods. This section is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the other financial information contained elsewhere in this document. Our financial statements have been prepared in accordance with IFRS. Our discussion contains forward looking information based on current expectations that involve risks and uncertainties, such as our plans, objectives and intentions. Our actual results may differ from those indicated in such forward looking statements.
The principal uncertainties and variables facing our business and, therefore, the key drivers of our operating results and principal activities are:
| · | revenue, which is influenced by; |
A. o | Operational Resultsthe price of gold, which fluctuates in terms of the realised USD gold price obtained; and |
| o | our production tonnages and gold content thereof, impacting on the amount of gold we produce at our operation; |
Annual Operational Highlights| · | our cost of producing gold; |
| · | capital expenditure; and |
| · | other significant matters affecting profitability. |
Revenue
Revenue increased to $61,992,000 in fiscal year 2016 from $48,977,000 in fiscal year 2015 (2014: $53,513,000) due to an increase in the average realised gold price received of $1,232 per oz. (2015: $1,139 per oz.; 2014; $1,245 per oz.) and an increase in the sale of gold produced of 50,351 oz. (2015: 42,943 oz.; 2014: 42,927 oz.).
2014– 2013Gold price
Our revenues are derived from the sale of gold produced by the Blanket Mine. As a result our revenues are directly influenced by the realized average gold price obtained from the sale of gold. The gold prices obtained fluctuate widely and are influenced by factors beyond the control of the Company. The table below indicates the average realized gold price per ounce obtained for the 2016, 2015 and 2014 fiscal years.
| | Year 2013 | Year 2014 | Comment |
| Gold produced (oz) | 45,530 | 41,771 | Gold production in 2014 was adversely affected by the lower head grade. |
| On-mine cost (US$/oz)1 | 613 | 652 | On-mine costs for 2014 were higher than 2013 due to lower sales which means that on-mine fixed costs are spread over fewer ounces. |
| All-in Sustaining Cost (US$/oz) (“AISC”) | 973 | 969 | AISC decreased due to lower royalties, lower refining charges, lower community costs and lower sustaining capital investment the combined effects of which were reduced by higher administrative costs. |
| $’000 | 2014 | 2015 | 2016 |
| Revenue (IFRS) | 53,513 | 48,977 | 61,992 |
| Revenue from silver sales | (61) | (48) | (62) |
| Revenue from gold sales | 53,452 | 48,929 | 61,930 |
| Gold ounces sold | 42,927 | 42,943 | 50,269 |
| Average realized gold price per ounce | 1,245 | 1,139 | 1,232 |
Gold produced
2013 – 2012Tonnes milled, average grades, recoveries and gold produced are shown in the table below.
| | Year 2012 | Year 2013 | Comment |
| Gold produced (oz) | 45,465 | 45,530 | Gold production in 2013 was similar to 2012 despite lower head grades and recovery which were offset by higher tonnage throughput. The head grade in 2013 was 3.88 grams per tonne, compared to 4.16 grams per tonne in 2012 and the gold recovery in 2013 was 93.3 per cent compared to 93.7 per cent in 2012. Tonnage throughput in 2013 was 392,320 tonnes compared to 363,315 tonnes in 2012 |
On Mine cash cost (US$/oz)2 | 570 | 613 | On-mine costs in 2013 were adversely affected by higher labour and electricity costs in 2013 compared to 2012 and also by the higher level of work-in-progress at December 31, 2013. |
| All-in sustaining cost (US$/oz) | 759 | 973 | All-in sustaining costs were adversely affected in Q4 2013 by higher administrative expenses and sustaining capital investment |
| Blanket Mine Production Statistics |
| | Year | Tonnes Milled (t) | Gold Head (Feed) Grade (g/t Au) | Gold Recovery (%) | Gold Produced (oz.) |
| Quarter 1 | 2014 | 92,846 | 3.67 | 93.6 | 10,241 |
| Quarter 2 | 2014 | 99,229 | 3.74 | 94.1 | 11,223 |
| Quarter 3 | 2014 | 98,575 | 3.34 | 93.4 | 9,890 |
| Quarter 4 | 2014 | 100,085 | 3.47 | 93.2 | 10,417 |
| Year | 2014 | 390,735 | 3.55 | 93.4 | 41,771 |
| Quarter 1 | 2015 | 104,755 | 3.19 | 92.7 | 9,960 |
| Quarter 2 | 2015 | 103,551 | 3.35 | 93.3 | 10,401 |
| Quarter 3 | 2015 | 116,694 | 3.14 | 92.7 | 10,927 |
| Quarter 4 | 2015 | 115,079 | 3.34 | 93.1 | 11,515 |
| Year | 2015 | 440,079 | 3.25 | 93.0 | 42,804 |
| Quarter 1 | 2016 | 114,527 | 3.16 | 93.0 | 10,822 |
| Quarter 2 | 2016 | 120,590 | 3.47 | 93.1 | 12,510 |
| Quarter 3 | 2016 | 133,375 | 3.36 | 93.2 | 13,428 |
| Quarter 4 | 2016 | 142,169 | 3.21 | 92.8 | 13,591 |
| Year | 2016 | 510,661 | 3.30 | 93.0 | 50,351 |
| January | 2017 | 36,896 | 3.44 | 93.7 | 3,899 |
| February | 2017 | 39,411 | 3.46 | 93.7 | 4,114 |
Gold production in the year was a new record for production from underground, surpassing the previous record of 42,804 oz. which was achieved in 2015.
Production cost
Production costs include salaries and wages, on mine administration, consumable materials and electricity and other related costs incurred in the production of gold. Salaries and wages, consumable materials and electricity, are the largest components of production cost. Production costs for 2016, 2015 and 2014 are summarised below.
2012-2011| $ ‘000 | 2014 | 2015 | 2016 | |
| Salaries and wages | 10,014 | 11,908 | 12,206 | |
| Consumable materials | 14,565 | 14,479 | 16,291 | |
| Site restoration | 29 | - | 32 | |
| Exploration cost not capitalised | 343 | 380 | 408 | |
| Safety | 473 | 551 | 221 | |
| On mine administration | 2,484 | 2,701 | 2,898 | |
| Other | - | - | 30 | |
| Total | 27,908 | 30,019 | 32,086 | |
| | Year 2011 | Year 2012 | Comment |
| Gold produced (oz) | 35,826 | 45,465 | Gold production increased by 27% due to a 21% increase in tonnes milled, a 3% increase in grade and a 1% increase in metallurgical recovery |
| On Mine cash cost (US$/oz)3 | 581 | 570 | On-mine costs were reduced in 2012 due to the higher production which meant that fixed costs were spread across more production ounces. This effect was offset somewhat by higher electricity and other costs |
| Total inclusive cost per ounce | 895 | 759 | Total inclusive costs were reduced in 2012 due to the reduction in sustaining capital investment, offset somewhat by higher royalty payments |
___________________________________
1 Non-IFRS measures such as “On-Mine Cost per ounce”, “All-in Sustaining Cost per ounce”28
On mine cost, all in sustaining cost (“AISC”) and “average realised gold price” are used throughout this document.
2 Non-IFRS measures such as “on-mine cashall in cost per ounce” “all-in sustainingounce
A narrow focus on the direct costs of production (mainly labour, electricity and consumables) does not fully reflect the total cost of gold production. Accordingly, cost per ounce”ounce data for the year and “average realised gold price” are used throughout this document.
3 “On mine cash costs” and “Total inclusive cost per ounce” calculatedthe comparative years have been prepared in 2011 pre-date the adoption by Caledonia ofaccordance with the Guidance Note issued by the World Gold Council on June 23, 2013 and these Non-IFRS Measures are set out in the table below on the following bases:
| i. | On-mine cost per ounce, which shows the on-mine costs of producing an ounce of gold and includes direct labour, electricity consumables and other costs that are incurred at the mine including insurance, security and on-mine administration; |
| ii. | All-in sustaining cost per ounce, which shows the on-mine cost per ounce plus royalty paid, share-based payment expenses, additional costs incurred outside the mine (i.e. at offices in Harare, Johannesburg and St. Helier), costs associated with maintaining the operating infrastructure and resource base that are required to maintain production at the current levels (sustaining capital investment) less silver by-product revenue; and |
| iii. | All-in cost per ounce, which shows the all-in sustaining cost per ounce plus the additional costs associated with activities that are undertaken with a view to increasing production (expansion capital investment). |
| | | | | | | | | | |
| ($’000’s unless otherwise indicated) | | 12 Months to December 31 | |
| | | 2014 | | | 2015 | | | 2016 | |
| Production cost (IFRS) | | | 27,908 | | | | 30,019 | | | | 32,086 | |
| Less site restoration costs | | | (29 | ) | | | - | | | | (32 | ) |
| Less exploration cost | | | (343 | ) | | | (380 | ) | | | (408 | ) |
| Less safety costs | | | (473 | ) | | | (551 | ) | | | (221 | ) |
| Other cost | | | 906 | | | | 1,011 | | | | 535 | |
| On-mine production cost | | | 27,979 | | | | 30,099 | | | | 31,960 | |
| | | | | | | | | | | | | |
| Gold sales (oz.) | | | 42,927 | | | | 42,943 | | | | 50,269 | |
| On-mine cost per ounce ($/oz.) | | | 652 | | | | 701 | | | | 636 | |
| | | | | | | | | | | | | |
| Royalty | | | 3,521 | | | | 2,455 | | | | 2,923 | |
| Export incentive | | | - | | | | - | | | | (1,104 | ) |
| Exploration, remediation and permitting cost | | | 305 | | | | 399 | | | | 311 | |
| Sustaining capital development | | | 2,348 | | | | 4,707 | | | | 3,792 | |
| Administrative expenses | | | 7,387 | | | | 7,622 | | | | 7,263 | |
| Less Zambian expenses | | | (896 | ) | | | (716 | ) | | | (17 | ) |
| Silver by-product credit | | | (61 | ) | | | (48 | ) | | | (62 | ) |
| Share-based payment expense | | | - | | | | 24 | | | | 788 | |
| Other | | | 54 | | | | (2 | ) | | | | |
| All in sustaining cost | | | 40,637 | | | | 44,540 | | | | 45,854 | |
| | | | | | | | | | | | | |
| Gold sales (oz.) | | | 42,927 | | | | 42,943 | | | | 50,269 | |
| All in sustaining cost per ounce ($/oz.) | | | 947 | | | | 1,037 | | | | 912 | |
| | | | | | | | | | | | | |
| Permitting and exploration expenses | | | 161 | | | | 138 | | | | 182 | |
| Non-sustaining capital expenses | | | 3,833 | | | | 13,486 | | | | 15,367 | |
| Total all in cost | | | 44,631 | | | | 58,164 | | | | 61,402 | |
| | | | | | | | | | | | | |
| Gold sales (oz.) | | | 42,927 | | | | 42,943 | | | | 50,269 | |
| All in cost per ounce ($/oz.) | | | 1,040 | | | | 1,354 | | | | 1,221 | |
| | | | | | | | | | | | | |
The all-in sustaining costs incurred in 2015 and 2014 have been re-stated to include share-based payment expenses and the by-product credits arising on the sale of silver. The change is not material.
Per-ounce costs are calculated on the basis of sales and not production, so that an accurate value can be ascribed to the royalty. On-mine cost per ounce decreased from the comparative years due to the increase in gold ounces sold. On-mine costs comprise labour, electricity, consumables and other costs which include security and insurance. Blanket Mine did not experience significant inflationary pressure on input costs.
All-in sustaining cost per ounce comprises on-mine costs and also includes royalty payments, the export incentive, group administrative costs, sustaining capital investment, share based payment expenses and, by-product expenses. The all-in sustaining cost decreased in the year compared to the comparative years due to lower on-mine cost per ounce, the reduced royalty cost per ounce due to the effect of the export incentive credit for incremental production which was recognised in the 2016 year, lower general and administrative costs per ounce and lower sustaining capital expenditure per ounce.
Investment in expansion projects in the year was $15,4 million compared to $13,5 million in 2015 and $3,8 million in 2014, due to the continued high levels of investment in terms of the Investment Plan.
Capital expenditure (Cash)
Total cash capital expenditure increased to $19,885,000 (2015: $16,567,000; 2014: $6,150,000) due to the implementation of the Investment plan. Significant projects on which capital expenditures were incurred in 2016 included:
| · | Sustaining capital expenditure |
Capital projects and expenditures are further analysed in item 4 “Mining operations” and “Metallurgical processes” and note 13 of the Consolidated Financial Statements.
Other significant matters affecting profitability
Administrative expenses
Administrative expenses decreased by 5% from the previous year, due to the reduction in cost from the closure of the Zambian operations partly offset by professional consulting fees associated with the evaluation of potential investment opportunities and, legal costs relating to Caledonia’s general corporate affairs including regulatory and tax compliance in all relevant jurisdictions. Administrative expenses are further analysed in note 10 of the Consolidated Financial Statements.
Sale of treasury bills
On May 16, 2016 Blanket Mine sold treasury bills (“Bills”) issued by the Zimbabwe government for a total consideration of $3,203,000. The Bills were issued to Blanket in 2015 and replaced the Special Tradeable Gold Bonds (“Bonds”) which were issued to Blanket in 2009 as part consideration for gold sales that were made by Blanket in 2008 under the terms of the sales mechanism that existed at that time for Zimbabwean gold producers. The proceeds from the Bills were subject to Zimbabwean income tax at 25.75% during 2016. The sale of the Bills is a once off item and is not expected to be repeated in fiscal year 2017.
Export Incentive Credit
In May 2016 the RBZ announced an export incentive scheme (the “scheme”) to encourage large-scale gold producers such as Blanket to increase gold production and thereby increase the quantity of gold available for export from Zimbabwe. In terms of the scheme, Blanket received an export incentive credit in its account with Fidelity to the value of 2.5% of the sale proceeds of the gold sold to Fidelity. As at the date of issue of this Annual Report all export incentive credits outstanding as at December 31, 2016 were received. The amount was recognised as Other Income in the Statement of Profit or Loss and Other Comprehensive Income (refer to note 9 of the Consolidated Financial Statements).
In January 2017, Blanket Mine was awarded an additional export incentive credit of 1% of sale proceeds, thus the total export incentive in 2017 is expected to be 3.5% of gold proceeds.
Agreement for the Sale of EGM
In 2016 Caledonia reached agreement for the sale of its 100 % interest in the EGM. EGM is located in South Africa and has been held on care and maintenance since 1997 and accordingly has recorded no production since then. The total agreed consideration is $3.0 million payable plus a non-refundable deposit of ZAR5.0 million ($0.4 million) in cash. Completion of the transaction is conditional only on receipt by Caledonia of the consideration in full. To date, Caledonia has received consideration of approximately $145,000 (ZAR2.0 million) which is included as “Other Income” in the Statement of profit or loss for the year to December 31 2016. The purchaser is an unlisted South African entity which is currently raising capital to fund the consideration. Caledonia has received a non-binding letter of comfort from the financial adviser to the purchaser as to the nature and timing of the fund-raising by the purchaser, but this does not amount to an underwriting of the purchase consideration. Due to the uncertainty relating to the suggested reportingreceipt of cash costs, sustaining costs and all-in costs.the consideration, the sale proceeds will be recognized when received.
Share based payment awards – Long-term incentive plan
Caledonia has established its Omnibus Equity Incentive Compensation Plan (“OEICP”) for grants after May 2015. Share options issued before May 2015 were issued in terms of the rolling stock option plan, which was superseded by the OEICP. In accordance with both plans, options are granted at an exercise price equal to the market price of the shares at the date of grant and vest according to dates set at the discretion of the Compensation Committee of the Board of Directors at the date of grant. All outstanding option awards that have been granted pursuant to the plan vest immediately.
Terms and conditions of share option programmes 34The maximum term of the options under the OEICP is 10 years and under the rolling stock option plan 5 years. The terms and conditions relating to the grant of options under the rolling stock option plan are that all options are to be settled by physical delivery of shares.
During 2016, certain key management members were granted Restricted Share Units (“RSUs”) and Performance Share Units (“PSUs”), pursuant to the provisions of the 2015 OEICP. All RSUs and PSUs were granted and approved by the Compensation Committee of the Board of Directors.
The RSUs will vest three years after grant date given that the service condition of the relevant employees are fulfilled. The value of the vested RSUs will be the amount of RSUs vested multiplied by the fair market value of the Company’s shares, as specified by the plan, on date of settlement.
The PSUs have a service condition and a performance period of three years. The performance condition is a function of production cost, gold production and central shaft depth targets on certain specified dates. The number of shares that will vest will be the PSU units 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 calculated at the average Bank of Canada noon rate immediately preceding the dividend payment. PSUs have rights to dividends only after they have vested.
The fair value of the RSUs were estimated to be the Toronto Stock Exchange (“TSX”) share price on reporting date. The fair value of the PSUs were calculated as the TSX share price at reporting date less the fair value of the expected dividends during the vesting period multiplied by the performance multiplier expectation. As at December 31, 2016, it was expected that there is a 100% probability that the performance conditions will be met and therefore a 100% performance multiplier was used in the estimated liability.
Financial HighlightsThe effect on the profitability of the Company is therefore influenced by the amount of RSUs and PSUs that vest and the fair value of the share options that is based on the share price of the Company. The share based payment expense in the Statement of Profit or Loss amounted to $617,792 (2015:$ Nil; 2014:$ Nil).
2014-2013Gold hedge
| | Year 2013 | Year 2014 | Comment |
| Gold Sales (oz) | 45,048 | 42,927 | Sales in 2014 were lower than 2013 due to lower production gold ounces. |
| Average realised gold price (US$/oz) | 1,402 | 1,245 | Lower realised gold prices in 2014 primarily due to the lower quoted gold price. |
| 29.9 | 20.5 | Lower gross profit in 2014 compared to 2013 mainly due to the lower realised gold prices and lower production and sales. |
| Net (loss)/profit attributable to shareholders ($’m) | (3.1) | 4.9 | Net loss in 2013 was after an impairment charge of $14.2m in respect of the Nama project in Zambia. Profit for 2014 was adversely affected by lower gold production and the lower realised gold price. |
Adjusted basic (loss)/earnings per share5 (cents) | 27.6 | 12.1 | Adjusted basic earnings per share excludes impairment charges, foreign exchange profits or losses, indigenisation expenses, deferred taxation and tax adjustments in respect of prior years and the costs of the Zambian operation. |
| Cash and cash equivalents ($’m) | 25.2 | 26.8 | Caledonia’s cash is held in Canadian, UK and South African banks. |
| Cash from operating activities ($’m) | 14.7 | 13.7 | Cash flow in Q4 and the year were lower due to the lower realised gold price and, for the year, the lower number of ounces sold the effect of which was reduced by lower tax payments. |
2013 – 2012
| | Year 2012 | Year 2013 | Comment |
| Gold Sales (oz) | 45,181 | 45,048 | Lower sales in 2013, despite higher production, due to the higher level of work in progress at December 31, 2013 of 1,978 oz. |
| Average realised gold price (US$/oz) | 1,666 | 1,402 | Lower realised gold prices in 2013 were due to the lower quoted gold price. |
| 40.9 | 29.9 | Lower gross profit mainly due to the lower realised gold prices. |
| Net (loss)/profit attributable to shareholders ($’m) | 8.7 | (3.1) | Net loss in 2013 is after an impairment charge of $14.2m mainly in respect of the Nama Project. |
Adjusted basic earnings per share7 (cents) | 41.2 | 27.7 | Adjusted basic earnings per share exclude the impairment charge, foreign exchange profits or losses, indigenisation expenses and deferred taxation. |
| Cash and cash equivalents ($’m) | 27.9 | 25.2 | Caledonia’s cash is held in Canadian, UK and South African banks. |
| Cash from operating activities ($’m) | 29.7 | 14.7 | Cash flow in Q4 was adversely affected by higher work-in progress at December 31, 2013. Cash flow in the Year and the Quarter was also adversely affected by the lower realised gold price. |
4 Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses.
5 Adjusted earnings per share (“EPS”) isThe derivative contract resulted in a non-IFRS measure which aims to reflect Caledonia’s ordinary trading performance. The adjusted EPS calculation excludes any share based expense arising on the implementationloss of indigenisation and the impairment and the foreign exchange profit, all of which are$435,000 included in the calculationStatement of EPS under IFRS.
Profit or Loss and Other Comprehensive Income. The Company settled the loss with the $435,000 margin call deposited at the inception of the hedge transaction.
2012-2011
| | Year 2011 | Year 2012 | Comment |
| Gold Sales (oz) | 35,504 | 45,181 | Higher sales in 2012 reflects the higher production |
| Average realised gold price (US$/oz) | 1,577 | 1,666 | Higher realised gold prices in 2012 was due to the higher quoted gold price |
| 29.1 | 40.9 | Higher gross profit due to the higher realised gold price, higher sales and lower cost per ounce |
| Net (loss)/profit attributable to shareholders ($’m) | 12.1 | 8.7 | Net loss in 2012 is after a non-cash, non-recurring charge of $14,569,000 for share based payments of which $14,161,000 was due to the sale of 51% of Blanket to Indigenous Zimbabweans, for which Blanket provided facilitation loans, and for the donation of 10% of Blanket to the Gwanda Community Share Ownership Trust (“GCSOT”). |
Adjusted basic earnings per share9 (cents) | 31.4 | 41.2 | Adjusted basic earnings per share excludes the charge for share based payments arising on indigenisation, foreign exchange profits or losses, indigenisation expenses and deferred taxation. |
| Cash and cash equivalents ($’m) | 9.7 | 27.9 | Cash increased due the increase profit and reduced capital investment, offset by higher taxation payments, indigenisation expenses and other costs associated with indigenisation |
| Cash from operating activities ($’m) | 17.4 | 29.7 | Cash flow in 2012 benefitted from increased profit and reduced capital investment, offset by higher taxation payments, indigenisation expenses and other costs associated with indigenisation |
6 Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses.
7 Adjusted earnings per share (“EPS”) is a non-IFRS measure which aims to reflect Caledonia’s ordinary trading performance. The adjusted EPS calculation excludes any share based expense arising on the implementation of indigenisation and the impairment and the foreign exchange profit, all of which are included in the calculation of EPS under IFRS.
8 Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses.
9 Adjusted earnings per share (“EPS”) is a non-IFRS measure which aims to reflect Caledonia’s ordinary trading performance. The adjusted EPS calculation excludes any share based expense arising on the implementation of indigenisation and the impairment and the foreign exchange profit, all of which are included in the calculation of EPS under IFRS.
Average realised gold price per ounce
“Average realised price per ounce” is a non-IFRS measure which, in conjunction with the cost per ounce measures described above, allows stakeholders to assess our performance. The table below reconciles “Average realised price per ounce” to the Revenue shown in the financial statements which have been prepared under IFRS.
| | Reconciliation of Average Realised Gold Price per Ounce to IFRS |
| | | | | | | | | | | | |
| Revenue (IFRS) (C$’000’s) | 75,221 | 19,218 | 17,190 | 16,591 | 12,114 | 65,113 | 17,063 | 15,555 | 13,492 | 12,972 | 59,082 |
| Less miscellaneous income | - | - | (947) | - | - | (947) | - | - | - | - | - |
| Revenue from precious metal sales (C$’000s) | 75,221 | 19,218 | 16,243 | 16,591 | 12,114 | 65,113 | 17,063 | 15,555 | 13,492 | 12,972 | 59,082 |
| Exchange rate (1US$: C$) | 0.99 | 1.00 | 1.02 | 1.04 | 1.00 | 1.02 | 1.10 | 1.09 | 1.09 | 1.14 | 1.10 |
| Revenue from precious metal sales (US$’000’s) | 75,340 | 19,148 | 15,922 | 16,013 | 12,133 | 63,216 | 15,480 | 14,233 | 12,401 | 11,343 | 53,513 |
| Revenues from sales of silver (US$’000s) | (72) | (5) | (15) | - | (57) | (77) | (3) | (31) | (15) | (12) | (61) |
| Revenues from sales of gold (US$’000s) | 75,268 | 19,143 | 15,907 | 16,013 | 12,076 | 63,138 | 15,477 | 14,202 | 12,386 | 11,331 | 53,452 |
| Gold ounces sold (oz) | 45,181 | 11,965 | 11,587 | 12,042 | 9,454 | 45,048 | 12,210 | 11,223 | 9,890 | 9,604 | 42,927 |
| Average realised gold price per ounce (US$) | 1 666 | 1 600 | 1 373 | 1,330 | 1,277 | 1,402 | 1,268 | 1,265 | 1,252 | 1,180 | 1,245 |
Adjusted earnings per share
“Adjusted earnings per share” is a non-IFRS measureNon-IFRS Measure which management believes assists investors in understanding the company’s underlying performance.cash-based performance of core business activities. The table below reconciles “adjusted earnings per share” to the Profit/Loss attributable to Owners of the Company shown in the financial statementsConsolidated Financial Statements which have been prepared under IFRS.IFRS, adjusts for deferred tax and non-core business activities.
Reconciliation of Adjusted Earnings per Share to IFRS Profit/(Loss) Attributable to Owners of the Company (C$’000’s except per share numbers) |
| | Year 2012 | Q1 2013 | Q2 2013 | Q3 2013 | Q4 2013 | Year 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | Year 2014 | |
| Profit/(loss) attributable to owners of the company (IFRS) | 8,721 | 4,593 | 3,055 | 3,733 | (14,436) | (3,055) | 2,425 | 1,840 | 1,112 | (380) | 4,897 | |
| Blanket Mine Employee Trust adjustment (refer Note 18 to the Consolidated Financial Statements) | - | - | - | - | (105) | (105) | - | - | - | (54) | (54) | |
| Add back amounts attributable to owners of the company in respect of: | | | | | | | | | | | | |
| Indigenisation expenses, advance dividends, donations etc. | 16,034 | - | 1,640 | - | - | 1,640 | - | - | - | - | - | |
| Foreign exchange loss/(profit) | 3 | - | - | - | (1,677) | (1,677) | (257) | 129 | (389) | (659) | (1,176) | |
| Asset impairment | 330 | - | - | - | 14,203 | 14,203 | - | - | - | 196 | 196 | |
| Deferred tax | 271 | - | - | 54 | 2,131 | 2,185 | | | | 801 | 801 | |
| Withholding tax on distributions in specie | - | 1,531 | | - | - | 1,531 | | | | | | |
| Reversal of Zambian G&A | - | - | - | - | - | - | 142 | 198 | 309 | 340 | 989 | |
| Under accrual for 2013 UK tax | - | - | - | - | (375) | (375) | - | - | - | 375 | 375 | |
| Prior year adjustment in respect of GMS (SA) tax | (100) | | | | (100) | (100) | | | | 300 | 300 | |
| Adjusted profit | 25,258 | 6,124 | 4,695 | 3,787 | (359) | 14,247 | 2,310 | 2,167 | 1,032 | 819 | 6,328 | |
| Weighted average shares (m) | 50.8 | 51.5 | 51.8 | 52.1 | 52.1 | 52.0 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | |
| Adjusted EPS (cents) | 49.8 | 11.9 | 9.1 | 7.3 | (0.7) | 27.6 | 4.4 | 4.2 | 2.0 | 1.9 | 12.1 | |
| Reconciliation of Adjusted Earnings per Share (“EPS”) to IFRS Profit Attributable to Owners of the Company | |
| ($’000’s unless otherwise indicated) | | 12 Months to December 31 | |
| | | 2014 | | | 2015 | | | 2016 | |
| Profit for the year | | | 5,946 | | | | 5,590 | | | | 11,085 | |
Non-controlling interest share (“NCI”) | | | (1,511 | ) | | | (811 | ) | | | (2,559 | ) |
| Profit attributable to owners of the Company (IFRS) | | | 4,435 | | | | 4,779 | | | | 8,526 | |
| | | | | | | | | | | | | |
| Add back/(deduct) | | | | | | | | | | | | |
| IAS 19 adjustment | | | 48 | | | | 100 | | | | 80 | |
| Deferred tax | | | 706 | | | | 2,567 | | | | 4,611 | |
| Sale of Blanket Mine treasury bills | | | - | | | | - | | | | (3,202 | ) |
| Other income | | | - | | | | - | | | | (226 | ) |
| Foreign exchange (gain)/loss | | | (1,065 | ) | | | (2,850 | ) | | | 505 | |
| Zambian expenses | | | 896 | | | | 716 | | | | 17 | |
| Prior year over accrual of GMS UK tax | | | - | | | | (871 | ) | | | - | |
| Asset impairment | | | 178 | | | | - | | | | - | |
| Prior year adjustment in respect of South African tax | | | 306 | | | | (765 | ) | | | - | |
| South African tax and penalties | | | - | | | | 744 | | | | - | |
| Total before tax and NCI | | | 5,504 | | | | 4,420 | | | | 10,311 | |
| | | | | | | | | | | | | |
| Reversal of tax effect | | | 243 | | | | 660 | | | | 891 | |
| NCI effect | | | (151 | ) | | | (444 | ) | | | 111 | |
| Adjusted profit | | | 5,596 | | | | 4,636 | | | | 11,284 | |
| | | | | | | | | | | | | |
| Weighted average shares in issue (m) | | | 52.117 | | | | 52.095 | | | | 52.787 | |
| Adjusted EPS (cents) | | | 10.7 | | | | 8.8 | | | | 21.4 | |
Q4 2013 and Year 2013 adjusted EPS calculations have been adjusted to reflect the under-accrual for UK income tax arising in respect of 2013 on interest receivable by GMS (UK) on the facilitation loans.
Zimbabwe Indigenisation Policy
Transactions that implemented the Indigenisationindigenisation of Blanket Mine were completed on September 5,th 2012. Following completion of these transactions Caledonia now owns 49% of Blanket.Blanket Mine. Caledonia has received the Certificate of Compliance from the Government of Zimbabwe government which confirms that Blanket Mine is fully compliant with the Indigenisation and Economic Empowerment Act.
Investing
During 2014 Caledonia invested $6,786,000 ($11,738,000 – 2013, $7,909,000 – 2012) in property, plant and equipment including mineral properties. Of the amount $6,786,000 ($9,066,000 – 2013, $4,280,000 - 2012) at Blanket, and its satellite properties.
| B. | Liquidity and Capital Resources |
Caledonia financed all its operations using funds on hand and those generated by its operations. No equity financing took place in the year and none is currently planned. Blanket has an unsecured US$2.5 million loan facility in Zimbabwe which is repayable on demand. At December 31, 2014 this facility was unused.
Cash and cash equivalents
| | | 2014 | 2013 |
| | | | $ |
| Bank balances | | 26,838 | 25,222 |
| Cash and cash equivalents in the statement of financial position | | 26,838 | 25,222 |
| Bank overdrafts used for cash management purposes | | - | (1,796) |
| Cash and cash equivalents in the statement of cash flows | | 26,838 | 23,426 |
$’000 | | 2014 | 2015 | 2016 |
| | | | | |
| Bank balances | | 23,082 | 12,568 | 14,335 |
| Cash and cash equivalents in the statement of financial position | | 23,082 | 12,568 | 14,335 |
| Bank overdraft used for cash management purposes | | - | (1,688) | - |
| Cash and cash equivalents in the statement of cash flows | | 23,082 | 10,880 | 14,335 |
The availableOn August 23, 2016 Blanket Mine arranged an unsecured bank overdraft facility of US$2.5$2 million that was unutilised at December 31, 2016. The overdraft facility bears interest at 8%6.5% per annum of the amount outstanding, 4.65% above the bank’s base rate.rate and has a $20,000 arrangement fee over a 12 month period with a review date of August 31, 2017. The facility is unsecuredpayable on demand.
On October 19, 2016 Blanket Mine received $3 million in terms of a term facility with Barclays Bank of Zimbabwe Limited bearing interest at a nominal rate of 7,25% per annum and valid for 12 months and is renewable.an upfront arrangement fee of $30,000. The term facility will be paid back over 8 quarterly instalments of $375,000 starting January 19, 2017. The term facility is repayable on demand.secured in terms of a general notarial bond registered over the moveable assets of Blanket Mine.
As at year end, Caledonia’s cash was held in the following jurisdictions:
| $’000 | 2014 | 2015 | 2016 |
| Jersey, Channel Islands | - | - | 2,844 |
| United Kingdom | 9,822 | 2,922 | 2,038 |
| South Africa | 10,566 | 3,979 | 690 |
| Canada | 833 | 5,519 | 150 |
| Zimbabwe (Net of overdraft) | 1,835 | (1,542) | 8,613 |
| Zambia | 26 | 2 | - |
| Total | 23,082 | 10,880 | 14,335 |
Liquidity and Capital Resources
An analysis of the sources and uses of Caledonia’s cash is set out in the Consolidated Statement of Cash Flows in the Consolidated Financial Statements. As of December 31, 2014,2016, Caledonia had a working capital surplus of $31,127,000 ($28,620,000-2013, $26,014,000 – 2012)$15,960,000 (2015: $15,165,000; 2014: $26,771,000). As of December 31, 2014,2016, Caledonia had potential liabilities for rehabilitation work on the Blanket and Eersteling MinesEGM - if and when those Mines aremines permanently closedclose - at an estimated present value cost of $2,888,000 ($1,572,000 – 2013, $1,015,000 – 2012)$3,456,000 (2015: $2,762,000; 2014: $2,484,000). The South African rehabilitation trust held $155,942 on cash deposit as at December 31, 2014.
The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue its mining operations and exploration potential of its mineral properties.
The Company’s capital includes shareholders’ equity, comprising issued common shares, reserves, accumulated other comprehensive income, accumulated deficit, bank loans and non-controlling interest
activities.
The Company’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its ongoing operations, to provide returns for shareholders, accommodate any asset retirement obligation and to pursue growth opportunities. Refer to note 25 of the Consolidated Financial Statements for information on the type of financial instruments used and the maturity profiles thereof. Management believes that the current working capital and future production cash proceeds will be sufficient to meet its capital requirements.
Caledonia paid its inaugural dividend of 5 Canadian cents per share in February 2013 following a capital re-structure which was approved by shareholders in January 2013 which allowed it to make dividend payments. The inaugural dividend did not relate to any specific accounting period. Caledonia paid a further dividend of 5 Canadian cents per share in April 2013 in respect of the earnings for the year to December 31, 2012.
On November 25, 2013 Caledonia announced a revised dividend policy in terms ofpursuant to which it intended to pay a dividend of 6 Canadian cents per share in 2014, split into 4 equal quarterly payments of 1.5 Canadian cents per share. The first quarterly dividend was paid on January 31, 20142014; further payments were made quarterly thereafter.
Following the announcement on December 16, 2015 that henceforth Caledonia will report its financial results in USD, the quarterly dividend that was paid at the end of January 2016 was declared and subsequentdenominated in USD as 1.125 United States cents. A further quarterly dividend of 1.125 United States cents was paid at the end of April 2016.
On July 5, 2016 Caledonia announced a quarterly dividend of 1.375 United States cents per share, which was paid at the end of July 2016; further dividends of 1.375 United States Cents were paid at the end of April, JulyOctober 2016 and October 2014 and at the end of January 2015.2017. The increased dividend represents Caledonia’s revised dividend policy. It is currently envisaged that the existing dividend policy of 65.5 United States cents per annum paid in equal quarterly instalments will be maintained in 2015. Caledonia will consider further dividends thereafter in the context of the prevailing commercial environment and expects to provide guidance for dividend payments in 2016 at or about the time of the Q2 results in August 2015.2017.
It is intended that all of the capital investment which will be required to fund the planned growth and development at Blanket Mine over the next 7 years will be funded by Blanket’sBlanket Mine’s internal cash flows and debt facilities.
There are no exchange control restrictions onApproval from the RBZ is required for the remittance in full of dividends declared, repayment of loans orand advances out of trading profits offrom subsidiary companies such as Blanket Mine (1983)(Private) Limited to Caledonia. Caledonia has not experienced difficulty in securing the Group.necessary approvals.
In the opinion of the Company, the working capital is sufficient for the company’s present needs.| C. | Research and development, patents and licences |
Not applicable.
As a result ofFor the completion of the No. 4 Shaft Expansion Project in late 2014, the underground mining areas can now produce up to 1,200 tons of ore daily using predominately long-hole open stoping methods. Blanket Mine produced 41,771 ounces in 2014 and is implementing a 7full fiscal year Expansion Program to progressively increase2017, we are expecting gold production from inferred resourcesour operations of 60,000 ounces at on mine cash cost of $600 to approximately 70-75,000 ounces in 2021, this being in addition to projected production in 2021 from proven and probable mineral reserves of approximately 6,000 ounces.
The surplus capacity of the Blanket leach section and crushing and milling plant enables it to immediately treat additional feed material when compatible. The inflationary environment is subdued and the regulatory environment is subject to unexpected adverse changes. Nevertheless, Blanket Mine has surplus metallurgical plant capacity and is sufficiently cash flow positive if the investment climate is acceptable, and could invest in projects with a view to further increase production, thereby helping to maintain downward pressure on the cost$630 per ounce of gold produced at Blanket Mine.
(2016: $701; 2015: $652). Our ability to meet the full year’s production targetstarget could be impacted by, amongstamong other factors, lower grades and failure to achieve the production targets set unforeseenat Blanket Mine. Unforeseen changes in ore grades and recoveries, unexpected changes in the quality or quantity of reserves and resource, technical production issues, environmental and industrial accidents, gold theft, environmental factors and environmental factors.pollution could adversely impact the production, sales and cash operating costs for fiscal year 2017. The foregoing expected results for 2017 are subject to risks and uncertainties and actual results may be lower. See “Cautionary Note Regarding Forward-Looking Statements”.
C. E. | Off-Balance Sheet Arrangements |
Not applicable.As at December 31, 2016, we had not entered into any off-balance sheet arrangements.
D. F. | Tabular Disclosure of Contractual Obligations |
| $’000 | Payments due by Period |
| | Within 1 Year | 1-3 years | 3-5 years | More than 5 years | Total |
| Trade and other payables | 8,077 | - | - | - | 8,077 |
| Term loan facility | 1,410 | 1,577 | - | - | 2,987 |
| Provisions | - | - | - | 3,456 | 3,456 |
| Capital expenditure commitments | 2,122 | - | - | - | 2,122 |
| | Payments due by Period – in thousands of Canadian Dollars |
| | Within 1 Year | 1-3 years | 3-5 years | More than 5 years | Total |
| Trade and other payables | 3,791 | - | - | - | 3,791 |
| Asset retirement obligations | - | - | - | 2,888 | 2,888 |
| Capital expenditure commitments | 642 | - | - | - | 642 |
| ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
| A. | Directors and Senior Management |
The following is a list of our current directors and officers as of December 31, 2014. There are noMarch 30, 2016.
| Name, Office Held and Municipality of Residence | Principal Occupations During Past Five Years | Positions held Since | Number of Shares Beneficially Owned, Controlled or Directed as of March 30, 2017 |
James Johnstone
Director
Gibsons, British Columbia, Canada | Retired. Formerly Chief Operating Officer of the Company and Director of several of its subsidiary companies. | 1997 | 40,000 |
Steven Curtis Chief Executive Officer & Director
Johannesburg, South Africa | Previous VP Finance, Chief Financial Officer from March 2016 and Director of the Company and Director of certain of its subsidiary companies. | Director since 2008 Chief Executive Officer since 2014 | 420,000 |
Leigh Wilson
Director Stuart, Florida, USA | Chairman of the Victory Portfolios Winston Maritime LLC FundVantage Trust Stella and Hack Wilson Family Foundation | 2012 | 215,000 |
John Kelly
Director New Canaan, Connecticut | Partner at Endgate Commodities LLC, Member of CrossRoad LLC, Director of Liquidnet Europe Ltd, Officer of Liquidnet Holdings, Inc. | 2012 | 57,465 |
Johan Holtzhausen
Director,
Cape Town, South Africa | Business consultant and Independent Director of DRDGOLD Limited. | 2013 | 90,000 |
Dana Roets
Chief Operating Officer
Johannesburg, South Africa | VP and Head of Operations at Kloof Gold Mine. More recently, Dana was the COO at Great Basin Gold which had gold mining operations in the United States of America and South Africa. | 2013 | Nil |
Mark Learmonth
Chief Financial Officer & Director Jersey, Channel Islands | Vice-President of the Company focused on financial reporting, investor and shareholder relations and corporate development. Former Vice-President Business Development, of the Company | Chief Financial Officer since 2014 and Director since 2015 Vice-President, Business Development since 2008 | 324,750 |
John McGloin Director Bishops Stortford, United Kingdom | Previous Executive Chairman and Chief Executive Officer of Amara Mining Plc. Current non-executive director of Perseus Mining Limited | 2016 | Nil |
Maurice Mason VP Corporate Development and Investor Relations London, England | Previous Director at Equity Research, for Stifel Nicolaus Europe Ltd | 2016 | 35,000 |
Adam Chester General Counsel, Company Secretary and Head of Risk and Compliance Jersey, Channel Islands | Solicitor of the Supreme Court of England and Wales. Partner at Walkers and advocate of the Royal Court of Jersey. | 2017 | Nil |
No family relationships exist between any of the directors and officers.Directors or Senior management.
| Name, Office Held and Municipality of Residence | Principal Occupations During Past Five Years | Positions held Since | Number of Shares Beneficially Owned, Controlled or Directed as of March 27, 2015 |
James Johnstone (2) (5)(6)(7) Director Gibsons, British Columbia, Canada | Retired. Formerly Chief Operating Officer of the Company and Director of several of its subsidiary companies. | 1997 | 16,000 |
Steven Curtis (4)(5)(7) President, Chief Executive Officer & Director Johannesburg, South Africa | Financial Director Avery Dennison SA (Pty) Ltd. until March 2006. Since then, VP Finance, Chief Financial Officer and Director of the Company and Director of certain of its subsidiary companies. Former VP Finance and Chief Financial Officer, of the company | Director since 2006 President and Chief Executive since 2014 | 270,000 |
Richard Patricio(2)(3)(7) Director, Toronto, Ontario Canada | Chief Executive Officer at Pinetree Capital Ltd | 2012 | Nil |
Leigh Wilson(1)(2)(3)(4)(5)(7) Director, Stuart, Florida, USA | Chairman of the Victory Portfolios. | 2012 | 72,500 |
John Kelly(1)(2)(3)(7) Director, Pound Ridge, New York, USA | Partner at Endgate Commodities LLC. | 2012 | Nil |
Johan Holtzhausen(1)(2)(5)(6)(7) Director, Cape Town, South Africa | Business consultant and ex Audit partner of KPMG Inc. Director of DRDGOLD Limited and First Food Brands Limited. | 2013 | Nil |
Dana Roets(6)(7) Chief Operating Officer Johannesburg, South Africa | VP and Head of Operations at Kloof Gold Mine. More recently, Dana was the COO at Great Basin Gold which had gold mining operations in the United States of America and South Africa. | 2013 | Nil |
Mark Learmonth(5)(7) VP Finance, Chief Financial Officer & Director Johannesburg, South Africa | Vice-President of the Company focused on financial reporting, investor and shareholder relations and corporate development. Former Vice President Business Development, of the company | Director since 2008 Vice-President, Business Development since 2014 | 186,730 |
Trevor Pearton(6)(7) Vice-President Exploration Johannesburg, South Africa | Vice-President of the Company acting as Exploration Manager of the Company and its subsidiaries | 2004 | Nil |
Notes:
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Corporate Governance Committee.
(4) Member of Nominating Committee.
(5) Member of Disclosure Committee.
(6) Member of Technical Committee.
(7) Member of Strategic Planning Committee.
Mr. S.E. Hayden resigned as a Director on 6 December 2014.
A brief profile of each of the Directors and the senior managementofficers is given below:
James Johnstone, B.Sc., ARCST, Director
A graduate-mining engineer Mr. Johnstone has 40 yearsyears’ experience in mine operations in North America, Africa and Europe. He has experience in both underground and open pit operations. For the 20 years prior to his retirement he was employed as General Manager or Vice-President Operations for mining companies producing gold, base metals and industrial minerals. Mr. Johnstone has been responsible for the construction, start up and commissioning of two major mines in addition to the commissioning of Caledonia's Filon Sur operation. He has also been involved in the orderly closure of three operations. He has operated successfully in environmentally sensitive areas and has a good understanding of the permitting process in Canada and the United States. Mr. Johnstone joined Caledonia in April 1997 as Vice President Operations and was responsible for Caledonia's operations in Zambia and South Africa and for all activities in Canada. He was elected a Director of Caledonia in June 1997. He retired from active employment with Caledonia in September, 2006.
Steven Curtis, CA(SA)CA (SA) – Director President and Chief Executive Officer
Mr. Curtis is a Chartered Accountant with over 24 years of experience and has held a number of senior financial positions in the manufacturing industry. Before joining Caledonia in April 2006, he was Director Finance and Supply Chain for Avery Dennison SA and prior to this, Financial Director and then Managing Director of Jackstadt GmbH South African operation. Mr. Curtis is a member of the South African Institute of Chartered Accountants and graduated from the University of Cape Town.
Mr. Curtis was appointed Vice-President Finance and Chief Financial Officer of the Company in April, 2006 and served in the position until Dec 2014 when he was appointed as President and Chief Executive Officer.
Leigh Wilson - Director
Mr. Leigh Alan Wilson has an international business and financial services background having served in senior executive and management positions with Union Bank of Switzerland (Securities) Ltd. in London and with the Paribas Group in Paris and New York where he served as CEO of Paribas North America between 1984 and 1990.
Mr. Wilson has served on the Victory Fund Board since 1993. He currently serves as Independent Chairman of the Board of Trustees of the Victory fund and of the Munder Fund. The Victory and Munder Funds have assets aggregating to US $40 billion.
Mr
Mr. Wilson is also the Chief Executive Officer of New Century Home Health Care Inc., a role he has held since 1995. In March 2006, Mr. Wilson received the Mutual Fund Trustee of the Year Award from Institutional Investor Magazine.
Between March 2008 and October 2008, Mr. Wilson was an Independent Non-Executive Director of Caledonia.
|
John Kelly - Director
Mr. John Lawson Kelly has over 3035 years of experience in the financial services industry in the U.S.A and international markets including emerging markets in Asia. He is registered with the Financial Industry Regulatory Authority of the U.S.A. as a General Securities Principal.
Mr. Kelly is currently partner at EndgateEndGate Commodities LLC, CrossRoad LLC, and a directoris an Independent Trustee of the AmeriCares Foundation.Victory Funds.
Within the last five years Mr. Kelly has been an officer of Liquidnet Holdings, Inc. and a managing director of JL Thornton & Co, LLCLiquidnet Europe Ltd. Mr. Kelly is a graduate of Yale University and CrossRoad LLC and he has also been an Independent Trusteethe Yale School of The Victory Funds.Management.
Richard Patricio – Director
Mr. Richard Patricio is the Chief Executive Officer of Pinetree Capital Ltd. ("Pinetree"), a Toronto-based investment company. Mr. Patricio currently holds directorships with several Canada, US and Australian-based publicly quoted resource companies. He previously practiced law at Osler Hoskin & Harcourt LLP in Toronto. Mr Patricio is also currently Chief Executive Officer of Mega Uranium Ltd.
Johan Holtzhausen - Director
Mr. Johan Andries Holtzhausen is a retired partner of KPMG South Africa with 42 years of audit experience, of which 36 years were as a partner focused on the mining sector. MrMr. Holtzhausen chaired the Mining Interest Group at KPMG South Africa and his clients included major listed mining companies operating in Africa and elsewhere, which operated across a broad range of commodities. In addition to his professional qualifications, MrMr. Holtzhausen holds a B.Sc. from the University of Stellenbosch, majoring in chemistry and geology.
MrMr. Holtzhausen is chairman of the Finance, Audit and Risk Committees of Strategic Partners in Tourism and its related party the Tourism Micro Enterprises Support Fund, both of which are not-for-profit organizations. Until 28 February 2011, MrMr. Holtzhausen served as a director of KPMG Inc. and KPMG Services (Pty) Ltd, both of which are private companies registered in South Africa and which provided audit, taxation and advisory services.
Dana Roets – Chief Operating Officer
Dana Roets is a qualified Mining Engineer and holds a B.Sc. Mining Engineering degree from Pretoria University (1986) and an MBA from the University of Cape Town (1995). Dana is a South African national with over 24 years of operational and managerial experience in the South African gold and platinum industry. He started his career with Gold Fields at the St Helena Gold Mine as a graduate trainee and progressed via various operational roles from being an underground shift boss to become Vice President and Head of Operations at Kloof Gold Mine in January 1999 at which time Kloof produced over 1,000,000 ounces of gold per annum. More recently, Dana was the COO at Great Basin Gold which had gold mining operations in the United States of America and South Africa. Dana Roets is located at Caledonia’s Africa office in Johannesburg, South Africa.
Dr. Trevor Pearton - B.Sc. Eng. (Mining Geology), Ph.D. (Geology), Pr.Sci.Nat., F.G.S.S.A – Vice President Exploration
Dr. Pearton has worked for Caledonia since 2001. During the time, he was responsible for the establishment and management of the resource bases at the Blanket Mine (operating) and the Barbrook and Eersteling Mines (now under care and maintenance) and the assessment of the Nama project in Zambia. This work resulted in the identification of the Nama copper target and was followed up by the 2009 to 2012 exploration program which identified a large low-grade copper deposit (uneconomic in the current market). Prior to joining Caledonia, Dr. Pearton worked for a number of financial institutions in South Africa as a highly rated gold analyst, as well as consulting to a number of mining companies. He graduated from the University of the Witwatersrand with a BSc Eng. (Mining Geology) and was awarded a PhD in Geology for research into Archaean gold and antimony deposits (Witwatersrand University). He is a registered professional with the South African Council for Natural Scientific Professions and is Caledonia’s Qualified Person (QP) for all technical disclosures. He is a member of the Geological Society of South Africa; elected a Fellow of the Society in 2004, a member of the South African Institute for Mining and Metallurgy and a member of the Witwatersrand University Mining Engineers Association.
Mark Learmonth – Vice-President FinanceDirector and Chief Financial Officer
MrMr. Learmonth joined Caledonia in July 2008. Prior to this, he was a Division Director of Investment Banking at Macquarie First South in South Africa, and has over 17 years of experience in corporate finance and investment banking, predominantly in the resources sector. Mr. Learmonth graduated from Oxford University and is a chartered accountant. He is a member of the Executive Committee of the Chamber of Mines, Zimbabwe and is also a member of the Gold Producers Sub-Committee.
Mr. Learmonth was appointed Vice-President Finance, and Chief Financial Officer of the Company in DecNovember 2014.
John McGloin - Director
John McGloin is the former Chairman and Chief Executive of Amara Mining and is currently a Non-executive director of Perseus Mining. Mr. McGloin joined Caledonia in August 2016, he is a geologist and graduate of Camborne School of Mines.
Mr. McGloin worked for many years in Africa within the mining industry before moving into consultancy. He joined Arbuthnot Banking Group following four years at Evolution Securities as their mining analyst. He is also the former Head of Mining at Collins Stewart.
Maurice Mason - VP Corporate Development and Investor Relations
Mr. Maurice Mason is a dual South African and UK national, resident in London, who holds a BSc in Engineering from the University of Natal, South Africa and an MBA from Henley Management College. Mr. Mason’s career includes positions at Unilever, SABMiller and Anglo American. Most recently, Mr. Mason was director, Equity Research, for Stifel Nicolaus Europe Ltd covering mining companies listed in the UK. Mr. Mason has taken over the day-to-day responsibility for Investor Relations and Corporate Development from Mr. Learmonth, who, since November 2014 had combined this role with that of Chief Financial Officer.
Adam Chester – General Counsel, Company Secretary and Head of Risk and Compliance
In January 2017 Mr Adam Chester joined the management team as General Counsel, Company Secretary and Head of Risk and Compliance. Mr. Chester is a dual qualified lawyer (England and Jersey, Channel Islands) and previously worked as a solicitor of the Supreme Court of England and Wales at international law firms in the City of London and, more recently, as an advocate of the Royal Court of Jersey at an international offshore law firm in which he was a partner. He has approximately 15 years’ experience advising businesses and individuals on a variety of commercial and corporate legal issues.
Arrangements, Understandings, etc.
Caledonia has no arrangements or understanding with any major shareholders, customers, suppliers or others, pursuant to which any person referred to above, was selected as a director or member of senior management.
Summary Compensation Table
Name and principal position | Year | Salary ($) | Share based awards ($) | Option-based awards | Non-equity incentive plan compensation
($)
| Pension value
($)
| All other
compensation
| Total compensation $ |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h)(4)
| (i) |
| | | | | Annual incentive plans
(f1)
| Long-term incentive plans
(f2)
| | | |
Stefan Hayden(1)
Chief Executive Officer
| 2014
2013
2012
| 938,425
485,724
483,655
| -
_
–
| -
-
61,600(2)
| -
131,552
108,994
| -
_
–
| -
_
–
| 45,000
153,599
136,673
| 983,425
770,875
790,922
|
Steve Curtis
Chief(3)
Executive Officer
| 2014
2013
2012
| 452,763
328,691
279,188
| -
_
–
| -
-
52,800(2)
| 66,258
53,550
36,600
| -
_
–
| -
_
–
| 45,000
35,000
25,000
| 564,021
417,241
393,588
|
Dana Roets
Chief Operating Officer
| 2014
2013
| 441,720
119,335
| -
-
| -
-
| 66,258
10,305
| -
-
| -
-
| -
-
| 507,978
129,640
|
Mark Learmonth(3)
Chief Financial Officer
| 2014
2013
2012
| 303,682
179,928
176,821
| -
_
–
| -
-
39,600(2)
| 66,258
25,704
20,628
| -
_
–
| -
_
–
| -
_-
–
| 369,940
205,632
237,049
|
Caxton Mangezi
General Manager and Director of the Blanket Mine
| 2014
2013
2012
| 369,940
304,321
262,932
| -
_
–
| -
-
44,000(2)
| 30,828
44,702
18,802
| -
–
–
| -
–
–
| 11,043
11,158
–
| 411,811
360,181
325,734
|
Trevor Pearton
VP Exploration
| 2014
2013
2012
| 237,425
161,704
170,688
| -
_
–
| -
-
11,000(2)
| 19,786
13,880
13,752
| -
_
-
| -
_
-
| -
_
–
| 257,211
175,584
195,440
|
| Name and principal position | Year | Salary | Long term incentive plan (2) | Annual incentive plans | All other compensation | Total compensation |
| (a) | (b) | (c) | (d) | (e) | (h) | (i) |
Steven Curtis Chief Executive Officer | 2016 2015 2014 | 428,637 428,637 410,085 | 214,282 - - | - - 60,012 | 42,867 (1)180,255 40,758 | 685,786 608,892 510,855 |
Dana Roets Chief Operating Officer | 2016 2015 2014 | 418,182 418,182 400,083 | 140,107 - - | - - 60,012 | 41,818 (1)138,000 - | 600,107 556,182 460,095 |
Mark Learmonth Chief Financial Officer | 2016 2015 2014 | 410,000 360,000 275,057 | 122,410 - - | - - 60,012 | 41,000 (1)154,000 - | 573,410 514,000 335,069 |
Caxton Mangezi General Manager and Director of the Blanket Mine | 2016 2015 2014 | 348,400 348,400 335,069 | 115,383 - - | - - 27,922 | 205,226 (1)190,002 10,002 | 669,009 538,402 372,993 |
Maurice Mason VP Corporate Development and Investor Relations | 2016 2015 2014 | 96,735 - - | 25,610 - - | - - - | - - - | 122,345 - - |
(1) Mr. S. E. Hayden was employed indirectly by Bonuses paid to directors and key management (Refer note 28 of the Company through an agreement with a management company,Consolidated Financial Statements)
(2) Long term incentive plan awards are stated at the fair value and option amount outstanding as detailed in 7B. The amounts shown areat December 31, 2016. None of the amounts presented has been paid to date and will vest on the management company. Mr Hayden resigned as Chief Executive Officer on 6 December 2014 and is no longer employed bydates mentioned in the company.
(2) Thetable below; refer to note 21.2 of the Consolidated Financial Statements for further information. During the year equity share purchase options shown were granted to Mr. J McGloin (Non-Executive Director) that are excluded from this table.
Non-Executive Directors’ fees of $45,000 per annum were paid in 4 equal quarterly payments in advance during fiscal 2016. The non-Executive Directors’ fees will be paid in arrears from fiscal year 2017. The fee was revised in fiscal year 2016 from CAD 45,000 in fiscal year 2015 annually.
Long-term Incentive Plan
The following key management members were granted RSUs and PSUs, pursuant to provisions of the Non-Executive Directors (“NED”)OEICP. The outstanding RSUs and PSUs as at December 31, 2016 were as follows:
| Key management member | Vesting date | RSU’s | PSU’s |
| Steve Curtis | January 11, 2019 | 132,146 | 503,226 |
| Dana Roets | January 11, 2019 | 86,403 | 329,032 |
| Mark Learmonth | January 11, 2019 | 28,801 | 109,677 |
| March 23, 2019 | 56,565 | 219,355 |
| Caxton Mangezi | January 11,2019 | 71,156 | 270,968 |
| Maurice Mason | August 6, 2019 | 26,103 | 102,353 |
| Total | | 401,174 | 1,534,611 |
For further detail on September 10, 2012the RSU’s and expire on September 10, 2017. They were all fully vested atPSU’s refer to note 21.2 of the dateConsolidated Financial Statements.
Refer to item 6E for a breakdown of being granteddirector equity options outstanding, these equity options and are all exercisable at $0.90 per share. The fair value is calculated using the Black Scholes methodology using the following assumptions:their grant dates.
Risk-free interest rate – 1.0%
Expected stock price volatility – 58.37%
Expected option life in years – 5 years
Fair value at grant date - $0.44
(3) Mr S Curtis was appointed as Chief Executive Officer in November 2014 and was replaced by Mr M Learmonth as Chief Financial Officer. Mr Learmonth served as VP Business Development and Investor Relations in previous periods.
(3) | Apart from S E Hayden, the total amount shown in (h) relates to directors fees paid to the NED. |
(4) | Dana Roets was employed in during 2013. The increase in salary occurred due to the cost of his employment being included for a full year during 2014. |
A $45,000 fee is paid to each director annually. This revised fee was effective from July 1, 2013. In addition, certain directors received further fees for their service on certain sub-committees of the board.
The Company has a Stock Option Plan pursuant to which it grants options to directors, offices and key employees from time to time. The numbers of shares covered by the various options granted are determined by the Company’s Compensation Committee subject to approval by the Board of Directors. One hundred percent (100%) of the share purchase options which are presently outstanding are in favor of directors, offices and key employees of the Company and, in some cases, its subsidiaries, and providers of services to the Company or its subsidiaries.
Caledonia does not have a bonus or profit-sharing plan. Caledonia does not have a pension, retirement or similar benefits scheme.scheme for Directors.
The directors all hold their positions for an indefinite term, subject to re-election at each annual general meeting of the shareholders. The officers hold their positions subject to being removed by resolution of the Boardboard of Directors.directors. The term of office of each Directordirector expires as of the date that an Annual General Meetingannual general meeting of the shareholders is held, - subject to the re-election of the Directorsa particular director at such Annual General Meeting.
There are no service contracts between Caledonia and any of the Directors of Caledonia or its subsidiaries except for a service agreement between Greenstone Management Services Proprietary Limited and Mr. Curtis which includes an option to terminate the contract in the event of a change in control of the Company and to receive a severance payment equal to two years’ compensation. If this was triggered as at December 31, 2014 the severance payment would have amounted to US $820,000. The contract also includes a payment of one month’s pay per year of service rendered by Mr Curtis if Caledonia terminates his services. A change in control would constitute:
· the acquisition of more than 50% of the ordinary shares; or
· the acquisition of right to exercise the majority of the voting rights of ordinary shares; or
· the acquisition of the right to appoint the majority of the board of directors; or
· the acquisition of more than 50% of the assets; of
Greenstone Management Service Proprietary Limited or Caledonia Mining Corporation.
annual general meeting. The following persons comprise the following committees:
| Audit | Compensation | Governance | NominatingNomination | Disclosure |
| J Holtzhausen | L Wilson | L Wilson | L Wilson | M Learmonth |
L WilsonJ McGloin | J Kelly | J Kelly | S R CurtisJ Holtzhausen | S R Curtis |
| J Kelly | J Holtzhausen | R PatricioJ Johnstone | J Johnstone | J Holtzhausen |
| | J Johnstone | | | T Pearton |
| R Patricio
| | J McGloin | L Wilson |
| | | | S Curtis | J Kelly |
| | | | | D Roets |
| Technical | Strategic | Life of Mine | | M Mason |
| J Johnstone | L Wilson | L Wilson | | A Chester |
| J Holtzhausen | J Kelly | J Johnstone | | |
| D Roets | S R Curtis | J Holtzhausen | | |
T Pearton | R Patricio | | | |
| J McGloin | M Learmonth | | | |
| S Curtis | D Roets | | | |
| | T PeartonJ McGloin | | | |
| | J Holtzhausen | | | |
| J Johnstone | | | |
| M Mason | | | |
| | | | | |
Terms of reference of the Audit Committee are given in the Charter of the Audit Committee. The Charters of Company Committeesthe other committees are available on the Company’s website or, on request, from the Company’s offices listed in this report.
The Company’s Audit Committee is comprised of the following Directors (i) Johan Holtzhausen (Chair)(Chairperson), (ii) Leigh Alan Wilson,John McGloin, and (iii) John Lawson Kelly. Each member of the Audit Committee is considered independent as defined under NI 52-110 and as defined pursuant to Section 803 of the NYSE MKT Company Guide (as such definition may be modified or supplemented) and considered to be financially literate as such terms are defined under National Instrument 52-110 Audit Committees. The SEC has indicated that the designation of an audit committee financial expert does not make that person an "expert" for any purpose, impose any duties, obligations, or liability on that person that are greater than those imposed on members of the audit committee and board of directors who do not carry this designation, or affect the duties, obligations, or liabilities of any other member of the audit committee.
The average, approximate number of employees, their categories and geographic location for each of the last 5 years are summarized in the table below:
Geographic Location and Number of Employees:
| Employee Location | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | 2012 | 2013 | 2014 | 2015 | 2016 |
| Total Employees | | | | | | | | | | | | | | | | |
| London, United Kingdom | | - | 1 |
| Jersey, Channel Islands | | - | 2 |
| South Africa (African Office) | | | 10 | | | | 10 | | | | 10 | | | | 13 | | | | 14 | | 10 | 13 | 14 | 13 |
Zimbabwe – approx.(i) | | | 794 | | | | 856 | | | | 860 | | | | 1,028 | | | | 1,007 | | 860 | 1,028 | 1,007 | 1,157 | 1,282 |
| South Africa (Mine Security and Operations and Exploration) | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | | 1 | 1 |
| Zambia (Head Office and Security) | | | 8 | | | | 8 | | | | 8 | | | | 8 | | | | 6 | | 8 | 6 | - | - |
| Total Employees at all Locations | | | 813 | | | | 875 | | | | 879 | | | | 1,050 | | | | 1,028 | | 879 | 1,050 | 1,028 | 1,172 | 1,299 |
| | | | | | | | | | | | | | | | | | | | | | | | |
(i) the number of employees in Zimbabwe varies slightly from month-to-month.
| Management and Administration: | | | | | | | | | | | | | | | | |
| Employee Locations: | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | 2012 | 2013 | 2014 | 2015 | 2016 |
| Canada | | | - | | | | - | | | | - | | | | - | | | | - | | |
| London, United Kingdom | | - | 1 |
| Jersey, Channel Islands | | - | 2 |
| Zimbabwe | | | 30 | | | | 30 | | | | 32 | | | | 32 | | | | 36 | | 32 | 36 | 37 | 42 |
| South Africa (African Office) | | | 7 | | | | 7 | | | | 7 | | | | 12 | | | | 12 | | 7 | 12 | 13 |
| South Africa (Exploration and Operations) | | | 2 | | | | 2 | | | | 2 | | | | 1 | | | | 1 | | 2 | 1 | 1 |
| Zambia (Head Office and Security) | | | 4 | | | | 4 | | | | 4 | | | | 4 | | | | 4 | | 4 | - | - |
| Total Management and Administration | | | 43 | | | | 43 | | | | 45 | | | | 49 | | | | 53 | | 45 | 49 | 53 | 50 | 59 |
(a)The direct and indirect shareholdings of the Company’s Directorsdirectors, officers and Officerssenior management as at March 27, 201530, 2017 were as follows:
| | Number of shares | Percentage share holding | | Number of shares | | | Percentage share holding | |
| L Wilson | 72,500 | 0.14% | | | 215,000 | | | | 0.41 | % |
| J Johnstone | 16,000 | 0.03% | | | 40,000 | | | | 0.08 | % |
| S Curtis | 270,000 | 0.52% | | | 420,000 | | | | 0.80 | % |
| M Learmonth | 186,730 | 0.36% | | | 324,750 | | | | 0.62 | % |
| P. Patricio | Nil | - | |
| J. Kelly | Nil | - | | | 57,465 | | | | 0.11 | % |
| D Roets | Nil | - | | Nil | | | | - | |
| T. Pearton | Nil | - | |
| | | | |
| J Holtzhausen | | | | 90,000 | | | | 0.17 | % |
| J McGloin | | | Nil | | | | - | |
| M Mason | | | | 35,000 | | | | 0.07 | % |
| Total | 545,230 | 1.04% | | | 1,182,215 | | | | 2.26 | % |
All of the shares held by the Directorsabove are voting common shares and do not have any different voting or other rights than the other outstanding common shares of the Company.
As at March 27, 2015,30, 2017, the Directorsdirectors, officers and Officers,senior management, collectively, owned 545,230 Common Shares,1,182,215 shares, being approximately 1.04%2.26% of the issued Common Shares.shares.
The information as to shares beneficially owned or controlled or directed, not being within the knowledge of the Company, has been furnished by the respective directors, officers and officers individuallysenior management members individually.
(a) (b) | Share purchase options outstanding as of March 27, 2015:30, 2017: |
| Name | Exercise Price CAD | Expiry Date | Number of Options |
| J Johnstone | 0.90 | September 10, 2018 | 28,000 |
| A Lawson | 0.90 | September 10, 2018 | 3,000 |
| T Pearton | 0.90 | September 10, 2018 | 25,000 |
| C Mangezi | 0.90 | September 10, 2018 | 100,000 |
| P Dell | 0.90 | September 10, 2018 | 3,000 |
| P Human | 0.90 | September 10, 2018 | 5,000 |
| S Smith | 0.90 | September 10, 2018 | 2,400 |
| J Kelly | 0.90 | September 10, 2018 | 90,000 |
| R Patricio | 0.90 | September 10, 2018 | 90,000 |
| DSA Corporate Services | 0.80 | October 7, 2020 | 25,000 |
| J McGloin | 2.30 | October 13, 2021 | 90,000 |
| TOTAL | | | 461,400 |
| Name | Exercise Price C$ | | Expiry Date | | Number of Options |
| J Johnstone | 0.90 | | August 31, 2017 | | 40,000 |
| J Johnstone | 1.30 | | January 31, 2016 | | 160,000 |
| L Wilson | 0.90 | | August 31, 2017 | | 90,000 |
| C Jonsson | 0.90 | | August 31, 2017 | | 40,000 |
| C Jonsson | 1.30 | | January 31, 2016 | | 160,000 |
| J Liswaniso | 0.90 | | August 31, 2017 | | 7,500 |
| J Liswaniso | 1.30 | | January 31, 2016 | | 10,000 |
| M Learmonth | 0.90 | | August 31, 2017 | | 89,020 |
| M Learmonth | 1.30 | | January 31, 2016 | | 150,000 |
| A Lawson | 0.90 | | August 31, 2017 | | 3,000 |
| A Lawson | 1.30 | | January 31, 2016 | | 7,500 |
| T Pearton | 0.90 | | August 31, 2017 | | 25,000 |
| T Pearton | 1.30 | | January 31, 2016 | | 25,000 |
| SR Curtis | 0.70 | | May 11, 2016 | | 30,000 |
| SR Curtis | 0.90 | | August 31, 2017 | | 120,000 |
| SR Curtis | 1.30 | | January 31, 2016 | | 250,000 |
Caledonia Holdings Africa(1) | 0.90 | | August 31, 2017 | | 103,000 |
Caledonia Holdings Africa(1) | 1.30 | | January 31, 2016 | | 207,500 |
| R Babensee | 0.90 | | August 31, 2017 | | 40,000 |
| R Babensee | 1.30 | | January 31, 2016 | | 175,000 |
| P Human | 0.90 | | August 31, 2017 | | 5,000 |
| P Human | 1.30 | | January 31, 2016 | | 10,000 |
| S Smith | 1.30 | | January 31, 2016 | | 6,000 |
| S Smith | 0.90 | | August 31, 2017 | | 2,400 |
| J Kelly | 0.90 | | August 31, 2017 | | 90,000 |
| R Patricio | 0.90 | | August 31, 2017 | | 90,000 |
| D Roets | 0.72 | | November 21, 2018 | | 100,000 |
| J Holtzhausen | 0.72 | | November 21, 2018 | | 90,000 |
| TOTAL | | | | | 2,125,920 |
(1)The options granted to Caledonia Holdings (Africa) Limited – a subsidiary of Caledonia – are for the benefit of certain employees of a subsidiary of Caledonia.
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
To the best of Caledonia's knowledge, as of December 31, 20142016 there was one shareholder that beneficially owned, directly or indirectly, or exercises control or direction over more than 5% of the voting shares of Caledonia – beingCaledonia. Allan Gray, a South Africanan investment trust/fund manager, which owns 6,382,500 ordinaryowned 8,431,000 shares of the Company, representing 12.25 per cent15.97% of the current issued share capital of the Company.Company as at December 31, 2016.
The only shares issued by Caledonia are common shares. All shareholders have the same voting rights as all other shareholders of Caledonia.
To the best of the knowledge of Caledonia, based on information in its Share Registershare register on January 24, 2015,March 30, 2017, the portion of the common shares of Caledonia is held in the following geographic locations:
Geographic Area | Number of Shares Held | Percentage of Issued Shares |
| USA | 22,108,122 | 42.42% |
| Canada | 16,796,148 | 32.23% |
| South Africa | 8,542,838 | 16.39% |
| England | 3,350,860 | 6.43% |
| Other | 1,319,940 | 2.53% |
| | 52,117,908 | 100% |
There are 2,578 recorded holders of the Company’s issued shares. Geographic Area | | Number of Shares Held | | | Percentage of Issued Shares | |
USA | | | 20,469,964 | | | | 38.77 | % |
| Canada | | | 16,092,913 | | | | 30.49 | % |
| United Kingdom | | | 15,672,353 | | | | 29.69 | % |
| Other | | | 552,236 | | | | 1.05 | % |
| | | | 52,787,466 | | | | 100 | % |
Caledonia is not, to the best of its knowledge, directly or indirectly owned or controlled by another corporation or corporations, by any other natural or legal person or persons severally or jointly or by any foreign government.
Caledonia is not aware of any arrangement, the operation of which may at some subsequent date result in a change of control of Caledonia.
The foregoing information in this paragraph is based exclusively on information with respect to recorded shareholders in the Company’s shareholdersshare register. The Company does not have actual information available as to who may be the beneficial owners of the Company’s issued shares and, specifically, does not know the identity of the beneficial owners of the shares who are registered in two large intermediaries.
| B. | Related Party Transactions |
The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows:
Related Party Transactions42
| $’000 | 2014 | 2015 | 2016 |
| Key management salaries and bonuses | 1,781 | 2,452 | 2,033 |
Share-based payment awards (1) | - | 24 | 788 |
| | 1,781 | 2,476 | 2,821 |
(1) Refer to note 21.1 and 21.2 of the Consolidated Financial Statement for detail of equity and cash settled share based payment awards.
Employees, officers, directors, consultants and other service providers also participate in Caledonia’s share option program (see note 21 of the Consolidated Financial Statements). Group entities of Caledonia are set out in note 29 of the Consolidated Financial Statements. The share option plan is filed as exhibit 4.1 of the Annual Report.
As at December 31, 2016 employee contracts between the Company or Caledonia Mining South Africa Proprietary Limited and key management, include an option for respective key management to terminate such employee contract in the event of a change in control of the Company and to receive a severance payment equal to two years’ compensation. If this was triggered as at December 31, 2016 the severance payment would have amounted to $4,646,000 (2015: $3,578,000; 2014: $3,611,000). A change in control would constitute:
Caledonia had · | the following related party transactions:acquisition of more than 50% of the shares; or |
| | Note | 2014 | 2013 | 2012 | 2014 | 2013 |
| | | $ | $ | $ | $ | $ |
| Management contract fees, allowances and bonus paid or accrued to a company for management services provided by the Group’s former President and Chief Executive Officer. | (i) | 938 | 736 | 704 | - | - |
| Rent for office premises paid to a company owned by members of the former President’s family. | (ii) | 142 | 38 | 43 | - | - |
| Legal fees and disbursements up to retirement. | | - | 88 | 111 | - | - |
| Directors fees paid. | | 326 | 285 | 215 | - | - |
| · | the acquisition of the right to exercise the majority of the voting rights of the shares; or |
(i)· | On July 15, 2014 Caledonia served a six month notice to Epicure Overseas S.A. for the terminationacquisition of the contract between Caledonia and Epicure forright to appoint the provisionmajority of the servicesboard of Mr. Stefan Hayden, who was at that time Caledonia’s President and Chief Executive Officer (“CEO”). Negotiations for alternative arrangements to secure directors; or |
| · | the continued servicesacquisition of Mr. Hayden as President and CEO failed to reach agreement. Accordingly, on November 18, 2014 Mr. Hayden stepped down as President and CEO and on December 6, 2014, Mr. Hayden resigned as a director of Caledonia. No payments othermore than the contractual payments that were due to Epicure Overseas SA for the provision50% of the servicesassets of Mr. Hayden during the notice period were made.Caledonia. |
(ii) | The contract expires September 2015. |
These related party transactions were in the normal course of operations and are recorded at the exchange amount.
| C. | Interests of Experts and Counsel |
Not Applicable.
ITEM 8 - FINANCIAL INFORMATION
| A. | Consolidated Statements and Other Financial Information |
This Annual Report contains the audited consolidated financial statementsConsolidated Financial Statements which comprise the consolidated statements of financial position as at December 31, 20142016 and December 31, 20132015 and the related consolidated statements of profit or loss and other comprehensive income, consolidated statementstatements of changes in equity and consolidated statementstatements of cash flows for the 12 month periodsthree years ended December 31, 2014,2016, December 31, 20132015 and December 31, 2012.
2014.
Reference is made to page 6261 where the financial statementsConsolidated Financial Statements are filed as part of this annual reportAnnual Report on pages F1 – F48F58
Dividend Policy
Caledonia paid its inaugural dividend of 5 Canadian cents per share in February 2013 following a capital re-structure which was approved by shareholders in January 2013 which allowed it to make dividend payments. The inaugural dividend did not relate to any specific accounting period. Caledonia paid a further dividend of 5 Canadian cents per share in April 2013 in respect of the earnings for the year to December 31, 2012.
On November 25, 2013 Caledonia announced a revised dividend policy in terms ofpursuant to which it intended to pay a dividend of 6 Canadian cents per share in 2014, split into 4 equal quarterly payments of 1.5 Canadian cents per share. The first quarterly dividend was paid on January 31, 20142014; further payments were made quarterly thereafter.
Following the announcement on December 16, 2015 that henceforth Caledonia will report its financial results in USD, the quarterly dividend that was paid at the end of January 2016 was declared and subsequentdenominated in USD as 1.125 United States cents. A further quarterly dividend of 1.125 United States cents was paid at the end of April 2016.
On July 5, 2016 Caledonia announced a quarterly dividend of 1.375 United States cents per share, which was paid at the end of July 2016; further dividends of 1.375 United States cents were paid at the end of April, JulyOctober 2016 and October 2014 and at the end of January 2015.2017. The increased dividend represents Caledonia’s revised dividend policy. It is currently envisaged that the existing dividend policy of 65.5 United States cents per annum paid in equal quarterly instalments will be maintained in 2015. Caledonia will consider further dividends thereafter in the context of the prevailing commercial environment and expects to provide guidance for dividend payments in 2016 at or about the time of the Q2 results in August 2015.
2017.
There are currently no restrictions on the Company which would prevent it from paying dividends.
With effect from December 5, 2013, Caledonia appointed Computershare Investor Services Inc. as its transfer agent and registrar and dividend disbursing agent. Following the appointment of Computershare, Shareholders in the USA and UK now receive their dividends denominated in US Dollars and Pounds Sterling respectively. All other shareholders will continue to be paid in Canadian dollars. Computershare also offers Direct Registration System (“DRS”) services for Caledonia shareholders who do not wish to hold their shares in nominee accounts in the name of their financial adviser or stock-broker. Shareholders who wish to participate in the DRS should contact Computershare using the contact details set out below:
Computershare Canada and USA Toll-free North American Number 1-800-564-6253
For Shareholders outside North America 1-514-982-7555
Computershare UK +44 (0)870 702 0000
Legal Proceedings and Regulatory Actions
To our knowledge, there are no legal proceedings material to us to which we are or were a party to or of which any of our properties are or were the subject of, during the financial year ended December 31, 20142016 nor are there any such proceedings known to us to be contemplated, which would materially impact our financial position or ability to continue as a going concern.
During the twelve-month period ended December 31, 2014,2016, there were no (i) penalties or sanctions imposed against us by a court relating to securities legislation or by a securities regulatory authority; (ii) penalties or sanctions imposed by a court or regulatory body against us that would likely be considered important to a reasonable investor in making an investment decision, or (iii) settlement agreements we entered into before a court relating to securities legislation or with a securities regulatory authority.
We have not experienced any significant changes since the date of the financial statementsConsolidated Financial Statements included with this Annual Report except as disclosed in this Annual Report.
| ITEM 9 - THE OFFERING AND LISTING |
| A. | Offering and Listing Details |
The Common Sharesshares of the Company arehave been quoted for trading in the U.S. on the OTCQX under “CALVF” since October 2011 and depositary interests representing the shares have been admitted to trading on the AIM Market in London under symbol “CMCL” since June 27, 2005. The principal marketplace for the Company is the listingtrading of the Common Sharesdepositary interests on the Toronto Stock Exchange under symbol “CAL”.AIM. During the year ended December 31, 2014, 15,332,415 Common Shares2016, 10,206,200 depository interests were traded on the Toronto Stock ExchangeAIM at prices that ranged between a high of $1.20£1.43 and a low of $0.60£0.38 per Common Share.depository interest.
The high and low market prices expressed in Canadian dollarPounds Sterling on the Toronto Stock ExchangeAIM for our Common Sharesdepositary interests for the last five financial years, for the last six months, and each quarter for the last three fiscal years:years is as follows:
| | AIM
(Pound Sterling) |
Last Six Months | High | Low |
| March 2017 (up to 13 March) | 1.14 | 1.12 |
| February 2017 | 1.18 | 1.12 |
| January 2017 | 1.18 | 0.83 |
| December 2016 | 0.88 | 0.77 |
| November 2016 | 1.33 | 0.84 |
| October 2016 | 1.43 | 1.25 |
| September 2016 | 1.37 | 1.00 |
| | | |
2016 | High | Low |
| Fourth Quarter ended December 31, 2016 | 1.43 | 0.77 |
| Third Quarter ended September 31, 2016 | 1.37 | 0.75 |
| Second Quarter ended June 30, 2016 | 0.74 | 0.57 |
| First Quarter ended March 31, 2016 | 0.59 | 0.38 |
| | | |
2015 | High | Low |
| Fourth Quarter ended December 31, 2015 | 0.44 | 0.37 |
| Third Quarter ended September 31, 2015 | 0.49 | 0.36 |
| Second Quarter ended June 30, 2015 | 0.48 | 0.34 |
| First Quarter ended March 31, 2015 | 0.38 | 0.33 |
| | | |
2014 | High | Low |
| Fourth Quarter ended December 31, 2014 | 0.49 | 0.30 |
| Third Quarter ended September 31, 2014 | 0.50 | 0.42 |
| Second Quarter ended June 30, 2014 | 0.42 | 0.35 |
| First Quarter ended March 31, 2014 | 0.38 | 0.27 |
| | | |
2013 | High | Low |
| Fourth Quarter ended December 31, 2013 | 0.38 | 0.34 |
| Third Quarter ended September 31, 2013 | 0.47 | 0.38 |
| Second Quarter ended June 30, 2013 | 0.70 | 0.47 |
| First Quarter ended March 31, 2013 | 0.66 | 0.45 |
| | | |
Last Five Fiscal Years | High | Low |
| 2016 | 1.43 | 0.38 |
| 2015 | 0.49 | 0.33 |
| 2014 | 0.50 | 0.27 |
| 2013 | 0.70 | 0.34 |
| 2012 | 0.63 | 0.33 |
| | TSX Exchange (Canadian Dollars) |
| Last Six Months | | |
| March 2015 | 0.73 | 0.72 |
| February 2015 | 0.74 | 0.72 |
| January 2015 | 0.78 | 0.75 |
| December 2014 | 0.70 | 0.67 |
| November 2014 | 0.75 | 0.70 |
| October 2014 | 0.85 | 0.83 |
| | | |
| 2014 | | |
| Fourth Quarter ended December 31, 2014 | 0.81 | 0.77 |
| Third Quarter ended September 31, 2014 | 1.10 | 1.07 |
| Second Quarter ended June 30, 2014 | 0.87 | 0.85 |
| First Quarter ended March 31, 2014 | 0.80 | 0.77 |
| | | |
| 2013 | | |
| Fourth Quarter ended December 31, 2013 | 0.82 | 0.67 |
| Third Quarter ended September 31, 2013 | 0.98 | 0.74 |
| Second Quarter ended June 30, 2013 | 1.20 | 1.15 |
| First Quarter ended March 31, 2013 | 1.40 | 0.95 |
| | | |
| 2012 | | |
| Fourth Quarter ended December 31, 2012 | 1.10 | 0.90 |
| Third Quarter ended September 31, 2012 | 1.10 | 0.60 |
| Second Quarter ended June 30, 2012 | 0.90 | 0.65 |
| First Quarter ended March 31, 2012 | 1.25 | 0.80 |
| | | |
| Last Five Fiscal Years | | |
| 2014 | 0.90 | 0.86 |
| 2013 | 1.40 | 0.67 |
| 2012 | 1.25 | 0.60 |
| 2011 | 1.45 | 0.65 |
| 2010 | 1.70 | 0.55 |
The high and low market prices expressed in United States dollarCanadian dollars on the OTCQXToronto Stock Exchange for our Common Sharesshares for the last five financial years, for the last six months, and each quarter for the last three fiscal years are as follows:
| | TSX
(Canadian Dollars) |
Last Six Months | High | Low |
| March 2017 (up to 14 March) | 1.86 | 1.80 |
| February 2017 | 1.98 | 1.77 |
| January 2017 | 1.89 | 1.54 |
| December 2016 | 1.45 | 1.28 |
| November 2016 | 2.23 | 1.35 |
| October 2016 | 2.39 | 2.09 |
| September 2016 | 2.35 | 1.71 |
| | | |
2016 | High | Low |
| Fourth Quarter ended December 31, 2016 | 2.39 | 1.28 |
| Third Quarter ended September 31, 2016 | 2.35 | 1.30 |
| Second Quarter ended June 30, 2016 | 1.40 | 1.05 |
| First Quarter ended March 31, 2016 | 1.12 | 0.79 |
| | | |
2015 | High | Low |
| Fourth Quarter ended December 31, 2015 | 0.84 | 0.67 |
| Third Quarter ended September 31, 2015 | 0.96 | 0.70 |
| Second Quarter ended June 30, 2015 | 0.95 | 0.66 |
| First Quarter ended March 31, 2015 | 0.75 | 0.62 |
| | | |
2014 | High | Low |
| Fourth Quarter ended December 31, 2014 | 0.81 | 0.77 |
| Third Quarter ended September 31, 2014 | 1.10 | 1.07 |
| Second Quarter ended June 30, 2014 | 0.87 | 0.85 |
| First Quarter ended March 31, 2014 | 0.80 | 0.77 |
| | | |
Last Five Fiscal Years | High | Low |
| 2016 | 2.39 | 0.79 |
| 2015 | 0.96 | 0.62 |
| 2014 | 0.90 | 0.86 |
| 2013 | 1.40 | 0.67 |
| 2012 | 1.25 | 0.60 |
The high and low market prices expressed in USD on the OTCQX for our shares for the last five financial years, for the last six months, and each quarter for the last three fiscal years is as follows:
| | OTCQX (United States Dollar) |
| Last Six Months | | |
| March 2015 | 0.59 | 0.58 |
| February 2015 | 0.60 | 0.57 |
| January 2015 | 0.64 | 0.62 |
| December 2014 | 0.61 | 0.58 |
| November 2014 | 0.65 | 0.62 |
| October 2014 | 0.76 | 0.70 |
| | | |
| | | |
| 2014 | | |
| Fourth Quarter ended December 31, 2014 | 0.71 | 0.56 |
| Third Quarter ended September 31, 2014 | 1.01 | 0.98 |
| Second Quarter ended June 30, 2014 | 0.80 | 0.78 |
| First Quarter ended March 31, 2014 | 0.73 | 0.70 |
| | | |
| 2013 | | |
| Fourth Quarter ended December 31, 2013 | 0.85 | 0.65 |
| Third Quarter ended September 31, 2013 | 0.94 | 0.68 |
| Second Quarter ended June 30, 2013 | 1.21 | 1.20 |
| First Quarter ended March 31, 2013 | 1.35 | 0.95 |
| | | |
| 2012 | | |
| Fourth Quarter ended December 31, 2012 | 1.12 | 0.88 |
| Third Quarter ended September 31, 2012 | 1.10 | 0.65 |
| Second Quarter ended June 30, 2012 | 0.96 | 0.68 |
| First Quarter ended March 31, 2012 | 1.25 | 0.84 |
| | | |
| Last Five Fiscal Years | | |
| 2014 | 0.81 | 0.78 |
| 2013 | 1.45 | 0.65 |
| 2012 | 1.25 | 0.65 |
| 2011 | 1.58 | 0.63 |
| 2010 | 1.60 | 0.52 |
| | OTCQX
(USD) |
Last Six Months | High | Low |
| March 2017 (up to 13 March) | 1.37 | 1.33 |
| February 2017 | 1.53 | 1.36 |
| January 2017 | 1.45 | 1.16 |
| December 2016 | 1.14 | 0.96 |
| November 2016 | 1.68 | 1.00 |
| October 2016 | 1.82 | 1.55 |
| September 2016 | 1.77 | 1.31 |
| | | |
2016 | High | Low |
| Fourth Quarter ended December 31, 2016 | 1.82 | 0.96 |
| Third Quarter ended September 31, 2016 | 1.77 | 0.98 |
| Second Quarter ended June 30, 2016 | 1.09 | 0.79 |
| First Quarter ended March 31, 2016 | 0.89 | 0.54 |
| | | |
2015 | High | Low |
| Fourth Quarter ended December 31, 2015 | 0.66 | 0.49 |
| Third Quarter ended September 31, 2015 | 0.76 | 0.53 |
| Second Quarter ended June 30, 2015 | 0.79 | 0.52 |
| First Quarter ended March 31, 2015 | 0.63 | 0.51 |
| | | |
2014 | High | Low |
| Fourth Quarter ended December 31, 2014 | 0.71 | 0.56 |
| Third Quarter ended September 31, 2014 | 1.01 | 0.98 |
| Second Quarter ended June 30, 2014 | 0.80 | 0.78 |
| First Quarter ended March 31, 2014 | 0.73 | 0.70 |
| | | |
Last Five Fiscal Years | High | Low |
| 2016 | 1.82 | 0.54 |
| 2015 | 0.79 | 0.49 |
| 2014 | 0.81 | 0.78 |
| 2013 | 1.45 | 0.65 |
| 2012 | 1.25 | 0.65 |
| ITEM 10 - ADDITIONAL INFORMATION |
Not Applicable.
| B. | Memorandum and Articles of Association |
Securities Registrar
Computershare Investor Services Inc. is the transfer agent and registrar for the common shares at its principal office in the City of Toronto, with branch registrars of transfers at Computershare Trust Company, N.A office in the City of Golden, Colorado. Computershare Investor Services at its principal office in Bristol, United Kingdom is the Transfer Agenttransfer agent for the Depositary Interests.depositary interests.
Place of Incorporation and Purpose
The Company was incorporated, effective February 5, 1992, by the amalgamation of three predecessor companies. It exists pursuant towas registered in terms of the Canada Business Corporations Act (the “CBCA”“CBCA”). The company re-domiciled to Jersey effective March 19, 2016 through a process called Continuance. The Continuance had no appreciable effect on the Company’s listing in Toronto, the admission of its depositary interests to trading on AIM in London or the trading facility on the OTCQX and the Company’s securities continued to be traded on these listing and trading platforms after the Continuance process was completed.
Memorandum and Articles of IncorporationAssociation
The Company’s
At a special meeting of shareholders held on February 18, 2016, Caledonia’s shareholders voted in favor of a resolution to approve the Continuance. This resolution, inter alia, included provisions to replace Caledonia’s by-laws with new articles of incorporationassociation (the “Articles of Association”). The Articles of Association do not place any restrictions on the Company’s business. The authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited number of preference shares. As of March 27, 2015 52,117,908 Common Shares were issued and outstanding and there were no preference shares issued or outstanding.
The holders of the Common Sharesshares are entitled to one vote per share at all meetings of the shareholders of the Company. The holders of Common Sharesshares are also entitled to dividends, if and when declared, by the directors of the Company and the distribution of the residual assets of the Company in the event of a liquidation, dissolution or winding up of the Company. The Company's Common Sharesshares do not have pre-emptive rights to purchase additional shares.
No preference shares are currently issued and outstanding. Preference shares may be issued from time to time in one or more series composed of such number of shares with such preference, deferred or other special rights, privileges, restrictions and conditions as specified in the Articles of Association or as fixed before such issuance by a resolution passed by the directors and confirmed and declared by articles of amendment.shareholders by a special resolution. The preference shares shall be entitled to preference over Common Sharesshares in respect of the payment of dividends and shall have priority over the Common Shares in the event of a distribution of residual assets of the Company in the event of a liquidation, dissolution or windupwinding up of the Company. Please see ExhibitsExhibit 1.1 and 1.2 for details in respect of the rights, privileges, restrictions and conditions attaching to the Common Sharesshares and Preferred Shares.preference shares. The rights attaching to the Common Shares andshares or the Preferred Sharespreference shares can only be modified by the affirmative vote of at least two-thirds of the votes cast at a meeting of the relevant shareholders called for that purpose.
Certain Powers of Directors
The CBCA requires that every director or officer who is a party to a material contract or transaction or a proposed material contract or transaction with the Company, or who is a director or officer of, or has a material interest in, any person who is a party to a material contract or transaction or a proposed material contract or transaction with the Company, shall disclose in writing to the Company or request to have entered in the minutes of the meetings of directors the nature and extent of his or her interest, and shall refrain from voting in respect of the material contract or transaction or proposed material contract or transaction unless the contract or transaction is: (a) one relating primarily to his or her remuneration as a director, officer, employee or agent of the Company or an affiliate; (b) one for indemnity of or insurance for directors as contemplated under the CBCA; or (c) one with an affiliate. However, a director who is prohibited by the CBCA from voting on a material contract or proposed material contract may be counted in determining whether a quorum is present for the purpose of the resolution, if the director disclosed his or her interest in accordance with the CBCA, the directors approved the contract or transaction and the contract or transaction was reasonable and fair to the Company at the time it was approved.
The directors may, by resolution, amend or repeal any by-laws that regulate the business or affairs of the Company unless the articles, the bylaws or a unanimous shareholder agreement provide otherwise. The CBCA requires the directors to submit any such amendment or repeal to the Company’s shareholders at the next meeting of shareholders, and the shareholders may confirm, reject or amend the amendment or repeal.
Meetings of Shareholders
The CBCAArticles of Association requires the Company to call an annual shareholders'general meeting of shareholders within 1513 months after holding the last preceding annual general meeting but not later than six months after the end of the Company’s preceding financial year and permits the Company to call a special shareholders'any other meeting of shareholders at any time. In addition, in accordance with the CBCA, the holders of not less than 5% of the Company’s shares carrying the right to vote at a meeting sought to be held may requisition the Company’s directors to call a special shareholders' meeting for the purposes stated in the requisition. The Company is required to mail a notice of meeting and management information circular to registered shareholders not less than 21 clear days and not more than 60 days prior to the date of any annual or special shareholders' meeting.other general meeting of shareholders. These materials must also arebe filed with Canadian securities regulatory authorities. The Company’s by-lawsArticles of Association provide that a quorum of two shareholders in person or represented by proxy holding or representing by proxy not less than 5% of the Company’s issued shares carrying the right to vote at the meeting is required to transact business at a shareholders'general meeting. Shareholders, and their duly appointed proxies and corporate representatives, as well as the Company's auditors, are entitled to be admitted to the Company's annual and special shareholders' meetings.other general meetings of shareholders.
Limitations on the Right to Own Securities
There are no limitations on the rights to own securities.securities in the Company.
Limitations on Restructuring
There is no provision in ourthe Articles or Bylawsof Association that would have the effect of placing any limitations on any corporate restructuring in addition to what would otherwise be required by applicable law.
Disclosure of Share Ownership
There are no provisionsThe Articles of Association permit the Company to give a disclosure notice to any person that the Company has reasonable cause to believe is/was interested in our Bylaws governing the ownershipCompany’s shares within the preceding three years; such notice may require the person to inform the Company whether that person holds/has held an interest in the Company’s shares. The Articles of Association also incorporate by reference certain of the disclosure and transparency rules (“DTR”) published by the UK's Financial Conduct Authority (“FCA”). The DTR include, inter alia, a requirement that a shareholder must notify the Company of the percentage of its voting rights (held directly and indirectly) if the percentage of those voting rights reaches, exceeds or falls below 3%, of the Company’s issued voting securities and each 1% threshold above which shareholder ownership must be disclosed.3%.
We enter into various contracts in the normal course of business. However, there are no material contracts outside of the normal course of business to report here.in this Annual Report.
There are no governmental laws, decrees or regulations existing in CanadaJersey (where Caledonia is incorporated), which restrict the export or import of capital, or the remittance of dividends, interest or other payments to non-resident holders of Caledonia's securities. Norsecurities, nor does CanadaJersey have foreign exchange currency controls. Nor do any such restrictions existExchange control approvals from the RBZ and the Reserve Bank of South Africa are required on the flow of funds in Zimbabwe.and out of Zimbabwe and South Africa; Caledonia has not encountered difficulty in obtaining all of its required approvals.
Certain United States Federal Income Tax Considerations
The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of Common Shares. shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of Common Shares.shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including without limitation specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares.shares. In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax consequences relating to the acquisition, ownership, and disposition of Common Shares. shares.
No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary are based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”“Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.
U.S. Holders
For purposes of this summary, the term "U.S. Holder" means a beneficial owner of Common Sharesshares that is for U.S. federal income tax purposes:
| · | an individual who is a citizen or resident of the U.S.; |
| · | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the U.S., any state thereof or the District of Columbia; |
| · | an estate whose income is subject to U.S. federal income taxation regardless of its source; or |
| · | a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar;USD; (e) own Common Sharesshares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) acquired Common Sharesshares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) hold Common Sharesshares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); or (h) own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold Common Sharesshares in connection with carrying on a business in Canada; (d) persons whose Common Sharesshares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax consequences relating to the acquisition, ownership and disposition of Common Shares.
If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds Common Shares,shares, the U.S. federal income tax consequences to such entity and the partners (or other owners) of such entity generally will depend on the activities of the entity and the status of such partners (or owners). This summary does not address the tax consequences to any such owner. Partners (or other owners) of entities or arrangements that are classified as partnerships or as “pass-through” entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of Common Shares.shares.
Ownership and Disposition of Common Sharesshares
The following discussion is subject to the rules described below under the heading “Passive Foreign Investment Company Rules.”
Taxation of Distributions
A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a Common Shareshare will be required to include the amount of such distribution in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the Common Sharesshares and thereafter as gain from the sale or exchange of such Common Sharesshares (see “Sale or Other Taxable Disposition of Common Shares”shares” below). However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution by the Company with respect to the Common Sharesshares will constitute ordinary dividend income. Dividends received on Common Sharesshares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction”. Subject to applicable limitations and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention, or the shares are readily tradable on a United States securities market dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC (as defined below) in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Sharesshares
A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of Common Sharesshares in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holder’s tax basis in such Common Sharesshares sold or otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if, at the time of the sale or other disposition, such Common Sharesshares are held for more than one year.
Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.
Passive Foreign Investment Company (“PFIC”) Rules
If the Company were to constitute a PFIC for any year during a U.S. Holder’s holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of Common Shares.shares. The Company believes that it was not a PFIC for the tax year ended December 31, 2014.2016. No opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or is currently planned to be requested. However, PFIC classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in question, and is determined annually. Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. Consequently, there can be no assurance that the Company has never been and will not become a PFIC for any tax year during which U.S. Holders hold Common Shares.shares.
In addition, in any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. A failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621.
The Company generally will be a PFIC under Section 1297 of the Code if, after the application of certain “look-through” rules with respect to subsidiaries in which the Company holds at least 25% of the value of such subsidiary, for a tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income (the “income test”) or (b) 50% or more of the value of the Company’s assets either produce passive income or are held for the production of passive income (the “asset test”), based on the quarterly average of the fair market value of such assets. “Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation’s commodities are stock in trade or inventory, depreciable property used in a trade or business or supplies regularly used or consumed in the ordinary course of its trade or business, and certain other requirements are satisfied.
If the Company were a PFIC in any tax year during which a U.S. Holder held Common Shares,shares, such holder generally would be subject to special rules with respect to “excess distributions” made by the Company on the Common Sharesshares and with respect to gain from the disposition of Common Shares.shares. An “excess distribution” generally is defined as the excess of distributions with respect to the Common Sharesshares received by a U.S Holder in any tax year over 125% of the average annual distributions such U.S. Holder has received from the Company during the shorter of the three preceding tax years, or such U.S. Holder’s holding period for the Common Shares.shares. Generally, a U.S. Holder would be required to allocate any excess distribution or gain from the disposition of the Common Sharesshares ratably over its holding period for the Common Shares.shares. Such amounts allocated to the year of the disposition or excess distribution would be taxed as ordinary income, and amounts allocated to prior tax years would be taxed as ordinary income at the highest tax rate in effect for each such year and an interest charge at a rate applicable to underpayments of tax would apply.
While there are U.S. federal income tax elections that sometimes can be made to mitigate these adverse tax consequences (including the “QEF Election” under Section 1295 of the Code and the “Mark-to-Market Election” under Section 1296 of the Code), such elections are available in limited circumstances and must be made in a timely manner.
U.S. Holders should be aware that, for each tax year, if any, that the Company is a PFIC, the Company can provide no assurances that it will satisfy the record keeping requirements of a PFIC, or that it will make available to U.S. Holders the information such U.S. Holders require to make a QEF Election with respect to the Company or any subsidiary that also is classified as a PFIC. U.S. Holders should consult their own tax advisors regarding the potential application of the PFIC rules to the ownership and disposition of Common Shares,shares, and the availability of certain U.S. tax elections under the PFIC rules.
Additional Considerations
Additional Tax on Passive Income
Certain individuals, estates and trusts whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surtax on “net investment income” including, among other things, dividends and net gain from disposition of property (other than property held in certain trades or businesses). Special rules apply to PFICs. U.S. Holders should consult their own tax advisors regarding the effect, if any, of this tax on their ownership and disposition of Common Shares.shares.
Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of Common Shares,shares, generally will be equal to the U.S. dollarUSD value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollarsUSD at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollarUSD value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method with respect to foreign currency received upon the sale, exchange or other taxable disposition of the Common Shares.shares. Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common Sharesshares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution with respect to the Common Sharesshares that is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U. S.U.S. Holders may be subject to these reporting requirements unless their Common Sharesshares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, Common Sharesshares will generally be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.
The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules.
| F. | Dividends and Paying Agents |
Not Applicable.
Not Applicable.
Any statement in this Annual Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this Annual Report, the contract or document is deemed to modify the description contained in this Annual Report. Readers must review the exhibits themselves for a complete description of the contract or document.
Readers may review a copy of our filings with the SEC, including exhibits and schedules filed with it, at the SEC's public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. Readers may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC maintains a Web sitewebsite (http://www.sec.gov) that contains reports, submissions and other information regarding registrants that file electronically with the SEC. We have only recently become subject to the requirement to file electronically through the EDGAR system most of itsour securities documents, including registration statements under the Securities Act of 1933, as amended and registration statements, reports and other documents under the Securities Exchange Act of 1934, as amended (the "Exchange Act").Act.
We also file certain reports with the Canadian Securities Administrators that you may obtain through access of the SEDAR website, www.sedar.com.www.sedar.com.
Readers may read and copy any reports, statements or other information that we file with the SEC at the address indicated above and may also access them electronically at the Web sitewebsite set forth above. These SEC filings are also available to the public from commercial document retrieval services.
We are required to file reports and other information with the SEC under the Exchange Act. Reports and other information filed by us with the SEC may be inspected and copied at the SEC's public reference facilities described above. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in section 16 of the Exchange Act. Under the Exchange Act, as a foreign private issuer, we are not required to publish financial statements as frequently or as promptly as United States companies.
Copies of our material contracts are kept at our principal executive office.
Not Applicable.
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The CorporationCompany is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on preservation of capital, and protecting current and future Company assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.
The Boardboard of Directorsdirectors of the Company has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Company’s Audit Committee oversees management’s compliance with the Company’s financial risk management policy.
The fair value of the Company’s financial instruments approximates their carrying value unless otherwise noted. The types of risk exposure and the way in which such exposures are managed are as follows:
AsCaledonia’s group of companies (the “Group”) is exposed to currency risk to the Group operatesextent that there is a mismatch between the currency that it transacts in an international environment, some ofand the Group’s financial instruments and transactions are denominated in currencies other than the Canadian Dollar.functional currency. The results of the Group’s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Group are reported in Canadian dollarsUSD in the Group’s consolidated financial statements.Consolidated Financial Statements.
The fluctuation of the Canadian dollarUSD in relation to other currencies that entities, within the Group, may transact in will consequently have an impact upon the profitability of the Group and may also affect the value of the Group’s assets and liabilities and the amount of shareholders’ equity.
liabilities. As noted below, the Group has certain financial assets and liabilities denominated in foreign currencies.currencies other than the functional currency of the Company. The Group does not use any derivative instruments to reduce its foreign currency risks. To reduce exposure to currency transaction risk, the Group predominantly maintains cash and cash equivalents in the currencies used by the GroupUSD to avoid foreign exchange exposure and to meet short‐term liquidity requirements.
Below isSensitivity analysis
As a summaryresult of the Group’s monetary assets and liabilities denominated in aforeign currencies which is different to the functional currency other thanof the Canadian dollar that wouldunderlying entities, the profit or loss and equity in the underlying entities could be affected by changesmovements between the functional currency and the foreign currency. The table below indicates net monetary assets/(liabilities) in exchange rates relative to the Canadian dollar. The valuesGroup that have a different functional currency and foreign currency. Amounts are the Canadian dollar equivalentindicated before elimination of intergroup balances.
| | | 2016 USD‘000 | | | 2015 USD‘000 | | | 2014 USD‘000 | |
| | | Functional currency | | | Functional currency | | | Functional currency | |
| | | ZAR | | | USD | | | ZAR | | | CAD | | | ZAR | | | CAD | |
| Cash and cash equivalents | | | 457 | | | | 265 | | | | 3,874 | | | | 5,483 | | | | 10,514 | | | | 553 | |
| Trade and other payables | | | - | | | | 43 | | | | - | | | | - | | | | - | | | | - | |
Intercompany balances* | | | (30,552 | ) | | | (1,514 | ) | | | (27,650 | ) | | | 44,390 | | | | (30,320 | ) | | | 48,484 | |
| | | | (30,095 | ) | | | (1,206 | ) | | | (23,776 | ) | | | 49,873 | | | | (19,806 | ) | | | 49,037 | |
A reasonably possible strengthening or weakening of 5% of the respective assetvarious functional currencies against the foreign currencies, would have the following equal or liability that is denominated in US dollarsopposite effect on profit or South African rand.loss before tax for the Group:
| | | 2016 USD‘000 | | | 2015 USD’000 | | | 2014 USD’000 | |
| | | Functional currency | | | Functional currency | | | Functional currency | |
| | | ZAR | | | USD | | | ZAR | | | CAD | | | ZAR | | | CAD | |
| Cash and cash equivalents | | | 23 | | | | 13 | | | | 194 | | | | 274 | | | | 526 | | | | 28 | |
| Trade and other payables | | | | | | | 2 | | | | - | | | | - | | | | - | | | | - | |
Intercompany balances* | | | (1,527 | ) | | | (88 | ) | | | (1,382 | ) | | | 2,219 | | | | (1,516 | ) | | | 2,424 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | 2013 | | |
| | $ | $ | | |
| Cash and cash equivalents | 26,512 | 25,042 | | |
| Bank overdraft | - | (1,796) | | |
| Trade and other receivables | 773 | 3,887 | | |
| Trade and other payables | (2,199) | (5,160) | | |
* These intercompany balances represent the exposure to foreign currency risk between functional currencies and foreign currencies at a subsidiary level. These balances eliminate on consolidation.
The Group's interest rate risk arises from loans and borrowings, overdraft facility and cash held. The loans and borrowings, overdraft facility and cash held have variable interest rate borrowings. Variable rate borrowings expose the group to cash flow interest rate risk. The Group has not entered into interest rate swap agreements.
The Group’s assets and (liabilities) exposed to interest rate fluctuations as at year end is summarized as follows:
| | 2016 | 2015 | 2014 |
| Term loan | (2,987) | - | - |
| Cash and cash equivalents | 14,335 | 12,568 | 23,082 |
| Overdraft | - | (1,688) | - |
Interest rate risk arising is offset by available cash and cash equivalents. The table below summarises the risk borne by an interest-bearing asset or liability aseffect of a result of fluctuationschange in interest rates.finance cost on the Group’s total comprehensive income for the year, had the rates charged differed.
Sensitivity analysis – term loan and bank overdraft
| | 2016 | 2015 | 2014 |
| | | | |
| Increase in 100 basis points | 30 | 17 | 3 |
| Decrease in 100 basis points | (30) | (17) | (3) |
| | | | |
| | | | |
Unless otherwise noted, it is the opinion of management that the Group is not exposed to significant interest rate risk as it has no debt financing apart from short term borrowings utilized in Zimbabwe. The Group’s cash and cash equivalents include highly liquid investments that earn interest at market rates. The Group manages its interest rate risk by endeavoring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. The Group’s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.
In the monetary policy statement announced by the Governor of the Reserve Bank of Zimbabwe (“RBZ”) in February 2009, the debt owing by RBZ to Blanket Mine was converted into a Special Tradable Gold-Backed Foreign Exchange Bond, with a term of 12 months and an 8% interest rate. The Bond plus accrued interest is guaranteed by RBZ on maturity. Blanket Mine has been unable to sell the Bond at an acceptable discount rate and the RBZ did not redeem the Bond on the initial maturity date nor any subsequently advised maturity dates. As a result of the uncertain redemption date and the lack of information coming from the RBZ, the Bond has been written down to nil whilst Blanket continues to retain legal ownership of the RBZ debt.
| C. | Concentration of Credit Risk |
Credit risk is the risk of a financial loss to the Company if a gold sales customerdebtor fails to meet its contractual obligation. From 2014, gold sales were made to Fidelity in Zimbabwe and the payment terms stipulated in the service delivery contract have been adhered to in all instances. No funds wereTrade and other receivables are analysed in note 15 to the Consolidated Financial Statements and include $1.0 million (2015: $ nil; 2014: $ Nil) due from Fidelity in respect of gold deliveries immediately prior to the close of business at the end of 2016 and $1.9 million (2015: $2.9 million) due from the Zimbabwe government in respect of VAT refunds. The amount due from Fidelity was paid in full after year end; the outstanding balance at December 31, 2014,2016 reflects a normal balance in the context of the timing of bullion shipments to Fidelity and payments from Fidelity for bullion delivered.received. The amount due in respect of the longer-outstanding VAT refunds were within the agreed terms.
Liquidity risk is the risk that the CompanyGroup will not be able to meet its financial obligations as they fall due.
The CompanyGroup manages its liquidity risk by ensuring that there is always sufficient capitalcash to meet its estimatedlikely cash requirements, after taking into account cash flows from operations and the Company’sGroup’s holdings of cash and cash equivalents. The CompanyGroup believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities.
The Zimbabwean operations are now covered for Public Liability risk, assets all risk and Comprehensive cover on all motor vehicles.
The value of the Company’s mineral resource properties is related to the price of gold and the outlook for these minerals. In addition, adverse changes in the price of certain key or high cost operating consumables can significantly impair the Company’s cash flows.
Gold prices historically have fluctuated widely and are affected by numerous factors outside of the Company's control, including, but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand because of speculative hedging activities, and macro-economic variables, and certain other factors related specifically to gold. Recent US$
In February 2016, the Company entered into a hedge in respect of 15,000 ounces of gold over a period of 6 months. The hedge protected the Company if the gold price movements have been descending butfell below $1,050 per ounce and gave the effectCompany full participation if the price of devaluationgold exceeded $1,079 per ounce. The derivative financial instrument was entered into by the Company for economic hedging purposes and not as a speculative investment and was closed out in August 2016.
The derivative contract resulted in a loss of $435,000 included in profit or loss. The Company settled the loss with the $435,000 margin call deposited at the inception of the Canadian $ andhedge transaction. The Company is fully exposed to the South African Rand against the US$ has mitigated somewhat against the lower US$ gold price.price as at December 31, 2016.
Caledonia has not hedged any of its pastA 5% increase or futuredecrease in the average realised gold sales.price would have increased or decreased revenue by $3,100,000 (2015: $2,449,000; 2014:$2,664,000)
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not Applicable.
ITEM 13 - DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES
Not Applicable.
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not Applicable.
ITEM 15 - CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
The Company’s Chief Executive Officer (“CEO”CEO”) and Chief Financial Officer (“CFO”CFO”) have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, and assessed the design of the Company’s internal control over financial reporting as of December 31, 2014.2016. As required by Rule 13(a)-15 under the Exchange Act, in connection with this Annual Report on Form 20-F, under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated our disclosure controls and procedures as of December 31, 2014,2016, and we have concluded our disclosure controls and procedures were effective as at December 31, 2014.2016.
B. Management’s annual report on internal control over financial reporting (“ICOFR”)
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting has been designed to provide reasonable assurance with respect to the reliability of financial reporting and the presentation of financial statements for external purposes in accordance with IFRS. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
As of the date of this filing, we have in place controls and procedures to maintain appropriate segregation of duties in our manual and computer based business processes that we believe are appropriate for a company of our size and extent of business transactions. Under the supervision and with the participation of the CEO and CFO, Managementmanagement assessed the effectiveness of the Company’sCompany's internal control over financial reporting as of December 31, 2014.2016. In making their assessment, Managementmanagement used criteriathe control objectives established in the framework on 19922013 Committee of Sponsoring Organizations of the Treadway Commission (“COSO”("COSO"). framework. Based upon that assessment Managementand those criteria, management concluded that the Company’sCompany's internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2014.2016.
C. Attestation Report of registered public accounting firm
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which permits us to provide only management's report in this Annual Report; the Dodd-Frank Act permits a "non-accelerated filer" to provide only management's report on internal control over financial reporting in an Annual Report and omit an attestation report of the issuer's registered public accounting firm regarding management's report on internal control over financial reporting and (ii) as we qualify as an "emerging growth company" under section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and are therefore exempt from the attestation requirement.
D. Changes in internal controls over financial reporting.reporting
There were no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of 17 CFR 240.13a-15 or 240.15d-15 that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.
ITEM 16A - AUDIT COMMITTEE FINANCIAL EXPERT
Caledonia’s Boardboard of Directorsdirectors has determined, as at March 27, 201530, 2017 that the three members of its Audit Committee are considered independent as defined under NI 52-110 and as defined pursuant to Section 803 of the NYSE MKT Company Guide (as such definition may be modified or supplemented) and considered to be financially literate as such terms are defined under National Instrument 52-110 Audit Committees and one of the members can be considered to be an expert. The financial expert serving on the audit committeeAudit Committee is Mr. JohanJ. Holtzhausen. Mr.Messrs. J. Holtzhausen, and Messrs., J. Kelly and L. WilsonJ McGloin are all independent directors under the applicable rules.
The SEC has indicated that the designation of an audit committee financial expert does not make that person an "expert" for any purpose, impose any duties, obligations, or liability on that person that are greater than those imposed on members of the audit committeeAudit Committee and board of directors who do not carry this designation, or affect the duties, obligations, or liabilities of any other member of the audit committee.Audit Committee.
ITEM 16B - CODE OF ETHICS
On AprilNovember 8, 20042016 the registrant’s Boardboard of Directors adopteddirectors approved in principle a revised code of business conduct, ethics and anti-bribery policy that applies to the registrant’s Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, or persons performing similar functions.functions (as well as many others).
The registrant has filed a copy of this code of ethics that applies to the registrant’s Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, or persons performing similar functions. The code of ethics was filed as Exhibit 1 to the 2003 Form 20-F Annual Report and is incorporated herein by reference. It has not been amended.
The text of this code of ethics has been posted on the Company website. (www.caledoniamining.com)
(www.caledoniamining.com)
ITEM 16C - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the audit service fees billed by our current external auditors, unless stated otherwise, for the years indicated:
| | | 2016(1) | | | 2015(1) | | | 2014(1) | |
| Audit fees | | | 334,996 | | | | 181,652 | | | | 276,824 | |
| Audit – related fees | | | | | | | - | | | | - | |
Tax fees (2) | | | 18,012 | | | | 181950 | | | | 56,414 | |
| All other fees | | | 2,498 | | | | - | | | | - | |
| TOTAL | | | 355,506 | | | | 363,602 | | | | 333,238 | |
| | 2014(1) $ -Cdn | 2013(1) $ -Cdn |
Audit fees | 305,633 | 275,000 |
| Audit – related fees | - | 32,000 |
Tax fees (2) | 62,285 | 1,500 |
| All other fees | - | - |
| TOTAL | 367,918 | 308,500 |
(1) | Prior to the start of the audit process, Caledonia’s Audit Committee receives an estimate of the costs, from its auditors and reviews such costs for their reasonableness. After their review and pre-approval of the fees, the Audit Committee recommend to the board of directors to accept the estimated audit fees given by the auditors. |
(2) | Tax fees were for assistance provided regarding international tax matters relating to a possible permanent establishment tax exposure and a tax transfer pricing review. |
ITEM 16D - EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
ITEM 16E - PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 16F - CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
The Audit Committee of the board of directors of the Company conducted a review of the Corporation's audit requirements, and as a result of the review, the audit committee resolved to recommend changing the Company's auditors from BDO Canada LLP (“BDO”) to KPMG Inc.(“KPMG”) effective as of April 30, 2013, being the expiry of BDO's current appointment following the filing of the Corporation’s 2012 Form 20F. On March 19, 2013, the board of directors of the Company approved the recommendation of the audit committee described above.Not applicable.
| (i) | The report issued by BDO for the years ended December 31, 2012 did not contain an adverse opinion nor a disclaimer opinion nor was qualified nor modified as to uncertainty, audit scope or accounting principles. |
| (ii) | No disagreements with BDO relating to the comparative period of December 31, 2012, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. |
(iii) | During the reporting period December 31, 2012 KPMG consulted to the Company on the application of accounting principles relating to the indigenisation transaction of Blanket Mine whereby the Company disposed of 51% of the shareholding of Blanket Mine. The accounting principles determined to be appropriate are reflected in the annual financial statements for the Company for the year ended December 31, 2012, which was audited and signed off by BDO. |
ITEM 16G - CORPORATE GOVERNANCE
Not Applicable.Because our securities are not listed on a national securities exchange in the United States, we are not subject to exchange related corporate governance requirements in the United States. However, we are subject to a variety of corporate governance guidelines and requirements enacted by the jurisdictions and exchanges in which we operate our business and on which our securities are traded. We incorporate a mix of corporate governance best practices to ensure that our corporate governance complies in all material respects with the requirements of the jurisdictions in which we operate and the exchanges on which our securities are traded.
ITEM 16H - MINE SAFETY DISCLOSURE
Not Applicable.
ITEM 17 - FINANCIAL STATEMENTS
Responded to inSee Item 18.
ITEM 18 - FINANCIAL STATEMENTS
The financial statementsConsolidated Financial Statements and schedules appear on pages F-1 through F-48F-58 of this Annual Report and are incorporated herein by reference. Our audited financial statements as prepared by our management and approved by the audit committeeboard of directors include:
Consolidated Statements of Profit or Loss and loss and otherOther Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the consolidated financial statementsConsolidated Financial Statements
All the above statements are available on the Company’s website at – www.caledoniamining.com or under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com
Financial Statements
| Description | | Page |
| | |
| Financial Statements and Notes | | F4- F48F1- F58 |
Exhibit List
| Exhibit No. | Name |
| Articles of IncorporationAssociation (incorporated herein by reference to Exhibit 1.1 to the Registrant’s Annual Report on Form 20-F filed with the SEC on March 31, 2016) |
1.2 | By-lawsOEICP (revised 2015) (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 20-F filed with the SEC on March 31, 2015) |
4.1 | Stock Option PlanEmployment contracts/executive employment agreements |
| List of Caledonia Mining Corporation Plc group entities |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 15.1 | Summary of Independent Technical Report and PEA on the Blanket Mine Property in ZimbabweMine(incorporated herein by reference to Exhibit 15.1 to the Registrant’s Annual Report on Form 20-F filed with the SEC on March 31, 2015) |
| 15.2 | Property and Claims Information of Blanket Mine (incorporated herein by reference to Exhibit 15.2 to the Registrant’s Annual Report on Form 20-F filed with the SEC on March 31, 2015) |
| 15.3 | Shareholder Rights Plan (incorporated herein by reference to Exhibit 15.3 to the Registrant’s Annual Report on Form 20-F filed with the SEC on March 31, 2015) |
| 15.4 | Share Subscription Agreements – Blanket Mine |
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION (incorporated herein by reference to Exhibit 15.4 to the Registrant’s Annual Report on Form 20-F filed with the SEC on March 31, 2015) |
To the Shareholders of Caledonia Mining Corporation:59
Report of Independent Registered Public 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 consolidated financial statements are presented fairly, in all material respects.
The 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 is produced. Our independent auditor has the responsibility of auditing the consolidated financial statements and expressing an opinion on them.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting (“ICFR”). Any system of internal controls over financial reporting, 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 December 31, 2014 management evaluated the effectiveness of the Group’s internal control over financial reporting and concluded that such internal control over financial reporting was effective and there were no material weaknesses or changes in internal controls identified by management.
Firm
The Board of Directors through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three independent directors. This Committee meets periodically with management and the external auditor to review accounting, auditing, internal control and financial reporting matters.Shareholders
The consolidated financial statements have been audited by the Group’s independent auditor, KPMG Inc., in accordance with Canadian Auditing Standards. The independent auditor’s report outlines the scope of their examination and their opinion on the consolidated financial statements.
The consolidated financial statements for the year ended December 31, 2014 were approved by the Board of Directors and signed on its behalf on March 27, 2015.
(Signed) S. R. Curtis (Signed) M. Learmonth
Chief Executive Officer | Chief Financial Officer |
INDEPENDENT AUDITOR'S REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders of Caledonia Mining Corporation Plc
We have audited the accompanying consolidated statements of financial statementsposition of Caledonia Mining Corporation which comprise the consolidated statementsPlc as of financial position as at December 31, 20142016 and 2013,December 31, 2015 and the related consolidated statements of profit or loss and other comprehensive income, consolidated changes in equity, and consolidated cash flows for each of the years in the three‑year period ended December 31, 2014 and 2013, and a summary of significant accounting policies and other explanatory information, as set out on pages F-4 to F-48.
Management's responsibility for the2016. These consolidated financial statements
Management is responsible for are the preparation and fair presentationresponsibility of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free fromof material misstatement.
An audit involves performing procedures to obtain auditincludes examining, on a test basis, evidence aboutsupporting the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluatingassessing the appropriateness of accounting policiesprinciples used and the reasonableness of accountingsignificant estimates made by management, as well as evaluating the overall presentation offinancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriatestatements referred to provide a basis for our audit opinion.
Opinion
In ouropinion, the consolidated financial statementsabove present fairly, in all material respects, the consolidated financial position of Caledonia Mining Corporation Plc as atof December 31, 20142016 and 2013,December 31, 2015, and its consolidated financial performance and its consolidated cash flows for each of the years in the three‑year period ended December 31, 2014 and 2013,2016, in accordanceconformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/(Signed) KPMG Inc.
KPMG Inc.
Chartered Accountants
85 Empire road
Road
Parktown
Johannesburg
South Africa
March 27, 2015
30, 2017
|
Independent Auditor’s Report of Registered Public Accounting Firm |
|
To the Shareholders of Caledonia Mining Corporation
We have audited the accompanying consolidatedConsolidated statements of profit or loss and other comprehensive income and cash flows
(In thousands of Caledonia Mining Corporation for the year ended December 31, 2012, and a summary of significant accounting policies and other explanatory information (“consolidated financial statements”).United States Dollars, unless indicated otherwise)
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated statements of profit or loss and other comprehensive income and cash flows present fairly, in all material respects, the financial performance and cash flows of Caledonia Mining Corporation for the year ended December 31, 2012 in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
(Signed) BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants| For the years ended December 31 | | Notes | | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | | | | |
| Revenue | | | | | | 61,992 | | | | 48,977 | | | | 53,513 | |
| Less: Royalties | | | | | | (2,923 | ) | | | (2,455 | ) | | | (3,522 | ) |
| Production costs | | 8 | | | | (32,086 | ) | | | (30,019 | ) | | | (27,908 | ) |
| Depreciation | | 13 | | | | (3,491 | ) | | | (3,322 | ) | | | (3,540 | ) |
| Gross profit | | | | | | 23,492 | | | | 13,181 | | | | 18,543 | |
| Other income | | 9.1 | | | | 1,330 | | | | 110 | | | | 25 | |
| Other expenses | | | | | | (55 | ) | | | - | | | | - | |
| Administrative expenses | | 10 | | | | (7,263 | ) | | | (7,622 | ) | | | (7,387 | ) |
| Share based payment expense | | 21 | | | | (788 | ) | | | (24 | ) | | | - | |
| Sale of Blanket Mine treasury bills | | 9.2 | | | | 3,202 | | | | - | | | | - | |
| Net foreign exchange (loss)/gain | | | | | | (505 | ) | | | 2,850 | | | | 1,065 | |
| Loss on settlement of hedge | | 25 | | | | (435 | ) | | | - | | | | - | |
| Impairment | | | | | | - | | | | - | | | | (178 | ) |
| Finance income | | 11 | | | | 16 | | | | 1 | | | | 14 | |
| Finance cost | | 11 | | | | (192 | ) | | | (536 | ) | | | (154 | ) |
| Profit before tax | | | | | | 18,802 | | | | 7,960 | | | | 11,928 | |
| Tax expense | | 12 | | | | (7,717 | ) | | | (2,370 | ) | | | (5,982 | ) |
| Profit for the year | | | | | | 11,085 | | | | 5,590 | | | | 5,946 | |
| Other comprehensive income | | | | | | | | | | | | | | | |
| Items that are or may be reclassified to profit or loss | | | | | | | | | | | | | | | |
| Foreign currency translation differences of foreign operations | | | | | | 262 | | | | (3,291 | ) | | | (685 | ) |
| Tax on other comprehensive income | | 12 | | | | - | | | | 199 | | | | 111 | |
| Total comprehensive income for the year | | | | | | 11,347 | | | | 2,498 | | | | 5,372 | |
| | | | | | | | | | | | | | | | |
| Profit attributable to: | | | | | | | | | | | | | | | |
| Owners of the Company | | | | | | 8,526 | | | | 4,779 | | | | 4,435 | |
| Non-controlling interests | | | | | | 2,559 | | | | 811 | | | | 1,511 | |
| Profit for the year | | | | | | 11,085 | | | | 5,590 | | | | 5,946 | |
| Total comprehensive income attributable to: | | | | | | | | | | | | | | | |
| Owners of the Company | | | | | | 8,788 | | | | 1,687 | | | | 3,861 | |
| Non-controlling interests | | | | | | 2,559 | | | | 811 | | | | 1,511 | |
| Total comprehensive income for the year | | | | | | 11,347 | | | | 2,498 | | | | 5,372 | |
| | | | | | | | | | | | | | | | |
| Earnings per share | | | | | | | | | | | | | | | |
| Basic earnings - per share ($) | | 19 | | | | 0.16 | | | | 0.09 | | | | 0.08 | |
| Diluted earnings - per share ($) | | 19 | | | | 0.16 | | | | 0.09 | | | | 0.08 | |
Toronto, Ontario
March 26, 2013
Caledonia Mining Corporation
| Consolidated statements of profit or loss and other comprehensive income | | | | | | | | | | | | | | | |
| (In thousands of Canadian dollars) For the years ended December 31 | | Note | | | | 2014 | | | | 2013 | | | | 2012 | |
| | | | | | | $ | | | | $ | | | | $ | |
| Revenue | | | | | | 59,082 | | | | 65,113 | | | | 75,221 | |
| Less: Royalty | | | | | | (3,889 | ) | | | (4,544 | ) | | | (5,261 | ) |
| Production costs | | | 8 | | | | (30,812 | ) | | | (27,412 | ) | | | (25,653 | ) |
| Depreciation | | | | | | | (3,908 | ) | | | (3,276 | ) | | | (3,392 | ) |
| Gross profit | | | | | | | 20,473 | | | | 29, 881 | | | | 40,915 | |
| Other income | | | | | | | 28 | | | | - | | | | - | |
| Administrative expenses | | | 9 | | | | (8,157 | ) | | | (7,772 | ) | | | (4,055 | ) |
| Share-based payment expense | | | 20 | | | | - | | | | (68 | ) | | | (14,569 | ) |
| Foreign exchange gain | | | | | | | 1,176 | | | | 1,677 | | | | (4 | ) |
| Indigenisation expenses | | | | | | | - | | | | - | | | | (1,700 | ) |
| Impairment | | | 12 | | | | (196 | ) | | | (14,203 | ) | | | (330 | ) |
| Operating profit | | | | | | | 13,324 | | | | 9,515 | | | | 20,257 | |
| Finance income | | | 10 | | | | 15 | | | | 24 | | | | 79 | |
| Finance cost | | | 10 | | | | (170 | ) | | | (132 | ) | | | (160 | ) |
| Net finance costs | | | | | | | (155 | ) | | | (108 | ) | | | (81 | ) |
| Profit before tax | | | | | | | 13,169 | | | | 9,407 | | | | 20,176 | |
| Tax expense | | | 11 | | | | (6,604 | ) | | | (9,897 | ) | | | (12,818 | ) |
| Profit/(Loss) for the year | | | | | | | 6,565 | | | | (490 | ) | | | 7,358 | |
| Other comprehensive income | | | | | | | | | | | | | | |
| Items that are or may be reclassified to profit or loss | | | | | | | | | | | | | | |
| Foreign currency translation differences of foreign operations | | | | | | | 3,848 | | | | 2,254 | | | | (1,589 | ) |
| Tax on other comprehensive income | | | 11 | | | | 122 | | | | - | | | | - | |
| Other comprehensive income for the year, net of income tax | | | | | | | 3,970 | | | | 2,254 | | | | (1,589 | ) |
| Total comprehensive income for the year | | | | | | | 10,535 | | | | 1,764 | | | | 5,769 | |
| Profit/(Loss) attributable to: | | | | | | | | | | | | | | | | |
| Owners of the Company | | | | | | | 4,897 | | | | (3,055 | ) | | | 8,720 | |
| Non-controlling interests | | | | | | | 1,668 | | | | 2,565 | | | | (1,362 | ) |
| Profit/(Loss) for the year | | | | | | | 6,565 | | | | (490 | ) | | | 7,358 | |
| Total comprehensive income attributable to: | | | | | | | | | | | | | | | | |
| Owners of the Company | | | | | | | 8,833 | | | | (726 | ) | | | 7,122 | |
| Non-controlling interests | | | | | | | 1,702 | | | | 2,490 | | | | (1,343 | ) |
| Total comprehensive income for the year | | | | | | | 10,535 | | | | 1,764 | | | | 5,769 | |
| Earnings/(Loss) per share | | | | | | | | | | | | | | | | |
| Basic earnings/(loss) - per share ($) | | | 18 | | | | 0.093 | | | | (0,061 | ) | | | 0.172 | |
| Diluted earnings/(loss) - per share ($) | | | 18 | | | | 0.093 | | | | (0,061 | ) | | | 0,172 | |
The accompanying notes on page F-8F-6 to F-48are an integral part of these consolidated financial statements.
On behalf of the Board: “S.R. Curtis” - Director and “M. Learmonth”
Caledonia Mining Corporation
| Consolidated statements of financial position | | |
| (In thousands of Canadian dollars) | Note | | 2014 | 2013 |
| As at | | | December 31 | December 31 |
| | | | $ | $ |
| Assets | | | | |
| Property, plant and equipment | 12 | | 40,388 | 33,448 |
| Total non-current assets | | | 40,388 | 33,448 |
| | | | | |
| Inventories | 13 | | 7,571 | 6,866 |
| Prepayments | | | 348 | 177 |
| Trade and other receivables | 14 | | 2,040 | 3,889 |
| Income tax receivable | | | 111 | - |
| Cash and cash equivalents | 15 | | 26,838 | 25,222 |
| Total current assets | | | 36,908 | 36,154 |
| Total assets | | | 77,296 | 69,602 |
| | | | | |
| Equity and liabilities | | | | |
| Share capital | 16 | | 57,607 | 57,607 |
| Reserves | 17 | | 159,883 | 156,069 |
| Retained loss | | | (159,759) | (161,651) |
| Equity attributable to shareholders | | | 57,731 | 52,025 |
| Non-controlling interests | 29 | | 804 | (51) |
| Total equity | | | 58,535 | 51,974 |
| | | | | |
| Liabilities | | | | |
| Provisions | 21 | | 2,888 | 1,572 |
| Deferred tax liability | 11 | | 10,092 | 8,522 |
| Total non-current liabilities | | | 12,980 | 10,094 |
| | | | | |
| Trade and other payables | 22 | | 3,791 | 4,600 |
| Income tax payable | | | 1,990 | 1,138 |
| Bank overdraft | 15 | | - | 1,796 |
| Total current liabilities | | | 5,781 | 7,534 |
| Total liabilities | | | 18,761 | 17,628 |
| Total equity and liabilities | | | 77,296 | 69,602 |
The accompanying notes on page F-8 to F-48F-58 are an integral part of these consolidated financial statements.
On behalf of the Board: “S.R. Curtis”- Director and “M. Learmonth”
Caledonia Mining Corporation
Plc
Consolidated statements of changes in equityfinancial position
(In thousands of Canadian dollars)United States Dollars, unless indicated otherwise)
| | | Notes | | | | | | | |
| As at 31 December | | | | | 2016 | | | 2015 | |
| Assets | | | | | | | | | |
| Property, plant and equipment | | 13 | | | | 64,873 | | | | 49,218 | |
| Deferred tax asset | | 12 | | | | 44 | | | | 58 | |
| Total non-current assets | | | | | | 64,917 | | | | 49,276 | |
| | | | | | | | | | | | |
| Inventories | | 14 | | | | 7,222 | | | | 6,091 | |
| Prepayments | | | | | | 810 | | | | 667 | |
| Trade and other receivables | | 15 | | | | 3,425 | | | | 3,839 | |
| Income tax receivable | | 12 | | | | - | | | | 397 | |
| Cash and cash equivalents | | 16 | | | | 14,335 | | | | 12,568 | |
| Total current assets | | | | | | 25,792 | | | | 23,562 | |
| Total assets | | | | | | 90,709 | | | | 72,838 | |
| | | | | | | | | | | | |
| Equity and liabilities | | | | | | | | | | | |
| Share capital | | 17 | | | | 55,002 | | | | 54,569 | |
| Reserves | | 18 | | | | 142,374 | | | | 141,942 | |
| Retained loss | | | | | | (141,767 | ) | | | (147,654 | ) |
| Equity attributable to shareholders | | | | 55,609 | | | | 48,857 | |
| Non-controlling interests | | 31 | | | | 3,708 | | | | 1,504 | |
| Total equity | | | | | | 59,317 | | | | 50,361 | |
| | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | |
| Provisions | | 20 | | | | 3,456 | | | | 2,762 | |
| Deferred tax liability | | 12 | | | | 15,909 | | | | 11,318 | |
| Long term portion of term loan facility | | 22 | | | | 1,577 | | | | - | |
| Cash settled share based payments | | 21.2 | | | | 618 | | | | - | |
| Total non-current liabilities | | | | | | 21,560 | | | | 14,080 | |
| | | | | | | | | | | | |
| Short term portion of term loan facility | | 22 | | | | 1,410 | | | | - | |
| Trade and other payables | | 23 | | | | 8,077 | | | | 6,656 | |
| Income tax payable | | 12 | | | | 345 | | | | 53 | |
| Bank overdraft | | 16 | | | | - | | | | 1,688 | |
| Total current liabilities | | | | | | 9,832 | | | | 8,397 | |
| Total liabilities | | | | | | 31,392 | | | | 22,477 | |
| Total equity and liabilities | | | | | | 90,709 | | | | 72,838 | |
| | Note | Share capital | Investment Revaluation Reserve | Foreign Currency Translation Reserve | Contributed Surplus | Share- based payment reserve | Retained Loss | Total | Non- controlling interests (“NCI”) | Total Equity |
| | | $ | $ | $ | $ | $ | $ | $ | $ | $ |
| Balance at December 31, 2012 | | 197,137 | 5 | (2,010) | - | *15,682 | (153,399) | 57,415 | (1,796) | 55,619 |
| Transactions with owners: | | | | | | | | | | |
| Reduction of stated capital | 17 | (140,000) | - | - | 140,000 | - | - | - | - | - |
| Share-based payment transaction | 20 | - | - | - | - | 68 | - | 68 | - | 68 |
| Dividends paid | | - | - | - | - | - | (5,202) | (5,202) | (745) | (5,947) |
| Shares issued | 16 | 470 | - | - | - | - | - | 470 | - | 470 |
| Movement in equity | | | (5) | | | | 5 | | | |
| Total comprehensive income: | | | | | | | | | | |
| (Loss)/profit for the year | | - | - | - | - | - | (3,055) | (3,055) | 2,565 | (490) |
| Other comprehensive income for the year | | - | - | 2,329 | - | - | - | 2,329 | (75) | 2,254 |
| Balance at December 31, 2013 | | 57,607 | - | 319 | 140,000 | 15,750 | (161,651) | 52,025 | (51) | 51,974 |
| Transactions with owners: | | | | | | | | | | |
| Dividends paid | | - | - | - | - | - | (3,127) | (3,127) | (847) | (3,974) |
| Total comprehensive income: | | | | | | | | | | |
| Profit for the year | | - | - | - | - | - | 4,897 | 4,897 | 1,668 | 6,565 |
| Other comprehensive income for the year | | - | - | 3,814 | - | - | 122 | 3,936 | 34 | 3,970 |
| Balance at December 31, 2014 | | 57,607 | - | 4,133 | 140,000 | 15,750 | (159,759) | 57,731 | 804 | 58,535 |
* Refer to notes 5 and 20.
The accompanying notes on page F-8F-6 to F-48 are an integral part of these consolidated financial statements.
On behalf of the Board: “S.R. Curtis” - Director and “M. Learmonth”
Caledonia Mining Corporation
| Consolidated statements of cash flows | | | | | | | |
| (In thousands of Canadian dollars) | | | | | | | |
| For the years ended December 31, | Note | 2014 | | 2013 | | 2012 | |
| | | $ | | $ | | $ | |
| | | | | | | | |
| Cash flows from operating activities | 23 | 18,822 | | 22,768 | | 41,420 | |
| Interest received | | 15 | | 24 | | 79 | |
| Interest paid | | (133) | | (132) | | (160) | |
| Tax paid | 11 | (4,999) | | (7,974) | | (11,618) | |
| Cash from operating activities | | 13,705 | | 14,686 | | 29,721 | |
| | | | | | | | |
| Cash flows from investing activities | | | | | | | |
| Acquisition of property, plant and equipment | | (6,786) | | (11,738) | | (7.909) | |
| Proceeds from sale of property, plant and equipment | | - | | - | | 38 | |
| Net cash used in investing activities | | (6,786) | | (11,738) | | (7,871) | |
| | | | | | | | |
| Cash flows from financing activities | | | | | | | |
| Dividends paid | | (3,974) | | (5,947) | | - | |
| Advance dividend paid | | - | | (1,987) | | (3,739) | |
| Proceeds from the exercise of share options | 16 | - | | 470 | | 974 | |
| Net cash used in financing activities | | (3,974) | | (7,464) | | (2,765) | |
| Net increase/(decrease) in cash and cash equivalents | | 2,945 | | (4,516) | | 19,085 | |
| Cash and cash equivalents at beginning of year | | 23,426 | | 27,942 | | 9,256 | |
| Effect of exchange rate fluctuations on cash held | | 467 | | - | | (399) | |
| Cash and cash equivalents at year end | 15 | 26,838 | | 23,426 | | 27,942 | |
The accompanying notes on page F-8 to F-48F-58 are an integral part of these consolidated financial statements.
On behalf of the Board: “S.R. Curtis”- DirectorChief Executive Officer and “M. Learmonth”
- Chief Financial Officer.
Consolidated statements of changes in equity
(In thousands of United States Dollars, unless indicated otherwise)
| | Share capital | | | Foreign Currency Translation Reserve | | | Contributed Surplus | | | Share- based payment reserve | | | Retained Loss | | | Equity attributable to shareholders | | | Non- controlling interests (“NCI”) | | | Total Equity | |
| Balance at December 31, 2013 | | | 54,569 | | | | (2,544 | ) | | | 132,591 | | | | 15,847 | | | | (151,824 | ) | | | 48,639 | | | | (48 | ) | | | 48,591 | |
| Transactions with owners: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends paid | | | - | | | | - | | | | - | | | | - | | | | (2,850 | ) | | | (2,850 | ) | | | (770 | ) | | | (3,620 | ) |
| Total comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Profit for the year | | | - | | | | - | | | | - | | | | - | | | | 4,435 | | | | 4,435 | | | | 1,511 | | | | 5,946 | |
| Other comprehensive income for the year | | | - | | | | (685 | ) | | | - | | | | - | | | | 111 | | | | (574 | ) | | | | | | | (574 | ) |
| Balance at December 31, 2014 | | | 54,569 | | | | (3,229 | ) | | | 132,591 | | | | 15,847 | | | | (150,128 | ) | | | 49,650 | | | | 693 | | | | 50,343 | |
| Transactions with owners: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity settled share-based payment | | | - | | | | - | | | | - | | | | 24 | | | | - | | | | 24 | | | | - | | | | 24 | |
| Dividends paid | | | - | | | | - | | | | - | | | | - | | | | (2,504 | ) | | | (2,504 | ) | | | - | | | | (2,504 | ) |
| Total comprehensive income: | | | | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | |
| Profit for the year | | | - | | | | - | | | | - | | | | - | | | | 4,779 | | | | 4,779 | | | | 811 | | | | 5,590 | |
| Other comprehensive income for the year | | | - | | | | (3,291 | ) | | | - | | | | - | | | | 199 | | | | (3,092 | ) | | | - | | | | (3,092 | ) |
| Balance at December 31, 2015 | | | 54,569 | | | | (6,520 | ) | | | 132,591 | | | | 15,871 | | | | (147,654 | ) | | | 48,857 | | | | 1,504 | | | | 50,361 | |
| Transactions with owners: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity settled share-based payment | | | - | | | | - | | | | - | | | | 170 | | | | - | | | | 170 | | | | - | | | | 170 | |
| Shares issued – Option exercises (note 21.1) | | | 433 | | | | - | | | | - | | | | - | | | | - | | | | 433 | | | | - | | | | 433 | |
| Dividends paid | | | - | | | | - | | | | - | | | | - | | | | (2,639 | ) | | | (2,639 | ) | | | (355 | ) | | | (2,994 | ) |
| Total comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Profit for the year | | | - | | | | - | | | | - | | | | - | | | | 8,526 | | | | 8,526 | | | | 2,559 | | | | 11,085 | |
| Other comprehensive income for the year | | | - | | | | 262 | | | | - | | | | - | | | | - | | | | 262 | | | | - | | | | 262 | |
| Balance at December 31, 2016 | | | 55,002 | | | | (6,258 | ) | | | 132,591 | | | | 16,041 | | | | (141,767 | ) | | | 55,609 | | | | 3,708 | | | | 59,317 | |
The accompanying notes on page F-6 to F-58 are an integral part of these consolidated financial statements
| | | Note | | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | | | | |
| Cash flows from operating activities | | 24 | | | | 25,671 | | | | 8,823 | | | | 15,584 | |
| Interest received | | | | | | 16 | | | | 1 | | | | 14 | |
| Interest paid | | | | | | (210 | ) | | | (493 | ) | | | (121 | ) |
| Tax paid | | 12 | | | | (2,466 | ) | | | (1,462 | ) | | | (4,526 | ) |
| Net cash from operating activities | | | | | | 23,011 | | | | 6,869 | | | | 10.951 | |
| | | | | | | | | | | | | | | | |
| Cash flows from investing activities | | | | | | | | | | | | | | | |
| Acquisition of property, plant and equipment | | | | | | (19,885 | ) | | | (16,567 | ) | | | (6,150 | ) |
| Proceeds from sale of property, plant and equipment | | | | | | 3 | | | | - | | | | - | |
| Net cash used in investing activities | | | | | | (19,882 | ) | | | (16,567 | ) | | | (6,150 | ) |
| | | | | | | | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | | | | | | | |
| Dividends paid | | | | | | (2,994 | ) | | | (2,504 | ) | | | (3,620 | ) |
| Proceeds from term loan facility | | | | | | 3,000 | | | | - | | | | - | |
| Term loan – Transaction cost | | | | | | (73 | ) | | | - | | | | - | |
| Proceeds from issue of share capital | | | | | | 433 | | | | - | | | | - | |
| Net cash from/(used in) financing activities | | | | | | 366 | | | | (2,504 | ) | | | (3,620 | ) |
| | | | | | | | | | | | | | | | |
| Net increase/(decrease) in cash and cash equivalents | | | | | | 3,495 | | | | (12,202 | ) | | | 1,181 | |
| Effect of exchange rate fluctuation on cash held | | | | | | (40 | ) | | | - | | | | - | |
| Cash and cash equivalents at beginning of year | | | | | | 10,880 | | | | 23,082 | | | | 21,901 | |
| Net cash and cash equivalents at year end | | 16 | | | | 14,335 | | | | 10,880 | | | | 23,082 | |
The accompanying notes on page F-6 to F-58 are an integral part of these consolidated financial statements
1Reporting entity
Caledonia Mining Corporation Plc (the “Company”) is a company domiciled in Canada.Jersey, Channel Islands. The address of the Company’s registered office is Suite 4009, 1 King Street West, Toronto, Ontario, M5H 1A1, Canada.3rd Floor, Weighbridge House, St Helier, Jersey, Channel Islands. These consolidated financial statements of the Group as at and for the yearyears ended December 31, 2014 comprises2016 and December 31, 2015 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Group is primarily involved in the operation of a gold mine and the exploration and development of mineral properties for precious metals.
2Basis for preparation
(i) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The consolidated financial statements were authorised for issue by the Board of Directors on March 27, 2015.30, 2017.
(ii) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for equity-settled share-based payment arrangements measured at fair value on grant date.for:
| · | equity settled share-based payment arrangements measured at fair value on grant date; |
| · | cash settled share-based payment arrangement measured at fair value on the grant and re-measurement dates; and |
| · | derivative financial instruments measured at fair value. |
(iii) Functional and presentation currency
These consolidated financial statements are presented in CanadianUnited States dollars (“$”), which is also the functional currency of the Company. All financial information presented in CanadianUnited States dollars hashave been rounded to the nearest thousand.thousand, unless indicated otherwise.
(iv) Going concernComparatives
These consolidatedWhere necessary comparative periods may be adjusted to conform to changes in presentation. The Group has reclassified Exploration and Evaluation assets as a separate class of Property, plant and equipment in order to enhance disclosure. The January 1, 2015 carrying value of Mineral properties depreciated decreased by $1,951 (2014:1,871) and was renamed Mine development, infrastructure and other. The January 1, 2015 carrying value of Mineral properties not depreciated, increased by 1,951 (2014:1,871) and was renamed Exploration and Evaluation assets. The reclassifications had no impact on the statements of financial statements have been prepared on a going-concern basis.position.
3Use of estimates and judgements
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group‘sGroup’s accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. RevisionsChanges in estimates are recognised prospectively.
| (a) | Judgements, assumptions and estimation uncertainties |
i) Depreciation of Property, plant and equipment
Depreciation on mine development, infrastructure and other assets in the production phase is computed on the units-of-production method over the life-of-mine based on the estimated quantities of reserves and resources, which can be recovered in the future from known mineral deposits. The method of calculating depreciation changed during the current financial year, refer to par 4(e)(iv) for more detail. Confidence in the existence, commercial viability and economical recovery of such reserves and resources may be based on historical experience and available geological information, such as geological information obtained from other operations that are contiguous to the Group’s mine. This is in addition to the drilling results obtained by the Group and management’s knowledge of the geological setting of the surrounding areas, which would enable simulations and extrapolations to be done with a sufficient degree of accuracy. In instances where management is able to demonstrate the economic recovery of such resources with a high level of confidence, such additional resources, are included in the calculation of depreciation. The future development costs are those costs that need to be incurred to access the resources, for example the costs to complete a decline or level, which may include infrastructure and equipping costs. These amounts have been extracted from the cash flow projections for the life-of-mine plans. Other items of property, plant and equipment are depreciated as described in note 4(iv) Useful lives.
ii) Mineral reserves and resources
Mineral reserves and resources are estimates of the amount of product that can be economically and legally extracted. In order to calculate the reserves and resources, estimates and assumptions are required about a range of geological, technical and economic factors, including but not limited to quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and grade of mineral reserves and resources requires the size, shape and depth of orebodies to be determined by analysing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological judgements and calculations to interpret the data. Estimates of mineral reserves and resources may change due to the change in economic assumptions used to estimate mineral reserves and resources and due to additional geological data becoming available during the course of operations. Changes in reported reserves and resources may affect the Group’s financial results and position in a number of ways, including the following:
| · | Asset carrying values may be affected due to changes in the estimated cash flows; |
| · | Depreciation and amortisation charges to profit or loss may change as these are calculated on the unit-of-production method or where useful lives of an asset change; and |
| · | Decommissioning, site restoration and environmental provisions may change in ore reserves and resources which may affect expectations about the timing or cost of these activities. |
3Use of estimates and judgements Indigenisation- (continued)
iii) Blanket mine’s indigenisation transaction
The indigenisation transaction of the Blanket Mine (1983) (Private) Limited (“Blanket Mine”) required management to make significant judgements and assumptions which are explained in Note 5.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
3 | Use of estimates and judgements – (continued) |
(b) | Assumptions and Estimation uncertainties |
i) | iv) Site restoration provisions |
The site restoration provision has been calculated for the Blanket Mine based on an independent analysis of the rehabilitation costs as performed in 20122015 and based on thea further internal assessment for additional areas of disturbance in 2016. The restorations provision for Eersteling Gold Mining Company Limited.Limited was estimated based on an internal management assessment. Estimates and assumptions are made when determining the inflationary effect on current restoration costs and the discount rate to be applied in arriving at the present value of the provision where the time value of money effect is significant. Assumptions, based on the current economic environment, have been made whichthat management believes are a reasonable basis upon which to estimate the future liability. These estimates take into account any material changes to the assumptions that occur when reviewed by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs which will reflect the market condition at the time the rehabilitation costs are actually incurred.rehabilitation. The final cost of the currently recognized site rehabilitation provisions may be higher or lower than currently provided for.for (Refer to note 20).
ii) | v) Exploration and evaluation (“E&E”) expenditure |
The application of the Group’s accounting policy for exploration and evaluation expenditures requires judgements when determining which expenditures are recognised as exploration and evaluation(“E&E”) assets (“E&E properties”), disclosed under Property, plant and equipment as mineral properties not depreciated.
The Group also makes estimates and assumptions regarding the possible impairment of E&E propertiesassets by evaluating whether it is likely that future economic benefits will flow to the Group, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available.
The recoverability of the carrying amount of the South Africanexploration and Zambian mineral properties (if not impaired) isevaluation assets are dependent upon the availability of sufficient funding to bring the properties into commercial production, the price of the products to be recovered the exchange rate of the local currency relative to the currency of funding and the undertaking of profitable mining operations. As a result of these uncertainties, the actual amount recovered may vary significantly from the carrying amount.
iii)vi) Income taxes
Significant estimates and assumptions are required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
In addition, the Group applies judgement in recognizing deferred tax assets relating to tax losses carried forward to the extent that there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses canmay be utilized or sufficient estimated taxable income against which the losses can be utilized. However, utilization
3 | 3 | Use of estimates and judgements - (continued) |
vii) Share-based payment transactions
iv)Share-basedEquity settled share-based payment transactionsarrangements
The Group measures the cost of equity-settled, share basedequity settled, share-based payment transactions with employees, directors as well as with Indigenisation Shareholdersand Blanket’s indigenous shareholders (refer notenotes 5 and 20)21.1) by reference to the fair value of the equity instruments on the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the appropriate valuation model and considering the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield. Additional information about significant judgements and estimates and assumptions for estimating fair value for share-based payment transactions are disclosed in note 20.21.1.
Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Group’s stock options.share options.
v)ImpairmentCash settled share-based payment arrangements
The fair value of the amount payable to employees in respect of share-based awards, which will be settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period over which the employee becomes unconditionally entitled to payment. The liability is re-measured at each reporting date. Any changes in the fair value of the liability are recognised as an expense in profit or loss.
Additional information about significant judgements, estimates and the assumptions used to estimate the fair value of cash settled share-based payment transactions are disclosed in note 21.2.
viii) Impairment
At each reporting date, the Group determines if impairment indicators exist, and if present, performs an impairment review of the non-financial assets held in the Group. The exercise is subject to various judgemental decisions and estimates. Financial assets are also reviewed regularly for impairment. Further details of the judgements and estimates made for these reviews are set out in Note 4(g).note 13.
vi)Functional currency
The functional currency of each entity in the Group is determined after considering various primary and secondary indicators which require management to make numerous judgement decisions. The determination of the functional currency has a bearing on the translation process and ultimately the foreign currency translation reserve.
vii) ix) Measurement of fair values
Some of the Group’s accounting policies and disclosure require the measurement of fair values, for both financial and non-financial assets and liabilities.
The Group has established a control framework with respectF-9
| 3 | Use of estimates and judgements - (continued) |
ix) Measurement of fair values. This includes a valuation team member who has overall responsibility for overseeing all significant fair value measurements.
Significant valuation issues are reported to the Group’s Audit Committee.values - (continued)
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Where applicable, fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation technique as follows:
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
| · | Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities. |
| · | Level 2: inputs other than quoted prices included in Level 1 that are observable for the assets and liability,liabilities, either directly (i.e. as price) or indirectly (i.e. derives from prices). |
| · | Level 3: inputs for the assets or liabilityliabilities that are not based for identical assets or observable market data (unobservable inputs). |
4Significant accounting policies
Except as stated in note 4(p)4(r), the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The accounting policies have been applied consistently by the Group entities.
(a) Basis of consolidation
| i) | Subsidiaries and structured entities |
Subsidiaries and certain structured entities are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variability in returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCINon-controlling interests (“NCI”) and other components of equity. Any gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
| iii) | Non-controlling interests |
NCI are measured at their proportionate share of the carrying amounts of the acquiree’s identifiable net assets at fair value at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
F-10
4Significant accounting policies - (continued) iv) | Transactions eliminated on consolidation |
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
As stated in note 2(iii) the presentation currency of the Group is the United States Dollar. The functional currency of Caledonia Mining Corporationthe Company and all its subsidiaries is the Canadian dollar, andUnited States Dollar except for itsthe South African subsidiaries it is US dollar, Zambian Kwacha andthat use the South African Rand (“ZAR”) respectively.as their functional currency. Subsidiary financial statements have been translated to Canadian dollarsthe presentation currency as follows:
| · | Assets and liabilities are translated using the exchange rate at period end; and |
| · | Income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions. |
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized in Other Comprehensive Income (“OCI”). If settlement is planned or likely in the foreseeable future, foreign exchange gains and losses are included in profit or loss.
4 Significant accounting policies - (continued) When settlement occurs, settlement will not be regarded as a partial disposal and accordingly the foreign exchange gain or loss previously recognised in OCI is not reclassified to profit or loss/reallocated to NCI.
When the Group disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in OCI related to the foreign operation are recognized in profit or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in OCI related to the subsidiary are reallocated between controlling and non-controlling interests.
All resulting translation differences are reported in OCI.
| ii) | Foreign currency translation |
In preparing the financial statements of the Group entities, transactions in currencies other than the Group entities’ functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities are translated using the current foreign exchange rate. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All gains and losses on translation of these foreign currency transactions are included in profit or loss for the year.
4Significant accounting policies - (continued)
| i) | Non-derivative financial assets |
The Group initially recognises loans and receivables on the date that which they are originated.originate. All other financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows onfrom the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial assets: trade and other receivables prepayments as well as cash and cash equivalents.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. The impairment loss on receivables is based on a review of all outstanding amounts at periodyear end. Bad debts are written off during the year in which they are identified. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Loans and receivables include trade and other receivables and prepayments.
receivables.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
4 Significant accounting policies - (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management areprocess. The bank overdraft is included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
4Significant accounting policies - (continued)
| ii) | Non-derivative financial liabilities |
Financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged, or cancelled or expire.
Non-derivative financial liabilities consist of bank overdrafts, loans and borrowings and trade and other payables.
Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.
| iii) | Derivative financial instruments |
During the year the Group held derivative financial instruments to hedge its gold price exposure. Derivatives are recognised initially at fair value, attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value. The Group does not hold derivatives that are classified as cash flow hedges, embedded derivatives or hedges that qualify as highly effective. Therefore, all changes in the fair value of derivative instruments are accounted for in profit or loss.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
(d) Share capital
Share capital is classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
| (e) | Property, plant and equipment |
| i) | Recognition and measurement |
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised within other income in profit or loss.
4Significant accounting policies - (continued)
| ii) | Exploration and evaluation expenditureassets |
Exploration costs are expensed as incurred, unless there is a high degree of confidence in the project's viability, and it is probablepossible that the project will return future economic benefits to the group when all further pre-production expenditure is capitalised. These costs include evaluation costs.
Once and the legal right to explore a property has beenis acquired, in these circumstances the costs directly related towill be capitalised. These exploration and evaluation expenditures (“E&E”)cost capitalised are capitalized in addition to the acquisition costs and disclosed under Property,property, plant and equipment as mineral properties not depreciated These direct. Direct expenditures include such costs as materials used, surveying costs, drilling costs, payments made to contractors, direct administrative costs and depreciation on plant and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year in which they occur.
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development. Explorationdevelopment and evaluation assets are tested for impairment beforemoved to the assets are transferred to mine under development.development, infrastructure and other asset category within Property, plant and equipment. All direct costs related to the acquisition, exploration and development of mineral properties are capitalized until the properties to which they relate are ready for their intended use, sold, abandoned or management has determined there to be impairment. If economically recoverable ore reservesExploration and evaluation assets are developed, capitalized costs oftested for impairment before the related propertyassets are reclassified as mineral properties being depleted.
Caledonia Mining Corporation
Notestransferred to the Consolidated Financial Statements
For the years ended December 31, 2014mine development, infrastructure and 2013
(in thousands of Canadian dollars)
4 Significant accounting policies – (continued)
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised within other income in profit or loss.assets.
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow
to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Depreciation is calculated to write off the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, except for mineral properties,mine development, infrastructure and other assets, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. On commencement of commercial production, depreciation of each mineral propertymine development, infrastructure and development isother assets are provided for on the unit-of-production basis using estimated provenreserves and probable reserves. Whereresources. Land is not depreciated.
The calculation of the totalunits of production rate could be affected to the extent that actual production in the future is different from the current forecast production based on reserves and resources. This would generally result from the extent to which there are significant changes in any of the factors or assumptions used in estimating mineral reserves and resources.
4Significant accounting policies – (continued)
These factors include:
| · | Changes in mineral reserves and resources; |
| · | Differences between actual commodity prices ad commodity price assumptions; |
| · | Unforeseen operational issues at mine sites; and |
| · | Changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange rates. |
Change in depreciation method
Previously in mining areas to which the full extent of the orebodies were not determinable because ore bearing structures are open at depth or are open laterally, the straight-linestraight line method of depreciation iswas applied over the estimated life of the mine. Landmine for mine development, infrastructure and other assets. Due to an increase in focus on deep drilling which is not depreciated.expected to result in regular updates to the reserve and resources statements of Blanket Mine, it was determined that these items of property, plant and equipment will be depreciated on the units-of-production method from July 1, 2016. The change in estimation resulted in a decrease of $138 in the depreciation charge for period July 1, 2016 to December 31, 2016. This change in depreciation method has been accounted for prospectively as a change in estimate in accordance with IFRS.
Useful lives
The estimated useful lives for the current and comparative periods are as follows:
| · | buildings 10 to 15 years (2015: 10 to 15 years) |
| · | plant and equipment10equipment 10 years (2015: 10 years) |
| · | fixtures and fittings including computers 4 to 10 years (2015: 4 to 10 years) |
| · | motor vehicles 4 years (2015: 4 years) |
| · | mine development, infrastructure and other assets in production, units-of-production method from July 1, 2016 and 11 years on the straight line method for the period January 1, 2016 to June 30, 2016 (2015: 11 years, straight line method) |
Depreciation methods, useful lives and residual values are reviewed at each financial year-endyear and adjusted if appropriate. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
Consumable stores are measured at the lower of cost and net realisable value. The cost of consumable stores is based on the weighted average cost principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of gold in process, cost includes an appropriate share of production overheads based on normal operating capacity.capacity and is valued on the weighted average cost principle. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
4 | 4 | Significant accounting policies – (continued) |
(i) | Financial assets (including receivables) |
(i)Non-derivative financial assets (including receivables)
A financial asset not classified as fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A non-derivative financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, the absence or the disappearance of an active market for a bond or other security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost provides objective evidence of impairment.
The Group considers evidence of impairment for receivables at both the specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics. An impairment loss in respect of a non-derivative financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
(ii)Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or CGU”).
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
4 Significant accounting policies – (continued)
The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a CGU to which a corporate asset is allocated may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of a CGU exceeds its estimated recoverable amount. The estimated recoverable amount is the greater of its fair value less cost to sell and its estimated value in use. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amount of other assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been an indication of reversal and a change in the estimates used to determine the recoverable
4Significant accounting policies – (continued)
(ii)Non-financial assets – (continued)
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(iii) | Impairment of exploration and evaluation assets |
(iii)Impairment of exploration and evaluation (“E&E”) assetsThe test for recoverabilityimpairment of E&E assets, included in Mineral properties not depreciated, can combine several CGUs as long as the combination is not larger than a segment. The definition of a CGU does, however, change once development activities have begun. There are special impairment triggers for E&E assets. Despite certain relief in respect of impairment triggers and the level of aggregation, the impairment standard is applied in measuring the impairment of E&E assets. Reversals of impairment losses are permittedrequired in the event that the circumstances that resulted in impairment have changed.
E&E assets are only assessed for impairment when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount and upon transfer to development assets (therefore there is no requirement to assess for indication at each reporting date until the entity has sufficient information to reach a conclusion about the commercial viability and technical feasibility of extraction).amount. Indicators of impairment include the following:
| · | The entity's right to explore in the specific area has expired or will expire in the near future and is not expected to be renewed. |
| · | Substantive expenditure on further E&E activities in the specific area is neither budgeted nor planned. |
| · | The entity has not discovered commercially viable quantities of mineral resources as a result of E&E activities in the area to date and has decided to discontinue such activities in the specific area. |
| · | Even if development is likely to proceed, the entity has sufficient data indicating that the carrying amount of the asset is unlikely to be recovered in full from successful development or by sale. |
(i) | Short-term employee benefits |
(i)Short-term employee benefits
Short-term employee benefits are expensed when the related services are provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
| (ii) | Defined contribution plans |
(ii)Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
4 Significant accounting policies – (continued)
the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.
4Significant accounting policies – (continued)
| (I) | Share-based payment transactions |
| (i) | Share-based payment relatingEquity settled share-based payments to employees and directors |
The grant date fair value of share-based payment awards granted to employees and directors is recognised as an expense, with a corresponding increase in equity, over the vesting period of the award. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market vesting conditions at the vesting date.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive incomeprofit or loss over the remaining vesting period or immediately for awards already vested.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the statement of comprehensive income.profit or loss.
| (ii) | Share-based payment relatingCash settled share-based payments to the indigenisation transactionemployees and directors |
The grant date fair value of equity-settled share-based payment transactions with Indigenisation Shareholders (note 5) wascash settled awards granted to employees and directors is recognised immediately as an expense, in 2012 in the statement of comprehensive income, with a corresponding increase in equity,the liability, over the vesting period of the awards. At each reporting date the fair value of the awards are re-measured with a corresponding adjustment to profit or loss. In determining the fair value of a cash settled share-based payment at inception of the transaction and on re-measurement date of the liability, the liability is measured by reference to the listed share price when the transaction became effective.option holder has similar rights to a shareholder. The listing price would be adjusted for the present value of the expected dividends if the cash settled share-based payment has no dividend reinvestment option, as the holder would not be entitled to similar rights as a shareholder.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.liability if the time value of money is considered significant. The unwinding of the discount is recognised as finance cost.
The Group recognises liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of thethese assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to mineral properties along with a corresponding increase in the rehabilitation provision in the period incurred. Discount ratesFuture rehabilitation costs are discounted using a pre-tax risk free rate that reflects the time valuetime-value of money and are related to the provision are used to calculate the net present value.money. The Group’s estimates of rehabilitation costs, which are reviewed annually, could change as a result of changes in regulatory requirements, discount rates, effects of inflation and assumptions regarding the amount and timing of the future expenditures.
4Significant accounting policies – (continued)
(k) Site restoration - (continued)
These changes are recorded directly to mineral properties with a corresponding entry to the rehabilitation provision. Changes resulting from an increased footprint due to gold production are charged to profit andor loss for the period. The costs of rehabilitation projects that were included in the rehabilitation provision are recorded against the provision as incurred.year. The cost of on-going current programs to prevent and control pollution is charged against profit or loss as incurred.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
4 Significant accounting policies – (continued)
Revenue from the sale of precious metals is recognized when the metal is accepted at the refinery, risk and benefits of ownership are transferred and when the receipt of proceeds isare substantially assured. Revenue is measured at the fair value of the gold price receivable at the date of the transaction.
(m) | Finance income and finance costs |
(m) Government grantsThe Company recognises an unconditional government grant related to gold proceeds in profit or loss as other income when the grant becomes receivable. Government grants are initially recognised as deferred income at fair value if there is reasonable assurance that they will be received.
(n)Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on the rehabilitation provisions, and impairment losses recognised on financial assets, interest on bank overdraft balances, effective interest on loans and borrowings and also include commitment costs on overdraft facilities. Finance income and finance costs further include foreign exchange differences on financial assets and financial liabilities.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
Income tax expense comprises current and deferred tax. Current tax and deferred tax expense are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date. Current tax also includes withholding tax on dividends paid between companies within the Group.
| 4 | Significant accounting policies – (continued) |
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
4 Significant accounting policies – (continued)
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the adjusted profit or loss attributable to ordinary shareholders of the Group (see note 18)19) by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees and directors as well as any dilution in Group earnings originating from dilutive partially recognised non-controlling interests at a subsidiary level.
(p) | Changes in accounting policies |
(q) Borrowing cost
The Group has adoptedGeneral and specific borrowing costs that are directly attributable to the following new standards, including any consequential amendmentsacquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to other standards, withcomplete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a datesubstantial period of January 1, 2014. The nature and effects of the changes are explained below.time to get ready for their intended use or sale.
Offsetting of financial assets and financial liabilitiesOther borrowing costs are expensed in the period in which they are incurred.
The Group does not have financial assets and financial liabilities that are offset. As a result, the amendments to IFRS 7 did not require expanded disclosure about the offsetting of financial assets and financial liabilities.
IAS 36 Amendment - Disclosure of recoverable amount for non-financial assets
The Group has adopted the amendments to IAS 36 (2013) in the year ended December 31, 2014. To the extent that impairment is recognised and the recoverable amount is determined with reference to fair value less costs of disposals, the required additional disclosure has been provided.
(q) | Standards, amendments and interpretations issued but not yet effective |
There are new or revised Accounting Standards and Interpretations in issue that are not yet effective. Management have considered all of these Standards and Interpretations and have concluded that those that may have an impact on future consolidated financial statements are the following:
Standard/Interpretation
| Effective date*
| Adoption date by the Group |
Amendments to IAS 1 | Disclosure Initiative
| January 1, 2016 | January 1, 2016 |
IFRS 15 | Revenue from Contracts with Customers
| January 1, 2017 | January 1, 2017 |
IFRS 9 | Financial Instruments | January 1, 2018 | January 1, 2018 |
* F-20Annual periods beginning on or after
4 Significant accounting policies – (continued)
Possible(r)The following standards, amendments to standards and interpretations to existing standards may possibly have an impact on the consolidated financial statementsGroup:
Standard/Interpretation | ·Effective date and expected adoption date* |
| IAS 7 | Disclosure Initiative (AmendmentsThe amendments provide for disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. This includes providing a reconciliation between the opening and closing balances for liabilities arising from financing activities. The amendment is not expected to result in significant changes other than providing the user of the user with additional disclosure in the financial statements. | January 1, 2017 |
| IAS 12 | The amendments provide additional guidance on the existence of deductible temporary differences, which depend solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying amount or expected manner of recovery of the asset. The amendments also provide additional guidance on the methods used to calculate future taxable profit to establish whether a deferred tax asset can be recognised. The Group has performed a preliminary assessment and expects no significant effect on the results. | January 1, 2017 |
| IFRS 15 | This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. The Group has performed a preliminary assessment and expects no significant effect on the results. | January 1, 2018 |
| IFRS 9 | On July 24, 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. This standard is not expected to have a significant impact on the Group as measurement categories are similar to IAS 1)39 even though the criteria for classification into these categories are significantly different. The IFRS 9 impairment model has also been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model. The change is not expected to increase the provision for bad debts recognised in the Group because of the short gold sales collection period. The Group will adopt the standard in the first annual period beginning on or after January 1, 2018. | January 1, 2018 |
Standard/Interpretation | Effective date and expected adoption date* |
| IFRS 2 (Amendments) | The amendments cover three accounting areas: Measurement of cash-settled share-based payments –The new requirements do not change the cumulative amount of expense that is ultimately recognised, because the total consideration for a cash-settled share-based payment is still equal to the cash paid on settlement. Classification of share-based payments settled net of tax withholdings –The amendments introduce an exception stating that, for classification purposes, a share-based payment transaction with employees is accounted for as equity-settled if certain criteria are met. Accounting for a modification of a share-based payment from cash-settled to equity-settled –. The amendments clarify the approach that companies are to apply. The Group has performed a preliminary assessment and expects no significant effect on the results. | January 1, 2018 |
| IFRS 16 | IFRS 16 was published in January 2016. It sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 replaces the previous leases Standard, IAS 17 Leases, and related Interpretations. IFRS 16 has one model for lessees which will result in almost all leases being included on the Statement of Financial position. No significant changes have been included for lessors. The Group has performed a preliminary assessment and expects no significant effect on the results. | January 1, 2019 |
The amendments provide additional guidance on the application of materiality and aggregation when preparing financial statements. The amendments apply for annual
* Annual periods beginningending on or after January 1, 2016 and early application is permitted. The amendment is not expected to result in significant changes
F-21
| 5 | Blanket Zimbabwe Indigenisation Transaction |
During 2012 the Group, to comply with Zimbabwean law that requires indigenous Zimbabweans own at least 51% of the Blanket Mine, entered into agreements to transfer a 51% ownership interest in Blanket Mine as follows:
| · | Sold a 16% interest to the National Indigenisation and Economic Empowerment Fund (“NIEEF”) for US$11.74$11.74 million. |
| · | Sold a 15% interest to Fremiro Investments (Private) Limited (“Fremiro”), which is owned by Indigenous Zimbabweans, for US$11.01$11.01 million. |
| · | Sold a 10% interest to Blanket Employee Trust Services (Private) Limited (BETS)(“BETS”) for the benefit of present and future managers and employees for US$7.34$7.34 million. The shares in BETS are held by the Blanket Mine Employee Trust (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)(“Community Trust”). In addition Blanket Mine paid a non-refundable donation of US$1$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.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
5 | Blanket Zimbabwe Indigenisation Transaction – (continued) |
Outstanding balances on the facilitation loans attract interest at a rate of 10% over the 12-month LIBOR. The timing of the repayment of the loans depends on the future financial performance of Blanket Mine and the extent of future dividends declared by Blanket Mine.
The facilitation loans relating to the groupGroup were declared by Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”) (Blanket Mine’s parent company)transferred as a dividend in specie to a wholly-owned subsidiary of Caledonia Mining Corporation as a dividend in specie on February 14, 2013 and withholding tax amounting to US$1.504 million was paid and expensed on March 5, 2013.Plc.
Accounting treatment
The directors of CHZ,Caledonia Holding 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), and concluded that CHZ should continue to consolidate Blanket Mine and accounted for the transaction as follows:
| · | Non-controlling interests (NCI) are recognised on the portion of shareholding upon which dividends declared by Blanket Mine accrue unconditionally to equity holders as follows: |
(a) | - | 20% of the 16% shareholding of NIEEF; |
| - | 20% of the 15% shareholding of Fremiro; and |
| - | 100% of the 10% shareholding of the Community Trust. |
(b) 20% of the 15% shareholding of Fremiro;
(c) 100% of the 10% shareholding of the Community Trust.
·5 This effectively means that NCI is recognised at Blanket Mine level at 16.2% of the net assets.Zimbabwe Indigenisation Transaction – (continued)
| · | This effectively means that NCI is recognised at Blanket Mine level at 16.2% of the net assets. |
| · | The remaining 80% of the shareholding of NIEEF and Fremiro is recognised as non-controlling interests to the extent that their attributable share of the net asset value of Blanket Mine exceeds the balance on the facilitation loans including interest. At December 31, 20142016 the attributable net asset value did not exceed the balance on the respective loan accounts and thus no additional NCI was recognised. |
| · | The transaction with the BETS is accounted for in accordance with IAS 19 Employee Benefits (profit sharing arrangement) as the ownership of the shares does not ultimately pass to the employees. The employees are entitled to participate in 20% of the dividends accruing to the 10% shareholding in Blanket Mine if they are employed at the date of such distribution. To the extent that 80% of the attributable dividends exceed the balance on the BETS facilitation loan they will accrue to the employees at the date of such declaration. |
| · | The Employee Trust and BETS are structured entities which are effectively controlled and consolidated by Blanket Mine. Accordingly, the shares held by BETS are effectively treated as treasury shares in Blanket Mine and no NCI is recognised. |
Blanket’s indigenisation shareholding percentages and facilitation loan balances |
| | | | | Balance of facilitation loan # |
USD 000's | Shareholding | NCI Recognised | NCI subject to facilitation loan | Dec, 31 2016 | Dec, 31 2015 |
| NIEEF | 16% | 3.2% | 12.8% | 11,990 | 11,907 |
| Fremiro | 15% | 3.0% | 12.0% | 11,682 | 11,657 |
| Community Trust | 10% | 10.0% | - | - | - |
| BETS | 10% | -* | -* | 7,788 | 7,772 |
| | 51% | 16.2% | 24.8% | 31,460 | 31,336 |
Indigenisation shareholding percentages and facilitation loan balances |
| | Shareholding | NCI Recognised | NCI subject to facilitation loan | Balance of facilitation loan at Dec, 31 2014 # US$’000 | Dec, 31 2013 US$’000 |
| NIEEF | 16% | 3.2% | 12.8% | 11,907 | 11,742 |
| Fremiro | 15% | 3.0% | 12.0% | 11,657 | 11,402 |
| Community Trust | 10% | 10.0% | - | - | - |
| BETS ~ | 10% | -* | -* | 7,772 | 7,602 |
| | 51% | 16.2% | 24.8% | 31,336 | 30,746 |
5Blanket Zimbabwe Indigenisation Transaction – (continued)
The balance on the facilitation loans is reconciled as follows:
| Balance at January 1, 2015 | | USD ‘000’s | 31,336 | |
Interest accrued & | | | - | |
Dividends used to repay loans & | | | - | |
Balance at December 31, 20112015 | | 30,090 | 31,336 | |
Interest accrued& | | 656 | 1,359 | |
Dividends used to repay loans& | | - | (1,235 | ) |
Balance at December 31, 20122016 | | 30,746 |
Interest accrued31,460 | | 2,049 |
Dividends used to repay loans | | (2,120) |
Balance at December 31, 2013 | | 30,675 |
Interest accrued | | 2,407 |
Dividends used to repay loans | | (1,746) |
Balance at December 31, 2014 | | 31,336 |
*The shares held by BETS are effectively treated as treasury shares (see above).
~ Accounted The BETS facilitation loan earnings are accounted for under IAS19 Employee Benefits.Benefits as an employee charge under Production cost.
& An interest moratorium was placed on all facilitation loans from December 31, 2014 to August 1, 2016. Interest resumed when Blanket Mine’s started paying dividends on August 1, 2016.
# Facilitation loans are accounted for as equity instruments and are accordingly not recognised as loans receivable.
The following indigenisation costs have been incurred:
| | 2014 | 2013 | 2012 |
| Donation to Gwanda GSCOT | - | - | 1,140 |
| Legal fees | - | - | 21 |
| Professional consulting fees | - | - | 539 |
| | - | - | 1,700 |
Advance dividends
In anticipation of completion of the underlying subscription agreements, Blanket Mine agreed to an advance dividend arrangements with NIEEF and the Community Trust as follows:
(a) | Advances made to the Community Trust against their right to receive dividends declared by Blanket Mine on their shareholding as follows: |
· | A US$2 million payment on or before September 30, 2012; |
·A $2 million payment on or before September 30, 2012;· | A US$1 million payment on or before February 28, 2013; and |
·A $1 million payment on or before February 28, 2013; and· | A US$1 million payment on or before April 30, 2013. |
These advance payments were debited to a loan account bearing interest at a rate of 10% over the 12-month LIBOR. The loan is repayable by way of set off of future dividends on the Blanket Mine shares owed by the Community Trust.
Advances made to NIEEF as an advanced dividend loan before 2013 has been settled through Blanket Mine dividend repayments in fiscal 2014.
(b) | An advance payment of US$1.8 million to NIEEF against their right to receive dividends declared by Blanket Mine on their shareholding. The advance payment was debited to an interest-free loan account and was repayable by way of set off of future dividends on the Blanket Mine shares owned by NIEEF. Whilst any amount remained outstanding on the NIEEF dividend loan account, interest on the NIEEF facilitation loan was suspended. |
5 Blanket Zimbabwe Indigenisation Transaction – (continued)
The advance dividend payments were recognised as distributions to shareholders and they are classified as equity instruments. The loans arising are not recognised as loans receivable, because repayment is by way of uncertain future dividends to be declared.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
5 Blanket Zimbabwe Indigenisation Transaction – (continued)
(c) | From January 1, 2015, Blanket will suspend dividend payments until early 2016 as a result of which the repayment of facilitation loans by Blanket’s indigenous shareholders are also suspended. During this period, there will be a moratorium on the interest roll-up on the outstanding facilitation loans. |
The movement in the advance dividend loansloan to the Community trust is reconciled as follows in USD 000’s:follows:
| | | | NIEEF | Community Trust | Total |
| | | | US$ | US$ | US$ |
| Balance at January 1, 2013 | | | 1,800 | 2,062 | 3,862 |
| Advanced dividends paid | | | - | 2,000 | 2,000 |
| Interest accrued | | | - | 346 | 346 |
| Dividends used to repay advance dividends | | | (1,442) | (901) | (2,343) |
| Balance at December 31, 2013 | | | 358 | 3,507 | 3,865 |
| Interest accrued | | | - | 334 | 334 |
| Dividends used to repay advance dividends | | | (358) | (604) | (962) |
| Balance at December 31, 2014 | | | - | 3,237 | 3,237 |
| | Total | |
| | | |
| Balance at January 1, 2015 | | | 3,237 | |
| Interest accrued | | | - | |
| Dividends used to repay advance dividends | | | - | |
| Balance at December 31, 2015 | | | 3,237 | |
| Interest accrued | | | 133 | |
| Dividends used to repay advance dividends | | | (370 | ) |
| Balance at December 31, 2016 | | | 3,000 | |
Blanket has suspended dividend payments from January 1, 2015 until August 1, 2016 as a result of which the repayment of facilitation loans by Blanket’s indigenous shareholders were also suspended. A moratorium was placed on the interest of the advanced dividend loan until such time as dividends resumed, no repayments were made or interest accumulated from December 31, 2014 until July 31, 2016. This was considered a modification that was not beneficial to Blanket’s indigenous shareholders. Dividends and interest resumed on August 1, 2016, when Blanket Mine declared a dividend.
6Financial risk management
Overview
The Group has exposure to the following risks from its use of financial instruments:
| · | Currency risk (refer note 24)25) |
| · | Interest rate risk (refer note 24)25) |
| · | Credit risk (refer note 24)25) |
| · | Liquidity risk (refer note 24)25) |
This note and note 2425 presents information about the Group’s exposure to each of the above risks and the Group’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these consolidated financial statements.
The Group is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management
6Financial risk management – (continued)
program focuses on preservation of capital, and protecting current and future Group assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.
The Board of Directors has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Group’s Audit Committee oversees management’s compliance with the Group’s financial risk management policy.
On February 10, 2016, a gold price hedge was entered into to manage the possible effect of gold price fluctuations and expired in August 2016. As at December 31, 2016 no financial instruments were in place to manage the gold price risk. The fair value of the Group’s financial instruments approximates their carrying value unless otherwise noted.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
6 | Financial risk management – (continued) |
The types of risk exposure and the way in which such exposures are managed are as follows:described below:
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. The Group does not use financial instruments to hedge its exposure to currency risk. Currency risk on the repayment of the sales and purchases are managed by regular repayments of the outstanding amounts.
The Group is exposed to interest rate risk arising from its cash and cash equivalents invested with financial institutions as well as its overdraft facility.facility and term loan. Management’s policy is to invest cash in financial institutions with an investment grade credit-rating. The Company has not entered into interest rate swap agreements and mitigates the interest rate risk by remaining in a credit –rating of at least “A” that offer the highest interest rates.positive consolidated net cash position.
(c) Credit risk
Credit risk includes the risk of a financial loss to the Group if a gold sales customer fails to meet its contractual obligation. Gold sales were made to Fidelity Printers and Refiners in Zimbabwe during the year. The payment terms stipulated in the service delivery contract were adhered to in all circumstances. Cash is deposited only with “A” grade banks.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group manages its liquidity risk by ensuring that there is sufficient capitalcash to meet its likely cash requirements, after taking into account cash flows from operations and the Group’s holdings of cash and cash equivalents. The Group believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities. Since
7Capital Management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue the mining operations and exploration potential of the mineral properties.
The Group’s capital includes shareholders’ equity, comprising issued share capital, reserves, accumulated other comprehensive income, accumulated deficit, bank loans and non-controlling interests.
| | 2014 | 2013 |
| | $ | $ |
| Total equity | 58,535 | 51,974 |
| | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Total equity | | | 59,317 | | | | 50,361 | | | | 50,343 | |
The Group’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its on-going operations, to provide returns for shareholders and accommodate any rehabilitation provisions and to pursue growth opportunities. As at December 31, 2014,2016, the Group is not subject to externally imposed capital requirements other than the term loan which is covered by a notarial bond over moveable assets (refer notes 13 and 22) and there has been no change with respect to the overall capital risk management strategy. Management is of the opinion that the capital is sufficient to safeguard its ability to continue as a going concern and maintain operations and exploration potential of the mineral properties.
8Production costs
| | | | | | | | | | |
| | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Salaries and wages | | | 12,206 | | | | 11,908 | | | | 10,014 | |
| Consumable materials | | | 16,291 | | | | 14,479 | | | | 14,565 | |
| Site restoration | | | 32 | | | | - | | | | 29 | |
| Exploration cost not capitalised | | | 408 | | | | 380 | | | | 343 | |
| Safety | | | 221 | | | | 551 | | | | 473 | |
| On mine administration | | | 2,898 | | | | 2,701 | | | | 2,484 | |
| Other production cost | | | 30 | | | | - | | | | - | |
| | | | 32,086 | | | | 30,019 | | | | 27,908 | |
| | | | | | | | | | | | | |
9.1Other income
| | | 2016 | | | 2015 | | | 2014 | |
| Government grant – Gold sale export incentive | | | 1,104 | | | | - | | | | - | |
| Non-refundable deposit – Eersteling Gold Mining Company Limited | | | 120 | | | | - | | | | - | |
| Other | | | 106 | | | | 110 | | | | 25 | |
| | | | 1,330 | | | | 110 | | | | 25 | |
Government grant – Gold sale export incentive
From May 2016 the Reserve Bank of Zimbabwe announced a 2.5% export incentive on the gold proceeds received for all large scale gold mine producers. In terms of the directive the Blanket Mine will receive 2.5% on all gold proceeds sold to Fidelity Printers and Refiners Limited. As at the approval date of these financial statements all export incentive payments outstanding as at December 31, 2016 were received in cash. All incentives granted by the Zimbabwean government were included in other income when determined receivable.
| | 2014 | 2013 | 2012 |
| | $ | $ | $ |
| Salaries and wages | 11,056 | 10,105 | 8,491 |
| Consumable materials | 16,081 | 14,470 | 13,286 |
| Site restoration | 32 | 151 | 43 |
| Exploration | 379 | (288) | 831 |
| Safety | 522 | 595 | 251 |
| On mine administration | 2,742 | 2,379 | 2,751 |
| | 30,812 | 27,412 | 25,653 |
9 Administrative expenseGovernment grant – Gold sale export incentive (continued)
| | 2014 | 2013 | 2012 |
| | $ | $ | $ |
| Investor relations | 567 | 723 | 447 |
| Management contract fee | 938 | 879 | 704 |
| Audit fee | 393 | 333 | 443 |
| Legal fee and disbursements | 797 | 439 | 189 |
| Accounting services fee | 27 | 28 | 83 |
| Listing fees | 351 | 340 | 151 |
| Directors fees | 371 | 364 | 194 |
| Salaries and wages | 2,542 | 1,785 | 1,648 |
| Office costs - Zambia | 989 | - | - |
| Employee benefits relating to indigenisation | 155 | 216 | - |
| Donation to scholarship fund | - | 2,096 | - |
| Professional consulting fees | 541 | - | - |
| Other | 486 | 569 | 196 |
| | 8,157 | 7,772 | 4,055 |
10 Finance incomeOn July 12, 2016 the Group entered into an agreement to sell the shares and finance costsclaims of Eersteling Gold Mining Company Limited. On September 19, 2016 in the second addendum to the agreement it was agreed that the Group will receive a non-refundable deposit in addition to the initial agreed sale amount that was agreed upon in July, 2016. As at December 31, 2016 the sale of the shares and claims were not considered highly probable as 100% of the sale of shares and claims receivable and a significant portion of the non-refundable deposit were outstanding and outside of the agreed upon payment dates of the second addendum. Up to December 31, 2016 an amount of $120 was received as part of the non-refundable deposit and was recognised as other income.
9.2 Sale of Treasury Bills
| Finance income | 2014 | 2013 | 2012 |
| | $ | $ | $ |
| Interest received – Bank | 15 | 24 | 79 |
| | | | |
| Finance cost | | | |
| | | | |
| Interest paid – Bank | (22) | (30) | (60) |
| Unwinding of rehabilitation provision | (37) | - | - |
| Finance charges - Overdraft | (111) | (102) | (100) |
| | (170) | (132) | (160) |
10Administrative expense
| | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Investor relations | | | 543 | | | | 513 | | | | 514 | |
| Audit fee | | | 267 | | | | 240 | | | | 356 | |
| Legal fee and disbursements | | | 617 | | | | 452 | | | | 722 | |
| Advisory services fee | | | 373 | | | | 355 | | | | 24 | |
| Listing fees | | | 328 | | | | 206 | | | | 318 | |
| Directors fees company | | | 211 | | | | 191 | | | | 298 | |
| Directors fees Blanket | | | 48 | | | | 60 | | | | 38 | |
| Employee costs | | | 2,803 | | | | 3,106 | | | | 3,152 | |
| Office costs - Zambia | | | 17 | | | | 716 | | | | 896 | |
| Other office administration costs | | | 185 | | | | 547 | | | | 16 | |
| Unrecoverable VAT expenses and penalties | | | - | | | | 298 | | | | - | |
| Employee benefits relating to indigenisation | | | - | | | | - | | | | 140 | |
| Travel costs | | | 484 | | | | 325 | | | | 303 | |
| Donation to community | | | - | | | | 58 | | | | - | |
| Eersteling Gold Mine administration costs | | | 111 | | | | 111 | | | | 120 | |
| Professional consulting fees | | | 1,276 | | | | 444 | | | | 490 | |
| | | | 7,263 | | | | 7,622 | | | | 7,387 | |
11Finance income and finance costs
11
| Finance income | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Interest received – Bank | | | 16 | | | | 1 | | | | 14 | |
| | | | | | | | | | | | | |
| Finance cost | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Interest paid – Bank | | | 103 | | | | 49 | | | | 20 | |
| Interest paid – Capitalised to Property, plant and equipment (note 13) | | | (103 | ) | | | - | | | | - | |
| Unwinding of rehabilitation provision | | | 25 | | | | 43 | | | | 33 | |
| Interest – South African Revenue Service | | | - | | | | 344 | | | | - | |
| Finance charges – Overdraft | | | 167 | | | | 100 | | | | 101 | |
| | | | 192 | | | | 536 | | | | 154 | |
12Tax expense
| | | 2014 | 2013 | 2012 | | 2016 | | 2015 | | 2014 | |
| Tax recognised in profit or loss | | $ | $ | | | | | | | |
| | | | | | | | | | | | |
| Current tax expense | | 5,824 | 7,712 | 12,547 | |
| Current tax | | | 3,106 | | (197) | | 5,276 | |
| Income tax– current year | | 5,059 | 5,139 | 10,784 | | 2,414 | | 506 | | 4,582 | |
| Income tax – adjustment for current tax in prior years | | (215) | - | - | |
| Income tax – Prior year under/(over) provision | | | 49 | | (1,636) | | (194) | |
| Withholding tax expense | | 980 | 2,573 | 1,763 | | 643 | | 933 | | 888 | |
| Deferred tax expense | | 780 | 2,185 | 271 | | 4,611 | | 2,567 | | 706 | |
| Origination and reversal of temporary differences | | 517 | 2,185 | 525 | | 4,611 | | 2,567 | | 468 | |
| Change in effective tax rate | | 263 | - | (254) | | - | | - | | 238 | |
| | | | | | | | | | | | |
| Tax expense – recognised in profit or loss | | 6,604 | 9,897 | 12,818 | | 7,717 | | 2,370 | | 5,982 | |
Tax recognised in other comprehensive income
| Income tax - current year | (122) | - | | | - | | | | (199 | ) | | | (111 | ) |
| | | | |
| Net tax expense | 6,482 | 9,897 | 12,818 | |
Tax expense | | | | 7,717 | | | | 2,171 | | | | 5,871 | |
Unrecognised deferred tax assets
Deferred tax assets have not been recognised| Deferred tax assets have not been recognised in respect of the following items: | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Tax losses carried forward | | | 4,989 | | | | *11,150 | | | | | *19,957 |
| | | | 4,989 | | | | 11,150 | | | | 19,957 | |
*Tax losses carried forward in respect2015 include an amount of $6,243 relating to losses when Caledonia Mining Corporation was domiciled in Canada. These losses expired after the following items:
| | 2014 | | 2013 | 2012 |
| | $ | | $ | $ |
| Deductible temporary differences | - | | 3,594 | 3,338 |
| Tax losses carried forward | 23,205 | | 16,029 | 10,478 |
| | 23,205 | | 19,623 | 13,816 |
Taxable losses expire as set out below forCompany re-domiciled to Jersey, Channel Islands through a process called the entities making taxable losses within the group. Deferred tax assets have not been recognised for these items because future taxable income is not deemed probableContinuance and its name changed to utilise these benefits against.
| Year | Amount |
| 2015 | 1,863 |
| 2026 | 2,780 |
| 2027 | 3,054 |
| 2028 | 2,260 |
| 2029 | 1,661 |
| 2030 | 1,617 |
| 2031 | 2,238 |
| 2032 | 2,667 |
| 2033 | 2,896 |
| 2034 | 4,096 |
| No expiry | 51,116 |
| | 76,248 |
Caledonia Mining Corporation Plc.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
11 Tax expense - (continued)
Reconciliation of tax rate
| | 2014 | 2014 | 2013 | 2013 | 2012 | 2012 |
| | % | $ | % | $ | % | $ |
| Profit/(Loss) for the year | | 6,565 | | (490) | | 7,358 |
| Total tax expense | | 6,604 | | 9,897 | | 12,818 |
| Profit before tax | | 13,169 | | 9,407 | | 20,176 |
| | | | | | | |
| Income tax using Company's domestic tax rate | 26.5% | 3,490 | 26.5% | 2,493 | 26.5% | 5,347 |
| Tax rate differences in foreign jurisdictions | | (385) | | (1,450) | | (210) |
| Change in effective tax rate | | 263 | | - | | (254) |
| Foreign currency difference | | 37 | | (12) | | 439 |
| Withholding tax – not offsetable | | 205 | | 1,837 | | 1,763 |
| Share based payment expenses and other non-deductible expenses | | (373) | | 1,222 | | 4,364 |
| Accrual for dispute | | - | | - | | 806 |
| Net over provision of taxes in prior years | | (215) | | - | | - |
| Change in unrecognized deferred tax assets | | 3,582 | | 5,807 | | 563 |
| Tax expense - recognised in Profit or loss | | 6,604 | | 9,897 | | 12,818 |
Tax paid | 2014 | | 2013 | 2012 |
| | $ | | $ | $ |
| Income tax payable at January, 1 | 1,138 | | 1,518 | 295 |
| Current and withholding tax expense | 5,824 | | 7,712 | 12,547 |
| Income tax recognised through other comprehensive income | (122) | | - | - |
| Foreign currency movement | 38 | | (118) | 294 |
| Tax paid | (4,999) | | (7,974) | (11,618) |
| Net Income tax payable at December, 31 | 1,879 | | 1,138 | 1,518 |
| Net income tax | 2014 | | 2013 | 2012 |
| | $ | | $ | $ |
| Income tax receivable * | (111) | | - | - |
| Income tax payable | 1,990 | | 1,138 | 1,518 |
| | 1,879 | | 1,138 | 1,518 |
* Receivable is due to an overpayment made to ZIMRA during quarter 4 of 2014 which cannot be offset against other tax jurisdictions.
Caledonia Mining Corporation Plc
Notes to the Consolidated Financial Statements
For the years ended December 31 2014 and 2013
(in thousands of CanadianUnited States dollars, unless indicated otherwise)
12Tax expense - (continued)
Taxable losses do not expire for the entities incurring taxable losses within the group. Deferred tax assets have not been recognised as future taxable income is not deemed probable to utilise these losses against.
| Tax paid | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Net income tax receivable/(payable) at January 1 | | | 344 | | | | (1,617 | ) | | | (1,064 | ) |
| Current and withholding (expense)/tax credit | | | (3,106 | ) | | | 197 | | | | (5,276 | ) |
| Income tax expense recognised through other comprehensive income | | | - | | | | 199 | | | | 111 | |
| Foreign currency movement | | | (49 | ) | | | 103 | | | | 86 | |
| Tax paid | | | 2,466 | | | | 1,462 | | | | 4,526 | |
| Net income tax (payable)/receivable at December 31 | | | (345 | ) | | | 344 | | | | (1,617 | ) |
| Net income tax | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Income tax receivable | | | - | | | | 397 | | | | 95 | |
| Income tax payable | | | (345 | ) | | | (53 | ) | | | (1,712 | ) |
| Net income tax (payable)/receivable | | | (345 | ) | | | 344 | | | | (1,617 | ) |
12Tax expense - (continued)
Reconciliation of tax rate
| | 2016 | 2016 | 2015 | 2015 | 2014 | 2014 |
| | % | | % | | % | |
| Profit for the year | | 11,085 | | 5,590 | | 5,946 |
| Total tax expense | | 7,717 | | 2,370 | | 5,982 |
| Profit before tax | | 18,802 | | 7,960 | | 11,928 |
| | | | | | | |
| Income tax at Company's domestic tax rate | *0% | - | 26.5% | 2,109 | 26.5% | 3,161 |
| Tax rate differences in foreign jurisdictions | | 6,171 | | (63) | | (349) |
| Change in tax rate | | - | | - | | 238 |
| Foreign currency difference | | - | | (12) | | 34 |
| Net withholding tax | | 476 | | 317 | | 185 |
| Deemed interest on loans | | - | | 31 | | 636 |
| Share-based payments | | 122 | | 6 | | - |
| Impairment | | - | | - | | 37 |
| Non-deductible South African tax transactions | | - | | 470 | | - |
| Royalties | | 753 | | 632 | | 881 |
| Donations | | 2 | | 15 | | 3 |
| Other non-deductible expenditure | | 62 | | (49) | | 27 |
| Under/(over) provision of taxes in prior years | | 49 | | (1,636) | | (194) |
| Change in unrecognized deferred tax assets | | 82 | | 550 | | 1,323 |
| Tax expense - recognised in profit or loss | | 7,717 | | 2,370 | | 5,982 |
* The domestic income tax rate of the Company changed from 26.5% to 0% after it re-domiciled from Canada to Jersey Channel Islands.
11 12Tax expense - (continued)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
| | Assets | Liabilities | Net |
| | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| | $ | $ | $ | $ | $ | $ |
| Property, plant and equipment | - | - | (10,339) | (8,619) | (10,339) | (8,619) |
| Inventories | - | - | - | | | (85) |
| Provisions | 271 | 221 | - | - | 271 | 221 |
| Other items | - | - | (24) | (39) | (24) | (39) |
| Tax assets (liabilities) | 271 | 221 | (10,363) | (8,743) | (10,092) | (8,522) |
| | | Assets | | | Liabilities | | | Net | |
| | | 2016 | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | 2014 | | | 2016 | | | *2015 | | | 2014 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property, plant and equipment | | | - | | | | - | | | | - | | | | (17,092 | ) | | | (12,988 | ) | | | (9,223 | ) | | | (17,092 | ) | | | (12,988 | ) | | | (9,223 | ) |
| Provision for obsolete stock | | | 12 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 12 | | | | - | | | | - | |
| Prepayments | | | - | | | | - | | | | - | | | | (3 | ) | | | (3 | ) | | | (22 | ) | | | (3 | ) | | | (3 | ) | | | (22 | ) |
| Provisions | | | 1,218 | | | | 733 | | | | 565 | | | | - | | | | - | | | | - | | | | 1218 | | | | 733 | | | | 565 | |
| Assessed losses recognised | | | - | | | | 998 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 998 | | | | - | |
| Tax assets/ (liabilities) | | | 1,230 | | | | 1,731 | | | | 565 | | | | (17,095 | ) | | | (12,991 | ) | | | (9,245 | ) | | | (15,865 | ) | | | (11,260 | ) | | | (8,680 | ) |
* The deferred tax liability consists of a deferred tax asset of $44 (2015: $58) from the South African operations and a deferred tax liability of $15,909 (2015: $11,318) due to the Zimbabwean operations. The amounts are in different tax jurisdictions and therefore not offsetable and presented separately in the Statement of financial position as a Non-current asset and a Non-current liability. The deferred tax asset recognised is supported by evidence of probable future taxable income.
Movement in recognised deferred tax assets and liabilities
| | Balance January 1, 2014 | Recognised in profit or loss | Recognised in other comprehensive income | Balance December 31, 2014 | | Balance January 1, 2016 | | | Recognised in profit or loss | | | Foreign exchange movement | | | Balance December 31, 2016 | |
| Property, plant and equipment | (8,619) | (914) | (806) | (10,339) | | | (12,988 | ) | | | (4,104 | ) | | | - | | | | (17,092 | ) |
| Inventories | (85) | - | 85 | - | |
Prepayments | | | | (3 | ) | | | 2 | | | | (2 | ) | | | (3 | ) |
| Provisions | 221 | 119 | (69) | 271 | | | 733 | | | | 477 | | | | 8 | | | | 1218 | |
| Other | (39) | 15 | - | (24) | |
Provision for obsolete stock | | | | - | | | | 12 | | | | - | | | | 12 | |
Assessed loss | | | | 998 | | | | (998 | ) | | | - | | | | - | |
| Total | (8,522) | (780) | (790) | (10,092) | | | (11,260 | ) | | | (4,611 | ) | | | 6 | | | | (15,865 | ) |
| | | | | |
| | | | | |
| | Balance January 1, 2013 | Recognised in profit or loss | Recognised in other comprehensive income | Balance December 31, 2013 |
| Property, plant and equipment | (6,156) | (2,348) | (115) | (8,619) |
| Unrealised forex | 61 | - | (61) | - |
| Inventories | 66 | 158 | (309) | (85) |
| Provisions | 181 | 40 | | 221 |
| Other | (3) | (35) | (1) | (39) |
| Total | (5,851) | (2,185) | (486) | (8,522) |
| | | | | |
| | Balance January 1, 2012 | Recognised in profit or loss | Recognised in other comprehensive income | Balance December 31, 2012 |
| Property, plant and equipment | (6,466) | 143 | 167 | (6,156) |
| Unrealised forex | 119 | (49) | 9 | 61 |
| Inventories | 59 | 8 | (1) | 66 |
| Provisions | 373 | (182) | (10) | 181 |
| Other | (3) | - | - | (3) |
| Non capital loss carried forward | 206 | (191) | (15) | - |
| Total | (5,712) | (271) | (486) | (5,851) |
12Tax expense - (continued)
12 Property, plant and equipment
| | | Land and buildings | Mineral properties depreciated | Mineral properties not depreciated | Plant and equipment | Fixtures and fittings | Motor vehicles | Total |
| | | $ | $ | $ | $ | $ | $ | $ |
| Cost | | | | | | | | |
| Balance at January 1, 2013 | | 4,534 | 11,325 | 10,838 | 19,346 | 1,196 | 1,782 | 49,021 |
| Additions | | 3,240 | 2,695 | 4,451 | 979 | 85 | 288 | 11,738 |
| Foreign exchange movement | | 378 | 971 | 1,031 | 1,151 | 25 | 149 | 3,705 |
| Balance at December 31, 2013 | | 8,152 | 14,991 | 16,320 | 21,476 | 1,306 | 2,219 | 64,464 |
| | | | | | | | | |
| Balance at January 1, 2014 | | 8,152 | 14,991 | 16,320 | 21,476 | 1,306 | 2,219 | 64,464 |
| Additions* | | 592 | 3,390 | 1,864 | 1,921 | 122 | 19 | 7,908 |
| Reallocations between asset classes | | (640) | 1,834 | - | (1,197) | 3 | - | - |
| Disposals | | - | - | - | (304) | - | (9) | (313) |
| Foreign exchange movement | | 742 | 1,689 | (2,763) | 2,482 | (44) | 61 | 2,167 |
| Balance at December 31, 2014 | | 8,846 | 21,904 | 15,421 | 24,378 | 1,387 | 2,290 | 74,226 |
| | | | | | | | | |
There are commitments to purchase plant and equipment totalling $642 (2013 - $178) at year end.
* Included in mineral properties depreciated is an amount of $1,122 relating to rehabilitation asset capitalised refer note 21.
| | | Balance January 1, 2015 | | | Recognised in profit or loss | | | Foreign exchange movement | | | Balance December 31, 2015 | |
Property, plant and equipment | | | (9,223 | ) | | | (3,765 | ) | | | - | | | | (12,988 | ) |
Prepayments | | | (22 | ) | | | 16 | | | | 3 | | | | (3 | ) |
Provisions | | | 565 | | | | 184 | | | | (16 | ) | | | 733 | |
Assessed loss recognised | | | - | | | | 998 | | | | - | | | | 998 | |
Total | | | (8,680 | ) | | | (2,567 | ) | | | (13 | ) | | | (11,260 | ) |
| | | | | | | | | | | | | | | | | |
| | | Balance January 1, 2014 | | | Recognised in profit or loss | | | Foreign exchange movement | | | Balance December 31, 2014 | |
Property, plant and equipment | | | (8,058 | ) | | | (835 | ) | | | (330 | ) | | | (9,223 | ) |
Prepayments | | | - | | | | - | | | | (22 | ) | | | (22 | ) |
Provisions | | | 207 | | | | 108 | | | | 250 | | | | 565 | |
Inventory | | | (80 | ) | | | - | | | | 80 | | | | - | |
Other | | | (36 | ) | | | 21 | | | | 15 | | | | - | |
Total | | | (7,967 | ) | | | (706 | ) | | | (7 | ) | | | (8,680 | ) |
12 13Property, plant and equipment - (continued)
| | | Land and buildings | Mineral properties depreciated | Mineral properties not depreciated | Plant and equipment | Fixtures and fittings | Motor vehicles | Total |
| Accumulated depreciation and Impairment losses | | $ | $ | $ | $ | $ | $ | $ |
| Balance at January 1, 2013 | | 978 | 2,028 | - | 7,759 | 982 | 803 | 12,550 |
| Depreciation for the year | | 272 | 620 | - | 2,016 | 70 | 298 | 3,276 |
Impairment (1) | | (a)399 | - | (b)13,713 | 91 | - | - | 14,203 |
| Derecognition | | - | - | - | (443) | - | - | (443) |
| Foreign exchange movement | | 85 | 178 | 620 | 20 | 11 | 73 | 987 |
| Balance at December 31, 2013 | | 1,734 | 2,826 | 14,333 | 9,886 | 1,063 | 1,174 | 31,016 |
| | | | | | | | | |
| Balance at January 1, 2014 | | 1,734 | 2,826 | 14,333 | 9,886 | 1,063 | 1,174 | 31,016 |
| Depreciation for the year | | 567 | 810 | - | 2,088 | 86 | 357 | 3,908 |
| Disposals | | - | - | - | (236) | - | (9) | (245) |
| Impairment | | - | - | - | 180 | 16 | - | 196 |
| Foreign exchange movement | | (252) | 358 | (930) | (140) | (65) | (8) | (1,037) |
| Balance at December 31, 2014 | | 2,049 | 3,994 | 13,403 | 11,778 | 1,100 | 1,514 | 33,838 |
| | | | | | | | | |
| Carrying amounts | | | | | | | | |
| At December 31, 2013 | | 6,418 | 12,165 | 1,987 | 11,590 | 243 | 1,045 | 33,448 |
| At December 31, 2014 | | 6,797 | 17,910 | 2,018 | 12,600 | 287 | 776 | 40,388 |
| | Land and buildings | | | Mine development, infrastructure and other | | | Exploration and Evaluation assets | | | Plant and equipment | | | Fixtures and fittings | | | Motor vehicles | | | Total | |
| Cost | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2014 | | | 7,622 | | | | 12,145 | | | | 17,129 | | | | 20,079 | | | | 1,220 | | | | 2,075 | | | | 60,270 | |
| Additions | | | 536 | | | | *2,990 | | | | 1,768 | | | | 1,740 | | | | 114 | | | | 18 | | | | 7,166 | |
| Disposals | | | - | | | | - | | | | - | | | | (275 | ) | | | - | | | | (8 | ) | | | (283 | ) |
| Reallocations between asset classes | | | (580 | ) | | | 1,661 | | | | - | | | | (1,084 | ) | | | 3 | | | | - | | | | - | |
| Foreign exchange movement | | | 30 | | | | 92 | | | | (3,684 | ) | | | 508 | | | | (145 | ) | | | (114 | ) | | | (3,313 | ) |
| Balance at December 31, 2014 | | | 7,608 | | | | 16,888 | | | | 15,213 | | | | 20,968 | | | | 1,192 | | | | 1,971 | | | | 63,840 | |
| Balance at January 1, 2015 | | | 7,608 | | | | 16,888 | | | | 15,213 | | | | 20,968 | | | | 1,192 | | | | 1,971 | | | | 63,840 | |
| Additions | | | 681 | | | | *14,359 | | | | 1,595 | | | | 1,144 | | | | 149 | | | | 265 | | | | 18,193 | |
Surrender of Zambian assets *** | | | - | | | | - | | | | (11,527 | ) | | | - | | | | - | | | | - | | | | (11,527 | ) |
| Disposals | | | - | | | | - | | | | - | | | | (124 | ) | | | - | | | | (77 | ) | | | (201 | ) |
| Reallocations between asset classes | | | (256 | ) | | | - | | | | 1,012 | | | | (756 | ) | | | - | | | | - | | | | - | |
| Foreign exchange movement | | | (44 | ) | | | (89 | ) | | | (69 | ) | | | (606 | ) | | | (64 | ) | | | (90 | ) | | | (962 | ) |
| Balance at December 31, 2015 | | | 7,989 | | | | 31,158 | | | | 6,224 | | | | 20,626 | | | | 1,277 | | | | 2,069 | | | | 69,343 | |
| Balance at January 1, 2016 | | | 7,989 | | | | 31,158 | | | | 6,224 | | | | 20,626 | | | | 1,277 | | | | 2,069 | | | | 69,343 | |
Additions** | | | - | | | | *17,545 | | | | 739 | | | | 572 | | | | 73 | | | | 230 | | | | 19,159 | |
| Scrappings | | | - | | | | - | | | | - | | | | - | | | | (502 | ) | | | - | | | | (502 | ) |
| Reallocations between asset classes | | | 361 | | | | (3,699 | ) | | | - | | | | 3,338 | | | | - | | | | - | | | | - | |
| Disposals | | | | | | | | | | | | | | | | | | | | | | | (55 | ) | | | (55 | ) |
| Foreign exchange movement | | | 17 | | | | 74 | | | | 4 | | | | - | | | | 28 | | | | 11 | | | | 134 | |
| Balance at December 31, 2016 | | | 8,367 | | | | 45,078 | | | | 6,967 | | | | 24,536 | | | | 876 | | | | 2,255 | | | | 88,079 | |
* Included in additions to mine development, infrastructure and other assets is an amount of $557 (2015: $$391) relating to rehabilitation asset capitalised refer note 20.
** Included in additions is an amount of $17,731 (2015:$26,192) relating to capital work in progress (“CWIP”) and contains $103 (2015:$ Nil) of borrowing costs capitalized from the term loan. As at year end $34,086 of CWIP was included in the closing balance (2015:26,152).
*** The Group surrendered all exploration rights relating to the Zambian operations for a nominal value. The Zambian assets were fully impaired in previous years.
There are commitments to purchase plant and equipment totalling $2,122 (2015: $1,376; 2014: $552) at year end.
F-31
12 13Property, plant and equipment
| | | Land and buildings | | | Mine development, infrastructure and other | | | Exploration and Evaluation assets | | | Plant and equipment | | | Fixtures and fittings | | | Motor vehicles | | | Total | |
| Accumulated depreciation and Impairment losses | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2014 | | | 1,621 | | | | 2,642 | | | | 13,400 | | | | 9,243 | | | | 994 | | | | 1,098 | | | | 28,998 | |
| Depreciation for the year | | | 514 | | | | 734 | | | | - | | | | 1,891 | | | | 78 | | | | 323 | | | | 3,540 | |
| Impairment | | | - | | | | - | | | | | - | | | 164 | | | | 14 | | | | - | | | | 178 | |
| Disposals | | | - | | | | - | | | | - | | | | (214 | ) | | | - | | | | (8 | ) | | | (222 | ) |
| Foreign exchange movement | | | (372 | ) | | | 59 | | | | (1,873 | ) | | | (954 | ) | | | (140 | ) | | | (110 | ) | | | (3,390 | ) |
| Balance at December 31, 2014 | | | 1,763 | | | | 3,435 | | | | 11,527 | | | | 10,130 | | | | 946 | | | | 1,303 | | | | 29,104 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2015 | | | 1,763 | | | | 3,435 | | | | 11,527 | | | | 10,130 | | | | 946 | | | | 1,303 | | | | 29,104 | |
| Depreciation for the year | | | 559 | | | | 451 | | | | - | | | | 1,894 | | | | 98 | | | | 320 | | | | 3,322 | |
Surrender of Zambian assets *** | | | - | | | | - | | | | (11,527 | ) | | | - | | | | - | | | | - | | | | (11,527 | ) |
| Disposals | | | - | | | | - | | | | - | | | | (117 | ) | | | - | | | | (51 | ) | | | (168 | ) |
| Foreign exchange movement | | | (1 | ) | | | (105 | ) | | | - | | | | (383 | ) | | | (48 | ) | | | (69 | ) | | | (606 | ) |
| Balance at December 31, 2015 | | | 2,321 | | | | 3,781 | | | | - | | | | 11,524 | | | | 996 | | | | 1,503 | | | | 20,125 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2016 | | | 2,321 | | | | 3,781 | | | | - | | | | 11,524 | | | | 996 | | | | 1,503 | | | | 20,125 | |
| Scrappings | | | - | | | | - | | | | - | | | | - | | | | (502 | ) | | | - | | | | (502 | ) |
| Impairments | | | - | | | | - | | | | - | | | | - | | | | 20 | | | | - | | | | 20 | |
| Depreciation for the year | | | 629 | | | | 699 | | | | - | | | | 1,705 | | | | 106 | | | | 352 | | | | 3,491 | |
| Disposals | | | - | | | | - | | | | - | | | | - | | | | - | | | | (8 | ) | | | (8 | ) |
| Foreign exchange movement | | | - | | | | 61 | | | | - | | | | - | | | | 22 | | | | (3 | ) | | | 80 | |
| Balance at December 31, 2016 | | | 2,950 | | | | 4,541 | | | | - | | | | 13,229 | | | | 642 | | | | 1,844 | | | | 23,206 | |
*** The Group surrendered all exploration rights relating to the Zambian operations for a nominal value. The Zambian assets were fully impaired in previous years.
13Property, plant and equipment - (continued)
(1) | The impairments detail herein relate to the following: |
(a) | This relates to the cost attributable to mineral rights held by Eersteling Gold Mine. Due to changed legislation this cost no longer has value to the Group. This mineral right does not relate to the application lodged for the New Order Mining Right applied for by Eersteling Gold Mine. |
(b) | This relates to Exploration expenditure incurred at Caledonia Nama Limited in Zambia. The full carrying value of costs previously incurred and capitalised were impaired in 2013 for the following reasons: |
| · | Substantive expenditure on further E&E activities in the specific area is neither budgeted nor planned, and |
| · | The Group has not discovered commercially viable quantities of mineral resources as a result of E&E activities in the area to date and has decided to discontinue such activities in the specific area. |
13 Inventories| Carrying amounts | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2014 | | | 5,845 | | | | 13,453 | | | | 3,686 | | | | 10,838 | | | | 246 | | | | 668 | | | | 34,736 | |
| At December 31, 2015 | | | 5,668 | | | | 27,377 | | | | 6,224 | | | | 9,102 | | | | 281 | | | | 566 | | | | 49,218 | |
| At December 31, 2016 | | | 5,417 | | | | 40,537 | | | | 6,967 | | | | 11,307 | | | | 234 | | | | 411 | | | | 64,873 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | 2013 |
| | | $ | $ |
| Consumable stores | | 6,932 | 5,995 |
| Gold in process | | 639 | 871 |
| | | 7,571 | 6,866 |
F-36
Inventory comprises gold
13Property, plant and equipment - (continued)
Impairment indicators
Management’s budgeted capital expenditure for 2017 is focused on increasing the production capacity at the Blanket Mine (“Investment Plan”). It was therefore decided to place the satellite properties, GG and consumable stores utilised by Blanket Mine. Mascot, on care and maintenance until there are sufficient funds to re-commence the planned further exploration and evaluation of the orebodies, gold extraction processes and mining methods at these areas. Due to the impairment indicator, management assessed the recoverability of the investment in these satellite properties and determined that no impairment was required as at December 31, 2016. The discounted cash flow method was used to calculate the recoverable amount using the assumptions below:
| Long-term gold price per oz. | | $ | 1,192 | |
| Discount rate | | | 20 | % |
| Life of mine | | | | |
| - GG | 7 yrs | |
| - Mascot | 5 yrs | |
| Incremental operational cost per tonne (at 100 tonnes per day) | |
| - GG | | $ | 42 | |
| - Mascot | | $ | 44 | |
| | | | | |
14Inventories
| | | 2016 | | | 2015 | |
| | | | | | | |
| Consumable stores | | | 6,884 | | | | 5,739 | |
| Gold in process | | | 338 | | | | 352 | |
| | | | 7,222 | | | | 6,091 | |
Consumables stores are disclosed net of any write downs or provisions offor obsolete items.items, which amounted to $862 (2015: $46).
14 15Trade and other receivables
| | | 2014 | 2013 | | 2016 | | | 2015 | |
| | | $ | $ | | | | | | |
| Bullion revenue receivable | | - | 1,662 | | | 1,059 | | | | - | |
| VAT receivables | | 1,169 | 1,331 | | | 1,901 | | | | 2,997 | |
| Deposits for stores and equipment and other receivables | | 871 | 896 | | | 465 | | | | 842 | |
| | | 2,040 | 3,889 | | | 3,425 | | | | 3,839 | |
The Group's exposure to credit and currency risks, and impairment losses related to trade and other receivables is disclosed in notes 6 and 24.25.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(16in thousands of Canadian dollars)
15 Cash and cash equivalents
| | | 2014 | 2013 | | 2016 | | | 2015 | |
| | | $ | $ | | | | | | |
| Bank balances | | 26,838 | 25,222 | | | 14,335 | | | | 12,568 | |
| Cash and cash equivalents in the statement of financial position | | 26,838 | 25,222 | | | 14,335 | | | | 12,568 | |
| Bank overdrafts used for cash management purposes | | - | (1,796) | | | - | | | | (1,688 | ) |
| Cash and cash equivalents in the statement of cash flows | | 26,838 | 23,426 | |
| Net cash and cash equivalents at year end | | | | 14,335 | | | | 10,880 | |
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed in note 24.25.
TheOn August 23, 2016 Blanket Mine arranged an unsecured bank overdraft facility of US$2.5 million$2,000 of which full amount was unutilised at December 31, 2016. The overdraft facility bears interest at 8%6.5% per annum, 4.65% above the bank’s base rate. The facility is unsecured, valid forrate and has a $20 arrangement fee over a 12 months and is renewable.month period with a review date of August 31, 2017. The facility is repayable on demand.
16 17Share capital
| Authorised | | |
| Unlimited number of ordinary shares of no par value. |
| Unlimited number of preference shares of no par value. | |
| | Number of fully paid ordinary shares (1) | Amount $ |
Issued |
| December 31, 2012 | 51,446,178 | 197,137 |
| Reduction in stated capital (note 17) | - | (140,000) |
| Share options exercised during the year | 671,730 | 470 |
| December 31, 2013 | 52,117,908 | 57,607 |
| December 31, 2014 | 52,117,908 | 57,607 |
Unlimited number of shares of no par value.
Unlimited number of preference shares of no par value.
| Issued shares | | | Number of fully paid shares | | | | Amount | |
| January 1, 2014 | | | 52,117,908 | | | | 54,569 | |
December 31, 2014 | | | 52,117,908 | | | | 54,569 | |
Cancelled* | | | (39,000 | ) | | | - | |
December 31, 2015 | | | 52,078,908 | | | | 54,569 | |
Issued | | | 708,520 | | | | 433 | |
December 31, 2016 | | | 52,787,428 | | | | 55,002 | |
* 39,000 treasury shares of the Company were cancelled during 2015.
The holders of ordinary share capitalshares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Group. The Company has no preference shares in issue.
(1)F-37 During fiscal 2013 the directors of the Group took a decision to consolidate the issued shares on a 10:1 basis. Subsequent
17 Reserves
Investment revaluation reserve
The investment revaluation reserve arises from the valuation of investments at fair value through OCI. The amount was transferred to retained loss in the previous year because the investment was disposed of.18Reserves
Foreign currency translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations with functional currencies that differ from the presentation currency.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
Share-based payment reserve
The share-based payment reserve comprises the fair value of equity instruments granted to employees, directors and service providers under share option plans and equity instruments issued to ZimbabweBlanket’s indigenisation shareholders under theBlanket’s Indigenisation Transaction (refer Note 5).
Contributed surplus
The contributed surplus reserve comprises the reduction in stated capital as approved by shareholders at the special general meeting on January 24, 2013 so as to be able to commence dividend payments.
| Reserves | 2014 | 2013 |
| | $ | $ |
| Foreign currency translation reserve | 4,133 | 319 |
| Share-based payment reserve | 15,750 | 15,750 |
| Contributed surplus | 140,000 | 140,000 |
| Total - December 31 | 159,883 | 156,069 |
| | | 2016 | | | 2015 | | | 2014 | |
Foreign currency translation reserve | | | (6,258 | ) | | | (6,520 | ) | | | (3,229 | ) |
Equity settled share-based payment reserve | | | 16,041 | | | | 15,871 | | | | 15,847 | |
Contributed surplus | | | 132,591 | | | | 132,591 | | | | 132,591 | |
Total | | | 142,374 | | | | 141,942 | | | | 145,209 | |
18 Earnings/(Loss)19Earnings per share
Basic earnings/(loss)earnings per share
The calculation of basic earnings/(loss)earnings per share atfor the year ended December 31, 20142016 was based on the adjusted profit/(loss)profit attributable to shareholders of $4,843 (2013:($3,160), 2012: 8,720)$8,288 (2015: $4,679; 2014: $4,387), and a weighted average number of shares outstanding of 52,117,908 (2013: 51,986,466, 2012:50,597,068)52,286,208 (2015: 52,095,087; 2014: 52,117,908).
Weighted average number of shares| (In number of shares) | | Note | | | 2014 | | | 2013 | | | 2012 | |
| | | | | | | | | | | | | |
| Issued share capital at January 1 | | 16 | | | | 52,117,908 | | | | 51,446,178 | | | | 50,054,928 | |
| Weighted average issues during the year | | | | | | | - | | | | 540,288 | | | | 542,140 | |
| Weighted average number of shares at December 31 | | | | | | | 52,117,908 | | | | 51,986,466 | | | | 50,597,068 | |
| | | 2014 | | | 2013 | | | 2012 | |
| | | | $ | | | | $ | | | | $ | |
| Profit/(Loss) attributable to shareholders | | | 4,897 | | | | (3,055 | ) | | | 8,720 | |
| Blanket Mine Employee Trust Adjustment | | | (54 | ) | | | (105 | ) | | | - | |
| Adjusted profit/(loss) attributable to shareholders | | | 4,843 | | | | (3,160 | ) | | | 8,720 | |
| | | | | | | | | | | | | |
| Basic earnings/(loss) per share -$ | | | 0.093 | | | | (0.061 | ) | | | 0.172 | |
18 Earnings/(Loss)19Earnings per share – (continued)
Weighted average number of shares
| (In number of shares) | | Note | | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | | | | |
| Issued share capital at beginning of year | | | 17 | | | | 52,078,908 | | | | 52,117,908 | | | | 52,117,908 | |
| Weighted average cancellation during the year | | | | | | | - | | | | (22,821 | ) | | | - | |
| Weighted average share issues during the year | | | | | | | 207,300 | | | | - | | | | - | |
| Weighted average number of shares at December 31 | | | | | | | 52,286,208 | | | | 52,095,087 | | | | 52,117,908 | |
| | | 2016 | | | 2015 | | | 2014 | |
| Profit attributable to shareholders | | | 8,526 | | | | 4,779 | | | | 4,435 | |
| Blanket Mine Employee Trust Adjustment | | | (238 | ) | | | (100 | ) | | | (48 | ) |
| Adjusted profit attributable to shareholders | | | 8,288 | | | | 4,679 | | | | 4,387 | |
| Basic earnings per share -$ | | | 0.16 | | | | 0.09 | | | | 0.08 | |
| · | Basic earnings are adjusted for the amounts that accrue to other equity holders of subsidiaries upon the full distribution of post-acquisition earnings to shareholders. |
| · | Diluted earnings is calculated on the basis that the unpaid ownership interests of Blanket Mine’s Indigenisation shareholders are effectively treated as options whereby the weighted average fair value for the period of the Blanket Mine shares issued to Indigenous Zimbabweans and which are subject to settlement of the loan accounts is compared to the balance of the loan accounts and any excess portion is regarded as dilutive. The difference between the number of Blanket Mine shares subject to the settlement of the loan accounts and the number of Blanket Mine shares that would have been issued at the average fair value during the period of the Blanket Mine shares is treated as the issue of shares for no consideration and regarded as dilutive shares. The calculated dilution is taken into account with additional earnings attributable to the dilutive shares in Blanket Mine, if any. |
The interest of NIEEF and Fremiro shareholding were anti-dilutive in the current and prior year (i.e. the value of the options was less than the outstanding loan balance) and accordingly there was no adjustment to fully diluted earnings attributable to ordinary shareholders.
19Earnings per share – (continued)
The calculation of diluted earnings per share at December 31, 20142016 was based on the adjusted profit/(loss)profit attributable to shareholders of $4,843 (2013: ($3,160), 2012:8,720)$8,288 (2015: $4,679; 2014: $4,387), and a weighted average number of shares and potentially dilutive shares outstanding of 52,145,469 (2013: 52,007,646, 2012: 50,833,182)52,403,635 (2015: 52,203,255; 2014: 52,145,469), calculated as follows:
Weighted average number of shares
| (In number of shares) | 2014 | 2013 | 2012 | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | | | | |
| Weighted average number of shares (basic) at December 31 | 52,117,908 | 51,986,466 | 50,597,068 | |
| Weighted average number of shares at December 31 | | | | 52,286,208 | | | | 52,095,087 | | | | 52,117,908 | |
| Effect of dilutive options | 27,561 | 21,180 | 236,114 | | | 117,427 | | | | 108,169 | | | | 27,561 | |
| Weighted average number of shares (diluted) at December 31 | 52,145,469 | 52,007,646 | 50,833,182 | | | 52,403,635 | | | | 52,203,255 | | | | 52,145,469 | |
| Diluted earnings per share - $ | 0.093 | ($0.061) | 0.172 | | | 0.16 | | | | 0.09 | | | | 0.08 | |
The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the year during which the options were outstanding. The potential dilutive effectOptions of 2,538,359 options (2013 – 2,576,920, 2012 – 2,577,900) was343,973 (2015: 2,132,751; 2014: 2,538,359), were excluded from the above calculations becausedilutive earnings per share calculation as these options were anti-dilutive.
Site restoration
Site restoration relates to the net present value of the estimated cost of closing down a mine and site and environmental restoration costs, estimated to be paid up until 2030 for Blanket Mine based on the estimated life of mine. Site restoration costs at Blanket mine are capitalised to mineral properties depreciated at initial recognition and amortised systematically over the estimated life of the mine for costs relating to the decommissioning of property, plant and equipment.
| | | | | | | | | | |
| Reconciliation of site restoration provision | | 2016 | | | 2015 | | | 2014 | |
| Balance at January 1, | | | 2,762 | | | | 2,484 | | | | 1,470 | |
Foreign exchange movement | | | 80 252525 | | | | (156 | ) | | | (64 | ) |
| Unwinding of discount | | | 25 | | | | 43 | | | | 33 | |
| Change in estimate during the year | | | | | | | | | | | | |
- adjusted through profit or loss | | | 32 | | | | - | | | | 29 | |
- adjustment capitalised in Property, plant and equipment | | | 557 | | | | 391 | | | | 1,016 | |
| Balance at December 31, | | | 3,456 | | | | 2,762 | | | | 2,484 | |
| | | | | | | | | | | | | |
The discount rates currently applied in the calculation of the net present value of the Blanket mine provision is 0.86% (2015: 1.07%; 2014: 2,32%), based on a risk free rate and cash flows estimated at 0% inflation (2015: 0%). The Eersteling mine is under care and maintenance and the provision is not discounted.
| 20 | Provisions – (continued) |
Site restoration– (continued)
The gross rehabilitation costs before discounting amounted to $3,159 (2015: $3,006; 2014: $2,486) for Blanket mine and $571 (2015: $459; 2014: $616) for Eersteling mine.
21Share-based payments
| | | Note | | | 2016 | | | 2015 | | | 2014 | |
| Equity settled share-based payments | | | 21.1 | | | | 170 | | | | - | | | | - | |
| Cash settled share-based payments | | | 21.2 | | | | 618 | | | | - | | | | - | |
| | | | | | | | 788 | | | | - | | | | - | |
21.1Equity settled share-based payments
At December 31, 2016 the Group has the following Equity settled share-based payment arrangements:
(a) Share option programme
The Group has established a new Omnibus Equity Incentive Compensation Plan (“OEICP”) for grants after May 2015. Share options issued before May 2015 were issued in terms of the Rolling Stock Option Plan (“RSOP”), which was superseded by the OEICP. In accordance with both plans, options are granted at an exercise price equal to the market price of the shares at the date of grant and vest according to dates set at the discretion of the Compensation Committee of the Board of Directors at the date of grant. All outstanding option awards that have been granted, pursuant to the plan, vest immediately.
Terms and conditions of share option programmes
The maximum term of the options under the OEICP is 10 years and under the RSOP 5 years. The terms and conditions relating to the grant of options under the RSOP are that all options are to be settled by physical delivery of shares. Equity settled share based payments under the OEICP will also be settled by physical delivery of shares. Under both plans the aggregate number of shares that may be issued pursuant to the grant of options, or under any other share compensation arrangements of the Company, will not exceed 10% of the aggregate issued and outstanding shares issued of the Company.
At December 31, 2016, the Company has the following options outstanding:
| Number of Options | Exercise Price | Expiry Date(1) |
| | Canadian $ | |
| 90,000 | 2.30 | Oct 13, 2021 |
| 25,000 | 0.80 | Oct 8, 2020 |
| 346,400 | 0.90 | Sept 10, 2018 |
| 461,400 | | |
| (1) | In terms of the approved Plan, the expiry date of options that expire in a closed period will be extended by 10 days from the cessation of the close period. |
21Share-based payments – (continued)
21.1Equity settled share-based payments – (continued)
The continuity of the options granted, exercised, cancelled and expired under the Plan were as follows:
| | | Number of Options | | | Weighted Avg. Exercise Price | |
| | | | | | Canadian $ | |
| Options outstanding and exercisable at January 1, 2014 | | | 2,847,920 | | | | 1.11 | |
| Expired or forfeited | | | (282,000 | ) | | | 1.13 | |
| Options outstanding and exercisable at December 31, 2014 | | | 2,565,920 | | | | 1.11 | |
| Expired or forfeited | | | (440,000 | ) | | | 1.11 | |
| Granted | | | 115,000 | | | | 0.73 | |
| Options outstanding and exercisable at December 31, 2015 | | | 2,240,920 | | | | 1.08 | |
| Expired or forfeited | | | (1,161,000 | ) | | | 1.30 | |
| Granted | | | 90,000 | | | | 2.30 | |
| Exercised | | | (708,520 | ) | | | 0.83 | |
| Options outstanding and exercisable at December 31, 2016 | | | 461,400 | | | | 1.17 | |
The weighted average remaining contractual life of the outstanding options is 3.08 years (2015: 2.46 years).
Inputs for measurement of grant date fair values
The fair value of share-based payments noted above was estimated using the Black-Scholes Option Pricing Model with the following assumptions. Service and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value.
| | | 2016 | | | 2015 | | | 2015 | |
| Options granted | | 90,000 | | | 25,000 | | | 90,000 | |
| Grant date | | October 13, 2016 | | | October 7, 2015 | | | December 21, 2015 | |
| Risk-free interest rate | | 0.53 | % | | 0.53 | % | | 0.53 | % |
| Expected stock price volatility (based on historical volatility) | | 119 | % | | 39,6 | % | | 41,2 | % |
| Expected option life in years | | 5 | | | 5 | | | 5 | |
| Exercise price | | CAD 2.30 | | | CAD 0.80 | | | CAD 0.74 | |
| Share price at grant date | | CAD 2.30 | | | CAD 0.79 | | | CAD 0.74 | |
| Fair value at grant date | | USD 1.89 | | | USD 0.27 | | | USD 0.27 | |
During 2016 a share-based payment grant of 90,000 share equity options was made to Mr. J McGloin. The exercise price is determined on the prevailing Toronto Stock Exchange share price on the day of the grant. Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price. The expected term has been based on historical experience.
21Share-based payments – (continued)
21.2Cash settled share-based payments
Certain key management members were granted Restricted Share Units (“RSU’s”) and Performance Share Units (“PSU’s”), pursuant to provisions of the 2015 Omnibus Equity Incentive Compensation Plan. All RSU’s and PSU’s were granted and approved by the Compensation Committee of the Board of Directors.
The RSU’s will vest three years after grant date given that the service condition of the relevant employees are fulfilled. The value of the vested RSU’s will be the number of RSU’s vested multiplied by the fair market value of the Company’s shares, as specified by the plan, on date of settlement.
The PSU’s have a service condition and a performance period of three years. The performance condition is a function of production cost, gold production and central shaft depth targets on certain specified dates. The number of PSU’s that will vest will be the PSU’s 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 RSU’s at the then applicable share price calculated at the average Bank of Canada noon rate immediately preceding the dividend payment. PSU’s have rights to dividends only after they have vested.
The fair value of the RSU’s, at the reporting date, were assumed to be the Toronto Stock Exchange (“TSX”) share price at reporting date. The fair value of the PSU’s, at the reporting date, were calculated as the TSX share price at reporting date less the fair value of the expected dividends during the vesting period multiplied by the performance multiplier expectation. At the reporting date it was assumed that there is a 100% probability that the performance conditions will be met and therefore a 100% performance multiplier was used in calculating the estimated liability.
The following assumptions were used in estimating the fair value of the cash settled share-based payment liability on December 31, 2016:
| | | RSU’s | | | PSU’s | |
| Fair value (USD) | | $ | 1.10 | | | $ | 1.05 | |
| Share price (USD) | | $ | 1.10 | | | $ | 1.10 | |
| Performance multiplier percentage | | | - | | | | 100 | % |
| Dividend yield | | | - | | | | 3.07 | % |
Share units granted up until reporting date: | |
| | | RSU’s | | | PSU’s | |
| Grant - January 11, 2016 | | | 303,225 | | | | 1,212,903 | |
| Grant – March 23, 2016 | | | 54,839 | | | | 219,355 | |
| Grant – June 8, 2016 | | | 25,588 | | | | 102,353 | |
| RSU dividend reinvestments | | | 17,522 | | | | - | |
| Total awards at December 31, 2016 | | | 401,174 | | | | 1,534,611 | |
22Loans and borrowings
| | | 2016 | | | 2015 | |
| Non-current portion of term loan facility | | | 1,577 | | | | - | |
| Current portion of term loan facility | | | 1,410 | | | | - | |
| | | | 2,987 | | | | - | |
On October 19, 2016 Blanket Mine received $3 million in terms of a term facility with Barclays Bank of Zimbabwe Limited bearing interest at an interest rate of 7.25% per annum and an upfront arrangement fee of $73. The term facility will be paid back over 8 quarterly instalments of $375 starting January 19, 2017. The term facility is secured in terms of a general notarial bond registered over the moveable assets of Blanket Mine to the value of $3,000. The agreement also incorporates an endorsement by the insurer of these movable assets. The endorsement provides Barclays Bank of Zimbabwe Limited with the cession of the insurance cover on the movable assets against all risk insured.
At the inception of the loan the liability was recognised at its fair value plus transaction cost. The imputed finance costs on the liability was determined at an incremental borrowing rate of 7.25%. Finance costs are accounted for in note 11 on the effective interest method. The fair value of the term facility approximates the carrying amount as the market rate approximated the actual rate at year end.
23 Trade and other payables
| | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Trade payables | | | 4,536 | | | | 1,257 | | | | 866 | |
| Audit fee | | | 173 | | | | 240 | | | | 294 | |
| Other payables | | | 343 | | | | 1,599 | | | | 507 | |
| Financial liabilities | | | 5,052 | | | | 3,096 | | | | 1,667 | |
| VAT payable and other taxes | | | 242 | | | | 329 | | | | 357 | |
| Production and management bonus accrual | | | 1,156 | | | | 1,792 | | | | - | |
| Other employee benefits | | | 123 | | | | 114 | | | | 102 | |
| Leave pay | | | 1,504 | | | | 1,325 | | | | 1,134 | |
| Non-financial liabilities | | | 3,025 | | | | 3,560 | | | | 1,593 | |
| Total | | | 8,077 | | | | 6,656 | | | | 3,260 | |
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 6 and note 25. Of the production and management bonus accrual at December 31, 2016, $1,156 (2015: $1,289) relates to production bonuses payable to the employees at Blanket.
24 Cash flow information
Non-cash items and information presented separately on the cash flow statement:
| | | 2016 | | | 2015 | | | 2014 | |
| Profit before tax | | | 18,802 | | | | 7,960 | | | | 12,068 | |
| Adjustments for: | | | | | | | | | | | | |
Net finance cost * | | | 176 | | | | 535 | | | | | |
| Loss on sale of Property, plant and equipment | | | 44 | | | | - | | | | 62 | |
| Impairment of Property, plant and equipment | | | 20 | | | | 33 | | | | 178 | |
| Foreign exchange gains on cash held | | | (105 | ) | | | (2,865 | ) | | | (423 | ) |
| Site restoration | | | 32 | | | | - | | | | 29 | |
| Share-based payment expense | | | 788 | | | | 24 | | | | - | |
| Depreciation | | | 3,491 | | | | 3,322 | | | | 3,540 | |
| Write off of inventory | | | 862 | | | | 46 | | | | - | |
| Cash generated by operations before working capital changes | | | 24,110 | | | | 9,055 | | | | 15,454 | |
| Inventories | | | (1,990 | ) | | | 375 | | | | (94 | ) |
| Prepayments | | | (99 | ) | | | (321 | ) | | | (46 | ) |
| Trade and other receivables | | | 555 | | | | (1,472 | ) | | | 566 | |
| Trade and other payables | | | 3,095 | | | | 1,186 | | | | (296 | ) |
Cash flows from operating activities | | | 25,671 | | | | 8,823 | | | | 15,584 | |
* Net interest excludes an amount of $103 of interest expenditure capitalised to Property, Plant and equipment (refer note 13). Of the interest capitalised an amount of $43 was paid and included in the interest paid amount on the Cash flow statement.
25Financial instruments
i)Credit risk
Exposure to credit risk
The carrying amount of financial assets as disclosed in the statements of financial position and related notes represents the maximum credit exposure. The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
| Carrying amount | | 2016 | | | 2015 | |
| | | | | | | |
| Canada | | | - | | | | - | |
| Zimbabwe | | | 1,523 | | | | 842 | |
| | | | 1,523 | | | | 842 | |
Impairment losses
None of the trade and other receivables are past due at year-end. Trade and other receivables have a past history of payment shortly after year end and management identified no factors at year end that could cause doubt about the credit quality or recoverability of the trade and other receivables.
ii)Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.
| Non-derivative financial liabilities | | Carrying amount | | | 12 months or less | | | 1-2 Years | |
| December 31, 2016 | | | | | | | | | |
| Trade and other payables | | | 5,052 | | | | 5,052 | | | | - | |
| Term loan facility | | | 2,987 | | | | 1,410 | | | | 1,577 | |
| | | | 8,039 | | | | 6,462 | | | | 1,577 | |
| December 31, 2015 | | Carrying amount | | | 12 months or less | | | 1-2 Years | |
| Trade and other payables | | | 3,096 | | | | 3,096 | | | | - | |
| Bank overdraft | | | 1,688 | | | | 1,688 | | | | - | |
| | | | 4,784 | | | | 4,784 | | | | - | |
25Financial instruments (continued)
iii)Currency risk
The Group is exposed to currency risk to the extent that there is a mismatch between the currency that it transacts in and the functional currency. The results of the Group’s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Group are reported in US dollar in the Group’s consolidated financial statements.
The fluctuation of the US dollar in relation to other currencies that entities, within the Group, may transact in will consequently have an impact upon the profitability of the Group and may also affect the value of the Group’s assets and liabilities. As noted below, the Group has certain financial assets and liabilities denominated in currencies other than the functional currency of the Company. The Group does not use any derivative instruments to reduce its foreign currency risks. To reduce exposure to currency transaction risk, the Group predominantly maintains cash and cash equivalents in US Dollar to avoid foreign exchange exposure and to meet short‐term liquidity requirements.
Sensitivity analysis
As a result of the Group’s monetary assets and liabilities denominated in foreign currencies which is different to the functional currency of the underlying entities, the profit or loss and equity in the underlying entities could be affected by movements between the functional currency and the foreign currency. The table below indicates net monetary assets/(liabilities) in the group that have a different functional currency and foreign currency. Amounts are indicated before elimination of intergroup balances.
| | | 2016 USD‘000 | | | 2015 USD‘000 | | | 2014 USD‘000 | |
| | | Functional currency | | | Functional currency | | | Functional currency | |
| | | ZAR | | | USD | | | ZAR | | | CAD | | | ZAR | | | CAD | |
| Cash and cash equivalents | | | 457 | | | | 265 | | | | 3,874 | | | | 5,483 | | | | 10,514 | | | | 553 | |
| Trade and other payables | | | - | | | | 43 | | | | - | | | | - | | | | - | | | | - | |
Intercompany balances* | | | (30,552 | ) | | | (1,514 | ) | | | (27,650 | ) | | | 44,390 | | | | (30,320 | ) | | | 48,484 | |
| | | | (30,095 | ) | | | (1,206 | ) | | | (23,776 | ) | | | 49,873 | | | | (19,806 | ) | | | 49,037 | |
25Financial instruments (continued)
| (iii) | Currency risk (continued) |
A reasonably possible strengthening or weakening of 5% of the various functional currencies against the foreign currencies, would have the following equal or opposite effect on profit or loss before tax for the group:
| | | 2016 USD‘000 | | | 2015 USD’000 | | | 2014 USD’000 | |
| | | Functional currency | | | Functional currency | | | Functional currency | |
| | | ZAR | | | USD | | | ZAR | | | CAD | | | ZAR | | | CAD | |
| Cash and cash equivalents | | | 23 | | | | 13 | | | | 194 | | | | 274 | | | | 526 | | | | 28 | |
| Trade and other payables | | | | | | | 2 | | | | - | | | | - | | | | - | | | | - | |
Intercompany balances* | | | (1,527 | ) | | | (88 | ) | | | (1,382 | ) | | | 2,219 | | | | (1,516 | ) | | | 2,424 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
* These intercompany balances represent the exposure to foreign currency risk between functional currencies and foreign currencies at a subsidiary level. These balances eliminate on consolidation.
The group's interest rate risk arises from Loans and borrowings, overdraft facility and cash held. The Loans and borrowings, overdraft facility and cash held have variable interest rate borrowings. Variable rate borrowings expose the group to cash flow interest rate risk. The group has not entered into interest rate swap agreements.
The Group’s assets and liabilities exposed to interest rate fluctuations as at year end is summarized as follows:
| | | 2016 | | | 2015 | | | 2014 | |
| Term loan | | | 2,987 | | | | - | | | | - | |
| Cash and cash equivalents | | | 14,335 | | | | 12,568 | | | | 23,082 | |
| Overdraft | | | - | | | | (1,688 | ) | | | - | |
Interest rate risk arising is offset by available cash and cash equivalents. The table below summarises the effect of a change in finance cost on the Group’s Total comprehensive income for the year, had the rates charged differed.
Sensitivity analysis – Term loan and bank overdraft
| | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Increase in 100 basis points | | | 30 | | | | 17 | | | | 3 | |
| Decrease in 100 basis points | | | (30 | ) | | | (17 | ) | | | (3 | ) |
25Financial instruments (continued)
Sensitivity analysis – Cash and cash equivalents | 2016 | 2015 | 2014 |
| Increase in 100 basis points | 143 | 126 | 2 |
| Decrease in 100 basis points | (143) | (126) | (2) |
| | | | |
In February 2016, the Company entered into a derivative contract in respect of 15,000 ounces of gold over a period of 6 months and accordingly, the contract expired during the year. The contract protected the Company if the gold price fell below $1,050 per ounce but gave Caledonia full participation if the price of gold exceeded $1,079 per ounce. The derivative contract was entered into by the Company for economic hedging purposes and not as a speculative investment.
The derivative contract resulted in a loss of $435 that was included in profit or loss. The Company settled the contract with the $435 margin call deposited at the inception of the hedge transaction. Blanket continued to sell all of its gold production to Fidelity Printers and Refiners Ltd (“Fidelity”), as required by Zimbabwean legislation, and received the spot price of gold less an early settlement discount of 1.25%. As at December 31, 2016 no financial instruments were in place to manage the gold price risk. A 5% increase or decrease in the average realised gold price would have increased or decreased Revenue by $3,100 (2015: $2,449).
26Dividends
| | 2016 | 2015 | 2014 |
| | | | |
| Dividends paid to owners of the company (Excluding NCI) | 2,639 | 2,504 | 2,850 |
From January 7, 2014 to October 6, 2015, the Company paid an annual aggregate dividend of six Canadian cents CAD 0.060 per share in quarterly instalments of CAD 0.015 per share. On January 5, 2016 the Company announced that it revised its dividend policy to $0.045 per share per annum, paid in quarterly instalments of $0.01125. On July 5, 2016 the Company announced a 22 percent increase in the quarterly dividend to $ 0.01375 and $ 0.055 per annum. The increased dividend represents Caledonia’s revised dividend policy.
27Contingencies
The Group may be subject to various claims that arise in the normal course of business. Management believes there are no contingent liabilities of the Group arising from claims.
28Related parties
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity. Directors of the company, as well as certain mine managers are considered key management.
Employee contracts between Caledonia Mining South Africa Proprietary Limited, the Company and key management, include an option for respective key management to terminate such employee contract in the event of a change in control of the Company and to receive a severance payment equal to two years’ compensation. If this was triggered as at December 31, 2016 the severance payment would have amounted to $4,646 (2015: $3,578; 2014: $3,611). A change in control would constitute:
| · | the acquisition of more than 50% of the shares; or |
| · | the acquisition of right to exercise the majority of the voting rights of shares; or |
| · | the acquisition of the right to appoint the majority of the board of directors; or |
| · | the acquisition of more than 50% of the assets of the Group. |
Key management personnel and director transactions:
A number of related parties transacted with the Group in the reporting period. The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows:
| | | 2016 | | | 2015 | | | 2014 | |
| Key management salaries and bonuses | | | 2,033 | | | | 2,452 | | | | 1,781 | |
| Share-based payments | | | 788 | | | | 24 | | | | - | |
| | | | 2,821 | | | | 2,476 | | | | 1,781 | |
Employees, officers, directors, consultants and other service providers also participate in the Group's share option program (see note 21). Group entities are set out in note 29.
Refer to note 5 and note 31 for transactions with Non-controlling interests. Refer to note 30 for management fees between Caledonia Mining South Africa Proprietary Limited and Blanket Mine (1983) (Private) Limited.
29Group entities
| | Functional currency | Country of incorporation | Legal shareholding | Intercompany balances with Holding company |
| | | | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |
| Subsidiaries of the Company | | | % | % | % | | | | |
| Caledonia Holdings Zimbabwe (Private) Limited | USD | Zimbabwe | 100 | 100 | 100 | - | - | - | |
Caledonia Mining (Zambia) Limited(5) | ZMW | Zambia | - | - | 100 | - | - | (15,499) | |
Caledonia Nama Limited(5) | ZMW | Zambia | - | - | 100 | - | - | (12,435) | |
| Caledonia Mining Services Limited | USD | Zimbabwe | 100 | 100 | 100 | - | - | - | |
| Eersteling Gold Mining Company Limited | ZAR | South Africa | 100 | 100 | 100 | (12,793) | (12,585) | (12,575) | |
| Fintona Investments Proprietary Limited | ZAR | South Africa | 100 | 100 | 100 | (14,859) | (14,859) | (14,859) | |
| Caledonia Mining South Africa Proprietary Limited | ZAR | South Africa | 100 | 100 | 100 | (87) | (3,806) | (3,806) | |
Greenstone Management Services Holdings Limited (4) | USD | United Kingdom | 100 | 100 | 100 | 13,527 | 7,846 | 7,846 | |
| Maid O’ Mist Proprietary Limited | ZAR | South Africa | 100 | 100 | 100 | - | - | - | |
| Mapochs Exploration Proprietary Limited | ZAR | South Africa | 100 | 100 | 100 | - | - | - | |
| Caledonia Holdings (Africa) Limited | USD | Barbados | 100 | 100 | 100 | - | - | - | |
| Blanket (Barbados) Holdings Limited | USD | Barbados | 100 | 100 | 100 | - | - | - | |
Blanket Mine (1983) (Private) Limited(3) | USD | Zimbabwe | (2)49 | 49 | 49 | - | - | - | |
Blanket Employee Trust Services (Private) Limited (BETS) (1) | USD | Zimbabwe | - | - | - | - | - | - | |
(1)BETS and the Employee Trust are consolidated as structured entities.
(2)Refer to Note 5, for the effective shareholding. NCI has a 16.2% interest in cash flows of Blanket only.
(3)Blanket has no subsidiary companies
(4)On November 18, 2016, the entity’s name changed from Greenstone Management Services Limited to Greenstone Management Services Holdings Limited.
(5)The Zambia operations were closed down during 2015 and the Companies in Zambia were struck of the Companies register on September 2, 2015.
30Operating Segments
The Group's operating segments have been identified based on geographic areas.
During 2016 the Group had three reportable segments as described below, which represents the Group's strategic business units. The strategic business units are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. The following geographical areas describe the operations of the Group's reportable segments: Head office, Zimbabwe and South Africa. The accounting policies of the reportable segments are the same as described in note 4. The Corporate segment comprise the holding company and Greenstone Management Services Holdings Limited (UK) responsible for administrative functions within the group. The Zimbabwe operating segments comprise Caledonia Holdings Zimbabwe Limited and subsidiaries. The South Africa geographical segment comprise a gold mine, that is on care and maintenance, as well as sales made by Caledonia Mining South Africa Proprietary Limited to the Blanket Mine. The Zambia segment, relevant to the comparative year, consisted of Nama copper project and cobalt project and was deregistered on September 2, 2015. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group's CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
| Information about reportable segments 2016 | | *Head office | | | Zimbabwe | | | South Africa | | | Inter-group eliminations adjustments | | | Total | |
| | | | | | | | | | | | | | | | |
| Revenue | | | - | | | | 61,992 | | | | 11,348 | | | | (11,348 | ) | | | 61,992 | |
| Royalties | | | - | | | | (2,923 | ) | | | - | | | | - | | | | (2,923 | ) |
| Production costs | | | - | | | | (33,081 | ) | | | (10,185 | ) | | | 11,180 | | | | (32,086 | ) |
| Depreciation | | | - | | | | (3,733 | ) | | | (47 | ) | | | 289 | | | | (3,491 | ) |
Management fee** | | | - | | | | (3,960 | ) | | | 3,960 | | | | - | | | | - | |
| Other income | | | 120 | | | | 1,194 | | | | 16 | | | | - | | | | 1,330 | |
| Other expenses | | | - | | | | (55 | ) | | | - | | | | - | | | | (55 | ) |
| Administrative expenses | | | (4,690 | ) | | | (128 | ) | | | (3,119 | ) | | | 674 | | | | (7,263 | ) |
| Share-based payment expenses | | | (340 | ) | | | (342 | ) | | | (106 | ) | | | - | | | | (788 | ) |
| Net Foreign exchange gain | | | 22 | | | | 2 | | | | (529 | ) | | | - | | | | (505 | ) |
| Margin call on hedge | | | (435 | ) | | | - | | | | - | | | | - | | | | (435 | ) |
| Net finance cost | | | - | | | | (191 | ) | | | 15 | | | | - | | | | (176 | ) |
| Sale of Blanket Mine treasury bills | | | - | | | | 3,202 | | | | - | | | | - | | | | 3,202 | |
| Profit before tax | | | (5,323 | ) | | | 21,977 | | | | 1,353 | | | | 795 | | | | 18,802 | |
| Tax expense | | | - | | | | (6,795 | ) | | | (922 | ) | | | - | | | | (7,717 | ) |
| Profit for the year* | | | (5,323 | ) | | | 15,182 | | | | 431 | | | | 795 | | | | 11,085 | |
* Head office reconciles to group accounts.
** Of the management fee $641 was receivable and payable at year end (2015: $280).
30Operating Segments – (continued)
| 2016 | | Head office | | | Zimbabwe | | | South Africa | | | Inter-group elimination adjustments | | | Total | |
| | | | | | | | | | | | | | | | |
| Geographic segment assets: | | | | | | | | | | | | | | | |
| Current (excluding intercompany) | | | 5,050 | | | | 19,501 | | | | 1,616 | | | | (375 | ) | | | 25,792 | |
| Non-current (excluding intercompany) | | | 40 | | | | 65,824 | | | | 388 | | | | (1,335 | ) | | | 64,917 | |
| Additions to property, plant and equipment | | | - | | | | 19,000 | | | | 36 | | | | 123 | | | | 19,159 | |
| Intercompany balances | | | 42,871 | | | | - | | | | 7,080 | | | | (49,951 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Geographic segment liabilities | | | | | | | | | | | | | | | | | | | | |
| Current (excluding intercompany) | | | (313 | ) | | | (8,801 | ) | | | (718 | ) | | | - | | | | (9,832 | ) |
| Non-current (excluding intercompany) | | | - | | | | (20,989 | ) | | | (517 | ) | | | - | | | | (21,560 | ) |
| Intercompany balances | | | (14,900 | ) | | | (2,184 | ) | | | (32,867 | ) | | | 49,951 | | | | - | |
Information about reportable segments 2015 | Head office | Zimbabwe | South Africa | Zambia | Inter-group eliminations adjustments | Total |
| | | | | | | |
| Revenue | 9,497 | 48,978 | 17,016 | - | (26,514) | 48,977 |
| Royalties | - | (2,455) | - | - | - | (2,455) |
| Production costs | - | (30,955) | (12,174) | - | 13,110 | (30,019) |
| Depreciation | - | (3,559) | (42) | - | 279 | (3,322) |
| Other income | 9 | 55 | 46 | - | - | 110 |
| Management fee | - | (4,140) | 4,140 | - | - | - |
| Administrative expenses | (5,802) | (118) | (8,135) | (750) | 7,183 | (7,622) |
| Share-based payment expense | (24) | - | - | - | - | (24) |
| Net foreign exchange gain | 431 | - | 2,419 | - | - | 2,850 |
| Finance income | - | - | 1 | - | - | 1 |
| Finance expense | (344) | (190) | (2) | - | - | (536) |
| Profit before income tax | 3,767 | 7,616 | 3,269 | (750) | (5,942) | 7,960 |
| Tax expense | 522 | (2,616) | (276) | - | - | (2,370) |
| Profit after income tax | 4,289 | 5,000 | 2,993 | (750) | (5,942) | 5,590 |
30Operating Segments – (continued)
2015 | | Head office | | | Zimbabwe | | | South Africa | | | Zambia | | | Inter-group eliminations adjustments | | | Total | |
| Geographic segment assets: | | | | | | | | | | | | | | | | | | |
| Current | | | 8,857 | | | | 10,386 | | | | 4,918 | | | | 1 | | | | (600 | ) | | | 23,562 | |
| Non-current (excluding intercompany) | | | 40 | | | | 50,613 | | | | 370 | | | | - | | | | (1,747 | ) | | | 49,276 | |
| Additions to property, plant and equipment | | | - | | | | 18,385 | | | | 143 | | | | - | | | | (335 | ) | | | 18,193 | |
| Intercompany balances | | | 74,007 | | | | 1,509 | | | | 7,958 | | | | - | | | | (83,474 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Geographic segment liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | | (433 | ) | | | (6,497 | ) | | | (1,469 | ) | | | - | | | | - | | | | (8,397 | ) |
| Non-current (excluding intercompany) | | | - | | | | (13,621 | ) | | | (459 | ) | | | - | | | | - | | | | (14,080 | ) |
| Intercompany balances | | | (16,734 | ) | | | (3,507 | ) | | | (37,290 | ) | | | (25,943 | ) | | | 83,474 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Information about reportable segments 2014 | | Head office | | | Zimbabwe | | | South Africa | | | Zambia | | | Inter-group eliminations adjustments | | | Total | |
| | | | | | | | | | | | | | | | | | | |
| Revenue | | | 3,719 | | | | 53,513 | | | | 7,167 | | | | - | | | | (10,886 | ) | | | 53,513 | |
| Royalties | | | - | | | | (3,522 | ) | | | - | | | | - | | | | - | | | | (3,522 | ) |
| Production costs | | | - | | | | (28,836 | ) | | | (6,256 | ) | | | - | | | | 6,884 | | | | (27,908 | ) |
| Depreciation | | | - | | | | (3,522 | ) | | | (18 | ) | | | - | | | | - | | | | (3,540 | ) |
| Other income | | | - | | | | 16 | | | | 9 | | | | - | | | | - | | | | 25 | |
| Management fee | | | - | | | | (4,680 | ) | | | 4,680 | | | | - | | | | - | | | | - | |
| Administrative expenses | | | (3,115 | ) | | | (436 | ) | | | (2,942 | ) | | | (894 | ) | | | - | | | | (7,387 | ) |
| Impairment | | | - | | | | (81 | ) | | | - | | | | (97 | ) | | | - | | | | (178 | ) |
| Net foreign exchange gain | | | 49 | | | | - | | | | 1,016 | | | | - | | | | - | | | | 1,065 | |
| Finance income | | | 14 | | | | - | | | | - | | | | - | | | | - | | | | 14 | |
| Finance expense | | | - | | | | (154 | ) | | | - | | | | - | | | | - | | | | (154 | ) |
| Profit before income tax | | | 667 | | | | 12,598 | | | | 3,656 | | | | (991 | ) | | | (4,002 | ) | | | 11,928 | |
| Tax expense | | | (1,067 | ) | | | (3,594 | ) | | | (1,321 | ) | | | - | | | | - | | | | (5,982 | ) |
| Profit after income tax | | | (400 | ) | | | 9,004 | | | | 2,335 | | | | (991 | ) | | | (4,002 | ) | | | 5,946 | |
30Operating Segments – (continued)
2014 | | Head office | | | Zimbabwe | | | South Africa | | | Zambia | | | Inter-group eliminations adjustments | | | Total | |
Geographic segment assets: | | | | | | | | | | | | | | | | | | |
| Current | | | 10,768 | | | | 10,448 | | | | 11,782 | | | | 44 | | | | (1,300 | ) | | | 31,743 | |
| Non-current (excluding intercompany) | | | 48 | | | | 35,818 | | | | 306 | | | | - | | | | (1,436 | ) | | | 34,736 | |
| Additions to property, plant and equipment | | | - | | | | 7,022 | | | | 47 | | | | 97 | | | | - | | | | 7,166 | |
| Intercompany balances | | | 101,920 | | | | 1,503 | | | | 29,060 | | | | - | | | | (132,483 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Geographic segment liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | | (994 | ) | | | (2,412 | ) | | | (1,566 | ) | | | - | | | | - | | | | (4,972 | ) |
| Non-current (excluding intercompany) | | | - | | | | (10,571 | ) | | | (593 | ) | | | - | | | | - | | | | (11,164 | ) |
| Intercompany balances | | | (33,955 | ) | | | (902 | ) | | | (72,406 | ) | | | (25,220 | ) | | | 132,438 | | | | - | |
Major customer
Revenues from Fidelity Printers in Zimbabwe amounted to approximately 61,992 (2015: 48,977; 2014: $53,513).
| 31 | Non-controlling interests |
| Blanket Mine (1983) (Private) Limited NCI % - 16.2% | | | | |
| | | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | | |
| Current assets | | | 13,151 | | | | 10,386 | | | | 10,448 | |
| Non-current assets | | | 65,823 | | | | 50,613 | | | | 37,322 | |
| Current liabilities | | | (8,698 | ) | | | (6,497 | ) | | | (2,412 | ) |
| Non-current liabilities | | | (20,185 | ) | | | (13,621 | ) | | | (10,571 | ) |
| Net assets | | | 50,091 | | | | 40,881 | | | | (34,787 | ) |
| | | | | | | | | | | | | |
| Carrying amount of NCI | | | 3,708 | | | | 1,504 | | | | 693 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Revenue | | | 61,992 | | | | 48,977 | | | | 53,515 | |
| Profit | | | 15,800 | | | | 5,000 | | | | 8,860 | |
| Total comprehensive income | | | 15,800 | | | | 5,000 | | | | 8,860 | |
| | | | | | | | | | | | | |
| Profit allocated to NCI | | | 2,559 | | | | 811 | | | | 1,511 | |
| Dividend paid to NCI | | | (355 | ) | | | - | | | | 770 | |
32Defined Contribution Plan
Under the terms of the Mining Industry Pension Fund (“Fund”) in Zimbabwe, eligible employees contribute a fixed percentage of their eligible earnings to the Fund. Blanket Mine makes a matching contribution plus an inflation levy as a fixed percentage of eligible earnings of these employees. The total contribution by Blanket Mine for the year ended December 31, 20142016 was $489 (2013: $445).
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
20 Share-based payments
At December 31, 2014 the Group has the following share-based payment arrangements:
(a) Share option programme (equity-settled)
The Group has established a rolling stock option plan (the "Plan") for employees, officers, directors, consultants and other service providers. In accordance with the Plan, options are granted with exercise prices equal to the market price of the shares at the date of grant and vests immediately.
Terms and conditions of share option program
The terms and conditions relating to the grants under the Plan are that all options are to be settled by physical delivery of shares. Under the current Plan, the maximum term of the options is 5 years. Under the Plan, the aggregate number of shares that may be issued will not exceed 10% of the number of the shares issued of the Company.
At December 31, 2014, the Company has the following options outstanding:
| Number of Options | Exercise Price | Expiry Date(1) |
| | $ | |
| 1,461,000 | 1.30 | Jan 31, 2016 |
| 30,000 | 0.70 | May 11, 2016 |
| 884,920 | 0.90 | Sept 10, 2017 |
| 190,000 | 0.72 | Nov 21,2018 |
| 2,565,920 | | |
(1) | In terms of the approved Plan, the expiry date of options that expire in a closed period will be extended by 10 days from the cessation of the close period. |
The continuity of the options granted, exercised, cancelled and expired under the Plan during 2014 and 2013 are as follows:
| | Number of Options | Weighted Avg. Exercise Price | |
| | | $ |
| Options outstanding and exercisable at December 31, 2012 | 3,329,650 | 1.05 | |
| Exercised | (671,730) | 0.70 | |
| Granted | 190,000 | 0.72 | |
| Options outstanding and exercisable at December 31, 2013 | 2,847,920 | 1.11 | |
| Exercised | - | - | |
| Expired or forfeited | (282,000) | 1.13 | |
| Options outstanding and exercisable at December 31, 2014 | 2,565,920 | 1.11 | |
The weighted average remaining contractual life of the outstanding options is 1.81 years (2013: 2.76 years)$567 (2015: $473; 2014: $443).
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
20 Share-based payments – (continued)
The vesting of options is determined at the discretion of the board of directors, at the time the options are granted.
Inputs for measurement of grant date fair values
The fair value of share based payments noted above was estimated using the Black-Scholes Option Pricing Model with the following assumptions.
| | | |
| | | |
Risk-free interest rate | | | 0.95% |
Expected dividend yield | | | Nil |
Expected stock price volatility (based on historical volatility) | | | 57.88% |
Expected option life in years | | | 5 |
Exercise price | | | 0.72 |
Share price at grant date | | | 0.72 |
Fair value at grant date | | | 0.356 |
Expected forfeiture rate | | | 0% |
No share based payments were granted during 2014. Costs relating to share based payments granted amounted to Nil (2013: $68, 2012:14,569). The 2012 expense included and amount of 14,161 for the option value of the Blanket mine indigenisation transaction and 408 relating to share options granted to employees.
| (b) Equity instruments granted under the Blanket Mine Zimbabwe Indigenisation Transaction |
The equity instruments granted under the Blanket Mine Zimbabwe Indigenisation Transaction (refer note 5), excluding Blanket Mine Employee Trust Services (Private) Limited (BETS), were accounted for as share-based payments under IFRS 2 Share Based Payment, whilst the equity instruments granted to BETS have been accounted for under IAS 19 Employee benefits.
The fair value of the equity instruments on the grant date of September 5, 2012 was determined for each transaction as being the sum of the present value of the following components:
| · | The value of the shares at the point that any loans provided to purchase the shares or fund advance dividends are paid off; |
| · | The value of any advance dividends paid to participants; |
| · | The value of any “trickle dividends”, being the 20% entitlements, paid to participants while the loans to purchase the shares are outstanding. |
To determine the fair value of the equity-settled share-based payment and take into account the unique features of each transaction, the Monte Carlo Simulation technique was used as the valuation model to allow for the uncertainty around the potential scenarios that affect the value of each arrangement. Projected market values were estimated using a stochastic modelling methodology based on Geometric Brownian Motion model. Additional equity instruments will vest to the Non-controlling interest to the extent that their attributable share of the net asset value of Blanket Mine exceeds the balance on the facilitation loans including interest. Refer to note 5 for the accounting treatment of the Non-controlling interests.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
20 | Share-based payments – (continued) |
Assumptions used based on the grant date of September 5, 2012 were as follows:
Fair value of Blanket Mine | $45,065 |
Expected volatility (based on historical volatility) | 65% |
Risk free rates | USD swap curve with country specific adjustments |
Country specific adjustment | 17.3% |
Dividend yield | 14.8% |
Withholding tax | 5% of dividends |
Interest on loans | 10% |
Site restoration
Site restoration relates to the net present value of the estimated cost of closing down the mine and site and environmental restoration costs, estimated to be paid in 2026 (Blanket Mine) based on the estimated life of mine. Site restoration costs are capitalised to mineral properties depreciated at initial recognition and amortised systematically over the estimated life of the mine.
| $ |
Balance at January 1,2013 | 1,015 |
Foreign currency adjustment | 1 |
Unwinding of discount | (1) |
Change in estimate during the year | 557 |
Balance at December 31,2013 | 1,572 |
| |
Balance at January 1,2014 | 1,572 |
Foreign currency adjustment
| 125 |
Unwinding of discount | 37 |
Change in estimate during the year | |
-adjusted through profit or loss
| 32 |
-adjustment capitalised in Property, plant and equipment
| 1,122 |
Balance at December 31,2014 | 2,888 |
The discount rates currently applied in the calculation of the net present value of the Blanket mine provision is 2.32% (2013 - 2.75%). The Eersteling mine is under care and maintenance and the provision is not discounted. The gross rehabilitation costs before discounting amounted to $2,890 (2013 - $1,760) for Blanket mine and $716 (2013 - $697) for Eersteling mine.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
22 Trade and other payables
| | | | | $ | | $ |
| Trade payables | | | | 1,007 | | 1,026 |
| Other payables and accrued expenses | | | | 2,784 | | 3,574 |
| | | | | 3,791 | | 4,600 |
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 6 and note 24.
The Directors consider the carrying amounts of trade and other payables as a reasonable approximation of their fair values.
23 Cash flow information
Non-cash items and information presented separately on the cash flow statement:
| | 2014 | 2013 | 2012 |
| | $ | $ | |
| Operating profit | 13,324 | 9,515 | 20,257 |
| Adjustments for: | | | |
| Loss on scrapping of Property, plant and equipment | 68 | - | - |
| Site restoration | 32 | 556 | (91) |
| Share-based payment expense | - | 68 | 14,569 |
| Depreciation | 3,908 | 3,276 | 3,392 |
| Impairment | 196 | 14,203 | 330 |
| Cash generated by operations before working capital changes | 17,528 | 27,618 | 38,457 |
| Inventories | (159) | (1,767) | (1,151) |
| Prepayments | (234) | (51) | 195 |
| Trade and other receivables | 3,420 | (2,226) | 1,846 |
| Trade and other payables | (1,733) | (806) | 2,073 |
| Cash flows from operating activities | 18,822 | 22,768 | 41,420 |
24 Financial instruments
Credit risk
Exposure to credit risk
The carrying amount of financial assets as disclosed in the statements of financial position and related notes represents the maximum credit exposure.
The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
24 Financial instruments – (continued) Carrying amount | | | 2014 | | 2013 |
| | | | $ | | $ |
| Canada | | | 98 | | - |
| Other regions | | | 773 | | 3,889 |
| | | | 871 | | 3,889 |
Impairment losses
None of the trade and other receivables is past due at the year-end date and were estimated at a level 3 fair value hierarchy. No factors existed at year end that could cause doubt about the credit quality or recoverability of the trade and other receivables.
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.
| December 31, 2014 | Carrying amount | 6 months or less |
| | $ | $ |
| Non-derivative financial liabilities – Level 3 | | |
| Trade and other payables | 2,317 | 2,317 |
| | 2,317 | 2,317 |
| | | |
| | |
| December 31, 2013 | Carrying amount | 6 months or less |
| | $ | $ |
| Non-derivative financial liabilities – Level 3 | | |
| Trade and other payables | 4,600 | 4,600 |
| Bank overdraft | 1,796 | 1,796 |
| | 6,396 | 6,396 |
Currency risk
As the Group operates in an international environment, some of the Group’s financial instruments and transactions are denominated in currencies other than the Canadian Dollar. The results of the Group’s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Group are reported in Canadian dollar in the Group’s consolidated financial statements.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
24 Financial instruments – (continued)
The fluctuation of the Canadian dollar in relation to other currencies will consequently have an impact upon the profitability of the Group and may also affect the value of the Group’s assets and liabilities and the amount of shareholders’ equity.
As noted below, the Group has certain financial assets and liabilities denominated in foreign currencies. The Group does not use any derivative instruments to reduce its foreign currency risks. To reduce exposure to currency transaction risk, the Group maintains cash and cash equivalents in the currencies used by the Group to meet short‐term liquidity requirements.
Below is a summary of the assets and liabilities denominated in a currency other than the Canadian dollar that would be affected by changes in exchange rates relative to the Canadian dollar. The values are the Canadian dollar equivalent of the respective asset or liability that is denominated in US dollars or South African rands.
| | 2014 | | 2013 |
| | $ | | $ |
| Cash and cash equivalents | 26,512 | | 25, 042 |
| Bank overdraft | - | | (1,796) |
| Trade and other receivables | 773 | | 3,887 |
| Prepayments | 348 | | 177 |
| Trade and other payables | (2,199) | | (5,160) |
The following exchange rates applied during the year:
| | Average rate during the year | Spot rate |
| | 2014 | 2013 | December 31, 2014 | December 31, 2013 |
| (In Canadian dollars) | $ | $ | $ | $ |
| USD 1 | 1.1041 | 1.0300 | 1.1627 | 1.0696 |
| Rand 1 | 0.1018 | 0.1071 | 0.1001 | 0.1019 |
| Kwacha 1 | 0.1785 | 0.1895 | 0.1808 | 0.1921 |
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
24 | Financial instruments – (continued) |
Sensitivity analysis
As a result of the group’s monetary assets and liabilities denominated in foreign currencies which is different to the functional currency of the underlying entities, the profit or loss in the underlying entities could be affected by movements between the functional currency and the foreign currency. The table below indicates net monetary assets/(liabilities) in the group that have a different functional currency and foreign currency. Amounts are indicated before elimination of intergroup balances.
| | 2014 | | 2013 |
| | CAD’000 | | CAD’000 |
| | Functional currency | | Functional currency |
| USD denominated balance – Foreign currency | Rand | Kwacha | | Rand | Kwacha |
| | | | | | |
| Cash and cash equivalents | 12,084 | 12 | | 8,069 | 41 |
Intercompany balances* | (70,280) | (29,321) | | (64,640) | (26,968) |
| | | | |
* These intercompany balances represent the exposure to foreign currency risk between functional currencies and foreign currencies at a subsidiary level. These balances eliminates on consolidation. A 5% strengthening or weakening of the various functional currencies against the foreign currencies, for cash and cash equivalents, would have the following effect on profit or (loss) after tax for the group: |
| | 2014 | | 2013 |
| | CAD’000 | | CAD’000 |
| | Functional currency | | Functional currency |
| | Rand | Kwacha | | Rand | Kwacha |
| 5% Strengthening | 442 | 5 | | 290 | 4 |
| 5% Weakening | (442) | (5) | | (290) | (4) |
A 5% strengthening or weakening of the various functional currencies against the foreign currencies, for intercompany balances, which is allocated on consolidation to the foreign currency translation reserve within equity for the Group and have the following effect: |
| | 2014 | | 2013 |
| | CAD’000 | | CAD’000 |
| | Functional currency | | Functional currency |
| | Rand | Kwacha | | Rand | Kwacha |
| 5% Strengthening | 3,510 | 1,456 | | 2,327 | 1,348 |
| 5% Weakening | (3,510) | (1,456) | | (2,327) | (1,348) |
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
Interest rate risk
Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Unless otherwise noted, it is the opinion of management that the Group is not exposed to significant interest rate risk as it has no debt financing apart from short term borrowings utilized in Zimbabwe. The Group’s cash and cash equivalents include highly liquid investments that earn interest at market rates. The Group manages its interest rate risk by endeavouring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. The Group’s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.
25 Dividends
The following dividends were declared and paid by the Company (excluding NCI) for the year ended December, 31 2014.
| | 2014 | | 2013 |
| | $ | | $ |
| $0.0600 per qualifying share (2013: $0.0998) | 3,127 | | 5,202 |
26 Contingencies
The Group may be subject to various claims that arise in the normal course of business. Management believes there are no contingent liabilities of the Group arising from claims.
27 Related parties
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity. Directors of the company, as well as certain mine managers are considered key managers.
A service agreement between Greenstone Management Services Proprietary Limited and Mr. Curtis includes an option to terminate the contract in the event of a change in control of the Company and to receive a severance payment equal to two years’ compensation. If this was triggered as at December 31, 2014 the severance payment would have amounted to US $820. The contract also includes a payment of one month’s pay per year of service rendered by Mr Curtis if Caledonia terminates his services. A change in control would constitute:
· the acquisition of more than 50% of the ordinary shares; or
· the acquisition of right to exercise the majority of the voting rights of ordinary shares; or
· the acquisition of the right to appoint the majority of the board of directors; or
· the acquisition of more than 50% of the assets; of
Greenstone Management Service Proprietary Limited or Caledonia Mining Corporation.
| | 2014 | 2013 | 2012 |
| | $ | $ | $ |
| Directors fees, Salaries and bonuses | 1,966 | 1,526 | 1,357 |
| Share-based payments | - | 36 | 401 |
| | 1,966 | 1,562 | 1,758 |
In addition, Blanket Mine also contributes to a defined contribution plan on behalf of eligible employees. For the terms of the plan refer to note 19: Defined Contribution Plan.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
27 Related parties – (continued)
Employees, officers, directors, consultants and other service providers also participate in the Group's share option program (see note 20).
Key management personnel and director transactions:
A number of those entities transacted with the Group in the reporting period. The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows:
| | | | Outstanding balance |
| | | | As at December 31, |
| | Note | 2014 | 2013 | 2012 | 2014 | 2013 |
| | | $ | $ | $ | $ | $ |
| Management contract fees, allowances and bonus paid or accrued to a company for management services provided by the Group’s former President and Chief Executive Officer. | (i) | 938 | 736 | 704 | - | - |
| Rent for office premises paid to a company owned by members of the former President’s family. | (ii) | 142 | 38 | 43 | - | - |
| Legal fees and disbursements up to retirement. | | - | 88 | 111 | - | - |
| Directors fees paid. | | 326 | 285 | 215 | - | - |
(i) | On July 15, 2014 Caledonia served a six month notice to Epicure Overseas S.A. for the termination of the contract between Caledonia and Epicure for the provision of the services of Mr. Stefan Hayden, who was at that time Caledonia’s President and Chief Executive Officer (“CEO”). Negotiations for alternative arrangements to secure the continued services of Mr. Hayden as President and CEO failed to reach agreement. Accordingly, on November 18, 2014 Mr. Hayden stepped down as President and CEO and on December 6, 2014, Mr. Hayden resigned as a director of Caledonia. No payments other than the contractual payments that were due to Epicure Overseas SA for the provision of the services of Mr. Hayden during the notice period were made. |
(ii) | The contract expires September 2015. |
Refer to note 5 and note 29 for transactions with Non-controlling interests.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
28 Group entities
| | | | | | |
| | Country of incorporation | Legal shareholding | Intercompany balances with Holding company |
| | | 2014 | 2013 | 2014 | 2013 |
| Subsidiaries of the Company | | % | % | | |
| Caledonia Holdings Zimbabwe (Private) Limited | Zimbabwe | 100 | 100 | - | - |
| Caledonia Mining Services Limited | Zimbabwe | 100 | 100 | - | - |
| Caledonia Kadola Limited | Zambia | 100 | 100 | - | - |
| Caledonia Mining (Zambia) Limited | Zambia | 100 | 100 | (18,021) | (16,575) |
| Caledonia Nama Limited | Zambia | 100 | 100 | (11,200) | (13,301) |
| Caledonia Western Limited | Zambia | 100 | 100 | - | - |
| Mulonga Mining Limited | Zambia | 100 | 100 | - | - |
| Dunhill Enterprises Inc. | Panama | 100 | 100 | - | - |
| Eersteling Gold Mining Corporation Limited | South Africa | 100 | 100 | (14,632) | (13,450) |
| Fintona Investments (Proprietary) Limited | South Africa | 100 | 100 | (17,277) | (15,890) |
| Greenstone Management Services (Proprietary) Limited | South Africa | 100 | 100 | (4,425) | (4,070) |
| Greenstone Management Services Limited | United Kingdom | 100 | 100 | 9,122 | 8,390 |
| Maid O’ Mist (Proprietary) Ltd | South Africa | 100 | 100 | - | - |
| Mapochs Exploration (Proprietary) Ltd | South Africa | 100 | 100 | - | - |
| Caledonia Holdings (Africa) Limited | Barbados | 100 | 100 | - | - |
| Blanket (Barbados) Holdings Limited | Barbados | 100 | 100 | - | - |
Blanket Mine (1983) (Private) Limited(3) | Zimbabwe | (2)49 | 49 | - | - |
Blanket Employee Trust Services (Private) Limited (BETS) (1) | Zimbabwe | - | - | - | - |
Blanket Mine Employee Trust (Employee Trust)(1) | Zimbabwe | - | - | - | - |
| Mulonga Mining Guernsey | Guernsey | 100 | 100 | - | - |
() BETS and the Employee Trust are consolidated as structured entities.
(2)Refer to Note 5, for the effective shareholding. NCI has a 16.2% interest in cash flows of Blanket only.
(3)Blanket has no subsidiary companies.
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
29 Operating Segments
The Group's operating segments have been identified based on geographic areas.
The Group has four reportable segments as described below, which are the Group's strategic business units. The strategic business units are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. The following geographical areas describe the operations of the Group's reportable segments: Corporate, Zimbabwe, South Africa and Zambia. The accounting policies of the reportable segments are the same as described in note 4.
The Corporate segment comprise the holding company and Greenstone Management Services Limited (UK) responsible for administrative functions within the group. The Zimbabwe operating segments comprise of Caledonia Holdings Zimbabwe Limited and subsidiaries. The Zambia segments consist of Nama copper project and cobalt project. The South Africa geographical segment comprise a gold mine as well as sales made by Greenstone Management Services Proprietary Limited to the Blanket Mine.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management report that are reviewed by the Group's CFO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
Information about reportable segments
| 2014 | | Corporate | | | Zimbabwe | | | South Africa | | | Zambia | | | Inter-group eliminations adjustments | | | Total | |
| | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| External Revenue | | | 4,106 | | | | 59,082 | | | | 7,913 | | | | - | | | | (12,019 | ) | | | 59,082 | |
| Royalty | | | - | | | | (3,889 | ) | | | - | | | | - | | | | - | | | | (3,889) | |
| Production costs | | | - | | | | (31,506 | ) | | | (6,907 | ) | | | - | | | | 7,601 | | | | (30,812 | ) |
| Management fee | | | - | | | | (5,167 | ) | | | 5,167 | | | | - | | | | - | | | | - | |
| Other income | | | - | | | | 18 | | | | 10 | | | | - | | | | - | | | | 28 | |
| Administrative expenses | | | (3,439 | ) | | | (481 | ) | | | (3,248 | ) | | | (989 | ) | | | - | | | | (8,157 | ) |
| Depreciation | | | - | | | | (3,888 | ) | | | (20 | ) | | | - | | | | - | | | | (3,908 | ) |
| Impairment | | | - | | | | (89 | ) | | | - | | | | (107 | ) | | | - | | | | (196 | ) |
| Finance income | | | 15 | | | | - | | | | - | | | | - | | | | - | | | | 15 | |
| Finance expense | | | - | | | | (170 | ) | | | - | | | | - | | | | - | | | | (170 | ) |
| Foreign exchange gain/(loss) | | | 54 | | | | - | | | | 1,122 | | | | - | | | | - | | | | 1,176 | |
| Segment profit before income tax | | | 736 | | | | 13,910 | | | | 4,037 | | | | (1,096 | ) | | | (4,418 | ) | | | 13,169 | |
| Tax expense | | | (1,178 | ) | | | (3,968 | ) | | | (1,458 | ) | | | - | | | | - | | | | (6,604 | ) |
| Segment profit after income tax | | | (442 | ) | | | 9,942 | | | | 2,579 | | | | (1,096 | ) | | | (4,418 | ) | | | 6,565 | |
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
28 Operating Segments – (continued) | | |
| 2014 | Corporate | Zimbabwe | South Africa | Zambia | Inter-group eliminations adjustments | Total | |
| | $ | $ | $ | $ | $ | $ | |
Geographic segment assets: | | | | | | | |
| Current | 12,520 | 12,148 | 13,700 | 51 | (1,511) | 36,908 | |
| Non-Current (excluding intercompany) | 56 | 41,646 | 356 | - | (1,670) | 40,388 | |
| Expenditure on property, plant and equipment – cash | - | 6,627 | 52 | 107 | - | 6,786 | |
| Intercompany balances | 118,502 | 1,748 | 33,788 | - | (154,038) | - | |
| | | | | | | | |
Geographic segment liabilities | | | | | | | |
| Current | (1,146) | (2,804) | (1,831) | - | - | (5,781) | |
| Non-current (excluding intercompany) | - | (12,291) | (689) | - | - | (12,980) | |
| Intercompany balances | (39,479) | (1,049) | (84,187) | (29,323) | 154,038 | - | |
| | | | | | | |
| |
| 2013 | | | Corporate | | | | Zimbabwe | | | | South Africa | | | | Zambia | | | | Inter-group eliminations adjustments | | | | Total $ | |
| | | | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| External Revenue | | | - | | | | 65, 113 | | | | 10618.00 | | | | - | | | | (10618.00 | ) | | | 65113.00 | |
| Royalty | | | - | | | | (4,544 | ) | | | - | | | | | | | | | | | | (4,544 ) | |
| Production costs | | | - | | | | (28580.00 | ) | | | (9749.00 | ) | | | - | | | | 10917.00 | | | | (27412.00 | ) |
| Management fee | | | - | | | | (4820.00 | ) | | | 4820.00 | | | | - | | | | - | | | | - | |
| Other income/(expense) | | | 5770.00 | | | | (5770.00 | ) | | | - | | | | | | | | | | | | - | |
| Administrative expenses | | | (2872.00 | ) | | | (2380.00 | ) | | | (2304.00 | ) | | | - | | | | (216.00 | ) | | | (7772.00 | ) |
| Share-based payment expenses | | | (68.00 | ) | | | - | | | | - | | | | - | | | | | | | | (68.00 | ) |
| Depreciation | | | - | | | | (3491.00 | ) | | | (15.00 | ) | | | - | | | | 230.00 | | | | (3276.00 | ) |
| Impairment | | | - | | | | (91.00 | ) | | | (399.00 | ) | | | (13713.00 | ) | | | | | | | (14203.00 | ) |
| Finance income | | | 24.00 | | | | - | | | | - | | | | - | | | | | | | | 24.00 | |
| Finance expense | | | - | | | | (132.00 | ) | | | - | | | | - | | | | | | | | (132.00 | ) |
| Foreign exchange gain/(loss) | | | 111.00 | | | | 1.00 | | | | 2336.00 | | | | - | | | | (771.00 | ) | | | 1677.00 | |
| Segment profit before income tax | | | 2965.00 | | | | 15306.00 | | | | 5307.00 | | | | (13713.00 | ) | | | (458.00 | ) | | | 9407.00 | |
| Tax expense | | | (1842.00 | ) | | | (6482.00 | ) | | | (1573.00 | ) | | | - | | | | - | | | | (9897.00 | ) |
| Segment profit after income tax | | | 1123.00 | | | | 8,824 113,64586 | | | | 3734.00 | | | | (13713.00 | ) | | | (458.00 | ) | | | (490.00 | ) |
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
28 Operating Segments – (continued)
2013 | | | Corporate | | | Zimbabwe | | | South Africa | | | Zambia | | | Inter-group eliminations adjustments | | | Total | |
| Geographic segment assets: | | | | | | | | | | | | | | | | | | | |
| Current | | | | 15,064 | | | | 10,599 | | | | 10,446 | | | | 45 | | | | - | | | | 36,154 | |
| Non-Current (excluding intercompany) | | | | 55 | | | | 34,840 | | | | 331 | | | | - | | | | (1,778 | ) | | | 33,448 | |
| Expenditure on property, plant and equipment | | | | - | | | | 9,461 | | | | 35 | | | | 2,637 | | | | (395 | ) | | | 11,738 | |
| Intercompany balances | | | | 60,893 | | | | 1,773 | | | | 6,287 | | | | - | | | | (68,953 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Geographic segment liabilities | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | | | (160 | ) | | | (5,731 | ) | | | (1,635 | ) | | | (8 | ) | | | - | | | | (7,534 | ) |
| Non-current (excluding intercompany) | | | | - | | | | (9,360 | ) | | | (734 | ) | | | - | | | | - | | | | (10,094 | ) |
| Intercompany balances | | | | (3,601 | ) | | | (783 | ) | | | (38,623 | ) | | | (25,946 | ) | | | 68,953 | | | | - | |
| |
| | | | Corporate | | | | Zimbabwe | | | | South Africa | | | Zambia | | | | Inter-group eliminations adjustments | | | | Total | |
| 2012 | | $ | | | $ | | | $ | | | | | | $ | | | $ | |
| External Revenue | | | - | | | | 75221.00 | | | | 8054.00 | | | | - | | | | (8054.00 | ) | | | 75221.00 | |
| Royalty | | | - | | | | (5,261 | ) | | | - | | | | - | | | | - | | | | (5,261 | ) |
| Production costs | | | - | | | | (26842.00 | ) | | | (7202.00 | ) | | | - | | | | 8391.00 | | | | (25653.00 | ) |
| Management fee | | | - | | | | (4761.00 | ) | | | 4761.00 | | | | - | | | | - | | | | - | |
| Other income/(expense) | | | 5770.00 | | | | (5770.00 | ) | | | - | | | | | | | | | | | | - | |
| Administrative expenses | | | (2390.00 | ) | | | (214.00 | ) | | | (1451.00 | ) | | | - | | | | - | | | | (4055.00 | ) |
| Share-based payment expenses | | | (408.00 | ) | | | (14161.00 | ) | | | - | | | | - | | | | - | | | | (14569.00 | ) |
| Depreciation | | | - | | | | (3414.00 | ) | | | (183.00 | ) | | | - | | | | 205.00 | | | | (3392.00 | ) |
| Impairment | | | - | | | | (330.00 | ) | | | - | | | | - | | | | - | | | | (330.00 | ) |
| Finance income | | | 17.00 | | | | 62.00 | | | | - | | | | - | | | | - | | | | 79.00 | |
| Finance expense | | | - | | | | (160.00 | ) | | | - | | | | - | | | | - | | | | (160.00 | ) |
| Indigenisation costs | | | (292.00 | ) | | | (1396.00 | ) | | | (12.00 | ) | | | - | | | | - | | | | (1700.00 | ) |
| Foreign exchange gain/(loss) | | | - | | | | (4.00 | ) | | | 453.00 | | | | - | | | | (453.00 | ) | | | (4.00 | ) |
| Segment profit before income tax | | | (3073.00 | ) | | | 18740.00 | | | | 4420.00 | | | | - | | | | 89.00 | | | | 20176.00 | |
| Tax expense | | | - | | | | (11482.00 | ) | | | (1336.00 | ) | | | - | | | | - | | | | (12818.00 | ) |
| Segment profit after income tax | | | (3073.00 | ) | | | 7,258 113,64586 | | | | 3084.00 | | | | - | | | | 89.00 | | | | 7358.00 | |
Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(in thousands of Canadian dollars)
Major customer
Revenues from Fidelity Printers in Zimbabwe amounted to approximately $59,082.Revenues from Rand Refinery and Metalor technologies in Switzerland amounted to $65,113 in 2013. In 2012 Revenue from Rand Refinery in South Africa amounted to $75,221.
| 29 | Non-controlling interests |
| Blanket Mine (1983) (Private) Limited NCI % - 16.2 | |
| | | 2014 | 2013 | |
| | | $ | $ | |
| Current assets | | 12,148 | 10,599 | |
| Non-current assets | | 43,394 | 34,840 | |
| Current liabilities | | (2,804) | (5,731) | |
| Non-current liabilities | | (12,291) | (9,360) | |
| Net assets | | 40,447 | 30,348 | |
| | | | | |
| Carrying amount of NCI | | 804 | (51) | |
| | | | | |
| Revenue | | 59,082 | 65, 113 | |
| Profit | | 10,301 | 15,833 | |
| Other comprehensive income | | - | - | |
| Total comprehensive income | | 10,301 | 15,833 | |
| | | | | |
| | | | | |
| | 2014 | 2013 | 2012 | |
| | $ | $ | $ | |
| Profit allocated to NCI | 1,668 | 2,565 | (1,362) | |
| OCI allocated to NCI | 34 | (75) | 19 | |
| Dividend paid to NCI | (847) | (745) | (5,707) | |
| | | | | |
30 Subsequent events
No material subsequent events to report.
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
Date March 27, 201530, 2017
| CALEDONIA MINING CORPORATION PLC |
| | |
| By: | /s/ Steven CurtisMark Learmonth |
| | Steven CurtisMark Learmonth
Chief ExecutiveFinancial Officer |
F-50
F-57