6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

Report of Foreign Private Issuer

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

Of the Securities Exchange Act of 1934

For the month of March 2022

Commission File Number: 001-38164

CALEDONIA MINING CORPORATION PLC

(Translation of registrant's name into English)

B006 Millais House

Castle Quay

St Helier

Jersey JE2 3EF

(Address of principal executive offices)

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

Form 20-F  ☒     Form 40-F ☐

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

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

INCORPORATION BY REFERENCE

Exhibits 99.1 and 99.2 included with this report on Form 6-K are expressly incorporated by reference into this report and are hereby incorporated by reference as exhibits to the Registration Statement on Form F-3 of Caledonia Mining Corporation Plc (File No. 333-224784), as amended or supplemented.

Signatures

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

	CALEDONIA MINING CORPORATION PLC
	(Registrant)
	By:	/s/ Steve Curtis
Dated: March 17, 2022	Name:	Steve Curtis
	Title:	CEO and Director

Exhibit	Description
99.1	Annual Financial Statements/Report
99.2	Annual MD&A

EX-99.1

Exhibit 99.1

Caledonia Mining Corporation Plc

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION

To the Shareholders of Caledonia Mining Corporation Plc:

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

Our independent auditor has the responsibility of auditing the consolidated financial statements and expressing an opinion on these financial statements.

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

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

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

At December 31, 2021 management evaluated the effectiveness of the Group’s ICOFR and concluded that such ICOFR was effective based on the criteria set forth in the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organisations of the Treadway Commission.

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

The consolidated financial statements as at and for the year ended December 31, 2021, 2020 and 2019 have been audited by the Group’s independent auditor, BDO South Africa Incorporated. 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, 2021 were approved by the Board of Directors and signed on its behalf on March 17, 2022.

(Signed) S. R. Curtis	(Signed) J.M. Learmonth
Chief Executive Officer	Chief Financial Officer

Independent Auditor’s Report

To the shareholders of         

Caledonia Mining Corporation Plc

Opinion

We have audited the consolidated financial statements of Caledonia Mining Corporation Plc and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at December 31, 2021 and 2020 and the consolidated statements of profit and loss and other comprehensive income, changes in equity and cash flows for the years ended December 31, 2021, 2020 and 2019 and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated statement of financial position as at December 31, 2021 and 2020 and its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2021, 2020 and 2019 in accordance with International Financial Reporting Standards (IFRSs), as issued by the International Accounting Standards Board (“IASB”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

KEY AUDIT MATTER

HOW THE KEY AUDIT MATTER WAS ADDRESSED IN THE AUDIT

Site restoration provision. The Group’s site restoration obligations with a carrying value of $ 3.3 million as disclosed in accounting policy note 3(a)iv and note 29 (Provisions), are material. Significant judgement and estimation is required by management in determining the rehabilitation timing and underlying cost estimates for rehabilitation. This annual assessment also includes assumptions on inflation and discount rates as well as the scope of works required to rehabilitate the mine and surrounding areas in line with current legislation. The site restoration provision calculation includes several inputs that management uses to assess the appropriateness of their estimates, including inflation rates, discount rates, timing and value of cash flows that support their calculation. Based on the significance of the balance as well as the management judgements and estimates involved and the sensitivity of the balance for changes in the inputs, it was concluded to of most significance in our audit of the consolidated financial statements of the current year.

In considering the appropriateness of management’s judgements and estimates used in the calculation for site restoration and through discussions with management, we performed the following audit procedures making use of our expertise in site restoration models: ●         We obtained an understanding of the of key controls around the assessment of the site restoration cost model; ●     We obtained from our experts, the market and management available evidence that supported their key assumptions and assessed the reasonability/appropriateness of these assumptions; ●          We performed sensitivity analysis on the key assumptions; ●          We tested the mathematical accuracy of the model; and ●          We evaluated and challenged the basis for any significant revisions since the prior year to expectations and market conditions. ●          We assessed the objectivity, competence and experience of management’s experts through inspection of their professional credentials. ●          We evaluated key assumptions in the site restoration models, challenging the appropriateness of estimates with reference to contingencies applied, inflation rates, weighted average cost of capital calculation and the consistency of long-term discount rates to market information and expectations. We evaluated the work of management’s experts and compared the methods and assumptions used by the expert to those used in the preceding period in order to ensure consistency by using our knowledge of the industry as well as obtaining market information for similar entities to compare assumptions. We engaged our own expert to independently assess the restoration provision estimate and technical review of management’s calculation model. As part of our audit, we also focused on the adequacy of the group’s disclosures that is required in terms of International Financial Reporting Standards

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Other Information

Management is responsible for the other information. The other information comprises:

● The information included:

o The Management’s Discussion and Analysis report of the consolidated operating results and financial position of the Group for the quarter ended December 31, 2021.

o The Annual Report – referred to as Form 20-F.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the Management’s Discussion and Analysis report and the Annual Report – referred to as Form 20-F prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, 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.

3

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

● Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

● Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

● Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

● Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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Caledonia Mining Corporation Plc

INDEPENDENT AUDITOR’S REPORT (continued)

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Jacques Barradas.

BDO South Africa Inc.

Registered Auditors

Wanderers Office Park

52 Corlett Drive

Illovo, 2196

March 17, 2022

5

Caledonia Mining Corporation Plc

Consolidated statements of profit or loss and other comprehensive income

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

For the years ended December 31	Note		2021			2020			2019
Revenue		7		121,329			100,002			75,826
Less: Royalty				(6,083	)		(5,007	)		(3,854	)
Production costs		8		(53,126	)		(43,711	)		(36,400	)
Depreciation		18		(8,046	)		(4,628	)		(4,434	)
Gross profit				54,074			46,656			31,138
Other income		9		46			4,765			2,274
Other expenses		10		(7,136	)		(5,315	)		(666	)
Administrative expenses		11		(9,091	)		(7,997	)		(5,637	)
Cash-settled share-based expense		12.1		(477	)		(1,413	)		(689	)
Net foreign exchange gain		13		1,184			4,305			29,661
Profit on sale of subsidiary		23.2		–			–			5,409
Fair value losses on derivative instruments		14.1		(240	)		(266	)		(601	)
Operating profit				38,360			40,735			60,889
Finance income		16		14			62			146
Finance cost		16		(375	)		(367	)		(344	)
Profit before tax				37,999			40,430			60,691
Tax expense		17		(14,857	)		(15,173	)		(10,290	)
Profit for the year				23,142			25,257			50,401
Other comprehensive income
Items that are or may be reclassified to profit or loss
Exchange differences on translation of foreign operations				(531	)		(173	)		49
Reclassification of accumulated exchange differences on the sale of subsidiary				–			–			(2,109	)
Total comprehensive income for the year				22,611			25,084			48,341
Profit attributable to:
Owners of the Company				18,405			20,780			42,018
Non-controlling interests		28		4,737			4,477			8,383
Profit for the year				23,142			25,257			50,401
Total comprehensive income attributable to:
Owners of the Company				17,874			20,607			39,958
Non-controlling interests		28		4,737			4,477			8,383
Total comprehensive income for the year				22,611			25,084			48,341
Earnings per share
Basic earnings per share ($)		27		1.49			1.73			3.82
Diluted earnings per share ($)		27		1.48			1.73			3.81

The accompanying notes on pages 10 to 70 are an integral part of these consolidated financial statements.

On behalf of the Board: “S.R. Curtis”- Chief Executive Officer and “J.M. Learmonth”- Chief Financial Officer.

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Caledonia Mining Corporation Plc

Consolidated statements of financial position

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

Unaudited
As at December 31	Note		2021			2020
Assets
Property, plant and equipment		18		149,102			126,479
Exploration and evaluation asset		19		8,648			6,768
Deferred tax asset		17		194			87
Total non-current assets				157,944			133,334
Inventories		20		20,812			16,798
Prepayments		21		6,930			1,974
Trade and other receivables		24		7,938			4,962
Income tax receivable		17		101			76
Derivative financial assets		14.1		–			1,184
Cash and cash equivalents		22		17,152			19,092
Assets held for sale		23		–			500
Total current assets				52,933			44,586
Total assets				210,877			177,920
Equity and liabilities
Share capital		25		82,667			74,696
Reserves		26		137,779			138,310
Retained loss				(59,150	)		(71,487	)
Equity attributable to shareholders				161,296			141,519
Non-controlling interests		28		19,260			16,524
Total equity				180,556			158,043
Liabilities
Provisions		29		3,294			3,567
Deferred tax liabilities		17		8,034			4,234
Loans and borrowings - long term portion		30		–			–
Cash-settled share-based payment - long term portion		12.1		974			1,934
Lease liabilities - long term portion		15		331			178
Total non-current liabilities				12,633			9,913
Loans and borrowings - short term portion		30		–			408
Cash-settled share-based payment - short term portion		12.1		2,053			336
Lease liabilities - short term portion		15		134			61
Derivative financial liabilities		14.2		3,095			–
Income taxes payable		17		1,562			495
Trade and other payables		31		9,957			8,664
Overdraft		22		887			–
Total current liabilities				17,688			9,964
Total liabilities				30,321			19,877
Total equity and liabilities				210,877			177,920

The accompanying notes on pages 10 to 70 are an integral part of these consolidated financial statements.

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Caledonia Mining Corporation Plc

Consolidated statements of changes in equity

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

	Note		Share capital		Foreign currency translation reserve			Contributed surplus		Equity-settled share-based payment reserve			Retained loss			Total			Non-controlling interests (NCI)			Total equity
Balance January 1, 2019				55,102		(6,561	)		132,591		16,760			(127,429	)		70,463			8,345			78,808
Transactions with owners:
Dividends declared		34		-		-			-		-			(2,969	)		(2,969	)		(426	)		(3,395	)
Equity-settled share-based payment				963		-			-		-			-			963			-			963
Total comprehensive income:
Profit for the year				-		-			-		-			42,018			42,018			8,383			50,401
Other comprehensive income for the year				-		(2,060	)		-		-			-			(2,060	)		-			(2,060	)
Balance December 31, 2019				56,065		(8,621	)		132,591		16,760			(88,380	)		108,415			16,302			124,717
Transactions with owners:
Dividends declared		34		-		-			-		-			(3,887	)		(3,887	)		(655	)		(4,542	)
Shares issued:
- Share-based payment		12.1		216		-			-		-			-			216			-			216
- Options exercised		25		30		-			-		-			-			30			-			30
- Equity raise (net of transaction cost)		25		12,538		-			-		-			-			12,538			-			12,538
- Blanket shares purchased from Fremiro		5		5,847		-			-		(2,247	)		-			3,600			(3,600	)		-
Total comprehensive income:
Profit for the year				-		-			-		-			20,780			20,780			4,477			25,257
Other comprehensive income for the year				-		(173	)		-		-			-			(173	)		-			(173	)
Balance at December 31, 2020				74,696		(8,794	)		132,591		14,513			(71,487	)		141,519			16,524			158,043
Transactions with owners:
Dividends declared		34		-		-			-		-			(6,068	)		(6,068	)		(2,001	)		(8,069	)
Shares issued:
- Options exercised		25		165		-			-		-			-			165			-			165
- Equity raise (net of transaction cost)		25		7,806		-			-		-			-			7,806			-			7,806
Total comprehensive income:
Profit for the year				-		-			-		-			18,405			18,405			4,737			23,142
Other comprehensive income for the year				-		(531	)		-		-			-			(531	)		-			(531	)
Balance at December 31, 2021				82,667		(9,325	)		132,591		14,513			(59,150	)		161,296			19,260			180,556
	Note			25		26			26		26									28

The accompanying notes on pages 10 to 70 are an integral part of these consolidated financial statements.

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Caledonia Mining Corporation Plc

Consolidated statements of cash flows

For the years ended December 31,

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

	Note		2021			2020			2019
Cash generated from operations		32		38,703			37,967			23,885
Interest received				14			56			146
Interest paid				(388	)		(405	)		(454	)
Tax paid		17		(7,426	)		(6,656	)		(5,517	)
Net cash from operating activities				30,903			30,962			18,060
Cash flows used in investing activities
Acquisition of property, plant and equipment				(32,112	)		(25,081	)		(19,852	)
Acquisition of exploration and evaluation assets				(5,717	)		(2,759	)		(172	)
Proceeds from sale of assets held for sale		23.1		500			–			–
Realisation (purchase) of Gold ETF		14.1		1,066			(1,058	)		–
Proceeds from disposal of subsidiary		23.2		340			900			1,000
Net cash used in investing activities				(35,923	)		(27,998	)		(19,024	)
Cash flows from financing activities
Dividends paid				(8,069	)		(4,542	)		(3,395	)
Term loan proceeds (net of transaction cost)		30		–			–			2,294
Term loan repayments		30		(361	)		(574	)		–
Proceeds from gold loan		14.2		2,752			–			–
Proceeds from call option		14.2		208			–			–
Payment of lease liabilities		15		(129	)		(118	)		(124	)
Shares issued – equity raise (net of transaction cost)		25		7,806			12,538			–
Proceeds from share options exercised		25		165			30			–
Net cash from (used in) financing activities				2,372			7,334			(1,225	)
Net (decrease) / increase in cash and cash equivalents				(2,648	)		10,298			(2,189	)
Effect of exchange rate fluctuations on cash and cash equivalents				(179	)		(99	)		(105	)
Net cash and cash equivalents at the beginning of the year				19,092			8,893			11,187
Net cash and cash equivalents at the end of the year		22		16,265			19,092			8,893

The accompanying notes on pages 10 to 70 are an integral part of these consolidated financial statements.

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Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

1 Reporting entity

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

These consolidated financial statements of the Company and its subsidiaries (the “Group”) comprise the consolidated statements of financial position as at December 31, 2021 and 2020, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for each of the years ended December 31, 2021, 2020 and 2019, notes, significant accounting policies and other explanatory information. The Group’s primary involvement is in the operation of a gold mine and the exploration and development of mineral properties for precious metals.

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

2	Basis of preparation
i)	Statement of compliance

The consolidated financial statements have been prepared on a going concern basis, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The consolidated financial statements were approved for issue by the Board of Directors on March 17, 2022.

ii) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for:

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

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

● derivative financial assets and derivative financial liabilities measured at fair value.

iii) Functional currency

These consolidated financial statements are presented in United States Dollars (“$” or “US Dollars” or “USD”), which is also the functional currency of the Company. All financial information presented in US Dollars has been rounded to the nearest thousand, unless indicated otherwise. Refer to note 13 for changes to Zimbabwean real-time gross settlement, bond notes or bond coins (“RTGS$”) and its effect on the consolidated statement of profit or loss and other comprehensive income.

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Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

3 Use of accounting assumptions, estimates and judgements

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

(a)	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 (proven and probable) and resources (measured, indicated and inferred), which are planned to be extracted in the future from known mineral deposits. Where items have a shorter useful life than the life-of-mine, the mine development, infrastructure and other assets are depreciated over their useful life. Confidence in the existence, commercial viability and economical recovery of reserves and resources included in the life-of-mine may be based on historical experience and available geological information. This is in addition to the drilling results obtained by the Group and management’s knowledge of the geological setting of the surrounding areas, which would enable simulations and extrapolations to be done with a sufficient degree of accuracy. In instances where management is able to demonstrate the economic recovery of resources with a high level of confidence, such additional resources, are included in the calculation of depreciation.

Other items of property, plant and equipment are depreciated as described in note 4(g)(iii).

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 prices and exchange rates. Estimating the quantity and grade of mineral reserves and resources requires the size, shape and depth of orebodies to be determined by analysing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological assumptions and calculations to interpret the data. Estimates of mineral reserves and resources may change due to the change in economic assumptions used to estimate mineral reserves and resources and due to additional geological data becoming available during the course of operations.

The Group estimates its reserves (proven and probable) and resources (measured, indicated and inferred) based on information compiled by a Qualified Person in terms of the Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) relating to geological and technical data of the size, depth, shape and grade of the ore body and suitable production techniques and recovery rates. Such an analysis requires geological and engineering assumptions to interpret the data. These assumptions include:

● correlation between drill-holes intersections where multiple reefs are intersected;

● continuity of mineralisation between drill-hole intersections within recognised reefs; and

● appropriateness of the planned mining methods.

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Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

3 Use of accounting assumptions, estimates and judgements (continued)

(a)	Assumptions and estimation uncertainties (continued)
ii)	Mineral reserves and resources (continued)

The Group estimates and reports reserves and resources in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards for Mineral Resources and Mineral Reserves. Complying with the CIM code, NI 43-101 requires the use of reasonable assumptions to calculate the recoverable resources. These assumptions include:

● the gold price based on current market price and the Group’s assessment of future prices;

● estimated future on-mine costs, sustaining and non-sustaining capital expenditures;

● cut-off grade;

● dimensions and extent, determined both from drilling and mine development, of ore bodies; and

● planned future production from measured, indicated and inferred resources.

Changes in reported reserves and resources may affect the Group’s financial results and position in several ways, including the following:

● asset carrying values may be affected due to changes in the estimated cash flows (i.e. Impairment);

● 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 and resources which may affect expectations about the timing or cost of these activities.

iii) Blanket mine’s indigenisation transaction

The initial indigenisation transaction and modifications to the indigenisation transaction of Blanket Mine (1983) (Private) Limited (“Blanket Mine”) required management to make significant assumptions and estimates which are explained in note 5.

iv) Site restoration provision

The site restoration provision has been calculated for the Blanket Mine based on an independent analysis of the rehabilitation costs as performed in 2021. Assumptions and estimates are made when determining the inflationary effect on current restoration costs and the discount rate to be applied in arriving at the present value of the provision where the time value of money effect is significant. Assumptions, based on the current economic environment, have been made that management believes are a reasonable basis for estimating 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 the provision from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation. The final cost of the currently recognised site rehabilitation provision may be higher or lower than currently provided for (refer to note 29).

12

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

3	Use of accounting assumptions, estimates and judgements (continued)
(a)	Assumptions and estimation uncertainties (continued)
v)	Exploration and evaluation (“E&E”) assets

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

vi) Taxes

Significant assumptions and estimates 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. In 2019 the Zimbabwe Revenue Authority (“ZIMRA”) issued Public Notice 26 (“PN26”) effective from February 22, 2019. PN26 provided clarity on the interpretation of Section 4 (a) of the Finance Act [Chapter 23.04] of Zimbabwe, which requires a company earning taxable income to pay tax in the same or other specified currency that the income is earned. PN 26 clarifies that the calculation of taxable income be expressed in RTGS$ and that the payment of the tax payable, determined in RTGS$, be paid in the ratio of turnover earned. The application of PN26 resulted in a significant reduction in the deferred tax liability and the Group recorded the best estimate of the tax liability. The clarification of PN26 was applied prospectively from the 2019 year.

Management believes they have adequately provided for the probable outcome of tax related matters; however, the final outcome or future outcomes anticipated in calculating the tax liabilities may result in a materially different outcome than the amount included in the tax liabilities. In addition, the Group further makes assumptions and estimates when recognising deferred tax assets relating to tax losses carried forward to the extent that there are sufficient future taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses may be utilised or sufficient estimated future taxable income against which the losses can be utilised.

vii) Share-based payment transactions

Equity-settled share-based payment arrangements

The Group measures the cost of equity-settled share-based payment transactions with employees, directors and Blanket’s indigenous shareholders (refer to note 5) 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.

13

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

3	Use of accounting assumptions, estimates and judgements (continued)
(a)	Assumptions and estimation uncertainties (continued)
vii)	Share-based payment transactions (continued)

Where the Company granted the counterparty to a share-based payment award the choice of settlement in cash or shares, the equity component is measured as the difference between the fair value of the goods and services and the fair value of the cash-settled share-based payment liability at the date when the goods and services are received at the measurement date. For transactions with employees, the equity component is zero.

Option pricing models require the input of assumptions, including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate. Therefore, the existing models may not necessarily provide a reliable single measure of the fair value of the Group’s share options.

Cash-settled share-based payment arrangements

The fair value of the amount payable to employees regarding share-based awards that 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 change in the fair value of the liability is recognised in profit or loss.

Additional information about significant assumptions and estimates used to determine the fair value of cash settled share-based payment transactions are disclosed in note 12.1.

viii) Impairment

Non-financial assets

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 assumptions and estimates.

Non-derivative financial assets

The Group uses a simplified approach in accounting for trade receivables and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. The Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

(b) Judgements

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

Refer to note 4(b)(ii) for judgement applied to determine functional currency of entities in the Group and the use of the interbank rate of exchange to translate RTGS$.

14

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. In addition, the accounting policies have been applied consistently by the Group.

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.

ii) Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related Non-controlling interests (“NCI”) and other components of equity. Any gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

iii) Non-controlling interests

NCI is measured at their proportionate share of the carrying amounts of the acquiree’s identifiable net assets at fair value at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions

iv) Transactions eliminated on consolidation

Intra-group balances and transactions arising from intra-group transactions are eliminated.

(a)	Foreign currency
i)	Foreign operations

As stated in note 2(iii) the presentation currency of the Group is the US Dollars. The functional currency of the Company and all its subsidiaries is the US Dollars except for the South African subsidiary that uses the South African Rand (“ZAR”) as its functional currency. Subsidiary financial statements have been translated to the presentation currency as follows:

● assets and liabilities are translated using the exchange rate at year end; and

● income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions.

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 recognised in Other Comprehensive Income (“OCI”).

15

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(b)	Foreign currency (continued)
i)	Foreign operations (continued)

If settlement is planned or likely in the foreseeable future, foreign exchange gains and losses are included in profit or loss. When settlement occurs, the 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 over a foreign operation, the foreign currency gains or losses accumulated in OCI related to the foreign operation are reclassified to profit or loss. If the Group 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 reattributed between controlling and non-controlling interests.

All resulting translation differences are reported in OCI and accumulated in the foreign currency translation reserve.

ii) Foreign currency translation

In preparing the financial statements of the Group entities, transactions in currencies other than the functional currency (foreign currencies) of these Group entities 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.

On October 1, 2018 the Reserve Bank of Zimbabwe (“RBZ) pegged the Zimbabwe dollar (“RTGS$”) at 1:1 to the US Dollar and on February 20, 2019 issued a further monetary policy statement, which allowed inter-bank trading between RTGS$ and foreign currency. The interbank rate was introduced at 2.5 RTGS$ to 1 US Dollar and traded at 108.67 RTGS$ (2020: 81.79 RTGS$, 2019: 16.77 RTGS$) to 1 US Dollar as at December 31, 2021.

Further, the RBZ issued a directive to Zimbabwean banks to separate foreign currency (“Foreign currency”) and RTGS$ for bank accounts held by clients on October 1, 2018. Subsequent to the directive, the RBZ announced that 30% of Blanket Mine’s gold proceeds will be received in Foreign currency (i.e., US Dollars) and the remainder received as RTGS$. From November 12, 2018 the RBZ increased the Foreign currency allocation from 30% to 55%, with the remainder received as RTGS$. The RBZ increased the Foreign currency allocation with effect from May 26, 2020 from 55% to 70% and decreased the Foreign currency allocation with effect from January 8, 2021 from 70% to 60% with the remainder received as RTGS$. The allocation percentages remained in effect up to the date of approval of these financial statements. Further, the Company participated in the Foreign currency auction introduced by the Zimbabwean Government to exchange RTGS$ for US Dollars up to June 15, 2021.

16

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(b)	Foreign currency (continued)
ii)	Foreign currency translation (continued)

In June 2021 the RBZ announced that companies that are listed on the VFEX will receive 100% of the revenue arising from incremental production in US Dollars. Blanket has subsequently received confirmation that the “baseline” level of production for the purposes of calculating incremental production is 148.38 Kg per month (approximately 57,000 ounces per annum). The payment of the increased US Dollars proceeds for incremental production was applied from July 1, 2021 and Blanket has received all amounts due in terms of this revised policy up to the date of approval of these financial statements. Blanket intends to increase its production from approximately 67,000 ounces of gold in 2021 to a range of 73,000 to 80,000 ounces in 2022 and 80,000 ounces of gold from 2023 onwards. The CMCL listing on the VFEX should mean that Blanket will receive approximately 71.5% of its total revenues in US Dollars and the balance in RTGS$.

In applying IAS 21, management determined that the US Dollars remained the primary currency in which the Group’s Zimbabwean entities operate, as:

● the majority of revenue is received in US Dollars;

● the gold price receivable was calculated in US Dollars;

● the majority of costs are calculated by reference to the US Dollars if denominated in RTGS$ or is paid in US Dollars; and

● Income tax liabilities calculated in RTGS$ are settled predominantly in US Dollars.

The application of IAS 21, the advent of Statutory Instrument 142 (issued by Zimbabwean Government) and the devaluation of the RTGS$ against the US Dollars had an impact on the US Dollars value of RTGS$ denominated monetary assets and liabilities such as income and deferred tax liabilities, loans and borrowings, trade and other payables and to a lesser extent monetary asset such as cash held in RTGS$.

(c) Leases

The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right of use asset reflects that the Group will exercise a purchase option. In that case the right of use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as property, plant and equipment. Also, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

17

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(c)	Leases (continued)

Lease payments included in the measurement of the lease liability comprise the following:

● fixed payments, including in-substance fixed payments;

● amounts expected to be payable under a residual value guarantee; and

● the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if the lease agreement changes in substance in terms of payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset or is recorded in profit or loss if the carrying amount of the right of use asset has been reduced to zero.

The Group presents the right of use assets as property, plant and equipment. Lease liabilities are presented separately in the statement of financial position as current- and non-current Lease liabilities.

The Group has elected not to recognise the right of use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(d)	Financial instruments
i)	Financial assets

The Group had the following financial assets:

Financial assets at amortised cost

Financial assets at amortised cost comprise loans and receivables included in Trade and other receivables. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less any impairment losses. A trade receivable without a significant financing component is initially measured at the transaction price. Refer to note 5(j)(i) for the impairment of receivables. Finance income was recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

18

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(d)	Financial instruments (continued)
i)	Financial assets (continued)

Fair value through profit or loss

This category comprises the Gold ETF, Bank balances and Gold hedge. These instruments are carried in the consolidated statement of financial position at fair value with changes in fair value recognised in the consolidated statement profit or loss and other comprehensive income as Fair value losses on derivative financial instruments. Transaction cost are recognized in profit or loss in in the consolidated statement profit or loss and other comprehensive income immediately when incurred. The Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

ii) Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.

Fair value through profit or loss

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. This category comprises the Gold loan and the Call options, estimations made and further information is referred to in note 14.2. All changes in the fair value of derivative instruments are accounted for in profit or loss.

Financial liabilities at amortised cost

Non-derivative financial liabilities are recognised initially on the 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, 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.

iv) Offsetting

Financial assets and liabilities are offset and the net amount is 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.

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts are repayable on demand and form an integral part of the Group’s cash management process. The bank overdraft is included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

19

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(f)	Share capital

Share capital is classified as equity. Incremental costs directly attributable to the issue, consolidation and repurchase of fractional items of shares and share options are recognised as a deduction from equity, net of any tax effects.

(g)	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, borrowing costs on qualifying assets, the costs of dismantling and removing the items and restoring the site on which they are located. 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 in profit or loss. Refer to note 4(j)(ii) for the impairment of non-financial assets.

ii)  Subsequent costs

The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

iii)  Depreciation

Depreciation is calculated to write off the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. On commencement of commercial production, depreciation of mine development, infrastructure and other assets is calculated on the unit-of-production method using the Measured, Indicated and Inferred Mineral Resources of which the diluted Measured and Indicated Mineral Resources are converted to Mineral Reserves for extraction in Blanket’s life-of-mine plan (“LoMP”). Resources that are not included in the LoMP are not included in the calculation of depreciation.

For other categories, 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, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

All Mineral Resources and Reserves are categorised and reported in compliance with the definitions embodied in the CIM Definition Standards as incorporated into the NI 43-101, and Mineral Resources are reported inclusive of Mineral Reserves. Inferred Mineral Resources are not converted to Mineral Reserves.

Inferred Mineral Resources are considered in the LoMP to the extent that they are required in accessing, by development infrastructure, the Measured and Indicated Mineral Resources. In addition geological continuity is modelled, whilst grade continuity is continually upgraded by drilling of the Inferred Mineral Resources at depth, and where these Mineral Resources are above the cut-off, economically viable and of sufficient confidence, will be upgraded and form part of eventual extraction and as a result are included in the calculation of depreciation. Refer to note 18 for the evaluation of the cut-off.

20

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(g)	Property, plant and equipment
iii)	Depreciation (continued)

Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource.

Mineral Resources in the Measured and Indicated Mineral Resource classifications have been converted into Proven and Probable Mineral Reserves respectively, by applying the applicable modifying factors and reasonable prospects of economic extraction.

Land is not depreciated.

The calculation of the production rate units could be affected to the extent that actual production in the future is different from the current forecast production. 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.

These factors include:

● changes in mineral reserves and resources;

● differences between actual commodity prices and 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.

The estimated useful lives for the current and comparative years are as follows:

● buildings 10 to 15 years (2020: 10 to 15 years; 2019: 10 to 15 years);

● plant and equipment 10 years (2020: 10 years; 2019: 10 years);

● fixtures and fittings including computers 4 to 10 years (2020: 4 to 10 years; 2019: 4 to 10 years);

● motor vehicles 4 years (2020: 4 years; 2019: 4 years);

● right of use assets 3 to 6 years (determined by lease term); and

● mine development, infrastructure and other assets in production, units-of-production method.

Depreciation methods, useful lives and residual values are reviewed each financial year 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. Assets under construction’s useful life and residual values will be assessed once the asset is available for use.

(h) Exploration and evaluation assets

Qualifying exploration costs are capitalised as incurred. Costs incurred before the legal rights to explore are obtained are recognised in profit or loss. The costs related to speculative drilling on unestablished orebodies at the Blanket Mine, general administrative or overhead costs are expensed as incurred. Exploration and evaluation costs capitalised are disclosed under Exploration and evaluation assets. Qualifying direct expenditures include such costs as mineral rights, options to acquire mineral rights, materials used, surveying costs, drilling costs, payments made to contractors, direct administrative costs and depreciation on property, plant and equipment during the exploration phase.

21

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(h)	Exploration and evaluation assets (continued)

Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year they occur.

Once the technical feasibility and commercial viability of extracting the mineral resource have been determined, the property is considered to be a mine under development and moved to the mine development, infrastructure and other asset category within property, plant and equipment. Capitalised direct costs related to the acquisition, exploration and development of mineral properties remain capitalized, at their initial cost, until the properties to which they relate are ready for their intended use, sold, abandoned or management has determined there to be impairment. Exploration and evaluation assets are tested for impairment before the assets are transferred to mine development, infrastructure and other assets or when an indicator of impairment is identified.

Exploration and evaluations assets are not depreciated.

(i) Inventories

Consumable stores are measured at the lower of cost and net realisable value. The cost of consumable stores is based on the weighted average cost principle. It includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Gold in process is measured at the lower of cost and net realisable value. The cost of gold in process includes an appropriate share of production overheads based on normal operating capacity and is valued on the weighted average cost principle. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(j)	Impairment
i)	Non-derivative financial assets (including receivables)

The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been assessed individually as they possess different credit risk characteristics. Trade receivables have been assessed based on the days past due. The expected loss rates are based on the payment profile for gold sales over the past 48 months prior to December 31, of each year reported. The historical rates are adjusted to reflect current and forward looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding. However, given the short period exposed to credit risk the impact of these factors has not been considered significant. Failure to make payments within 90 days from lodgement date with Fidelity Printers and Refiners Limited (“Fidelity”) and failure to engage with the Group on alternative payment arrangement, amongst others, are considered indicators of no reasonable expectation of recovery. Trade and other receivables are written off (i.e. derecognised) when there is no reasonable expectation of recovery.

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. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

22

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(j)	Impairment (continued)
ii)	Non-financial assets (continued)

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate 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”). 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. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amount of assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been an indication of reversal and a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

iii) Impairment of Exploration and evaluation (“E&E”) assets

The test for impairment of E&E assets can combine several CGUs as long as the combination is not larger than a segment. The definition of a CGU does, however, change once development activities have begun. There are specific 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 required in the event that the circumstances that resulted in impairment have changed.

E&E assets are assessed for impairment only when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable 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 in future.

● 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.

(k)	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.

23

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(k)	Employee benefits (continued)
ii)	Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

(l)	Share-based payment transactions
i)	Equity-settled share-based payments to employees and directors

The grant date fair value of equity-settled 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 meet the related service and non-market vesting conditions at the vesting date.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in profit or loss.

ii) Cash-settled share-based payments to employees and directors

The grant date fair value of cash-settled awards granted to employees and directors is recognised as an expense, with a corresponding increase in the liability, over the vesting period of the awards. At each reporting date the fair value of the awards is re-measured with a corresponding adjustment to 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 12.1.

(m) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability if the time value of money is considered significant. The unwinding of the discount is recognised as a finance cost.

24

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(n)	Site restoration

The Group recognises liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of these assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalised to mineral properties along with a corresponding increase in the rehabilitation provision in the period incurred. Future rehabilitation costs are discounted using a pre-tax risk-free rate that reflects the time-value of 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. These changes are recorded directly to mineral properties with a corresponding entry to the rehabilitation provision.

(o) Revenue

Revenue from the sale of precious metals is recognized when the metal is accepted at the refinery by Fidelity (“Lodgment date”). Control is transferred and the receipt of proceeds is substantially assured at point of delivery. Revenue for each delivery is measured at the London Base Metal Association Tuesday PM price post-delivery less 1.25% and the quantities are determined on Lodgment date. The revenue amount calculated represents the fair value of the receivable at the date of the transaction. On average settlement occurs within 14 days of delivery.

(p) Finance income and finance cost

Finance income comprises interest income on funds invested. Finance income is recognised as it accrues in profit or loss, using the effective interest method. Finance cost comprise interest expense on the rehabilitation provisions, interest on bank overdraft balances, effective interest on leases, loans and borrowings and also includes commitment costs on overdraft facilities. Finance cost is recognised in profit or loss using the effective interest rate method and excludes borrowing costs capitalised.

(q)	Taxes
i)	Income tax

Tax expense comprises current and deferred tax. These expenses 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.

ii) Current tax

Current tax is the 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 includes withholding tax on management fees and dividends paid between companies within the Group.

25

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(q)	Taxes (continued)
iii)	Deferred tax

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 a monetary item measured at the tax rates and in the currency that are expected to be applied when temporary differences reverse. The tax and exchange rates are based on the laws that have been enacted, substantively enacted or the interbank exchange rates that prevail at 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.

(r) Earnings per share

The Group presents basic and diluted earnings per share (“EPS”) data for its shares. Basic EPS is calculated by dividing the adjusted profit or loss attributable to shareholders of the Group (see note 27) by the weighted average number of shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the weighted average number of shares outstanding, adjusted for own shares held, for the effects of all dilutive potential 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.

(s) Borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Other borrowing costs are expensed in the period in which they are incurred and recognised as finance cost.

(t) Assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use.

Such assets, or disposal groups, are generally measured at the lower of their carrying amount or fair value less costs to sell. Impairment losses on initial classification as held for sale or held for distribution and subsequent gains and losses on remeasurement are recognised in profit or loss.

Once classified as held for sale property, plant and equipment are no longer depreciated.

26

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(u)	The following standards, amendments to standards and interpretations to existing standards may possibly have an impact on the Group:

Standard/ Interpretation		Effective date and expected adoption date*
IAS 1	In response to feedback and enquiries from stakeholders, in December 2020, the IFRS Interpretations Committee (IFRIC) issued a Tentative Agenda Decision, analysing the applicability of the amendments to three scenarios. However, given the comments received and concerns raised on some aspects of the amendments, in April 2021, IFRIC decided not to finalise the agenda decision and referred the matter to the IASB. In its June 2021 meeting, the IASB tentatively decided to amend the requirements of IAS 1 with respect to the classification of liabilities subject to conditions and disclosure of information about such conditions and to defer the effective date of the 2020 amendment by at least one year.	January 1, 2023
IAS 16	The amendment to IAS 16 Property, Plant and Equipment (“PPE”) prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use. It also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. The amounts of proceeds and costs relating to items produced that are not an output of the entity’s ordinary activities must be disclosed separately.	January 1, 2022
IAS 37	Amendments to IAS 37 Provision, Contingent Liabilities and Contingent Assets clarifies the Onerous contracts – Cost of Fulfilling a Contract. The amendments specify which costs an entity includes in determining the cost of fulfilling a contract to assess whether the contract is onerous. The amendments apply to contracts existing at the date when the amendments are first applied. At the initial application date, the cumulative effect of applying the amendments is recognised as an opening balance adjustment to retained earnings or other components of equity, as appropriate.	January 1, 2022

27

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(u)	The following standards, amendments to standards and interpretations to existing standards may possibly have an impact on the Group: (continued)

Standard/ Interpretation		Effective date and expected adoption date*
Annual Improvements to IFRS Standards 2018–2020	The following improvements were finalised in May 2020: ●         IFRS 9 Financial Instruments – clarifies which fees should be included in the 10% test for derecognition of financial liabilities. ●        IFRS 16 Leases – amendment of illustrative example 13 to remove the illustration of payments from the lessor relating to leasehold improvements, to remove any confusion about the treatment of lease incentives.	January 1, 2022
Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2	The IASB amended IAS 1 to require entities to disclose their material rather than their significant accounting policies. The amendments define what is ‘material accounting policy information’ and explain how to identify when accounting policy information is material. They further clarify that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information. To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures.	January 1, 2023

28

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

4	Significant accounting policies (continued)
(u)	The following standards, amendments to standards and interpretations to existing standards may possibly have an impact on the Group: (continued)

Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities.   The amendment should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, entities should recognise deferred tax assets (to the extent that it is probable that they can be utilised) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with:   ●         right-of-use assets and lease liabilities, and ●         decommissioning, restoration and similar liabilities, and the corresponding amounts recognised as part of the cost of the related assets.   The cumulative effect of recognising these adjustments is recognised in retained earnings, or another component of equity, as appropriate. IAS 12 did not previously address how to account for the tax effects of on-balance sheet leases and similar transactions and various approaches were considered acceptable. January 1, 2023

^* Annual periods ending on or after.

The Group has completed its assessment of the impact of the above standards and concluded that the standard amendments would not have a material impact on the consolidated financial statements.

New standards, amendments to standards and interpretations adopted from 1 January 2021 had no significant effect on the Group’s accounting policies.

29

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

5 Blanket Zimbabwe Indigenisation Transaction

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

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

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

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

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

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

Accounting treatment

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

30

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

5 Blanket Zimbabwe Indigenisation Transaction (continued)

Accounting treatment (continued)

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

•	Non-controlling interests (“NCI”) were recognised on the portion of shareholding upon which dividends declared by Blanket Mine will accrue unconditionally to equity holders as follows:
	(a)         20% of the 16% shareholding of NIEEF;
	(b)         20% of the 15% shareholding of Fremiro; and
	(c)         100% of the 10% shareholding of the Community Trust.
•	This effectively means that NCI was initially recognised at 16.2% of the net assets of Blanket Mine, until the completion of the transaction with Fremiro, whereby the NCI reduced to 13.2% (see below).
•	The remaining 80% of the shareholding of NIEEF and Fremiro was recognised as NCI to the extent that their attributable share of the net asset value of Blanket Mine exceeds the balance on the facilitation loans, including interest. At December 31, 2021 the attributable net asset value did not exceed the balance on the respective loan account and thus no additional NCI was recognised.
•	The transaction with BETS is accounted for in accordance with IAS 19 Employee Benefits (profit sharing arrangement) as the ownership of the shares does not ultimately pass to the employees. The employees are entitled to participate in 20% of the dividends accruing to the 10% shareholding in Blanket Mine if they are employed at the date of such distribution. To the extent that 80% of the attributable dividends exceeds the balance on the BETS facilitation loan, they will accrue to the employees at the date of such declaration.
•	BETS is an entity effectively controlled and consolidated by Blanket Mine. Accordingly, the shares held by BETS are effectively treated as treasury shares in Blanket Mine and no NCI is recognised.

Fremiro purchase agreement

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

Blanket Mine’s indigenisation shareholding percentages and facilitation loan balances

			Effective interest &			NCI subject to			Balance of facilitation loan #
USD	Shareholding			NCI recognised			facilitation loan		December 31, 2021		December 31, 2020
NIEEF	16	%		3.2	%		12.8	%		10,359		11,728
Community Trust	10	%		10.0	%		0.0	%		–		–
BETS ~	10	%		2.0	%		0.0	%		6,353		7,447
	36	%		15.2	%		12.8	%		16,712		19,175

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

^~ Accounted for under IAS19 Employee Benefits.

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

31

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

5 Blanket Zimbabwe Indigenisation Transaction (continued)

Blanket Mine’s indigenisation shareholding percentages and facilitation loan balances (continued)

The balance on the facilitation loans is reconciled as follows:

	2021			2020
Balance at January 1		19,175			30,974
Cancellation of Fremiro loan		–			(11,458	)
Finance cost accrued		1,313			1,396
Dividends used to repay loan		(3,776	)		(1,737	)
Balance at December 31		16,712			19,175

Advance dividend loans and balances

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

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

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

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

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

Amendments to advanced dividend loan agreements

Advance dividend loan modification - Community Trust

On February 27, 2020, the Group, Blanket Mine and the indigenous shareholders of Blanket Mine reached an agreement to change the repayment terms of the advance dividend loan to the Community Trust. The amendment allowed that 20% of the Community Trust share of the Blanket dividend accrues on declaration of the dividend and that the remaining 80% be applied to the advance dividend loan from February 27, 2020. The modification was not considered beneficial to the indigenous shareholders.

The movement in the advance dividend loan to the Community Trust is reconciled as follows:

	2021			2020
Balance at January 1		994			1,632
Finance cost accrued		29			98
Dividends used to repay advance dividend loan		(1,023	)		(736	)
Balance at December 31		–			994

32

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

6 Capital management

When managing capital, the Group’s objectives 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 financing (refer to notes 22 and 30) and non-controlling interests.

	2021		2020
Total equity		180,556		158,043

The Group’s primary objective regarding its capital management is to ensure that it has sufficient cash resources to maintain its on-going operations, provide returns for shareholders, accommodate any rehabilitation provisions and pursue growth opportunities. It assesses its short term needs and funds these by available cash, overdrafts and short to medium term loans. Capital requirements for future project are evaluated on a case-by-case basis. As at December 31, 2021, there has been no change with respect to the overall capital risk management strategy.

7 Revenue

	2021			2020		2019
Revenue		121,329			100,002		75,826
Total ounces sold		68,617			57,137		54,801
Work in progress and refinery		(1,141	)		762		381
Gold produced (oz)		67,476			57,899		55,182
Tonnes milled		665,628			597,962		556,331
Grade		3.36			3.21		3.31
Recovery		93.9			93.8		93.4
Realised gold price ($/oz)		1,766			1,749		1,382

8 Production costs

	2021		2020		2019
Salaries and wages		20,515		15,811		13,782
Consumable materials – Operations		17,288		14,358		12,850
Consumable materials – COVID-19		297		824		–
Electricity costs		10,363		8,071		6,319
Safety		774		708		525
Cash-settled share-based expense (note 12.1(a))		692		634		107
Gold work in progress		243		1,166		376
On mine administration		2,650		1,766		2,140
Pre-feasibility exploration costs		304		373		301
		53,126		43,711		36,400

33

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

9 Other income

	2021		2020		2019
Government grant – Gold sale export credit incentive		-		4,695		866
Government grant – Gold support price		-		-		1,064
Other		46		70		94
Greenstone Retirement Fund pay-out		-		-		250
		46		4,765		2,274

Government grant – Gold sale export credit incentive

The Reserve Bank of Zimbabwe (“RBZ”) first announced an export credit incentive (“ECI”) on the gold proceeds received for all large-scale gold mine producers during 2016. The ECI is calculated as a percentage of the gold proceeds less the charges of Fidelity.

The below table indicates when the ECI was applicable and the percentages granted, as announced by the Zimbabwean Government:

ECI applicable periods	Percentage
May 1, 2016 – December 31, 2017		3.5	%
January 1, 2018 – January 31, 2018		2.5	%
February 1, 2018 – February 20, 2019		10	%
February 21, 2019 – March 9, 2020		0	%
March 10, 2020 – June 26, 2020		25	%

All incentives granted by the Zimbabwean Government were included in other income when determined receivable. Incentives were received in Blanket Mine’s RTGS$ account. The ECI fell away after June 26, 2020.

10 Other expenses

	2021		2020		2019
Intermediated Money Transaction Tax		799		451		354
Solar evaluation cost *		–		230		160
COVID-19 donations		74		1,322		–
Community and social responsibility cost		1,167		382		–
Other		–		–		8
Impairment of property, plant and equipment - plant and equipment (note 18)		498		–		144
Impairment of exploration and evaluation assets (note 19)		3,837		2,930		–
Expected credit losses on deferred consideration on the disposal of subsidiary (notes 23.2 and 24)		761		–		–
		7,136		5,315		666

* Capitalised from July 6, 2020, refer to note 18.

34

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

11 Administrative expenses

	2021	2020	2019
Investor relations	439	353	414
Audit fee	267	288	237
Advisory services fees	622	904	408
Listing fees	609	448	277
Directors fees – Company	527	323	240
Directors fees – Blanket	51	43	31
Employee costs	5,462	4,065	3,030
Other office administration cost	347	424	605
Management liability insurance	551	1,032	86
Travel costs	216	117	292
Eersteling Gold Mine administration costs	–	–	17
	9,091	7,997	5,637

12	Share-based payments
12.1	Cash-settled share-based payments

The Group has expensed the following cash-settled share-based expense arrangements for the twelve months ended December 31:

	Note	2021			2020		2019
Restricted Share Units and Performance Units	12.1(a)		515			1,299		616
Caledonia Mining South Africa employee incentive scheme	12.1(b)		(38	)		114		73
			477			1,413		689

(a) Restricted Share Units and Performance Units

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

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

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

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

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

35

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

12	Share-based payments (continued)
12.1	Cash-settled share-based payments (continued)
(a)	Restricted Share Units and Performance Units (continued)

The fair value of the RSUs at the reporting date was based on the Black Scholes option valuation model less the fair value of the expected dividends during the vesting period multiplied by the performance multiplier expectation. At the reporting date it was assumed that there is a 93%-100% probability that the performance conditions will be met and therefore a 93%-100% (2020: 93%-100%) average performance multiplier was used in calculating the estimated liability. The fair value of the PUs at the reporting date was based on the Black Scholes option valuation model. The liability as at December 31, 2021 amounted to $3,027 (2020: $2,240). Included in the liability as at December 31, 2021 is an amount of $692 (2020: $634; 2019: $107) that was expensed and classified as production costs; refer to note 8. During the year PUs to the value of $420 vested and were settled in cash (2020: $216 issued as share capital).

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

	December 31,						December 31,
	2021						2020
	RSUs			PUs			RSUs			PUs
Risk free rate		1.52	%		1.52	%		0.93	%		0.93	%
Fair value (USD)		12.06			11.63			15.88			15.51
Share price (USD)		11.71			11.71			15.88			15.88
Performance multiplier percentage		–			93-100	%		–			93-100	%
Volatility		1.20			1.06			1.00			1.06

Share units granted:	RSUs		PUs			RSUs		PUs
Grant - January 11, 2019		–		95,740			–		95,740
Grant - March 23, 2019		–		28,287			–		28,287
Grant - June 8, 2019		–		14,672			–		14,672
Grant - January 11, 2020		17,585		114,668			17,585		114,668
Grant - March 31, 2020		–		1,971			–		1,971
Grant - June 1, 2020		–		1,740			–		1,740
Grant - September 9, 2020		–		1,611			–		1,611
Grant - September 14, 2020		–		20,686			–		20,686
Grant - October 5, 2020		–		514			–		514
Grant - January 11, 2021		–		78,875			–		–
Grant -April 1, 2021		–		770			–		–
Grant - May 14, 2021		–		2,389			–		–
Grant - June 1, 2021		–		1,692			–		–
Grant - June 14, 2021		–		507			–		–
Grant - August 13, 2021		–		2,283			–		–
Grant - September 1, 2021		–		553			–		–
Grant - September 6, 2021		–		531			–		–
Grant - September 20, 2021		–		526			–		–
Grant - October 1, 2021		–		2,530			–		–
Grant - October 11, 2021		–		500			–		–
Grant - November 12, 2021		–		1,998			–		–
Grant - December 1, 2021		–		936			–		–
RSU dividends reinvested		1,066		–			386		–
Settlements/ terminations		-		(30,600	)		–		–
Total awards		18,651		343,379			17,971		279,889

36

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

12	Share-based payments (continued)
12.1	Cash-settled share-based payments (continued)
(b)	Caledonia Mining South Africa employee incentive scheme

From 2017 until 2019 Caledonia Mining South Africa Proprietary Limited granted awards to certain of its employees that entitles them to a cash pay-out at the Company’s share price on November 30 of each year over a 3-year period from the grant date. The cash-settled share-based payment liability was calculated based on the number of awards expected to vest multiplied by the Company’s Black Scholes option valuation fair value of £8.90 at the reporting date and apportioned for the quantity vested over the total vesting period. The liability relating to these cash-settled share-based payment awards amounted to $Nil (December 31, 2020: $30) and the fair value adjustment included in the consolidated financial statements of profit or loss and other comprehensive income amounted to ($38) (2020: $114) for the twelve months ended December 31, 2021.

During September 2020 it was communicated to employees of Caledonia Mining South Africa Proprietary Limited that going forwards they will receive awards of PUs under the OEICP, and so a discretionary 10% cash bonus scheme would gradually replace the current cash-settled share-based scheme and no more awards would be made under the cash-settled share-based scheme. To the extent their cash-settled share-based payments fall short of the cash bonus, they would receive the amount equal to the awards. All awards vested or expired by year-end. No new awards were granted.

The following assumptions were used in estimating the fair value of the cash-settled share-based payment liability for the year ended December 31.

	2021			2020
	Awards
Grant – August 2018 (3-year term)		5,918			5,918
Grant - August 2019 (3-year term)		9,034			9,034
Awards paid out/ expired		(14,952	)		(11,941	)
Total awards outstanding		–			3,011
Estimated awards expected to vest		100	%		100	%

13 Net foreign exchange gain

On October 1, 2018 the RBZ issued a directive to Zimbabwean banks to separate foreign currency from RTGS$ in the accounts held by their clients and pegged the RTGS$ at 1:1 to the US Dollars. On February 20, 2019 the RBZ issued a further monetary policy statement, which allowed inter-bank trading between RTGS$ and foreign currency. The interbank rate was introduced at 2.5 RTGS$ to 1 US Dollars and traded at 108.67 RTGS$ to 1 US Dollars as at December 31, 2021 (December 31, 2020: 81.79 RTGS$). On June 24, 2019 the Government issued S.I. 142 which stated, “Zimbabwe dollar (“RTGS$”) to be the sole currency for legal tender purposes for any transactions in Zimbabwe”. Throughout these announcements and to the date of issue of these financial statements the US dollar has remained the primary currency in which the Group’s Zimbabwean entities operate and the functional currency of these entities.

Previously there was uncertainty as to what currency would be used to settle amounts owed to the Zimbabwe Government. The announcement of S.I. 142 clarified the Zimbabwean Government’s intentions that these liabilities were always denominated in RTGS$ and that RTGS$ would be the currency in which they would be settled. The devaluation of the deferred tax and electricity liabilities contributed the largest portion of the foreign exchange gain set out below.

37

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

13 Net foreign exchange gain (continued)

In June 2021 the RBZ announced that companies that are listed on the VFEX will receive 100% of the revenue arising from incremental production in US Dollars. Blanket has subsequently received confirmation that the “baseline” level of production for the purposes of calculating incremental production is 148.38 Kg per month (approximately 57,000 ounces per annum). The payment of the increased US Dollars proceeds for incremental production was applied from July 1, 2021 and Blanket has received all amounts due in terms of this revised policy up to the date of approval of these financial statements. The CMCL listing on the VFEX should mean that Blanket will receive approximately 71.5% of its total revenues in US Dollars and the balance in RTGS$.

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

	2021			2020			2019
Unrealised foreign exchange gain		2,755			8,367			31,411
Realised foreign exchange loss		(1,571	)		(4,062	)		(1,750	)
Net foreign exchange gain		1,184			4,305			29,661

14 Derivative financial instruments

The fair value of derivative financial instruments not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where available. The company did not apply hedge accounting to the derivative financial instruments and all fair value losses were recorded in the consolidated statement of profit or loss and other comprehensive income.

		2021		2020		2019
Fair value losses on derivative financial assets	14.1
Gold ETF			105		164		–
Gold hedge			–		102		601
			105		266		601
Fair value losses on derivative financial liabilities	14.2
Gold loan			114		–		–
Call option			21		–		–
			135		–		–
Fair value losses on derivative financial instruments			240		266		601

14.1 Derivative financial assets

	2021		2020
Derivatives assets:
Gold exchange-traded fund ("Gold ETF")		–		1,184
Gold hedge		–		–
		–		1,184

38

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

14	Derivative financial instruments (continued)
14.1	Derivative financial assets (continued)

Gold ETF

In April 2020 the South African subsidiary, Caledonia Mining South Africa Proprietary Limited, purchased a Gold ETF from Standard Bank Limited at a cost of $1,058. The Gold ETF is denominated in South African Rand and the instrument is utilised to invest excess short-term Rands on hand at the South African subsidiary. The Gold ETF’s value tracks the US Dollars spot gold price and was entered into to offset fluctuations in the South African Rand against the US Dollars. The total expense, representing the change in the Rand tracked USD spot gold price, amounted to $105 (2020: $164) for the twelve months ended December 31, 2021. Foreign currency translation gains, due to the fluctuations in the Rand against the US Dollars on the translation of the foreign subsidiary, amounted to ($14) (2020: $100). On May 5, 2021 the Gold ETF was realised for $1,066.

Gold hedge

The Company entered into a hedge in November 2019 at a cost of $379. The hedge was in the form of put options in respect of 4,600 ounces of gold per month for the period January to June 2020 exercisable at a strike price of $1,400 per ounce. At December 31, 2020 the mark-to-market valuation, that represents the fair value of the hedge, amounted to $102. The put options were entered into by the Company for economic hedging purposes to ensure sufficient cash availability for Blanket Mine’s capital investment plan, rather than as a speculative investment. The hedge expired on June 30, 2020.

The Gold ETF and Gold hedge were classified under level 1 of the fair value hierarchy.

14.2 Derivative financial liabilities

Changes in fair value are recorded on a mark to market basis and recorded as financial liabilities. The table below summarizes the fair value movements in derivative liabilities:

	2021		2020		2019
Gold loan – increase in liability		114		–		–
Call option – increase in liability		21		–		–
		135		–		–

The table below summarizes the derivative financial liabilities balances as at December 31:

	2021		2020
Derivative liabilities:
Gold loan		2,866		–
Call option		229		–
		3,095		–

39

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

14	Derivative financial instruments (continued)
14.2	Derivative financial liabilities (continued)

Gold loan and call option

On December 13, 2021 the Company entered into two separate gold loan and option agreements with Auramet International LLC (“Auramet”).

In terms of the agreements the Group:

● received $3 million less transaction costs from Auramet at inception of the Gold loan agreement;

● is required to make two deliveries of 925 ounces each on May 31, 2022 and June 30, 2022 in repayment of the Gold loan or pay the equivalent in cash; and

● granted call options on 6,000 ounces to Auramet with a strike price of $2,000 per ounce, expiring monthly in equal monthly tranches from June 30, 2022 to November 30,2022.

Accounting for the Gold loan and the Call option transactions:

● At inception the fair value of the Gold loan was calculated at the amount received less the fair value of the Call option.

● As at December 31, 2021 the fair value of the gold loan was calculated by discounting the fair value of the gold deliveries at a forward rate of $1,833 due by a market related discount rate.

● At inception and at December 31, 2021 the Call options were valued at the quoted prices available from the CME Group Inc. at each respective date.

● Differences in the fair values were accounted for as Fair value losses on derivative financial instruments in the consolidated statement of profit or loss and other comprehensive income.

● The Call option was classified as level 1 in the fair value hierarchy and the Gold loan as level 2.

● Derivative liabilities are not designated as hedging instruments.

Proceeds received under the Gold loan and Option agreements were allocated as follows:

December 13, 2021
Gross proceeds	3,000
Transaction cost	(40	)
Net proceeds received	2,960
Fair value of Call options	208
Fair value of Gold loan	2,752
December 31, 2021
Fair value of Call options	229
Fair value of Gold loan	2,866

40

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

15 Leases

Leases as lessee

The Group leases administrative offices. The leases, which the Group normally enters into, typically run for a period of 3 to 6 years, with an option to renew the lease after that date. Two leases for the administrative offices expire in 2024 and one lease in 2025.

Information about leases for which the Group is a lessee is presented below.

i) Amounts recognised in the statement of financial position

Right of use assets

Right of use assets related to leased properties are presented as part of property, plant and equipment (refer note 18).

	2021			2020
Balance at January 1		229			337
Depreciation		(115	)		(99	)
Additions to right of use assets		527			-
Derecognition of right of use assets		(172	)		-
Foreign currency movement		(22	)		(9	)
Balance at December 31		447			229

Lease liabilities

	2021			2020
Balance at January 1		239			349
Additions to lease liability		527			-
Finance cost		24			15
Lease payments		(129	)		(118	)
Foreign currency movement		(23	)		(7	)
Derecognition of lease liability		(173	)		-
Balance at December 31		465			239

ii) Amounts recognised in profit or loss

	2021		2020			2019
Finance cost on lease liabilities		24		15			17
Unrealised foreign exchange gain		1		(2	)		4
Depreciation		115		99			112
		140		112			133

iii) Amounts recognised in statement of cash flows

	2021			2020			2019
Total cash outflow for leases - principal		129			118			124
Total cash outflow for leases - finance cost		(24	)		(15	)		(17	)

41

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

15 Leases (continued)

iv) Lease payments

Lease payments payable on leases of right of use assets are as follows:

	2021		2020
Less than one year		158		61
One to two years		165		46
Two to three years		163		46
Three to four years		46		46
Four to five years		–		40
		532		239

16         Finance income and finance cost

	2021			2020			2019
Finance income received - Bank		14			62			146
Finance cost - Term loan (note 30)		56			386			165
Finance cost - Capitalised to property, plant and equipment (note 18)		(17	)		(53	)		(165	)
Unwinding of rehabilitation provision (note 29)		–			2			20
Finance cost - Leases (note 15)		24			15			17
Finance cost - Overdraft		86			17			307
ZESA interest *		226			–			–
		375			367			344

^* During the period from January 2021 to March 2021 it was unclear in what currency the monthly payments to the Zimbabwe Electricity Supply Authority (“ZESA”) had to be made. In April 2021 Blanket was advised that the payments had to be paid on a 60/40 basis USD/RTGS$. Interest was charged on the outstanding amounts to ZESA during the period January 2021 to March 2021 when payments were withheld.

42

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

17 Tax expense

	2021			2020			2019
Tax recognised in profit or loss
Current tax		9,051			9,492			7,311
Income tax - current year		8,769			8,969			6,802
Income tax - change in tax estimates		(168	)		(54	)		29
Withholding tax - current year		450			577			480
Deferred tax expense		5,806			5,681			2,979
Origination and reversal of temporary differences		5,806			5,681			2,979
Tax expense – recognised in profit or loss		14,857			15,173			10,290
Tax recognised in other comprehensive income
Income tax - current year		-			-			-
Tax expense		14,857			15,173			10,290

Unrecognised deferred tax assets

	2021		2020		2019
Caledonia Holdings Zimbabwe (Private) Limited		1,800		593		421
Greenstone Management Services Holdings Limited		516		376		276
Tax losses carried forward		2,316		969		697

Taxable losses do not expire for the entities incurring taxable losses within the Group, unless the entities cease trading. Tax losses carried forward relate to Greenstone Management Services Holdings Limited (UK) and Caledonia Holdings Zimbabwe (Private) Limited. Deferred tax assets have not been recognised in these entities as future taxable income is not deemed probable to utilise these losses against.

Tax paid	2021			2020			2019
Net income tax payable at January 1		(419	)		(163	)		(1,538	)
Current tax expense		(9,051	)		(9,492	)		(7,310	)
Foreign currency movement		583			2,580			3,168
Tax paid		7,426			6,656			5,517
Net income tax payable at December 31		(1,461	)		(419	)		(163	)

43

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

17 Tax expense (continued)

Reconciliation of tax rate	2021			2020			2019
Profit for the year		23,142			25,257			50,401
Total tax expense		14,857			15,173			10,290
Profit before tax		37,999			40,430			60,691
Income tax at Company's domestic tax rate (1)		-			-			-
Tax rate differences in foreign jurisdictions (2)		11,847			12,405			16,232
Effect of income tax calculated in RTGS$ as required by PN26 (3)		590			2,004			(8,526	)
Management fee – withholding tax on deemed dividend portion		342			209			224
Management fee – non-deductible deemed dividend		611			570			652
Management fee – withholding tax - current year		148			123			129
Withholding tax on intercompany dividends		-			245			128
Non-deductible expenditure
- Royalty expenses (4)		-			-			933
- Donations		311			107			18
- Other non-deductible expenditure		(170	)		177			21
Credit export incentive income exemption		-			(598	)		(124	)
Change in income tax rate (5)		-			(287	)		-
Change in tax estimates
- Zimbabwean income tax		(166	)		-			29
- South African income tax		(2	)		(54	)		63
Change in unrecognised deferred tax losses		1,346			272			511
Tax expense - recognised in profit or loss		14,857			15,173			10,290

⁽¹⁾ The tax rate in Jersey, Channel Islands is 0% (2020: 0%, 2019: 0%).

⁽²⁾ The effective tax rate of 39.10% (2020: 37.52%) exceeds the statutory tax rates of subsidiaries of the Company, as certain expenditures are incurred by the Company that is not tax-deductible against taxable income in Zimbabwe and South Africa, where the enacted tax rates are 24.72% (2020: 25.75%) and 28.00% respectively. Further, Zimbabwean legislation requires the Blanket income taxation calculation to be performed in RTGS$ whereas the functional currency in which the profit before tax is calculated in these consolidated financial statements is in US Dollar; the requirement is further described in point 3 below.

⁽³⁾ In 2019 ZIMRA issued PN26 that was affected retrospectively from February 22, 2019. The public notice provided clarity on Section 4 (a) of the Finance Act [Chapter 23.04] of Zimbabwe, which requires a company earning taxable income to pay tax in the same or other specified currency in which taxable income and revenue is earned. PN 26 clarifies that the calculation of taxable income be performed in RTGS$ and that the payment of the tax be in the ratio of the currency that the taxable income and revenue is earned. The reconciling item reconciles the profit before tax calculated using US Dollars as the functional currency of the Zimbabwean entities to taxable income calculated in RTGS$.

⁽⁴⁾ On August 1, 2019 the Zimbabwean Government announced in the mid-term budget speech that mining royalties will be deductible for income tax purposes. The change came into effect on January 1, 2020.

⁽⁵⁾ On November 26, 2020 the Zimbabwean Government announced in the 2021 National Budget Statement that the income tax rate will be reduced from 25.75% to 24.72% and will take effect in the 2021 fiscal tax year. This resulted in a change in the estimated deferred tax liability.

44

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

17 Tax expense (continued)

Recognised deferred tax assets and liabilities

	Assets				Liabilities						Net
	2021		2020		2021			2020			2021			2020
Property, plant and equipment		-		-		(9,328	)		(5,380	)		(9,328	)		(5,380	)
Exploration and evaluation assets		-		-		(47	)		(29	)		(47	)		(29	)
Allowance for obsolete stock		3		13		-			-			3			13
Prepayments		-		-		(10	)		(3	)		(10	)		(3	)
Unrealised foreign exchange		499		530		-			-			499			530
Trade and other payables		989		636		-			-			989			636
Cash-settled share-based payments		-		8		-			-			-			8
Provisions		54		60		-			-			54			60
Other		-		18		-			-			-			18
Tax assets/ (liabilities)		1,545		1,265		(9,385	)		(5,412	)		*(7,840	)		*(4,147	)

^* The net deferred tax liability consists of a deferred tax asset of $194 (2020: $87, January 1, 2020: $63) from the South African operation and a net deferred tax liability of $8,034 (2020: $4,234, January 1, 2020: $3,129) due to the Zimbabwean operation. The amounts are in different tax jurisdictions and cannot be offset. The amounts are presented as part of Non-current assets and Non-current liabilities in the Statements of financial position. 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, 2021			Recognised in profit or loss			Foreign exchange movement			Balance December 31, 2021
Property, plant and equipment		(5,380	)		(6,439	)		2,491			(9,328	)
Exploration and evaluation assets		(29	)		(31	)		13			(47	)
Allowance for obsolete stock		13			3			(13	)		3
Prepayments		(3	)		(8	)		1			(10	)
Unrealised foreign exchange		530			344			(375	)		499
Trade and other payables		639			235			115			989
Cash-settled share-based payments		8			(8	)		-			-
Provisions		60			123			(129	)		54
Other		15			(15	)		-			-
Tax (liabilities)/ assets		(4,147	)		(5,796	)		2,103			(7,840	)

	Balance January 1, 2020			Recognised in profit or loss			Foreign exchange movement			Balance December 31, 2020
Property, plant and equipment		(4,117	)		(7,174	)		5,911			(5,380	)
Exploration and evaluation assets		(78	)		(21	)		70			(29	)
Allowance for obsolete stock		22			14			(23	)		13
Prepayments		(4	)		-			1			(3	)
Unrealised foreign exchange		309			742			(521	)		530
Trade and other payables		739			674			(774	)		639
Cash-settled share-based payments		5			3			-			8
Provisions		58			76			(74	)		60
Other		-			15			-			15
Tax (liabilities)/ assets		(3,066	)		(5,671	)		4,590			(4,147	)

45

Caledonia Mining Corporation Plc 
Notes to the Consolidated Financial Statements 

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

18 Property, plant and equipment

Cost	Land and Buildings			Mine development, infrastructure and other			Plant and equipment			Furniture and fittings			Motor vehicles			Solar Plant ~			Total
Balance at January 1, 2020		10,833			90,542			36,395			1,018			2,538			–			141,326
Additions*		1			19,507			4,221			219			458			372			24,778
Derecognised plant and equipment		–			–			(238	)		–			–			–			(238	)
Reallocations between asset classes		930			(1,210	)		280			–			–			–			–
Foreign exchange movement		(7	)		–			(14	)		(2	)		(1	)		20			(4	)
Balance at December 31, 2020		11,757			108,839			40,644			1,235			2,995			392			165,862
Balance at January 1, 2021		11,757			108,839			40,644			1,235			2,995			392			165,862
Additions*		318			25,529			3,531			134			176			1,581			31,269
Impairments@		–			(65	)		(1,565	)		–			–			–			(1,630	)
Derecognised plant and equipment		(192	)		–			–			–			–			–			(192	)
Reallocations between asset classes #		3,120			(24,913	)		21,785			8			–			–			–
Foreign exchange movement		(25	)		–			(76	)		(35	)		(2	)		(33	)		(171	)
Balance at December 31, 2021		14,978			109,390			64,319			1,342			3,169			1,940			195,138

*	Included in additions is an amount of $19,413 (2020: $6,476) relating to capital work in progress (“CWIP”) and contains $17 (December 31, 2020: $53) of borrowing costs capitalised from the term loan. As at year end $42,145 of CWIP was included in the cost closing balance (2020: $85,479).
~	On July 6, 2020 the Board appointed Voltalia as the contractor for the engineering, procuring and constructing of a solar plant to be owned by a subsidiary of the Company and supply Blanket Mine with power. All solar costs that were incurred before July 6, 2020 were accounted for as other expenses and accounted through profit or loss. Solar costs incurred after approval by the Board are accounted for as Property, plant and equipment as it became clear and probable that future economic benefits will flow to the project. The 40-hectare site for the project has been cleared and fenced and is ready for civil work to commence.  Construction of the 12MWac solar plant is expected to be completed in the second quarter of 2022. Included in Prepayments is an advance payment to Voltalia to the amount of $1,821 in terms of the EPC agreement and $704 for equipment. These items were delivered at the date of approval of these consolidated financial statements. Also included in Prepayments is an amount of $426 to entities in Zimbabwe for civil and construction work related to the solar plant. Refer to note 21.
@	Included in impairments are Gensets at a cost of $1,001 and Guide ropes at a total cost of $310. These assets were impaired as they are no longer in a working conditions as intended for the use in production or day to day operations.
#	Included in the reallocation between asset classes is an amount of $18,509 for the Central Shaft.

46

Caledonia Mining Corporation Plc 
Notes to the Consolidated Financial Statements 

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

18 Property, plant and equipment (continued)

Accumulated depreciation and Impairment losses	Land and Buildings			Mine development, infrastructure and other		Plant and equipment			Furniture and fittings			Motor vehicles			Solar Plant		Total
Balance at January 1, 2020		5,413			6,325		20,050			753			2,273			–		34,814
Depreciation for the year		1,030			648		2,691			102			157			–		4,628
Accumulated depreciation for derecognised plant and equipment		–			–		(56	)		–			–			–		(56	)
Foreign exchange movement		3			–		–			(6	)		–			–		(3	)
Balance at December 31, 2020		6,446			6,973		22,685			849			2,430			–		39,383
Balance at January 1, 2021		6,446			6,973		22,685			849			2,430			–		39,383
Depreciation for the year		1,217			2,537		3,953			136			203			–		8,046
Accumulated depreciation for derecognised plant and equipment		(230	)		–		–			–			–			–		(230	)
Accumulated depreciation for impairments		–			–		(1,133	)		–			–			–		(1,133	)
Foreign exchange movement		(1	)		–		–			(27	)		(2	)		–		(30	)
Balance at December 31, 2021		7,432			9,510		25,505			958			2,631			–		46,036
Carrying amounts
At December 31, 2020		5,311			101,866		17,959			386			565			392		126,479
At December 31, 2021		7,546			99,880		38,814			384			538			1,940		149,102

47

Caledonia Mining Corporation Plc 
Notes to the Consolidated Financial Statements 

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

18 Property, plant and equipment (continued)

Economic recovery

Items of property, plant and equipment are depreciated over the LoMP, which includes planned production from inferred resources. These inferred resources are included in the calculation when the economic recovery thereof is demonstrated by the achieved recovered grade relative to the mine’s pay limit for the period 2006 to 2018. The pay limit is 2.10 g/t (2020: 2.10 g/t) while the recovered grade has ranged from 3.38 g/t to 3.36 g/t over the period. All-in-sustaining-cost^# has remained consistently below the gold price received over this period resulting in economic recovery of the inferred resources.

^# All-in sustaining cost (“AISC”) per ounce is calculated as the on-mine cost per ounce to produce gold (which includes production costs before intercompany eliminations and exploration costs) plus royalty paid, additional costs incurred outside the mine (i.e. at offices in Harare, Johannesburg, London and Jersey), costs associated with maintaining the operating infrastructure and resource base that are required to maintain production at the current levels (sustaining capital investment), the share-based expense arising from the LTIP less silver by-product revenue and the export credit incentive.

48

Caledonia Mining Corporation Plc 
Notes to the Consolidated Financial Statements 

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

19 Exploration and evaluation assets

Glen Hume

Connemara North

Maligreen

GG

Eagle Vulture, Mascot & Penzance

Sabiwa

Abercorn

Valentine

Total

Balance at January 1, 2020

–

–

–

3,441

3,416

282

–

–

7,139

Acquisition costs:

- Option payments

2,500

300

–

–

–

–

–

–

2,800

Exploration costs:

- Consumables and drilling

161

–

–

28

–

–

–

–

189

- Labour

–

–

–

35

11

–

–

–

46

- Power

–

–

–

19

3

2

–

–

24

Reallocate to assets held for sale *

–

–

–

–

(500

)

–

–

–

(500

)

Impairment *

–

–

–

–

(2,930

)

–

–

–

(2,930

)

Balance at December 31, 2020

2,661

300

–

3,523

–

284

–

–

6,768

Balance at January 1, 2021

2,661

300

–

3,523

–

284

–

–

6,768

- Mining claims acquired

–

–

4,000

–

–

–

–

–

4,000

Decommissioning asset acquired

–

–

135

–

–

–

–

–

135

Exploration costs:

- Consumables and drilling

1,074

71

14

16

–

–

12

31

1,218

- Contractor

42

51

–

–

–

–

–

24

117

- Labour

60

41

47

46

–

–

4

10

208

- Power

–

–

–

33

–

6

–

–

39

Impairment ~

(3,837

)

–

–

–

–

–

–

–

(3,837

)

Balance at December 31, 2021

–

463

4,196

3,618

–

290

16

65

8,648

*	Management determined the fair value of Eagle Vulture, Mascot and Penzance as the future sale price as agreed by independent parties in the sale contract that amounted to $500. The carrying amount of Eagle Vulture, Mascot and Penzance before the impairment was $3,430 and the write down resulted in an impairment expense of $2,930. The $500 carrying value was reallocated to Assets held for sale in December, 2020. The sale was completed on July 27, 2021.
~	Caledonia has completed sufficient work to establish that the potential orebody at the Glen Hume property will not meet Caledonia’s requirements in terms of size, grade and width.  Accordingly, Caledonia will not exercise the option to acquire this property.
The Group voluntarily changed its disclosure policy for exploration and evaluation assets to be disclosed separately as Exploration and evaluation assets rather than as part of Property, plant and equipment (refer to note 4(h)).

49

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

19 Exploration and evaluation assets (continued)

(a) Maligreen

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

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

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

● 3.5 tonnes of bulk metallurgical test work

● Aeromagnetic and ground geophysical surveys

As at August 31, 2021, Maligreen is estimated to host a NI 43-101 compliant inferred mineral resource of approximately 940,000 ounces of gold in 15.6 million tonnes at a grade of 1.88g/t. Of the inferred mineral resource 76% (approximately 712,000 ounces) is shallower than 220m indicating the potential for an open pit mining operation. The inferred mineral resource has been estimated using a cut-off grade of 0.4g/t for a potential open pit and 1.5g/t for a potential underground mine (further information on the assumptions used is set out in the news release dated September 23, 2021 and in the technical report dated November 5, 2021 filed on SEDAR (www.sedar.com)). Initial assessments of the inferred mineral resource indicate a favourable grade tonnage curve; by applying a higher cut-off grade of 1.0g/t, the total estimated inferred mineral resource reduces by 12% to approximately 827,000 ounces at a grade of 2.79g/t, a 48% higher grade. These favourable grade tonnage dynamics offer a high level of flexibility in the evaluation of a future mining operation.

The total land area of Maligreen is approximately 550 hectares comprising two historic open pit mining operations which produced approximately 20,000 oz of gold mined from oxides between 2000 and 2002 after which the operation was closed. Caledonia expects to drill an initial 4,800 meters at an estimated cost of US$1.6 million over a period of 18 to 24 months to improve its understanding of the existing resource assess the potential for a mining operation. Further exploration opportunities exist within the claims area and a subsequent exploration programme is under consideration to explore for continuations of the existing inferred mineral resource at depth to the north-west and the strike extension in the northern part of the property.

(b) Connemara North

On December 16, 2020 the Company concluded an option agreement (“Connemara North option”) with the representatives of Connemara North to purchase the claims over the Connemara North mining properties situated in Gweru, Zimbabwe. The exercise of the option will be exercisable at the discretion of the Company until May 16, 2022.

An amount of $300 is payable for the Connemara North option and remained outstanding at the date of approval of the consolidated financial statements. The outstanding amount was accounted for as Trade and other payables (Refer note 31).

The Connemara North option gives the Company the right to carry out legal due diligence and conduct drilling and/or other exploratory work over a period of 18 months from the conclusion date to understand the resource body.

50

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

19 Exploration and evaluation assets (continued)

(c) Connemara North (continued)

If the Company elects to exercise the option, $600 becomes payable to the Connemara representatives within 7 days of the submission of the transfer documents to the Ministry of Mines and a further $4.4 million within 7 days from confirmation of transfer of ownership by the Ministry of Mines. The first payment of $600 will remain refundable subject to the Ministry of Mines approval. After the purchase, the Connemara representatives will retain a 1% NSR payable quarterly in arrears on the net sale proceeds from the Connemara gold deposits.

(d) Glen Hume

On November 19, 2020 the Company concluded an option agreement (“Glen Hume option”) with the representatives of Glen Hume, whereby they granted the Company an option for the right to carry out legal due diligence and conduct drilling and/or other exploratory work over a period of 15 months from the conclusion date to understand the resource body of the Glen Hume property, situated in Gweru, Zimbabwe.

After concluding drilling and exploration to the value of $3.8 million the Company decided not to exercise the option over the Glen Hume property as the results of the exploration work indicated that the property does not meet Caledonia’s strategic objectives. This gave rise to an impairment of $3.8 million. No further costs or impairments in respect of Glen Hume are anticipated.

20 Inventories

	2021			2020
Consumable stores		21,516			16,543
Gold in progress		243			1,166
Provision for obsolete stock		(947	)		(911	)
		20,812			16,798

Consumable stores at December 31, 2021 from December 31, 2020 increased due to increases to safety stock accumulated during 2021. Additional safety stock were purchased due to potential supply line disruptions in South Africa as a result of the riots and looting that occurred in 2021.

21 Prepayments

	2021		2020
Suppliers - South Africa		1,552		846
- Zimbabwe		1,766		1,073
Solar (note 18)		2,951		–
Other prepayments		661		55
		6,930		1,974

51

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

22 Cash and cash equivalents

	2021			2020
Bank balances		17,152			19,092
Cash and cash equivalents		17,152			19,092
Bank overdrafts used for cash management purposes		(887	)		–
Net cash and cash equivalents at year end		16,265			19,092

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed in note 33.

		Interest rate
Overdraft facilities
Stanbic Bank - RTGS$ denomination	112,000,000		32	%
Stanbic Bank - USD denomination	1,000,000		10	%

23 Assets held for sale

	Note		2021		2020
Non-current assets held for sale
Eagle Vulture, Mascot & Penzance		23.1		–		500
Sale of subsidiary		23.2		–		–

23.1 Eagle Vulture, Mascot and Penzance

Farvic Consolidated Mines (Pvt) Ltd (“Farvic”) requested permission from the Company to perform drilling on the Eagle Vulture, Mascot and Penzance orebodies to obtain an understanding of the technical feasibility and commercial viability of Eagle Vulture, Mascot and Penzance in 2019. Farvic later expressed their interest in buying Eagle Vulture, Mascot and Penzance in late 2020. Management evaluated the proposition and a price was determined in November of 2020. During February 2021 Farvic and the Group concluded the sale contract at $500 and Blanket relinquished all rights to the properties.

The assets were available for sale as at December 31, 2020 and therefore met the criteria to be classified as held for sale.

Management determined the fair value of these assets at $500 on December 31, 2020, as this was the lower of the fair value less cost to sell and the carrying amount. The carrying amount of Eagle Vulture, Mascot and Penzance, before impairment, at December 31, 2020 was $3,430 and it was classified as an Exploration and evaluation asset. The write down resulted in an impairment expense $2,930 during 2020. The sale was completed on July 27, 2021.

23.2 Sale of subsidiary

On May 31, 2018 the Group entered into an amended share sale agreement with SH Mineral Investments Proprietary Limited (“SH Minerals”) to sell the shares and claims of Eersteling Gold Mining Company Limited (“Eersteling”), a South African subsidiary previously consolidated as part of the Group, that has been on care and maintenance since 1997. The amended share sale agreement allowed for a purchase price of $3,000 which would be settled by three payments of $1,000 payable on the completion date, 12 and 18 months after the completion date. On January 31, 2019 all suspensive conditions for the sale were met and the Group transferred the registered and beneficial ownership of Eersteling to SH Minerals. During 2021 $340 (2020: $900) was received as payment towards the purchase price. SH minerals was unable to make the final payment outstanding due to the closure of the operation during the South African lock-down period and the death of two of the purchaser’s principals. Operations at Eersteling appear to have been suspended again in late 2021. As it was no longer clear that the receivable of $761 can be recovered, it was impaired.

52

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

23	Assets held for Sale (continued)
23.2	Sale of subsidiary (continued)

Details of the disposal are as follows:

	2019
Carrying amounts of net assets over which control was lost:
Non-current assets
Property, plant and equipment		227
Current assets
Trade and other receivables		84
Total assets		311
Non-current liabilities
Rehabilitation provision		650
Current liabilities
Trade and other payables		8
Total liabilities		658
Consideration receivable:
Cash received		1,000
Deferred consideration (at January 31, 2019)		1,953
Total consideration		2,953
Profit on sale of subsidiary:
Net liabilities derecognised		347
Cumulative exchange differences in respect of the net liabilities of the subsidiary reclassified from equity on loss of control of subsidiary		2,109
Fair value consideration receivable (at January 31, 2019)		2,953
Profit on sale of subsidiary		5,409

24 Trade and other receivables

	2021		2020
Bullion sales receivable		4,528		1,311
VAT receivables		3,162		2,278
Deferred consideration on the disposal of subsidiary (Note 23.2)		–		1,100
Deposits for stores, equipment and other receivables		248		273
		7,938		4,962

The Group's exposure to credit and currency risks, and impairment losses related to trade and other receivables are disclosed in note 33. The net carrying value of trade receivables was considered a reasonable approximation of fair value and are short-term in nature. No provision for expected credit losses were recognised as all scheduled payments were received as expected up to the date of approval of these financial statements, except for the deferred consideration on the disposal of subsidiary. The deferred consideration on the disposal of subsidiary was impaired (refer to note 23.2). The Bullion sales receivable and part of the VAT receivable were received after year-end

53

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

25 Share capital

Authorised

Unlimited number of ordinary shares of no par value.

Unlimited number of preference shares of no par value.

Issued ordinary shares

	Number of fully paid shares		Amount
January 1, 2020		10,763,041		56,065
Shares issued:
- share-based payment - employees (note 1(a))		25,553		216
- options exercised		5,000		30
- equity raise*		597,963		12,538
- Blanket shares purchased from Fremiro (note 5)		727,266		5,847
December 31, 2020		12,118,823		74,696
Shares issued:
- options exercised		18,000		165
- equity raise#		619,783		7,806
December 31, 2021		12,756,606		82,667

*	The Company raised equity for the construction of the solar plant by way of an At The Market (“ATM”) equity offer on the NYSE American. Gross proceeds of $13,000 were raised pursuant to the ATM sales agreement with Cantor Fitzgerald & Co. at a transaction cost of $462.
#	Gross proceeds of $7,834 with a transaction cost of $28 were raised by issuing depository receipts on the VFEX in December 2021.

26 Reserves

Foreign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations with functional currencies that differ from the presentation currency.

Share-based payment reserve

The share-based payment reserve comprises the fair value of equity instruments granted to employees, directors and service providers under share option plans (refer to note 12) and equity instruments issued to Blanket’s indigenous shareholders under Blanket Mine’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 to be able to commence dividend payments.

Reserves

	2021			2020
Foreign currency translation reserve		(9,325	)		(8,794	)
Equity-settled share-based payment reserve		14,513			14,513
Contributed surplus		132,591			132,591
Total		137,779			138,310

54

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

27 Earnings per share

Weighted average number of shares – Basic earnings per share
(in number of shares)	2021		2020		2019
Issued shares at the beginning of year (note 25)		12,118,823		10,763,041		10,603,153
Weighted average shares issued		51,462		940,489		138,736
Weighted average number of shares at December 31		12,170,285		11,703,530		10,741,889

Weighted average number of shares - Diluted earnings per share
(in number of shares)	2021		2020		2019
Weighted average at December 31		12,170,285		11,703,530		10,741,889
Effect of dilutive options		6,933		13,173		5,229
Weighted average number of shares (diluted) at December 31		12,177,218		11,716,703		10,747,118

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. Options of 18,842 (2020: 14,827, 2019: 32,771) were excluded from the dilutive earnings per share calculation as these options were anti-dilutive.

The quantity of options outstanding as at year end that were out of the money amounted to Nil (2020: Nil, 2019: 18,000) options.

The calculation of total basic and diluted earnings per share for the year ended December 31, 2021 was based on the adjusted profit attributable to shareholders as follows:

	2021			2020			2019
Profit for the year attributable to owners of the Company (basic and diluted)		18,405			20,780			42,018
Blanket Mine Employee Trust Adjustment		(326	)		(485	)		(986	)
Profit attributable to ordinary shareholders (basic and diluted)		18,079			20,295			41,032
Basic earnings per share - $		1.49			1.73			3.82
Diluted earnings per share - $		1.48			1.73			3.81

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 are calculated on the basis that the unpaid ownership interests of Blanket Mine’s indigenous shareholders are effectively treated as options whereby the weighted average fair value for the period of the Blanket Mine shares issued to the indigenous shareholders and which are subject to settlement of the loan accounts is compared to the balance of the loan accounts and any excess portion is regarded as dilutive. The difference between the number of Blanket Mine shares subject to the settlement of the loan accounts and the number of Blanket Mine shares that would have been issued at the average fair value, is treated as the issue of shares for no consideration and regarded as dilutive shares. The calculated dilution is taken into account with additional earnings attributable to the dilutive shares in Blanket Mine, if any. The interest of the NIEEF shareholding was anti-dilutive (i.e., the value of the options was less than the outstanding loan balance). Accordingly, there was no adjustment to fully diluted earnings attributable to shareholders.

55

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

28 Non-controlling interests

Blanket Mine’s NCI share recognised at an effective share of 13.2% (2020: 13.2%, 2019: 16.2%)

	2021			2020			2019
Current assets		33,634			24,864			21,386
Non-current assets		154,003			133,908			115,610
Current liabilities		(17,261	)		(7,339	)		(8,630	)
Non-current liabilities		(11,535	)		(8,065	)		(9,085	)
Net assets of Blanket Mine (100%)		158,841			143,368			119,281
Carrying amount of NCI of 13.2% (2020: 13.2%, 2019: 16.2%)		19,260			16,524			16,302
Revenue		121,329			100,002			75,826
Profit after tax		35,911			33,361			51,746
Total comprehensive income of Blanket Mine (100%)		35,911			33,361			51,746
Profit allocated to NCI of 13.2% (2020: 13.2%, 2019: 16.2%)		4,737			4,477			8,383
Dividend allocated to NCI of 13.2% (2020: 13.2%, 2019: 16.2%)		(2,001	)		(655	)		(426	)

29 Provisions

Site restoration

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

Reconciliation of site restoration provision	2021			2020
Balance January 1		3,567			3,346
Unwinding of discount		–			2
Change in estimate - adjustment capitalised in Property, plant and equipment		(408	)		219
Acquisition - Maligreen		135			–
Balance December 31		3,294			3,567

The discount rates currently applied in calculating the present value of the Blanket Mine provision is 1.94% (2020: 1.45%), based on a risk-free rate and cash flows estimated at an average 2.26% inflation (2020: 2.05%). The gross rehabilitation costs, before discounting, amounted to $3,087 (2020: $3,389) for Blanket Mine as at December 31, 2021.

56

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

30 Loans and borrowings

	2021			2020
Balance at January 1		408			2,471
Cash flows
Repayment
- Capital		(361	)		(574	)
- Finance cost		(69	)		(388	)
Unrealised foreign exchange		(34	)		(1,487	)
Non-cash flow
Finance cost		56			386
Balance at December 31		-			408
Short-term portion of loan facility		-			408

Finance cost are accounted for in note 16 on the effective interest rate method.

Terms and repayment schedule

The terms and conditions of outstanding loans are as follows on December 31:

							2021				2020
	Currency	Nominal interest rate			Year of maturity		Face value		Carrying value		Face value		Carrying value
Unsecured bank loan - Stanbic	RTGS$		50	%		2021		-		-		87		87
Unsecured bank loan - First Capital	RTGS$		55	%		2021		-		-		321		321
Total								-		-		408		408

The Stanbic loan was repaid as a single bullet payment in December 2021 and the First Capital loan in September 2021.

57

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

31 Trade and other payables

	2021		2020
Trade payables and accruals		2,503		1,897
Electricity accrual		888		735
Audit fee		260		273
Shareholders for dividend (Non-controlling interest)		–		208
Other payables		749		1,209
Connemara North - exploration option		–		300
Financial liabilities		4,400		4,622
Production and management bonus accrual - Blanket Mine		899		467
Other employee benefits		657		794
Leave pay		2,410		2,098
Bonus provision		645		–
Accruals		946		683
Non-financial liabilities		5,557		4,042
Total		9,957		8,664

The Group's exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in note 33.

The Group voluntarily changed the disclosure policy for lease liabilities to be disclosed separately rather than under Trade and other payables. The new disclosure policy was adopted from December, 2020 and has been applied retrospectively. Refer to note 15.

58

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

32 Cash flow information

Non-cash items and information presented separately on the cash flow statement:

	2021			2020			2019
Operating profit		38,360			40,735			60,889
Adjustments for:
Impairment of property, plant and equipment		497			–			144
Impairment of exploration and evaluation assets - Glen Hume (note 19)		3,837			2,930			–
Expected credit losses on deferred consideration on the disposal of subsidiary (notes 23.2 and 24)		761			–			–
Profit on sale of subsidiary		–			–			(5,409	)
Unrealised foreign exchange gains (note 13)		(2,754	)		(8,367	)		(31,307	)
Cash-settled share-based expense (note 12.1)		477			1,413			689
Cash-settled share-based expense included in production costs (note 8)		692			634			107
Non-cash portion of cash-settled share-based expense		(420	)		(1	)		(1,384	)
Depreciation		8,046			4,628			4,434
Fair value loss on derivative assets (note 14.1)		105			266			(102	)
Fair value loss on derivative liabilities (note 14.1)		135			–			–
Disposal of property, plant and equipment		–			–			63
Derecognition of property, plant and equipment		(38	)		182			–
Cash generated from operations before working capital changes		49,698			42,420			28,124
Inventories		(4,016	)		(5,707	)		(1,655	)
Prepayments		(4,272	)		816			(2,099	)
Trade and other receivables		(4,746	)		539			393
Trade and other payables		2,039			(101	)		(878	)
Cash generated from operations		38,703			37,967			23,885

33 Financial Instruments and risk management

The Group has exposure to the following risks from its use of financial instruments:

● Credit risk;

● Liquidity risk;

● Currency risk;

● Interest rate risk; and

● Market risk

This note present information about the Group’s exposure to each of the above risks and the Group’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these consolidated financial statements. The Group is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on the 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.

59

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

33 Financial Instruments and risk management (continued)

The Board of Directors has the 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.

Gold price hedges were entered into to manage the possible effect of gold price fluctuations. The derivative financial instrument was entered into by the Company for economic hedging purposes and not as a speculative investment. The fair value of the Group’s financial instruments approximates their carrying value due to the short period to maturity.

The types of risk exposure and the way in which such exposures are managed are described below:

(a) Credit risk

Exposure to 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 in Zimbabwe during the year.

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	2021		2020
Zimbabwe		4,753		1,581
Jersey, Channel Islands		–		1,100
Other regions		23		3
		4,776		2,684

The maximum exposure to credit risk for cash and cash equivalents at the reporting date by geographic region was:

	2021		2020
Zimbabwe		3,470		5,116
Jersey, Channel Islands		13,045		11,244
Other regions		637		2,732
		17,152		19,092

(b) Liquidity risk

Liquidity risk is the risk that will not enable the Group to meet its financial obligations as they fall due. The Group manages its liquidity risk by ensuring sufficient cash availability 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 reviewing and approving of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities.

The following are the contractual maturities of financial liabilities, including contractual interest payments and excluding the impact of netting agreements.

60

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

33 Financial Instruments and risk management (continued)

(b) Liquidity risk (continued)

Non-derivative financial liabilities

December 31, 2021	Carrying amount		12 months or less
Trade and other payables		4,400		4,400
Term loan facility		-		-
		4,400		4,400

December 31, 2020	Carrying amount		12 months or less
Trade and other payables		4,622		4,622
Term loan facility		408		408
		5,030		5,030

(c) Currency risk

The Group is exposed to currency risk on inter-company 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. To reduce exposure to currency transaction risk, the Group regularly reviews the currency (i.e. RTGS$ or Foreign currency) in which it spends its cash to identify and avoid specific expenditures in currencies that experience inflationary pressures. The Group aims to maintain cash and cash equivalents in US Dollars to manage foreign exchange exposure. In 2020 the Group invested in a Gold ETF to avoid fluctuations in South African Rand (refer to note 14.1) where cash spend is held in anticipation of South African Rand based expenses. Management consider the need for any financial instrument on a forward going basis to hedge risk.

The fluctuation of the US Dollar in relation to other currencies that entities within the Group may transact in will consequently have an effect upon the profitability of the Group and may also effect 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. To reduce exposure to currency transaction risk, the Group regularly reviews the currency in which it spends its cash to identify and avoid specific expenditures in currencies that experience inflationary pressures. The Group invested in a Gold ETF to avoid fluctuations in South African Rands. Further, the Group aims to maintain cash and cash equivalents in US Dollar to avoid foreign exchange exposure and to meet short‐term liquidity requirements.

61

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

33	Financial Instruments and risk management (continued)
(c)	Currency risk (continued)

Sensitivity analysis

As a result of the Group’s monetary assets and liabilities denominated in foreign currencies which is different to the functional currency of the underlying entities, the profit or loss and equity in the underlying entities could be affected by movements between the functional currency and the foreign currency. The table below indicates consolidated monetary assets/(liabilities) in the Group that have a different functional currency and foreign currency.

	2021				2020
	$'000				$'000
	Functional currency				Functional currency
	ZAR				ZAR
Cash and cash equivalents		59	259			59	1,959
Trade and other receivables		-	2,293			-	249
Trade and other payables		-	(166	)		-	(174	)
Term loan		-	-			-	408
Overdraft		-	(887	)		-	-
		59	1,499			59	2,442

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 and equity for the Group:

	2021				2020
	$'000				$'000
	Functional currency				Functional currency
	ZAR				ZAR
Cash and cash equivalents		3	40			3	103
Trade and other receivables		-	109			-	12
Trade and other payables		-	(8	)		-	(8	)
Term loan		-	-			-	19
Overdraft		-	(42	)		-	-
		3	99			3	126

(d) Interest rate risk

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 rates. Variable rates expose the Group to cash flow interest rate risk. The Group has not entered into interest rate swap agreements and mitigates the interest rate risk by remaining in a positive consolidated net cash position.

The Group’s assets and liabilities exposed to interest rate fluctuations as at year end is summarised as follows:

	2021		2020
Cash and cash equivalents		17,152		19,092
Term loan		–		(408	)
Overdraft		887		–

62

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

33	Financial Instruments and risk management (continued)
(d)	Interest rate risk (continued)

Interest rate risk arising from borrowings is offset by interest from available cash and cash equivalents. The table below summarises the effect of a change in finance cost on the Group’s profit or loss and equity, had the rates charged differed.

Sensitivity analysis - Cash and cash equivalents	2021			2020
Increase by 100 basis points		172			191
Decrease by 100 basis points		(172	)		(191	)
Sensitivity analysis - Term loan
Increase by 100 basis points		-			4
Decrease by 100 basis points		-			(4	)
Sensitivity analysis - Overdraft
Increase by 100 basis points		9			-
Decrease by 100 basis points		(9	)		-

(e) Market risk

Market risk is the risk that changes in the gold price will affect the Group’s consolidated statements of financial position and statements of profit or loss and other comprehensive income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The Group regularly monitors its market risk and evaluates the options available. Post year end management entered into a cap and collar hedge to hedge its exposure to the gold price, refer to note 41.1 and on December 13, 2021 into a call option (refer to note 14.2).

Sensitivity analysis

A reasonably possible strengthening (weakening) of the gold price will have an impact on the revenue of the Group and the fair value of the gold loan and call option at December 31, 2021. This would have affected the measurement of financial instruments by the amounts as indicated below. This analysis assumes that all other variables remain constant.

As at December 31, 2021 an increase or decrease of 5% of the gold price would have the following equal or opposite effect on the:

Consolidated statement of financial position:

	Increase		Decrease
Derivative financial liabilities - Gold loan		143		(143	)
Derivative financial liabilities - Call option		11		(11	)
		154		(154	)

Consolidated statement of profit or loss and other comprehensive income:

	Increase		Decrease
Fair value loss on derivative financial instruments - Gold loan		143		(143	)
Fair value loss on derivative financial instruments - Call option		11		(11	)
		154		(154	)

63

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

33	Financial Instruments and risk management (continued)
(f)	Market risk (continued)

The Group’s revenues had full exposure to the gold price up to December 13, 2021 when the Gold call option agreement was concluded (refer note 14.2).

34 Dividends

	2021		2020		2019
Dividends paid to owners of the Company (excluding NCI)		6,068		3,887		2,969

Quarterly dividend per share history:

Declaration date	cents per share
January 10, 2019		6.875
April 11, 2019		6.875
July 11, 2019		6.875
October 10, 2019		6.875
January 16, 2020		7.5
May 14, 2020		7.5
July 16, 2020		8.5
October 15, 2020		10.0
January 14, 2021		11.00
April 15, 2021		12.00
July 15, 2021		13.00
October 14, 2021		14.00

35 Contingencies

The Group may be subject to various claims that arise in the normal course of business. Management believes there are no contingent liabilities to report.

64

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

36 Related parties

Directors of the company, as well as certain executives, are considered key management. For entities within the Group refer to note 37.

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, 2021 the severance payment would have amounted to $8,214 (2020: $8,338, 2019: $6,259). 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:

	2021		2020		2019
Key management salaries and bonuses		3,245		2,915		2,362
Cash-settled share-based expense*		540		1,280		723
		3,785		4,195		3,085

Employees, officers, directors, consultants and other service providers also participate in the OEICP (see note 12.1(a)). Group entities are set out in note 37.

Refer to note 5 and note 28 for transactions with non-controlling interests. Refer to note 38 for management fees between Caledonia Mining South Africa Proprietary Limited and Blanket Mine (1983) (Private) Limited.

* Amount inclusive of $123 (2020: $295, 2019: $107) classified as production costs.

65

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

37 Group entities

	Functional currency	Country of incorporation	Legal shareholding				Intercompany balances with holding company
			2021		2020		2021			2020
Caledonia Holdings Zimbabwe (Private) Limited	$	Zimbabwe		100		100		-			-
Caledonia Mining Services (Private) Limited	$	Zimbabwe		100		100		-			-
Fintona Investments Proprietary Limited	ZAR	South Africa		100		100		(14,859	)		(14,859	)
Caledonia Mining South Africa Proprietary Limited	ZAR	South Africa		100		100		1,406			612
Greenstone Management Services Holdings Limited	$	United Kingdom		100		100		22,916			20,818
Blanket Mine (1983) (Private) Limited (2)	$	Zimbabwe		64		64		5,765			3,980
Blanket Employee Trust Services (Private) Limited (BETS) (1)	$	Zimbabwe		-		-		-			-

⁽¹⁾ BETS and the Community Trust are consolidated as structured entities.

⁽²⁾ Refer to note 5 for the effective shareholding. NCI has a 13.2% (2020: 13.2%, 2019: 16.2%) interest in cash flows of Blanket only.

38 Operating Segments

The Group's operating segments have been identified based on geographic areas. The strategic business units are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. Zimbabwe and South Africa describe the operations of the Group's reportable segments. The Zimbabwe operating segment comprises Caledonia Holdings Zimbabwe (Private) Limited and subsidiaries Blanket Mine (1983) (Private) Limited and Caledonia Mining Services (Private) Limited. The South African geographical segment comprises a gold mine that is on care and maintenance (and now sold), as well as sales made by Caledonia Mining South Africa Proprietary Limited to the Blanket Mine. The holding company (Caledonia Mining Corporation Plc) and Greenstone Management Services Holdings Limited (a UK company) responsible for administrative functions within the Group are taken into consideration in the strategic decision-making process of the CEO and are therefore included in the disclosure below. Reconciling amounts do not represent a separate segment. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management report that are reviewed by the Group's CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

66

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

38 Operating Segments (continued)

Information about reportable segments

For the twelve months ended December 31, 2021	Zimbabwe			South Africa			Inter-group eliminations adjustments			Corporate and other reconciling amounts			Total
Revenue		121,329			–			–			–			121,329
Inter-segmental revenue		–			21,662			(21,662	)		–			–
Royalty		(6,083	)		–			–			–			(6,083	)
Production costs		(53,117	)		(19,902	)		19,893			–			(53,126	)
Depreciation		(8,348	)		(120	)		466			(44	)		(8,046	)
Other income		47			(1	)		–			–			46
Other expenses		(3,241	)		–			–			(3,895	)		(7,136	)
Administrative expenses		(128	)		(2,867	)		(2	)		(6,094	)		(9,091	)
Management fee		(2,908	)		2,908			–			–			–
Cash-settled share-based expense		–			29			691			(1,197	)		(477	)
Net foreign exchange gain (loss)		1,182			(295	)		(92	)		389			1,184
Fair value loss on derivative assets and liabilities		–			(105	)		–			(135	)		(240	)
Net finance cost		(1,614	)		(2	)		–			1,255			(361	)
Profit before tax		47,119			1,307			(706	)		(9,721	)		37,999
Tax expense		(14,356	)		(652	)		151			–			(14,857	)
Profit after tax		32,763			655			(555	)		(9,721	)		23,142

As at December 31, 2021	Zimbabwe			South Africa			Inter-group eliminations adjustments			Corporate and other reconciling amounts			Total
Geographic segment assets:
Current (excluding intercompany)		34,440			2,457			(162	)		16,198			52,933
Non-Current (excluding intercompany)		159,612			2,315			(4,880	)		897			157,944
Expenditure on property, plant and equipment (note 18)		30,575			1,713			(1,019	)		–			31,269
Expenditure on evaluation and exploration assets (note 19)		5,554			–			–			163			5,717
Intercompany balances		34,512			9,131			(91,697	)		48,054			–
Geographic segment liabilities:
Current (excluding intercompany)		(10,042	)		(1,606	)		–			(6,040	)		(17,688	)
Non-current (excluding intercompany)		(11,535	)		(313	)		322			(1,107	)		(12,633	)
Intercompany balances		(12,414	)		(35,467	)		91,697			(43,816	)		–

67

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

38 Operating Segments (continued)

For the twelve months ended December 31, 2020	Zimbabwe			South Africa			Inter-group eliminations adjustments			Corporate and other reconciling amounts			Total
Revenue		100,002			–			–			–			100,002
Inter-segmental revenue		–			23,214			(23,214	)		–			–
Royalty		(5,007	)		–			–			–			(5,007	)
Production costs		(44,032	)		(20,318	)		20,639			–			(43,711	)
Depreciation		(4,920	)		(91	)		424			(41	)		(4,628	)
Other income		4,751			14			–			–			4,765
Other expenses		(5,180	)		(114	)		–			(21	)		(5,315	)
Administrative expenses		(156	)		(2,237	)		10			(5,614	)		(7,997	)
Management fee		(2,492	)		2,492			–			–			–
Cash-settled share-based expense		–			(114	)		634			(1,933	)		(1,413	)
Net foreign exchange gain (loss)		4,618			132			(272	)		(173	)		4,305
Fair value loss on derivative assets and liabilities		–			(164	)		–			(102	)		(266	)
Net finance cost		(352	)		47			–			–			(305	)
Dividends (paid) received		(2,198	)		(1,355	)		–			3,553			–
Profit before tax		45,034			1,506			(1,779	)		(4,331	)		40,430
Tax expense		(14,446	)		(854	)		380			(253	)		(15,173	)
Profit after tax		30,588			652			(1,399	)		(4,584	)		25,257

As at December 31, 2020	Zimbabwe			South Africa			Inter-group eliminations adjustments			Corporate and other reconciling amounts			Total
Geographic segment assets:
Current (excluding intercompany)		27,070			5,320			(194	)		12,390			44,586
Non-Current (excluding intercompany)		133,568			716			(4,237	)		3,287			133,334
Expenditure on property, plant and equipment (note 18)		26,391			151			(1,887	)		123			24,778
Expenditure on evaluation and exploration assets (note 19)		98			–			–			2,961			3,059
Intercompany balances		17,482			6,752			(69,144	)		44,910			–
Geographic segment liabilities:
Current (excluding intercompany)		(6,831	)		(1,797	)		–			(1,336	)		(9,964	)
Non-current (excluding intercompany)		(8,065	)		–			264			(2,112	)		(9,913	)
Intercompany balances		–			(34,020	)		69,144			(35,124	)		–

Major customer

Revenues from Fidelity amounted to $121,329 (2020: $100,002) for the twelve months ended December 31, 2021. Refer to note 7.

68

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

39 Defined Contribution Plan

Under the terms of the Mining Industry Pension Fund (“Fund”) in Zimbabwe, eligible employees contribute a fixed percentage of their eligible earnings to the Fund. Blanket Mine makes a matching contribution plus an inflation levy as a fixed percentage of eligible earnings of these employees. The total contribution by Blanket Mine for the year ended December 31, 2021 was $898 (2020: $796, 2019: $506).

40 COVID-19

Due to the worldwide COVID-19 outbreak, material uncertainties may come into existence that could influence management’s going concern assumption. This may affect Management’s accuracy of predicting the impact that COVID-19 may have on:

● global gold prices;

● demand for gold and the ability to refine and sell gold produced;

● the severity and the length of potential measures taken by governments to manage the spread of the disease, and their effect on labour availability and supply lines;

● availability of government supplies, such as water and electricity;

● local currency purchasing power; or

● ability to obtain funding.

With potential lockdowns by Governments across the globe the Group’s supply chain has continued to function at a level that is adequate to augment the Group’s inventories, which management believes are sufficient to maintain normal production without interruption and accordingly the current situation bears no impact on management’s going concern assumption.

Further management had to incur additional costs to ensure the wellbeing of its employees and made donations to stakeholders in Zimbabwe to assist in curbing the effects of COVID-19. The cost related to these expenditures are disclosed in notes 9 and 13.

Work on the Central Shaft project from April 2020 was delayed by restrictions on the movement of specialised personnel and the transport of equipment due to the coronavirus pandemic. The Central Shaft was commissioned in the first quarter of 2021 instead of the fourth quarter of 2020. The delay in commissioning affected production for 2021and is expected to result in higher planned capital expenditure for 2022. There is no change to the target production rate of 80,000 ounces in from 2022 onwards and at the date of approval of the consolidated financial statements the severity of the effects of COVID-19 appears to be diminishing in the jurisdictions where the Company operates.

At the date of the authorisation of the financial statements management is of the opinion that the effects of COVID-19 have been considered in making significant judgements and estimates, valuations and evaluating our going concern principle.

69

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

41	Subsequent events
41.1	Cap and collar hedge

On February 17, 2022 the Company entered into a zero cost contract to hedge 20,000 ounces of gold over a period of 5 months from March to July 2022. The hedging contract has a cap of $1,940 and a collar of $1,825 over 4,000 ounces of gold per month expiring at the end of each month over the 5-month period.

On March 9, 2022 in response to a very volatile gold price the Company purchased a matching quantity of call options at a strike price above the cap at a total cost of $796,000 over 4,000 ounces of gold per month at strike prices of $2,100 per ounce from March 2022 to May 2022 and $2,200 per ounce from June 2022 to July 2022 in order to limit margin exposure and reinstate gold price upside above the strike price.  The future impact of the hedges is indeterminable at the date of issue of these consolidated financial statements and will be quantified in the condensed consolidated interim financial statements as at March 31, 2022.

41.2 Connemara North

On conclusion of management’s drilling program it was decided not to exercise the option over the Connemara North claims as the results of the exploration work indicated that the property does not meet Caledonia’s strategic objectives. The decision to not exercise the option won’t have an impact on theses consolidated financial statements as the information required to make the decision was not available by December 31, 2021. The decision will impair the Exploration and evaluation assets and increase the impairment expense by $463 in the consolidated financial statements as at March 31, 2022.

70

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

DIRECTORS AND OFFICERS at March 17, 2022

BOARD OF DIRECTORS	OFFICERS
L.A. Wilson (2) (3) (4) (6) (8)  Chairman of the Board	S. R. Curtis (5) (6) (7) (8) Chief Executive Officer
Non-executive Director	Johannesburg, South Africa
Washington DC, United States of America
S. R. Curtis (5) (6) (7) (8)	D. Roets (5) (6) (7) (8)
Chief Executive Officer  Johannesburg, South Africa	Chief Operating Officer Johannesburg, South Africa
J. L. Kelly (1) (2) (3) (4) (6) (8)	M. Learmonth (6) (7)
Non-executive Director  Connecticut, United States of America	Chief Financial Officer Jersey, Channel Islands
J. Holtzhausen (1) (2) (4) (5) (6)	A. Chester (7) (8)
Chairman Audit Committee  Non-executive Director,  Cape Town, South Africa	General Counsel, Company Secretary and Head of Risk and Compliance Jersey, Channel Islands
M. Learmonth (6) (7)	BOARD COMMITTEES
Chief Financial Officer  Jersey, Channel Islands	(1) Audit Committee
	(2) Compensation Committee
	(3) Corporate Governance Committee
N. Clark (4) (5) (6)	(4) Nomination Committee
Non-executive Director	(5) Technical Committee
East Molesey, United Kingdom	(6) Strategic Planning Committee
	(7) Disclosure Committee
G. Wildschutt (1) (3) (4) (6) (8)	(8) ESG Committee
Non-executive Director
Johannesburg, South Africa
D. Roets (5) (6) (7) (8)
Chief Operating Officer
Johannesburg, South Africa

71

Caledonia Mining Corporation Plc

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(in thousands of United States Dollars, unless indicated otherwise

CORPORATE DIRECTORY as at March 17, 2022

CORPORATE OFFICES	SOLICITORS
Jersey	Mourant Ozannes (Jersey)
Head and Registered Office	22 Grenville Street
Caledonia Mining Corporation Plc	St Helier
B006 Millais House	Jersey
Castle Quay	Channel Islands
St Helier
Jersey JE2 3NF	Borden Ladner Gervais LLP (Canada)
	Suite 4100, Scotia Plaza
South Africa	40 King Street West
Caledonia Mining South Africa Proprietary Limited	Toronto, Ontario M5H 3Y4
No. 1 Quadrum Office Park	Canada
Constantia Boulevard
Floracliffe	Memery Crystal LLP (United Kingdom)
South Africa	165 Fleet Street
	London EC4A 2DY
Zimbabwe	United Kingdom
Caledonia Holdings Zimbabwe (Private) Limited
P.O. Box CY1277	Dorsey & Whitney LLP (US)
Causeway, Harare	TD Canada Trust Tower
Zimbabwe	Brookfield Place
	161 Bay Street
Capitalisation (March 17, 2022)	Suite 4310
Authorised: Unlimited	Toronto, Ontario
Shares, Warrants and Options Issued:	M5J 2S1
Shares: 12,833,126	Canada
Options: 10,000
	Gill, Godlonton and Gerrans (Zimbabwe)
SHARE TRADING SYMBOLS	Beverley Court
NYSE American - Symbol “CMCL”	100 Nelson Mandela Avenue
AIM - Symbol “CMCL”	Harare, Zimbabwe
VFEX – Symbol “CMCL”
	Bowman Gilfillan
BANKER	11 Alice Lane
Barclays	Sandton
Level 11	Johannesburg
1 Churchill Place	2196
Canary Wharf
London E14 5HP	AUDITOR
	BDO South Africa Incorporated
NOMINATED ADVISOR	Wanderers Office Park
WH Ireland	52 Corlett Drive
25 Martin Lane	Illovo 2196
London	South Africa
EC4R ODR	Tel: +27(0)10 590 7200
MEDIA AND INVESTOR RELATIONS	REGISTRAR AND TRANSFER AGENT
BlytheRay Communications	Computershare
4-5 Castle Court	150 Royall Street,
London EC3V 9DL	Canton,
Tel: +44 20 7138 3204	Massachusetts, 02021
	Tel: +1 800 736 3001 or +1 781 575 3100

72

EX-99.2

Exhibit 99.2

CALEDONIA MINING CORPORATION PLC March 17, 2022

Management’s Discussion and Analysis          

This management’s discussion and analysis (“MD&A”) of the consolidated operating results and financial position of Caledonia Mining Corporation Plc (“Caledonia” or the “Company”) is for the quarter ended December 31, 2021 (“Q4 2021” or the “Quarter” and the year ended December 31, 2021 (the “Year”) and the period ended March 17, 2022). It should be read in conjunction with the Consolidated Financial Statements of Caledonia for the Year (the “Consolidated Financial Statements”) which are available from the System for Electronic Data Analysis and Retrieval at www.sedar.com or from Caledonia’s website at www.caledoniamining.com. The Consolidated Financial Statements and related notes have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. In this MD&A, the terms “Caledonia”, the “Company”, the “Group”, “we”, “our” and “us” refer to the consolidated operations of Caledonia Mining Corporation Plc and its subsidiaries unless otherwise specifically noted or the context requires otherwise.

Note that all currency references in this document are to thousands of US Dollars, unless otherwise stated.

1

TABLE OF CONTENTS

1. Overview

2. Highlights

3. Summary Financial Results

4. Operations

4.1 Safety, Health and Environment

4.2 Social Investment and Contribution to the Zimbabwean Economy

4.3 Gold Production

4.4 Underground

4.5 Metallurgical Plant

4.6 Production Costs

4.7 Capital Projects

4.8 Indigenisation

4.9 Zimbabwe Commercial Environment

4.10 Opportunities and Outlook

4.11 Sale of Eersteling

4.12 COVID-19

4.13 Solar project

5. Exploration

6. Investing

7. Financing

8. Liquidity and Capital Resources

9. Off-Balance Sheet Arrangements, Contractual Commitments and Contingencies

10. Non-IFRS Measures

11. Party Transactions

12. Critical Accounting Estimates

13. Financial Instruments

14. Dividend Policy

15. Management and Board

16. Securities Outstanding

17. Risk Analysis

18. Forward-Looking Statements

19. Controls

20. Qualified Person

2

1. OVERVIEW

Caledonia is an exploration, development and mining corporation focused on Zimbabwe. Caledonia’s primary asset is a 64% ownership in Blanket Mine (“Blanket”), a gold mine in Zimbabwe. Caledonia consolidates Blanket into the Consolidated Financial Statements; accordingly, operational and financial information set out in this MD&A is on a 100% basis, unless otherwise specified. Caledonia’s shares are listed on the NYSE American LLC ("NYSE American"), depositary interests in Caledonia’s shares are admitted to trading on AIM of the London Stock Exchange plc and depositary receipts in Caledonia’s shares are listed on the Victoria Falls Stock Exchange (“VFEX”) (all under the symbols “CMCL”).

2. HIGHLIGHTS

	3 months ended December 31		12 months ended December 31		Comment
	2020	2021	2020	2021
Gold produced (oz)	15,012	18,604	57,899	67,476	Record annual gold production. Increased gold production was due to increased tonnes milled at a higher recovered grade.
On-mine cost per ounce ($/oz)1	770	740	744	742	On-mine cost per ounce decreased due to higher production, which spread fixed costs over more production ounces, and good management over controllable costs. Cost performance is after absorbing costs that are outside management control – particularly the cost of increased use of diesel generators.
All-in sustaining cost (“AISC”) excludes the export credit incentive (“ECI”)	988	1,020	967	990	AISC per ounce increased due to higher administrative expenses offset by a lower procurement margin.
Average realised gold price ($/oz)1	1,845	1,768	1,749	1,766	The average realised gold price reflects international spot prices.
Gross profit2	14,375	14,043	46,656	54,074	Gross profit for the Year increased due to higher production and lower cost per ounce; gross profit for the Quarter was adversely affected by the higher depreciation charge following the commissioning of Central Shaft in March 2021.
Net profit attributable to shareholders	2,973	4,222	20,780	18,405	Net profit for the Quarter was higher due to lower net other expenses and a net foreign exchange gain. Profit for the Year was adversely affected by an impairment in the second quarter of 2021.
Basic IFRS earnings per share (“EPS”) (cents)	24.0	33.3	173.4	148.6	IFRS EPS reflects the movement in IFRS profit attributable to shareholders.
Adjusted EPS1	74.9	42.1	204.2	225.9	Adjusted EPS excludes foreign exchange gains and losses, deferred tax and impairments.
Net cash from operating activities	11,617	9,099	30,962	30,903	Reduced cash generation because of higher working capital.
Net cash and cash equivalents	19,092	16,265	19,092	16,265	Reduced cash due to continued high levels of capital investment.

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

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

Safety

Regrettably, a fatal accident occurred on February 21, 2022 as a result of a vehicle accident undergound. The directors and management of Caledonia and Blanket express their sincere condolences to the family and colleagues of the deceased. Management has provided the necessary assistance to the Ministry of Mines Inspectorate Department in its enquiries into the incident. Caledonia takes the safety of its employees very seriously and, accordingly, measures have been taken to reinforce adherence to prescribed safety procedures. Safety is discussed further in section 4.1.

An excellent operating and financial performance

Gold production in the Year of 67,476 ounces was a new record which reflects an increase in tonnes milled and an improvement in the grade. Production for the Quarter was 18,604 ounces and was in-line with our expectations. Over 665,000 tonnes were milled in the Year which is a new record for Blanket and reflects the contribution of Central Shaft which, although currently hoisting development waste, has allowed No. 4 Shaft to focus on hoisting ore.

The robust operating performance was reflected in improved profitability and cashflows: gross profit for the Year was $54.1 million – almost 16% higher than 2020; gross profit for the Quarter was $14.0 million – 2.3% lower than the in the fourth quarter of 2020 (the “comparable quarter”). Cash generated from operations before working capital increased by 17% from $42.4 million to $49.6 million.

Rising production in 2022 and 2023

Production is expected to continue to increase in the next two years. Production guidance for 2022 is a range of 73,000 to 80,000 ounces; guidance from 2023 onwards is 80,000 ounces – 38% higher than the production in 2021.

104% cumulative increase in the quarterly dividend since October 2019

The Company paid a quarterly dividend of 14 cents per share in October 2021. This marked the seventh increase in the quarterly dividend since October 2019 which has more than doubled from 6.875 cents in October 2019. In January 2022 the Company declared a quarterly dividend of 14 cents per share which was paid at the end of January.

Listing on the VFEX principally to increase access to US Dollars

In December 2021, the Company obtained a secondary listing of its stock on the newly created VFEX in Zimbabwe by way of a placing and introduction of depositary receipts in the Company’s shares which raised $7.8 million (net). As a result of this listing, and in accordance with Reserve Bank of Zimbabwe policies, the proportion of revenues received in US Dollars has increased from 60% and is expected to increase further to approximately 71% when production increases to 80,000 ounces per annum.

Changes to the board and management

During the Year the following changes to management and the board were announced:

● On February 23, 2021, Ms Geralda Wildschutt was appointed to the board as a non-executive director – she has particular expertise in environmental, social and governance (ESG) compliance and was appointed the chairperson of the ESG Committee;

● With effect from August 1, 2021 Mr Caxton Mangezi was appointed as Vice President, Operations – Zimbabwe with general responsibility for all operations in country i.e. supervision of all interests of the Group in Zimbabwe, as well as continued oversight of Blanket. Mr Mangezi had previously been the General Manager of Blanket. Mr Nyorekai Mafurutu was promoted from Manager Mining to General Manger; and

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● On December 21, 2021, it was announced that Mr Steve Curtis will retire as Chief Executive Officer with effect from 30 June 2022, and will be succeeded by Mr Mark Learmonth, Caledonia’s current Chief Financial Officer. Mr Curtis will continue to serve as a director of the Company and he will also serve as a consultant until the end of 2023.

Changes after the end of the Year include:

● On January 20, 2022, Mr Dana Roets, Chief Operating Officer, was appointed to the board as an executive director; and

● On February 28, 2022, Mr John McGloin, resigned from the board as a non-executive director of the Company.

Progress on solar project accelerates following delays due to COVID-19 and supply chain problems

The Company is constructing a 12MWac solar plant at a cost of approximately $14 million to improve the quality and security of Blanket’s electricity supply and to reduce Blanket’s environmental footprint. The plant is expected to provide approximately 27% of Blanket’s total daily electricity demand. Progress on this project has been delayed due to the combined effects of COVID-19 and difficulties with the supply chain. These issues have now been resolved and equipment and materials are now arriving on-site. It is anticipated that the project will be commissioned in June 2022.

Caledonia has commissioned a technical proposal for an expansion of this project to further reduce Blanket’s reliance on the Zimbabwe grid.

Strategy and Outlook: increased focus on growth opportunities

Caledonia’s immediate strategic focus following the commissioning of the Central Shaft project is on Blanket: to increase production, reduce operating costs and increase the flexibility to undertake further development and exploration, thereby safeguarding and enhancing Blanket’s long-term future. Management believes there is excellent exploration potential at Blanket at depth, in the older shallower areas of the mine and in brownfield sites immediately adjacent to the existing Blanket footprint.

Caledonia continues to evaluate other opportunities further afield from Blanket. During the Quarter, the Company completed the acquisition of the mining claims at Maligreen in the Zimbabwe midlands which is estimated to host a NI 43-101 compliant inferred mineral resource of approximately 940,000 ounces of gold in 15.6 million tonnes at a grade of 1.88g/t³.

Our approach to new projects is highly disciplined: after further evaluation, the Company has decided not to exercise the options to acquire the Glen Hume and Connemara North properties as they do not meet our investment criteria. During the Year, we also divested non-core assets in the vicinity of Blanket.

_______________________

³ Refer to technical report entitled "Caledonia Mining Corporation Plc NI 43-101 Mineral Resource Report on the Maligreen Gold Project, Zimbabwe" by Minxcon (Pty) Ltd dated November 2, 2021 and filed on SEDAR on November 5, 2021.

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3. SUMMARY FINANCIAL RESULTS

The table below sets out the consolidated profit and loss for the three months ended December 31, 2021 and 2020 and the years ended December 31, 2021, 2020 and 2019 prepared under IFRS.

Condensed Consolidated Statement of Profit of Loss and Other Comprehensive Income

	3 months ended						12 months ended
($’000’s)	December 31						December 31
	2020			2021			2019			2020			2021
Revenue		28,128			32,136			75,826			100,002			121,329
Royalty		(1,408	)		(1,612	)		(3,854	)		(5,007	)		(6,083	)
Production costs		(11,174	)		(14,178	)		(36,400	)		(43,711	)		(53,126	)
Depreciation		(1,171	)		(2,303	)		(4,434	)		(4,628	)		(8,046	)
Gross profit		14,375			14,043			31,138			46,656			54,074
Other income		29			4			2,274			4,765			46
Other expenses		(3,488	)		(1,741	)		(666	)		(5,315	)		(7,136	)
Administrative expenses		(2,636	)		(3,830	)		(5,637	)		(7,997	)		(9,091	)
Net foreign exchange (loss)/gain		(389	)		843			29,661			4,305			1,184
Cash-settled share-based payment		(236	)		(51	)		(689	)		(1,413	)		(477	)
Profit on sale of subsidiary		-			-			5,409			-			-
Fair value loss on derivative assets		(145	)		(133	)		(601	)		(266	)		(240	)
Results from operating activities		7,510			9,135			60,889			40,735			38,360
Net finance costs		49			(7	)		(198	)		(305	)		(361	)
Profit before tax		7,559			9,128			60,691			40,430			37,999
Tax expense		(3,763	)		(3,539	)		(10,290	)		(15,173	)		(14,857	)
Profit for the period		3,796			5,589			50,401			25,257			23,142
Other comprehensive income
Items that are or may be reclassified to profit or loss
Exchange differences on translation of foreign operations		973			(382	)		49			(173	)		(531	)
Reversal of foreign exchange currency translation differences on disposal of subsidiary		-			-			(2,109	)		-			-
Total comprehensive income for the period		4,769			5,207			48,341			25,084			22,611
Profit attributable to:
Shareholders of the Company		2,973			4,222			42,018			20,780			18,405
Non-controlling interest		823			1,367			8,383			4,477			4,737
Profit for the period		3,796			5,589			50,401			25,257			23,142
Total comprehensive income attributable to:
Shareholders of the Company		3,946			3,840			39,958			20,607			17,874
Non-controlling interest		823			1,367			8,383			4,477			4,737
Total comprehensive income for the period		4,769			5,207			48,341			25,084			22,611
Earnings per share (cents)
Basic		24.0			33.3			382.0			173.4			148.6
Diluted		23.9			33.3			381.5			173.2			148.5
Adjusted earnings per share (cents)3
Basic		74.9			42.1			145.1			204.2			225.9
Dividends declared per share (cents)		10.0			14.0			27.5			33.5			50.0

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Revenue in the Quarter was 14% higher than the comparable quarter due to a 19% increase in the quantity of gold sold offset by a 4% decrease in the average realised gold price. Production in the Quarter included 1,584 ounces of work-in-progress (comparable quarter: 443 ounces). Revenue for the Year was 21% higher than in 2020 due to a 20% increase in the quantity of gold sold and a 1% increase in the average realised gold price.

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

Production costs increased by 27% in the Quarter compared to the comparable quarter due to the increase in production. Production costs in the Quarter were largely as budgeted other than the cost of electricity which was higher than expected due to increased use of diesel generators and increased labour costs following the conclusion of the collective bargaining between the union and the Chamber of Mines Zimbabwe. The on-mine cost per ounce in the Quarter decreased by 3.9% compared to the comparable quarter. Production costs for the Year increased by 22% compared to 2020 due to higher production and increased diesel usage. Costs are discussed in section 4.6 of this MD&A.

The depreciation charge in the Quarter and the Year increased substantially because of increased production (fixed assets are depreciated over production ounces) and the charge arising on the Central Shaft assets following its commissioning at the end of March 2021.

Other expenses are detailed in note 10 to the Consolidated Financial Statements and include expenditure in the Year of $1,167 on CSR projects by Blanket (as discussed in section 4.2) (2020: $382), an impairment of $3,837 on the accumulated expenditure on the Glen Hume exploration project as discussed in Section 5 and an impairment of $761 on the outstanding amount due in respect of the sale of Eersteling as discussed in Section 4.11.

Administrative expenses are detailed in note 11 to the Consolidated Financial Statements and include the costs of Caledonia’s offices and personnel in Johannesburg, the UK and Jersey which provide the following functions: technical services, finance, procurement, investor relations, corporate development, legal and company secretarial. Administrative expenses in the Quarter were 46% higher than the comparable quarter and 14% higher for the Year compared with 2020. The increase was due to higher wages and salaries because of an increased headcount in Johannesburg and London and higher bonus payments reflecting the strong performance of the business in 2021 and the outcome of a benchmarking exercise to align the Company’s performance payments with comparable companies.

Net foreign exchange movements relate to gains and losses arising on monetary assets and liabilities that are held in currencies other than the US Dollar. Foreign exchange movements principally arose due to the further devaluation of the Zimbabwe currency against the US Dollar which is discussed in section 4.9 of this MD&A. The net foreign exchange movement in the Quarter was smaller than in previous periods because of the slower rate of devaluation in the official exchange rate in the Quarter than in previous quarters.

The cash-settled share-based payment expense reflects an accrual for a payment which is expected to arise from the long-term incentive plan (“LTIP”) awards under the Company’s 2015 Omnibus Equity Incentive Compensation Plan (the “OEICP” or the “Plan”) to certain executives, heads of department and staff in the form of Restricted Share Units (“RSUs”) and Performance Units (“PUs”). LTIP awards may be settled in cash or, subject to conditions, shares or a combination of both at the request of the award holder. The LTIP expense reflects a combination of factors, including the change in the Company’s share price. Further information on the calculation of the charge is set out in note 12 to the Consolidated Financial Statements.

The tax expense comprises the following:

Analysis of Consolidated Tax expense/(credit) for the Year
($’000’s)
	Zimbabwe		South Africa		UK		Total
Income tax		8,097		503		-		8,600
Withholding tax
Management Fee		-		148		-		148
Deemed Dividend		302		-		-		302
Deferred tax		5,806		1		-		5,807
		14,205		652		-		14,857

The overall effective taxation rate in the Year was 39% (2020: 38%); most of the tax charge comprised income tax and deferred tax in Zimbabwe.

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Income tax in Zimbabwe is calculated at 24.72% of taxable profits (2020: 25.75%) which is IFRS profit before tax (in local currency terms) after adjustments which include the deduction of the government royalty and capital expenditure and the add-back of depreciation. Deferred tax reflects the difference between the accounting and tax treatments of capital investment: 100% of capital expenditure is deductible in the year in which it is incurred for tax purposes; whereas for accounting purposes depreciation commences when the project enters production.

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

Zimbabwe withholding tax arose on the management fees paid to CMSA and on dividends paid from Zimbabwe to the UK; South African withholding tax arose on dividends paid from CMSA to the UK.

Following the acquisition by the Company of a further 15% interest in Blanket in January 2020, the effective non controlling interest share in profit or loss reduced from 16.2% to 13.2% of Blanket’s net profit.

IFRS basic EPS for the Quarter increased by 39% from 24.0 cents in the comparable quarter to 33.3 cents; IFRS basic EPS for the Year decreased by 14% from 173.4 cents in 2020 to 148.6 cents. Adjusted EPS for the Quarter, which excludes inter alia the effect of foreign exchange gains and deferred tax decreased by 44% from 74.9 cents in the comparable quarter to 42.2 cents due to the lower deferred tax adjustment in the Quarter which was due to the foreign exchange effect of the impairment of the Mascot asset in the deferred taxation computation. Adjusted EPS for the Year increased by 11.1% to 225.9 cents. A reconciliation from IFRS EPS to adjusted EPS is set out in section 10.3.

A dividend of 14 cents per share was declared and paid in the Quarter which was 40% higher than in the comparable quarter. The dividend declared and paid in the Year was 50 cents - 49% higher than in 2020. Caledonia’s dividends are discussed further in section 14.

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

The table below sets out the consolidated statements of cash flows for the years ended December 31, 2021, 2020 and 2019 prepared under IFRS.

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Condensed Consolidated Statement of Cash Flows ($’000’s)
	12 months ended December 31
	2019			2020			2021
Cash flows from operating activities
Cash generated from operations		23,885			37,967			38,703
Net interest paid		(308	)		(349	)		(374	)
Tax paid		(5,517	)		(6,656	)		(7,426	)
Net cash from operating activities		18,060			30,962			30,903
Cash flows used in investing activities
Acquisition of property, plant and equipment		(19,852	)		(25,081	)		(32,112	)
Acquisition of exploration and evaluation assets		(172	)		(2,759	)		(5,717	)
Realisation (purchase) of gold ETF		-			(1,058	)		1,066
Proceeds from sale of assets held for sale		-			-			500
Proceeds from disposal of subsidiary		1,000			900			340
Net cash used in investing activities		(19,024	)		(27,998	)		(35,923	)
Cash flows from financing activities
Dividends paid		(3,395	)		(4,542	)		(8,069	)
Term loan repayments		-			(574	)		(361	)
Proceeds from gold loan		-			-			2,752
Proceeds from call option		-			-			208
Term loan proceeds (net of transaction cost)		2,294			-			-
Shares issued – equity raise (net of transaction cost)		-			12,538			7,806
Payment of lease liabilities		(124	)		(118	)		(129	)
Proceeds from share options exercised		-			30			165
Net cash (used in)/from financing activities		(1,225	)		7,334			2,372
Net (decrease)/increase in cash and cash equivalents		(2,189	)		10,298			(2,648	)
Effect of exchange rate fluctuations on cash held		(105	)		(99	)		(179	)
Net cash and cash equivalents at beginning of the period		11,187			8,893			19,092
Net cash and cash equivalents at end of the period		8,893			19,092			16,265

Cash generated from operating activities is detailed in note 32 to the Consolidated Financial Statements which shows that cash generated by operations before working capital changes in the Year was $49.7 million, 17% higher than the $42.4 million in 2020.

Working capital increased in the Year by $11.0 million (2020: $12.0 million increase) due to increased inventories, trade receivables and prepayments, which was partly offset by an increase in payables. Movements in working capital items are discussed below in the review of the Summarised Consolidated Statements of Financial Position.

Tax paid in the Year reflects the increased pre-tax profits at Blanket and is after the offset of part of the overdue VAT recoverable.

Investment in property, plant and equipment remains high due to the continued investment in new development associated with the Central Shaft project, which is discussed further in section 4.7 of this MD&A in sustaining capital investment and includes approximately $1.6 million of investment in the solar project as discussed in section 4.13.

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The acquisition of exploration and evaluation assets relates to the purchase of the Maligreen claims and geological evaluations as discussed further in section 5.

The realisation of a gold ETF relates to the sale of a gold ETF which was purchased by CMSA in 2020 to protect a temporary cash surplus that was denominated in South African rands from devaluation.

The proceeds from the sale of assets relates to the sale of the Eagle Vulture, Mascot and Penzance properties as discussed in section 5.

Dividends comprise dividends paid by the Company and by Blanket to its minority shareholders after deduction of amounts to repay the various advances and loans as discussed in section 4.9. The Company paid higher quarterly dividends during the Year which, in conjunction with the increased number of shares in issue following the equity issue in September 2020, resulted in an increase in Caledonia’s dividend payments. The Company’s dividends are discussed further in section 14.

The proceeds of the gold loan and sale of a call option relate to a $3 million gold loan which the Company entered into in December 2022 and which is discussed in section 7.

Cash inflows from the issue of shares relates to the proceeds of the placing of depositary receipts over 619,783 shares in the Company pursuant to obtaining a secondary listing on the VFEX in December 2021.

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

The table below sets out the consolidated statements of Caledonia’s financial position at December 31, 2021, December 31, 2020 and December 31, 2019 prepared under IFRS.

Summarised Consolidated Statements of Financial Position
($’000’s)	As at	Dec 31		Dec 31		Dec 31
		2019		2020		2021
Total non-current assets			113,714		133,334		157,944
Inventories			11,092		16,798		20,812
Prepayments			2,350		1,974		6,930
Trade and other receivables			6,912		4,962		7,938
Income tax receivable			-		76		101
Cash and cash equivalents			9,383		19,092		17,152
Derivative financial assets			102		1,184		-
Assets held for sale			-		500		-
Total assets			143,553		177,920		210,877
Total non-current liabilities			8,957		9,913		12,633
Loans and borrowings - short term portion			529		408		-
Lease liabilities – short term portion			349		61		134
Trade and other payables			8,348		8,664		9,957
Derivative financial liabilities			-		-		3,095
Income taxes payable			163		495		1,562
Overdraft			490		-		887
Cash-settled share-based payments - short term portion			-		336		2,053
Total liabilities			18,836		19,877		30,321
Total equity			124,717		158,043		180,556
Total equity and liabilities			143,553		177,920		210,877

Non-current assets increased due to the investment at Blanket in the Central Shaft and related infrastructure, electrical infrastructure and sustaining investment; investment in the solar project; and the acquisition and investments in exploration and evaluation properties.

Inventories increased due to the increased level of operations and the usual increase in inventories at the end of each year to prepare Blanket for the shut-down in the supply chain from South Africa. Inventories were also increased to safeguard against further disruption to Blanket’s supply chain due to any resurgence in the COVID-19 pandemic, renewed civil unrest in South Africa and strike action at suppliers in South Africa.

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Inventories include 443 ounces of gold work-in-progress (December 2020: 1,584 ounces). For logistical reasons, this gold was delivered and sold to Fidelity Printers and Refiners (Private) Limited (“Fidelity”), a subsidiary of the Reserve Bank of Zimbabwe (“RBZ”), early in January 2022.

Prepayments represent deposits and advance payments for goods and services. Prepayments increased largely due to prepayments in respect of the solar project.

Trade and other receivables are detailed in note 24 to the Consolidated Financial Statements and include $4.5 million (December 31, 2020: $1.3 million) due from Fidelity in respect of gold deliveries prior to the close of business on December 31, 2021 and $3.2 million (December 31, 2020: $2.3 million) due from the Zimbabwe Government in respect of VAT refunds.

Responsibility for making payment for gold deliveries changed from the RBZ to Fidelity in early 2021 after which the speed of payments has improved. The increased receivable due from Fidelity at the end of the Year reflects the higher level of deliveries due to the increased production; the full amount due from Fidelity in respect of gold deliveries was received as it fell due in January 2022.

The amount due in respect of VAT refunds increased because of the increased level of capital procurement during the Quarter and higher RTGS$-denominated local costs. Some of the RTGS$ component of the VAT receivable is outside its normal due date and management continues to pursue recovery of all amounts due, which includes offsetting VAT receivables from the amounts paid in respect of other taxes.

The distribution of the consolidated cash across the jurisdictions where the Company operates was as follows:

Geographical location of cash ($’000’s)
As at	March 31, 2021		June 30, 2021		Sept 30, 2021		December 31, 2021
Zimbabwe		2,170		3,162		2,072		8,092
South Africa		1,675		3,155		1,704		635
UK/Jersey		9,182		10,352		9,234		7,538
Total net cash and cash equivalents		13,027		16,669		13,010		16,265

The cash held in Zimbabwe at December 31, 2021 includes approximately $5 million from the proceeds of the $7.8 million equity raise accompanying the VFEX listing in December which had not been used for other purposes. This amount was transferred to Jersey in early 2022.

Non-current liabilities includes the deferred tax liability, which has increased due to the continued high level of capital investment, a provision for the liability arising on the closure of Blanket and the long-term portion of the cash-settled share-based payment liability.

The derivative financial liability relates to a gold loan and option agreement in terms of which the Company received $3 million (less transaction costs) which will be repaid by two deliveries of 925 ounces of gold in May and June 2022 but which will be financially settled. In addition, the Company granted the lender call options over 6,000 ounces of gold at a strike price of $2,000 per ounce expiring monthly in equal tranches from June 30, 2022 to November 30, 2022.

The short-term portion of the cash-settled share-based payment liability is in respect of awards made to employees at Caledonia, CMSA and Blanket in terms of the OEICP. The awards can be settled in cash or, subject to conditions, shares at the option of the recipient; approximately half of the awards outstanding at the end of the Year vested in January 2022 of which approximately $1.3 million was settled in cash and $0.9 million was settled by the issue of shares.

The increase in equity over the course of the Year reflects retained profits and the raising of $7.8 million (net) by the issue of shares pursuant to obtaining a secondary listing on the VFEX in December 2021.

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

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($’000’s except per share amounts)	Mar 31,		June 30,		Sept 30,		Dec 31,		Mar 31,		Jun 30,		Sep 30,		Dec 31,
	2020		2020		2020		2020		2021		2021		2021		2021
Revenues		23,602		22,913		25,359		28,128		25,720		29,977		33,496		32,136
Profit attributable to owners of the Company		8,240		5,134		4,433		2,973		4,550		2,694		6,939		4,222
EPS – basic (cents)		71.2		43.1		36.6		24.0		37.3		21.1		56.8		33.3
EPS – diluted (cents)		71.1		43		36.5		23.9		37.2		21.1		56.7		33.3
Net cash and cash equivalents		13,825		11,639		21,562		19,092		13,027		16,669		13,010		16,265

Fluctuations in profit attributable to owners of the Company on a quarterly basis are due to, inter alia, substantial foreign exchange profits as discussed in the relevant MD&As and financial statements.

4. OPERATIONS

4.1 Safety, Health and Environment

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

Blanket Mine Safety Statistics
Classification	Q1 2020		Q2 2020		Q3 2020		Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021
Fatal		0		0		0		0		0		0		0		0
Lost time injury		1		1		1		3		0		1		0		2
Restricted work activity		1		2		5		1		4		0		1		1
First aid		0		1		0		0		0		0		1		0
Medical aid		0		2		5		5		2		5		6		8
Occupational illness		0		0		0		0		0		0		0		0
Total		2		6		11		9		6		6		8		11
Incidents		9		15		21		14		17		9		26		10
Near misses		3		7		7		7		11		3		6		2
Disability Injury Frequency Rate		0.29		0.42		0.80		0.55		0.53		0.14		0.12		0.24
Total Injury Frequency Rate		0.29		0.83		1.48		1.23		0.79		0.85		0.98		1.58
Man-hours worked (000’s)		1,395		1,443		1,491		1,460		1,509		1,418		1,629		1,643

There were more accidents in the Quarter than in the preceding 4 quarters, although incidents and near misses were lower than in most of the preceding quarters. Blanket’s headcount has increased in the last 12 months and despite intensive training for new employees, they appear to have lower safety awareness. The Nyanzvi safety training initiative was resumed in the Quarter as COVID-19 restrictions were relaxed; management believes this will help to increase general safety awareness.

Unfortunately, on February 21, 2022 there was a fatal accident in a development haulage involving a LHD loader. The board and management of Caledonia extended their condolences to the family and colleagues of the deceased.

4.2 Social Investment and Contribution to the Zimbabwean Economy

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

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Payments to the Community and the Zimbabwe Government ($’000’s)
Period	Year	Community and Social Investment		Payments to GCSOT		Payments to Zimbabwe Government (excl. royalties)		Total
Year	2013		2,147		2,000		15,354		19,501
Year	2014		35		-		12,319		12,354
Year	2015		50		-		7,376		7,426
Year	2016		12		-		10,637		10,649
Year	2017		5		-		11,988		11,993
Year	2018		4		-		10,140		10,144
Year	2019		47		-		10,357		10,404
Year	2020		1,689		184		12,526		14,399
Q1	2021		3		100		2,802		2,905
Q2	2021		117		100		4,172		4,389
Q3	2021		591		248		5,371		6,210
Q4	2021		452		500		4,081		5,033
Year	2021		1,163		948		16,426		18,537

The implementation of corporate social responsibility (“CSR”) projects rebounded in the Quarter from the restricted level of activity in previous quarters due to measures to prevent the spread of the COVID-19 pandemic. Significant projects undertaken in the Quarter include the renovation of the Sabiwa High School for which furniture and computer equipment were provided; and the purchase of a mobile x-ray machine for the Phakama Clinic Isolation Centre.

Dividend payments to GCSOT in the Quarter were higher than in previous quarters because the final payment to settle the advance dividend loan to GCSOT was made on September 22, 2021; thereafter dividends paid to GCSOT are unencumbered.

4.3 Gold Production

Tonnes milled, average grades, recoveries and gold produced during the Quarter, the preceding 8 quarters, the years 2019, 2020 and 2021 and January and February 2022 are shown in the table below.

Blanket Mine Production Statistics
	Year	Tonnes Milled (t)		Gold Head (Feed) Grade (g/t Au)		Gold Recovery (%)		Gold Produced (oz)
Year	2019		556,331		3.31		93.4		55,182
Quarter 1	2020		140,922		3.35		93.8		14,233
Quarter 2	2020		143,210		3.13		93.9		13,499
Quarter 3	2020		157,343		3.19		93.9		15,155
Quarter 4	2020		156,487		3.19		93.5		15,012
Year	2020		597,962		3.21		93.8		57,899
Quarter 1	2021		148,513		2.98		93.0		13,197
Quarter 2	2021		165,760		3.34		93.8		16,710
Quarter 3	2021		179,577		3.48		94.2		18,965
Quarter 4	2021		171,778		3.57		94.3		18,604
Year	2021		665,628		3.36		93.9		67,476
January	2022		53,593		3.14		93.4		5,050
February	2022		54,926		3.78		94.3		6,310

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Gold production for the Quarter was 24% higher than the comparable quarter due to increased tonnes milled, a higher grade and higher recovery. Gold production for the Year was 17% higher than in 2020. Production for 2021 was a new record and exceeded the Company’s revised guidance for the Year. Tonnes milled and grade are discussed in section 4.4 of this MD&A; gold recoveries are discussed in section 4.5 of this MD&A.

Production in January and February was slightly affected by lower tonnes milled due to a delay in the installation of an additional mill because of COVID-19-related production delays at the manufacturer. The new mill is expected to be installed in the second quarter of 2022; in the meantime, unprocessed ore is being stockpiled.

4.4 Underground

Tonnes milled in the Quarter were 9.8% higher than the comparable quarter; the tonnes milled for the Year were 11% higher than in 2020. The increased production is due to the commissioning of the Central Shaft at the end of March; Central shaft currently handles most of the development waste, which creates capacity at No. 4 Shaft to hoist ore.

The grade in the Quarter and the Year was higher than in the comparable periods due to mine sequencing.

4.5 Metallurgical Plant

Recoveries in the Quarter were 94.3% compared to 93.5% in the comparable quarter; recoveries in the Year were 93.9% compared to 93.8% in 2020. The improved recovery was due to the improved grade and the increased proportion of free gold in the ore.

Plant availability was adversely affected in the Quarter by the increased incidence of power interruptions which totalled approximately 185 hours in the Quarter.

An additional re-grind mill will be installed before the end of the second quarter of 2022 to achieve the required daily throughput at a consistently fine grind.

4.6 Production Costs

A narrow focus on the direct costs of production (mainly labour, electricity and consumables) does not fully reflect the total cost of gold production. Accordingly, cost per ounce data for the Quarter and the comparable quarter have been prepared in accordance with the Guidance Note issued by the World Gold Council on June 23, 2013 and is set out in the table below on the following bases:

i. On-mine cost per ounce, which shows the on-mine costs of producing an ounce of gold and includes direct labour, electricity, consumables and other costs that are incurred at the mine including insurance, security and on-mine administration;

ii. All-in sustaining cost per ounce⁴, which shows the on-mine cost per ounce plus royalty paid, additional costs incurred outside the mine (i.e. at offices in Harare, Johannesburg and Jersey), costs associated with maintaining the operating infrastructure and resource base that are required to maintain production at the current levels (sustaining capital investment), the share-based expense (or credit) arising from the LTIP awards less silver by-product revenue. The all-in sustaining cost also includes as a credit (i.e. as a deduction from costs) any revenue from the export credit incentive (“ECI”) (or its predecessor as discussed in section 4.9); and

iii. All-in cost per ounce⁴, which shows the all-in sustaining cost per ounce plus the costs associated with activities that are undertaken with a view to increasing production (expansion capital investment).

___________________________

⁴ On-mine cost per ounce, all-in sustaining cost per ounce and all-in cost per ounce are non-IFRS measures.  Refer to section 10 for a reconciliation of these amounts to IFRS.

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Cost per Ounce of Gold Sold (US$/ounce)
	3 Months to December 31				12 Months to December 31
	2020		2021		2020		2021
On-mine cost4		770		740		744		742
All-in sustaining cost per ounce excl. ECI4		988		1,020		967		990
All-in cost per ounce4		1,739		1,500		1,356		1,408

A reconciliation of costs per ounce to IFRS production costs is set out in section 10.

On-mine costs

On-mine costs comprise labour, electricity, consumables and other costs such as security and insurance. Production costs are detailed in note 8 to the Consolidated Financial Statements. On-mine costs per ounce for the Quarter were 3.9% lower than the comparable quarter due to the increased production which meant that fixed costs were spread over more production ounces and good control of costs that are subject to management control. On-mine costs in the Quarter and the Year include $1.3 million and $2.9 million respectively of costs that are outside management control which include the effects of the collective wage negotiations on direct and indirect labour costs, increased cost of consumables and services that are denominated in local currency and higher than anticipated use of the diesel generators due to an increased incidence of power interruptions. On-mine costs include the procurement margin paid to CMSA on the grounds that this cost represents a fair value that Blanket would pay for consumables if they were sourced from a third party.

Wage negotiations in local currency (which take place every three or six months) reflect the very high rate of inflation in Zimbabwe but this is not compensated for by a reciprocal movement in the RTGS$/US$ exchange rate, which is managed by the RBZ. Thus, the higher RTGS$ wages that followed from the collective bargaining process result in substantially higher wages in US Dollar terms when translated at the official exchange rate. To avoid a repetition of this outcome, in late 2021, the remuneration of all Blanket’s employees was changed to 100% in US Dollars whereas previously it had been a combination of RTGS$ and US Dollars. Henceforth wage negotiations with Blanket employees will reference inflation in US Dollar terms which is expected to result in more subdued annual increases.

The installation of a further auto-tap changer at the end of the Year reduced the frequency of power interruptions resulting from power surges on the incoming grid power and has significantly reduced the generator use and diesel expense from January 2022.

On-mine cost per ounce for the Year and the Quarter was within the guidance range of between $740 and $815 per ounce.

All-in sustaining cost

The All-in sustaining cost excludes the intercompany procurement margin as this reflects the consolidated cost incurred at the group level. The all-in sustaining cost per ounce excluding the ECI for the Quarter and the Year were 3.2% and 2.4% higher respectively was than the comparable periods because of higher administrative costs and variations in the intercompany procurement margin.

All-in sustaining costs per ounce for the Year and the Quarter were within the guidance range of between $985 to $ 1,080 per ounce.

All-in cost

All-in cost includes investment in expansion projects at Blanket which remained at a high level in the Quarter due to the continued investment, as discussed in section 4.7 of this MD&A. All-in cost does not include pre-feasibility investment in exploration and evaluation projects.

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4.7 Capital Projects

The main capital development project is the Central Shaft and related infrastructure which will allow for three new production levels (26, 30 and 34 levels) below the current operations; a fourth level (38 level) is intended to be added in due course via a decline construction. Shaft sinking commenced in early 2015 and the shaft reached its target depth of 1,204 metres (approx. 4,000 feet) in July 2019. Work on equipping the shaft commenced in early January 2020, it was commissioned at the end of March 2021 and commercial operations commenced in April 2021. Central Shaft is currently being used to hoist development waste, men and material – thereby freeing up capacity at No. 4 Shaft to hoist ore.

Central Shaft was commissioned in March, approximately 6 months later than planned due to delays arising from COVID-19 and poor electricity supply. The combined effect of these factors was that the horizontal infrastructure development around Central Shaft on 30 and 34 levels was delayed by 7 months.

To minimise the effects of the delays to Central Shaft, approximately 2,000 meters of development on 26 Level was completed before Central Shaft was commissioned using mid-shaft loading, a decline at AR South and the No. 6 Winze. The AR South decline and two further declines from 22 Level provide access to production areas that were scheduled to be accessed via Central Shaft. These declines allow production to achieve planned levels and the build-up in production to 80,000 ounces to continue, despite the delay to Central Shaft. However, the longer than expected use of the declines (which were extended to one production level more than had initially been planned) has added approximately 3,000 meters of additional development across the three declines which has increased planned capital expenditure for 2022 by approximately $3.5m. In addition, the cost of the capital development in 2022 that was initially planned (i.e. before taking into account the delays to Central Shaft) is approximately $0.8 million higher than planned, mainly due to the higher cost of operating the trackless equipment. Caledonia’s committed and uncommitted capital expenditure obligations for the next 12 months are discussed in section 9 of this MD&A.

Development from Central Shaft has commenced northwards and southwards on 30 and 34 levels towards AR South and Eroica and is proceeding better than planned. The development on 26 level has already been completed before the commissioning of Central Shaft. The development southwards towards AR South has been completed, which is important to ensure that Blanket can achieve its production target of 80,000 ounces per annum from 2022 onwards. This development will also provide platforms for further deep-level exploration which is critical for upgrading the mineral resources.

In addition to the Central Shaft, work continued on the following developments:

● Eroica Decline 3: this decline will continue down to the 30 and 34 levels (990m and 1,110m below collar, respectively) and will connect to the haulages from Central Shaft. Progress in the Quarter has been good: sinking paused in the Quarter to allow development to open the orebody strike at 825m. Sinking has since resumed and the decline has advanced a further 133 meters to 840m;

● Decline 4: this decline has reached 930m where an intermediate haulage has been cut to facilitate early production in 2022. This haulage will cover the high-grade areas of the Blanket No.3 orebody and the Blanket Quartz Reef and will continue south to open the extensive strike of Blanket No.2 orebody; and

● Decline 5: the decline branches from Decline 4 at 885m and heads towards the high-grade AR South east-west limb. This decline reached 915m in the previous quarter; and has reached its destination at 930m.

In total, 810m of capital development were achieved in the Quarter compared to a plan of 907m; 3,224m were achieved in the Year against a plan of 2,864m.

4.8 Indigenisation

Transactions that implemented the indigenisation of Blanket (which expression in this section and in certain other sections throughout this MD&A refers to the Zimbabwe company that owns Blanket) were completed on September 5, 2012 following which Caledonia owned 49% of Blanket and received a Certificate of Compliance from the Zimbabwe Government which confirms that Blanket is fully compliant with the Indigenisation and Economic Empowerment Act.

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Following the appointment of President Mnangagwa in 2017 the requirement for gold mining companies to be indigenised was removed by a change in legislation with effect from March 2018. On November 6, 2018, the Company announced that it had entered into a sale agreement with Fremiro Investments (Private) Limited (“Fremiro”) to purchase Fremiro’s 15% shareholding in Blanket for a gross consideration of $16.7 million which was to be settled through a combination of the cancellation of the loan between the two entities which stood at $11.5 million as at June 30, 2018 and the issue of 727,266 new shares in Caledonia at an issue price of $7.15 per share. This transaction was completed on January 20, 2020 following which Caledonia has a 64% shareholding in Blanket and Fremiro held approximately 6.3% of Caledonia’s enlarged issued share capital.

As a 64% shareholder, Caledonia receives 64% of Blanket’s dividends plus the repayment of vendor facilitation loans which were extended by Blanket to certain of the indigenous shareholders. The outstanding balance of the facilitation loans at December 31, 2021 was $16.71 million (September 30, 2021: $17.34 million. June 30, 2021: $17.96 million). The facilitation loans (including interest thereon) are repaid by way of dividends from Blanket; 80% of the dividends declared by Blanket which are attributable to the beneficiaries of the facilitation loans are used to repay such loans and the remaining 20% unconditionally accrues to the respective indigenous shareholders. The dividends attributable to GCSOT, which holds 10% of Blanket, were withheld by Blanket to repay the advance dividends which were paid to GCSOT in 2012 and 2013 and which had an outstanding balance of $Nil at December 31, 2021 (December 31, 2020; $0.99 million).

In February 2020, Blanket agreed to a request from GCSOT that the terms of the debt relating to the repayment of the advance dividends be amended so that GCSOT might receive 20% of its attributable dividend and the balance of 80% would be applied to repay the advance dividends. The final payment to settle the advance dividend loan to GCSOT was made on September 22, 2021. Future dividends to GCSOT will be unencumbered.

The facilitation loans are not shown as receivables in Caledonia’s financial statements in terms of IFRS. These loans are effectively equity instruments as their only means of repayment is via dividend distributions from Blanket. Caledonia continues to consolidate Blanket for accounting purposes. Further information on the accounting effects of indigenisation at Blanket is set out in note 5 to the Consolidated Financial Statements.

4.9 Zimbabwe Commercial Environment

Monetary Conditions

The current situation in Zimbabwe can be summarized as follows:

● Although there continues to be a shortage of foreign currency in Zimbabwe, Blanket has had satisfactory access to foreign exchange to date.

● The rate of annual inflation increased from 5% in September 2018 to approximately 500% by December 2019; the rate of inflation appears to have moderated to an annual rate of 52% for the 12 months to the end of September 2021. A high rate of inflation has little effect on Blanket’s operations because Blanket’s employee remuneration was partly paid in US Dollars and the local currency component was adjusted each month to reflect the increased cost of living – this is discussed further below.

● Since October 2018, bank accounts in Zimbabwe have been bifurcated between Foreign Currency Accounts (“FCA”), which can be used to make international payments, and local currency (known as “ZWL$”, “RTGS Dollars” or “RTGS$”) accounts which can only be used for domestic transactions.

● On February 20, 2019 the RBZ allowed limited inter-bank trading between currency held in the RTGS$ system and the FCA system. Prior to this, the RBZ had stipulated that a Dollar in the RTGS$ system was worth 1 US Dollar in the FCA system. The interbank exchange rate at each quarter end since the introduction of the interbank rate in February 2019 is set out below.

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Interbank Exchange Rates (ZWL$:US$1)
February 20, 2019	2.50
March 31, 2019	3.00
June 30, 2019	6.54
September 30, 2019	15.09
December 31, 2019	16.77
March 31, 2020	25.00
June 30, 2020	57.36
September 30, 2020	81.44
December 31, 2020	81.79
March 31, 2021	84.40
June 30, 2021	85.42
September 30, 2021	87.67
December 31, 2021	108.66

● The interbank trading mechanism addressed the most pressing difficulty that emerged after the October 2018 policy implementation, being the erosion of the purchasing power of Blanket’s employees due to rapidly increasing retail prices which had an adverse effect on employee morale. In February 2020, the RBZ announced its intention to further liberalise the interbank market with the objective of increasing liquidity and transparency. However, in response to the COVID-19 pandemic, the Minister of Finance subsequently reversed this policy and re-established a fixed exchange rate of ZWL$25:US$1 with effect from March 26, 2020. On June 23, 2020, the RBZ introduced an “auction system” whereby, on a weekly basis, buyers and sellers of local currency and foreign exchange submit tenders which the RBZ uses to determine a revised interbank rate. During the Quarter the official exchange rate diverged significantly from the “unofficial” rate (i.e. the rate that could be obtained in the informal market). RTGS$ denominated goods and services are typically priced using a US Dollar reference point to which the informal exchange rate is applied. The official exchange rate does not reflect the local rate of inflation. This means that individuals who receive a RTGS$-denominated salary which references a US Dollar value at the official exchange rate suffer a significant reduction in their purchasing power. In addition, goods and services that are paid for in local currency have become much more expensive when the price is converted to US Dollars at the official exchange rate. Blanket employees are now paid 100% in US Dollars.

● Zimbabwean gold producers, including Blanket, are required to sell their gold to Fidelity. Prior to May 26, 2020, 55% of the sale proceeds were received in US Dollars and the balance was received in RTGS$. From May 26, 2020 gold producers received 70% of their sale proceeds in US Dollars and the balance was received in RTGS$. With effect from 7 January 2021, gold producers receive 60% of their revenues in US Dollars and the balance in RTGS$. Blanket uses the US Dollar component to pay for imported goods, services and a portion of the electricity bill and (for most of the Quarter and the Year) wages and salaries at Blanket; the RTGS$ component is used to pay for goods and services procured in Zimbabwe, the remaining portion of the electricity bill, wages and salaries at Blanket (until Blanket employees began receiving all their pay in US Dollars), payroll taxes and a proportion of Blanket’s income tax.

● After the reduction in the proportion of revenues received in US Dollars from 70% to 60% with effect from January 7, 2021, Blanket participated in the weekly auction system to access the resultant shortfall in US Dollars. From early June 2021, Blanket and other gold producers were excluded from the weekly auctions on the grounds that they are deemed to be exporters and therefore do not qualify to participate. Blanket subsequently secured allocations of foreign exchange from the RBZ to compensate for its exclusion from the auctions. Blanket has also increased the proportion of its expenditure that is made in local currency. As at the date of this MD&A, Blanket has not accumulated excess local currency.

● Blanket sells its gold production to Fidelity, which refines and on-sells the gold into the international market. During the first quarter of 2021, responsibility for making payments for gold deliveries from Blanket moved from the RBZ to its gold refining subsidiary Fidelity. This move simplified and improved the mechanism for making payments for gold and the new system is operating well.

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● In early June 2021 the RBZ announced that companies whose shares are listed on the VFEX will receive 100% of the revenue arising from incremental production in US Dollars. Blanket subsequently received confirmation that the “baseline” level of production for the purposes of calculating incremental production is 148.38 Kg per month (approximately 57,000 ounces per annum). In addition, the payment of the increased US Dollar proceeds for incremental production was backdated to July 1, 2021. Blanket has received all amounts due in terms of this revised policy.

● As Blanket intends to increase its production from approximately 58,000 ounces of gold in 2020 to 80,000 ounces of gold from 2022 onwards a listing on the VFEX should mean that Blanket will receive approximately 71.5% of its total revenues in US Dollars and the balance in local currency. Accordingly in December 2021 Caledonia obtained a secondary listing by way of introduction on the VFEX which was accompanied by a placing in Zimbabwe which raised approximately $7.8 million (after costs and expenses). The proceeds of the placing were used to replenish cash resources following the payment of $4 million to purchase the Maligreen mining claims as discussed in section 5 and for general corporate purposes.

● Throughout these developments and to the date of issue of the Consolidated Financial Statements the US Dollar has remained the primary currency in which the Group’s Zimbabwean entities operate and the functional currency of these entities.

Export credit incentive

Blanket sells gold to Fidelity at a price which is 98.75% of the price fixed by the London Bullion Market Association (the “LBMA price”).

The RBZ first announced an ECI on the gold proceeds for all large-scale gold producers during 2016 which was calculated as a percentage of the gold proceeds less the charges of Fidelity. The below table indicates when the ECI was applicable and the percentages granted.

ECI applicable periods	Percentage
May 1, 2016 – December 31, 2017	3.5%
January 1, 2018 – January 31, 2018	2.5%
February 1, 2018 – February 20, 2019	10%
February 21, 2019 – March 9, 2020	0%
March 10, 2020 – May 26, 2020	25%

All incentives granted by the Zimbabwean Government were included in other income when determined receivable. Incentives were received in Blanket’s RTGS$ account. The ECI fell away after June 26, 2020.

There was no income arising in the Quarter or the Year from the ECI (comparable quarter: nil; 2020 $4.7 million); any income from such sources in previous quarters was included as part of Other income “Government Grant - Gold sale export credit incentive” and was treated as a deduction from costs for the purposes of calculating all-in sustaining costs, as set out in section 10.1.

Electricity supply

The poor quality of electricity supply from the Zimbabwe Electricity Supply Authority (“ZESA”) is the most significant threat to production at Blanket. Blanket experiences interruptions to its power supply from the grid and the supply from the grid is also subject to frequent surges and dips in voltage which, if not controlled, cause severe damage to Blanket’s electrical equipment. To address this matter, in 2019 and early 2020 Blanket increased its diesel generating capacity to 18MW of installed capacity which was sufficient to maintain all operations and capital projects. Blanket also installed a 10MVA auto tap transformer to protect some of its equipment from voltage fluctuations on the incoming grid supply; a second 10MVA auto tap transformer was installed in December 2021 at a cost of approximately $0.5 million.

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Caledonia’s board has approved a project to construct a 12 MWac solar plant which should provide approximately 27% of Blanket’s average daily electricity demand at a cost of approximately $14 million (including construction costs and other project planning, structuring, funding and administration costs). This is discussed further in section 4.13.

Notwithstanding the measures taken to provide back-up power and to manage power surges, the switches from grid power to generator power cause delays to production and development activities: each switch-over results in up to 45 minutes of lost time as the generators are started and the compressors are re-charged. This can recur several times during a single shift, resulting in a considerable cumulative effect. Historically, production has been prioritized over development activity, including the horizontal development from Central Shaft. This, in conjunction with delays arising from COVID-19, has resulted in a cumulative delay in the Central Shaft development which, in turn, has required the continued use of declines to access producing areas, which has contributed to an anticipated increase in future capital costs as discussed further in section 4.7.

The continued deterioration in the ZESA supply means that the power factor regularly falls to 60%, which means that Blanket is effectively paying for 100% of the power, but receives only 60%, and Blanket also incurs the additional cost of generating its own power (approx. 5,000 kw each day) using diesel generators at a cost of approximately $300,000 per month.

Due to the higher than anticipated use of the diesel generators because of the further deterioration in the ZESA supply, Blanket lost two of its 2.5 MVA generators in October; replacement units were commissioned in early 2022 at a cost of approximately $1.2 million. Additional capital costs relating to poor electricity supply of approximately $3.2 million are anticipated in 2022.

Caledonia is considering increasing the scale of the solar plant to further reduce Blanket’s reliance on the grid and diesel generators and is investigating the feasibility of installing power factor correction equipment.

Water supply

Blanket uses water in the metallurgical process. Blanket is situated in a semi-arid region and rainfall typically only occurs in the period November to February. The 2021/2022 rainy season has been adequate and management believes water supply is now satisfactory.

Taxation

The main elements of the Zimbabwe tax regime insofar as it affects Blanket and Caledonia are as follows:

● A royalty is levied on gold revenues at a rate of 5% paid in RTGS$ if the gold price is above $1,200 per ounce; a royalty rate at 3% applies if the gold price is below $1,200. With effect from January 1, 2020, the royalty is allowable as a deductible expense for the calculation of income tax.

● With effect from February 4, 2022 the 5% royalty was payable 60% in USD and 40% in RTGS

● Income tax is levied at 24.72% (2020: 25.75%) on profits as adjusted for tax purposes. The main adjustments to profit for the purposes of calculating tax are the add-back of depreciation and most of the management fees paid by Blanket to CMSA. 100% of all capital expenditure incurred in the year of assessment is allowed as a deductible expense. As noted above, the royalty is deductible for income tax purposes with effect from January 1, 2020. The calculation of taxable income is performed using financial records prepared in RTGS$, which has significantly reduced the deferred tax liability.

● Withholding tax is levied on certain remittances from Zimbabwe i.e. dividend payments from Zimbabwe to the UK and payments of management fees from Blanket to CMSA.

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4.10 Opportunities and Outlook

Central Shaft Project to Increase Production and Extend Mine Life

As discussed in section 4.7, following the commissioning of the Central Shaft production is expected to increase to the targeted rate of approximately 80,000 ounces per annum from 2022 onwards. The Central Shaft will also create the operational flexibility to establish drilling platforms and resume deep-level exploration drilling.

Production Guidance

Production guidance for 2022 is between 73,000 and 80,000 ounces. The critical factors that influence whether Blanket can achieve this target include:

● Blanket’s ability to maintain an adequate supply of consumables and equipment if there is any resurgence in the COVID-19 pandemic and/or disruption to the supply chain arising from unrest in South Africa;

● Blanket’s workforce remaining healthy;

● Blanket continuing to receive payment in full and on-time for all gold sales;

● Blanket and Caledonia continuing to be able to make local and international payments in the normal course of business; and

● Blanket’s ability to manage the erratic supply of electricity from ZESA.

This is forward looking information as defined by National Instrument 51-102. Refer to section 18 of this MD&A for further information on forward looking statements.

Cost Guidance

On-mine cost per ounce guidance for 2022 is in the range of $669 to $736 per ounce; guidance for AISC is $880 to $970 per ounce. This is forward looking information as defined by National Instrument 51-102. Refer to section 18 of this MD&A for further information on forward looking statements.

Capital Expenditure

Capital expenditure at Blanket in 2022 is budgeted to be higher than the guidance of $15.2 million which was provided in the technical report entitled “Caledonia Mining Corporation Plc NI 43-101 Technical Report on the Blanket Gold Mine, Zimbabwe” dated May 17, 2021 prepared by Minxcon (Pty) Ltd and filed by the Company on SEDAR (www.sedar.com) on May 26, 2021 and which has an effective date of January 1, 2020. Capital investment for 2022 is now expected to be approximately $27 million the increase being due to the following factors:

● A cost overrun of approximately $0.8 million on the Central Shaft development that was envisaged in the initial project plan, this overrun being due mainly to the higher than anticipated running cost of the trackless equipment that is used in capital development on 30 and 34 levels;

● Additional development as a result of delays in the Central Shaft (as discussed in section 4.7) at a cost of approximately $3.4 million;

● Additional capital costs resulting from the poor quality of Blanket’s electricity supply from ZESA of approximately $3.2 million (as discussed in section 4.9). This excludes any further investment to increase the scale of the solar plant which is currently being constructed at Blanket;

● Investment of approximately $2.6 million to upgrade the workers’ village to accommodate the larger than anticipated workforce and upgrade the water and sewerage system;

● Investment of approximately $0.8 million to increase the capacity of the metallurgical plant so that it can handle the increased tonnes required to sustain a production level of 80,000 ounces per annum in the context of the expected reduction in the future head grade as discussed in section 4.4; and

● Investment of $1 million for additional compressors.

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The cash effect on Caledonia of the increased capital expenditure in 2022 will be mitigated somewhat by income tax relief at 24.72% and the 15.2% effective economic interest of Blanket’s indigenous shareholders.

Strategy

Caledonia’s immediate strategic focus following the commissioning of the Central Shaft at Blanket is to:

● increase production to the target rate of 80,000 ounces of gold per annum from 2022;

● re-commence deep level drilling at Blanket with the objective of upgrading inferred mineral resources, thereby extending the life of mine;

● commence exploration at Blanket above 750 meters; and

● commence exploration within the Blanket lease area that are outside the current mine footprint.

Caledonia will continue geological evaluations at the Maligreen claims with the objective of increasing the confidence level of the existing estimated mineral resource base as discussed in section 5 of this MD&A.

Caledonia will also evaluate further investment opportunities in Zimbabwe and elsewhere.

4.11 Sale of Eersteling

On May 31, 2018, the Group entered into a share sale agreement to sell the shares and claims of Eersteling Gold Mining Company Limited (“Eersteling”), a South African subsidiary which owns a mine that was on care and maintenance since 1997. The share sale agreement allowed for a purchase price of $3 million to be settled by three payments of $1 million, the last of which fell due on July 30, 2020. The purchaser was unable to make the final payment due to the closure of the operation during the South African lock-down period and the death of two of the purchaser’s principals. Caledonia received further consideration of $340 in the Quarter. Operations at Eersteling appear to have been suspended again in late 2021 - as it is no longer clear that the remaining consideration of $761 can be recovered, it was fully impaired in the Quarter.

4.12 COVID-19

Blanket employs over 1,900 employees the vast majority of whom live with their dependents on the mine village. One case of COVID-19 was recorded at Blanket during 2020; 232 cases of COVID-19 were detected in 2021 of which there was, regrettably, two deaths of an employee and a dependent. Further cases have been detected at the Company’s offices in Harare, Johannesburg and St Helier. Blanket procured sufficient doses of an approved vaccine for all adult employees and their spouses; as at December 31, 2021 1,077 of Blanket’s employees and 620 of the Blanket employee dependents living on the Blanket site have been vaccinated on site.

COVID-19 had no significant effect on production or costs in the Quarter. As discussed in section 4.7, COVID-19 delayed the completion of the Central Shaft with a resulting increase in the decline development at AR South, AR Main and Eroica required to maintain targeted production levels while the horizontal development from Central Shaft can catch up.

4.13 Solar project

As noted in section 4.9, Blanket suffers from unstable grid power and load shedding which results in frequent and prolonged power outages. In late 2019 Caledonia initiated a tender process to identify parties to make proposals for a solar project to reduce Blanket’s reliance on grid power. After careful consideration, Caledonia’s board approved the construction of a 12MWac solar plant at a revised construction cost of approximately $14 million. The plant is expected to provide all of Blanket’s minimum electricity demand during daylight hours; Blanket will continue to rely on the grid and generators to provide additional power during daylight hours and at night. It is estimated that the solar plant will provide approximately 27% of Blanket’s total daily electricity requirement.

In 2020 the Company raised $13 million (before commission and expenses) to fund the project through the sale of 597,963 shares at an average price of $21.74 per share.

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The status of the project is as follows:

• the 40-hectare site for the project has been cleared and fenced;

• Caledonia has obtained the necessary licences and permits for the project;

• Voltalia, an international renewable energy provider, has been appointed as contractor for the project under an engineering, procurement and construction contract;

• Caledonia provided Voltalia with a notice to proceed in March 2021 and has made an advance payment of $1.8 million for long lead time items that are required to construct the plant;

• orders have been placed for approximately 80% of the solar equipment required to build the plant;

• civil works on the internal roads, drainage, foundations for equipment and the operations and maintenance building have commenced; and

• the majority of the equipment to construct the project is now en route to site.

On October 15 and October 21, 2021, the Company received notices from Voltalia advising that due to the rationing of power supply to the Chinese manufacturers of certain components, implementation of the solar project may now be subject to an indeterminate delay. It is now expected that the project will be commissioned in June 2022.

The Company has commenced the evaluation of a further phase for the solar project to provide Blanket’s peak demand during daylight hours. This will require an agreement between the Company and the Zimbabwe authorities regarding the treatment of power that will be generated by a second phase that is surplus to Blanket’s requirements and/or the installation of storage capacity.

5 EXPLORATION

Caledonia’s exploration activities are focussed on Blanket and Maligreen.

Blanket

There was no deep exploration drilling at Blanket in the Quarter. Deep level exploration drilling will re-commence after the related development, in the Central Shaft area, has been completed to provide access to new drilling positions. Exploration at Blanket’s portfolio of satellite properties was suspended in 2016 so that resources could be re-deployed at Blanket. Since then, the Company has evaluated other investment opportunities in Zimbabwe and has concluded that the satellite properties other than GG are unattractive due to their relatively small size, low grade, limited exploration potential, operating complexity and metallurgical incompatibility with the existing Blanket plant. Accordingly, during the previous quarter, Blanket completed the sale of Mascot, Eagle Vulture and Penzance properties for a cash consideration of $500. The GG satellite property remains on care and maintenance.

Connemara North

In December 2020 Caledonia announced it had entered into an option agreement which gives the Company the exclusive right to explore for a period of 18 months (i.e. until May 2022) and subsequently, if exploration is successful and at its sole discretion, acquire the mining claims over an area known as Connemara North.

After further evaluations, in March 2022 Caledonia decided that the asset does not meet the Company’s criteria for further investment and accordingly the option to acquire the mining clams will not be exercised. The accumulated expenditure on this property of $163 will be impaired in the first quarter of 2022.

Maligreen         

On September 23, 2021 Caledonia announced that it had entered into an agreement to purchase the mining claims over the Maligreen project ("Maligreen"), a property situated in the Gweru mining district in the Zimbabwe Midlands, from Pan African Mining (Private) Limited, a privately-owned Zimbabwean company, for a total cash consideration of US$4 million. The transfer of the claims to Caledonia and the payment of the purchase price was completed during the Quarter.

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

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

• 3.5 tonnes of bulk metallurgical test work

• Aeromagnetic and ground geophysical surveys

As at August 31, 2021 the property is estimated to contain a NI 43-101 compliant inferred mineral resource of approximately 940,000 ounces of gold in 15.6 million tonnes at a grade of 1.88g/t. Of the inferred mineral resource 76% (approximately 712,000 ounces) is shallower than 220m indicating the potential for an open pit mining operation. The inferred mineral resource has been estimated using a cut-off grade of 0.4g/t for a potential open pit and 1.5g/t for a potential underground mine (further information on the assumptions used is set out in the news release dated September 23, 2021 and in the technical report mentioned in the footnote below).  Initial assessments of the inferred mineral resource indicate a favourable grade tonnage curve; by applying a higher cut-off grade of 1.0g/t, the total estimated inferred mineral resource reduces by 12% to approximately 827,000 ounces at a grade of 2.79g/t, a 48% higher grade. These favourable grade tonnage dynamics offer a high level of flexibility in the evaluation of a future mining operation.

The total land area of Maligreen is approximately 550 hectares comprising two historic open pit mining operations which produced approximately 20,000 oz of gold mined from oxides between 2000 and 2002 after which the operation was closed. Caledonia expects to drill an initial 4,800 meters at an estimated cost of US$1.6 million over a period of 18 to 24 months to improve its understanding of the existing resource and assess the potential for a mining operation. Further exploration opportunities exist within the claims area and a subsequent exploration programme is under consideration to explore for continuations of the existing inferred mineral resource at depth to the north-west and the strike extension in the northern part of the property.

Activities in the Quarter have focussed on re-evaluating data from previous exploration with the objective of upgrading the confidence level of the resource in the second quarter of 2022. Thereafter, it is expected that on-the-ground exploration activities will commence.

6. INVESTING

An analysis of investment in the Quarter, the preceding quarters of 2021 and the years 2020 and 2019 is set out below.

($’000’s)	2019		2020		2021		2021		2021		2021		2021
	Year		Year		Q1		Q2		Q3		Q4		Year
Total Investment – Property, plant and equipment		20,423		24,778		6,441		7,380		8,816		8,632		31,269
Blanket		20,128		24,315		6,363		7,091		8,465		7,404		29,323
Solar		-		372		76		65		212		1,228		1,581
Other		295		91		2		224		139		-		365
Total investment – Exploration and evaluation assets		172		3,058		190		784		449		159		1,582
Connemara North		-		300		-		26		78		120		163
Glen Hume		-		2,661		164		685		327		-		1,176
Other Satellite properties		172		97		26		73		44		39		243

Investment in property, plant and equipment at Blanket is in terms of the investment plan that was announced in October 2014 and which is discussed in section 4.7 of this MD&A; investment in solar is as discussed in section 4.13; investment in exploration and evaluation assets (other than at Glen Hume) is as set out in section 5. All further investment is expected to be funded by internal cash flows and cash resources.

_______________________

⁵ Refer to technical report entitled “Caledonia Mining Corporation Plc NI 43-101 Mineral Resource Report on the Maligreen Gold Project, Zimbabwe dated November 5, 2021 prepared by Minxcon (pty) Ltd and filed on SEDAR (www.sedar.com).

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7. FINANCING

Caledonia financed all its operations using funds on hand, funds generated by its operations, the proceeds of a secondary listing on the VFEX, the proceeds of a gold loan and Blanket’s and overdraft facilities which were as set out below at December 31, 2021.

Overdraft facilities
Lender	Date drawn	Principal value	Balance drawn at December 31, 2021	Repayment terms	Security
Stanbic Bank Zimbabwe Limited	Dec-21	US$1 million	Nil	On demand	Unsecured

Blanket opened discussions with its bankers in Zimbabwe after the end of the Year to increase its overdraft facilities to enhance the flexibility of its working capital.

As discussed in Section 4.9, the company obtained a secondary listing on the VFEX in December 2021 so that it can obtain a greater proportion of its revenues in US Dollars. To accompany this listing, depositary receipts representing 619,783 shares in the Company to a value of $7.83 million were issued to create the necessary shareholder spread. The proceeds of the placing will be used to defray the purchase consideration for the Maligreen mining claims as discussed in section 5 and for general corporate purposes.

In December 2021 the Company entered into a gold loan and option agreement with Auramet International LLC in terms of which the Company received $3 million (less transaction costs) which will be repaid by two deliveries of 925 ounces of gold in May and June 2022, but financially settled. In addition, the Company granted the lender call options over 6,000 ounces of gold at a strike price of $2,000 per ounce expiring monthly in equal tranches from 30 June 2022 to November 30, 2022. The proceeds of the gold loan will be used to part fund the solar project and for general corporate purposes.

On February 17, 2022 the Group entered into a zero cost contract to hedge 20,000 ounces of gold over a period of 5 months from March to July 2022. The hedging contract has a cap of $1,940 and a collar of $1,825, over 4,000 ounces of gold per month expiring at the end of each month over the 5-month period.

On March 9, 2022 in response to a very volatile gold price, the Company purchased a matching quantity of call options at a strike price above the cap at a total cost of $796,000 over 4,000 ounces of gold per month at strike prices of $2,100 per ounce from March 2022 to May 2022 and $2,200 per ounce from June 2022 to July 2022 in order to limit margin exposure and reinstate gold price upside above the strike price. The future impact of the hedges is undeterminable at the date of issue of this report and will be quantified in the Condensed Consolidated Interim Financial Statements as at March 31, 2022. Refer to note 14 and 41.1 of the Consolidated Financial Statements for more detail on the hedging agreements.

8. LIQUIDITY AND CAPITAL RESOURCES

An analysis of Caledonia’s capital resources at December 31, 2021 and at the end of each of the preceding 5 quarters is set out below.

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Liquidity and Capital Resources
($’000’s)
As at	Sept 30		Dec 31		Mar 31		Jun 30		Sep 30		Dec 31
	2020		2020		2021		2021		2021		2021
Term facility		515		408		286		178		70		-
Gold ETF		1,160		1,184		1,045		-		-		-
Gold loan		-		-		-		-		-		3,000
Cash and cash equivalents in the statement of cashflows		21,562		19,092		13,027		16,669		13,010		17,152
Working capital		37,691		34,622		33,179		34,804		35,729		35,360

Movements in Caledonia’s net cash, the overdraft and working capital and an analysis of the sources and uses of Caledonia’s cash are discussed in section 3 of this MD&A. The overdraft and term facilities are held by Blanket with Zimbabwean banks with security and repayment periods as detailed in section 7. The gold loan is held by Caledonia on the terms detailed in section 7. The Company’s liquid assets as at December 31, 2021 plus anticipated cashflows exceed its planned and foreseeable commitments as set out in section 9.

9. OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL COMMITMENTS AND CONTINGENCIES

There are no off-balance sheet arrangements apart from the facilitation loans of $16.7 million which are not reflected as loans receivable for IFRS purposes (refer to note 5 of the Consolidated Financial Statements). The Company had the following contractual obligations at December 31, 2021:

Payments due by Period
($’000’s)
Falling due	Within 1 year		1-3 Years		4-5 Years		After 5 Years		Total
Trade and other payables		9,957		-		-		-		9,957
Provisions		-		500		685		2,109		3,294
Capital expenditure commitments		3,493		-		-		-		3,493
Derivative financial liabilities		3,095		-		-		-		3,095
Lease liabilities		134		331		-		-		465
Cash-settled share-based payments		2,053		974		-		-		3,027

The capital expenditure commitments relate to materials and equipment which have been ordered by CMSA and which will be sold on to Blanket. In addition to the committed purchase obligations set out above:

● Blanket currently intends to invest approximately $27 million in 2022; and

● Caledonia intends to pay $10.2 million for the solar project in 2022.

Other than the proposed investment in the solar project and at the exploration properties, the committed and uncommitted investment will be used to maintain Blanket’s existing operations and implement the final development relating to the Central Shaft which is discussed in section 4.7 of this MD&A.

Committed and uncommitted purchase obligations are expected to be met from the cash generated from Blanket’s existing operations and Blanket’s existing borrowing facilities and, in respect of the solar project and the exploration properties, from Caledonia’s cash resources

The Group leases property for its administrative offices in Jersey, Harare and Johannesburg; following the implementation of IFRS 16 the Group recognises the liabilities for these leases. As of December 31, 2021, Caledonia had potential liabilities for rehabilitation work on Blanket – if the mine is permanently closed – at an estimated discounted cost of $3.4 million (December 30, 2020: $3.6 million).

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10. NON-IFRS MEASURES

Throughout this document, we provide measures prepared in accordance with IFRS in addition to some non-IFRS performance measures. As there is no standard method for calculating non-IFRS measures, they are not a reliable way to compare Caledonia against other companies. Non-IFRS measures should be used along with other performance measures prepared in accordance with IFRS. We define below the non-IFRS measures used in this document and reconcile such non-IFRS measures to the IFRS measures we report.

10.1 Cost per ounce

Non-IFRS performance measures such as “on-mine cost per ounce”, “all-in sustaining cost per ounce” and “all-in cost per ounce” are used in this document. Management believes these measures assist investors and other stakeholders in understanding the economics of gold mining over the life-cycle of a mine. These measures are calculated on the basis set out by the World Gold Council in a Guidance Note published on June 23, 2013 and accordingly differ from the previous basis of calculation. The table below reconciles non-IFRS cost measures to the production costs shown in the financial statements prepared under IFRS.

Reconciliation of IFRS production costs to non-IFRS cost measures Reconciliation of IFRS Production Cost to Non-IFRS Costs per ounce
($’000’s unless otherwise indicated)
	3 months ended December 31						12 months ended December 31
	2020			2021			2020			2021
Production cost (IFRS)		11,174			14,178			43,711			53,126
COVID-19 expenses included in operating cost		(198	)		(79	)		(1,038	)		(297	)
Cash-settled share-based expense		(154	)		(277	)		(634	)		(692	)
Less exploration and site restoration costs		(160	)		(218	)		(708	)		(774	)
Other cost		1,063			(168	)		1,201			(453	)
On-mine production cost*		11,725			13,436			42,532			50,910
Gold sales (oz)		15,230			18,160			57,137			68,617
On-mine cost per ounce ($/oz)		770			740			744			742
Royalty		1,408			1,612			5,007			6,083
Exploration, remediation and permitting cost		196			-			468			155
Sustaining capital expenditure		171			3			760			619
Administrative expenses		2,636			3,830			7,997			9,091
Silver by-product credit		(27	)		(32	)		(86	)		(122	)
Share-based payment expense included in production cost		154			277			634			692
Share-based payment expense		236			51			1,413			477
Procurement margin included in on-mine cost*		(1,455	)		(651	)		(3,501	)		(2,401	)
All-in sustaining cost		15,044			18,526			55,224			65,504
Gold sales (oz)		15,230			18,160			57,137			68,617
AISC per ounce excl. ECI ($/oz)		988			1,020			967			990
ECI		-			-			(4,695	)		-
All-in sustaining cost		15,044			18,526			50,529			65,504
Gold sales (oz)		15,230			18,160			57,137			68,617
AISC per ounce after ECI and procurement margin ($/oz)		988			1,020			884			955
Solar expenses		28			-			230			-
COVID-19 donations		274			-			1,322			74
COVID-19 labour and consumable expenses		198			79			1,038			297
Permitting and exploration expenses		251			-			373			74
Non-sustaining capital expenditure		10,691			8,629			24,018			30,650
Total all-in cost		26,486			27,234			77,510			96,599
Gold sales (oz)		15,230			18,160			57,137			68,617
All-in cost per ounce ($/oz)		1,739			1,500			1,356			1,408

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^{* The on-mine cost reflects the cost incurred on-mine to produce gold. The procurement margin on consumable sales between CMSA and Blanket is not deducted from On-mine cost as the cost represent a fair value that Blanket would pay for consumables if they were sourced from a third party. The procurement margin on these sales is deducted from All-in sustaining costs and All-in costs as these numbers represent the consolidated costs at a group level excluding intercompany profit margins.}

10.2 Average realised gold price per ounce

The table below reconciles “Average realised gold price per ounce” to the Revenue shown in the financial statements which have been prepared under IFRS.

Reconciliation of Average Realised Gold Price per Ounce
($’000’s unless otherwise indicated)
	3 months ended December 31						12 months ended December 31
	2020			2021			2020			2021
Revenue (IFRS)		28,128			32,136			100,002			121,329
Revenues from sales of silver		(27	)		(32	)		(86	)		(122	)
Revenues from sales of gold		28,101			32,104			99,916			121,207
Gold ounces sold (oz)		15,230			18,160			57,137			68,617
Average realised gold price per ounce (US$/oz)		1,845			1,768			1,749			1,766

10.3 Adjusted earnings per share

“Adjusted earnings per share” is a non-IFRS measure which management believes assists investors to understand the Company’s underlying performance. The table below reconciles “adjusted earnings per share” to the Profit/Loss attributable to owners of the Company shown in the financial statements which have been prepared under IFRS.

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Reconciliation of Adjusted Earnings per Share (“Adjusted EPS”) to IFRS Profit Attributable to Owners of the Company
($’000’s unless otherwise indicated)
	3 months ended December 31						12 months ended December 31
	2020			2021			2020			2021
Profit for the period (IFRS)		3,796			5,589			25,257			23,142
Non-controlling interest share of profit for the period		(823	)		(1,367	)		(4,477	)		(4,737	)
Profit attributable to owners of the Company		2,973			4,222			20,780			18,405
Blanket Mine Employee Trust adjustment		(67	)		(109	)		(485	)		(326	)
Earnings (IFRS)		2,906			4,113			20,295			18,079
Weighted average shares in issue (thousands)		12,119			12,323			11,704			12,170
IFRS EPS (cents)		24.0			33.4			173.4			148.6
Add back/(deduct) amounts in respect of foreign exchange movements
Realised net foreign exchange losses		292			1,310			4,062			1,571
- less tax		(40	)		(322	)		(1,006	)		(381	)
- less non-controlling interest		(15	)		(129	)		(383	)		(153	)
Unrealised net foreign exchange losses/(gains)		94			(2,153	)		(8,369	)		(2,755	)
- less tax		89			467			2,158			567
- less non-controlling interest		1			216			836			270
Adjusted IFRS profit excl. foreign exchange		3,327			3,502			17,593			17,198
Weighted average shares in issue (thousands)		12,119			12,323			11,704			12,170
Adjusted IFRS EPS excl. foreign exchange (cents)		27.5			28.4			150.3			141.3
Add back/(deduct) amounts in respect of:
Reversal of Blanket Mine Employee Trust adjustment		67			109			485			326
Impairment of property, plant and equipment		-			325			-			497
Impairment of E&E assets		2,930			-			2,930			3,837
Impairment of Eersteling receivable		-			761			-			761
Deferred tax		3,519			449			3,523			5,240
Non-controlling interest portion deferred tax and impairment		(914	)		(87	)		(900	)		(602	)
Fair value losses on derivative financial instruments		145			133			266			240
Adjusted profit		9,074			5,192			23,897			27,497
Weighted average shares in issue (thousands)		12,119			12,323			11,704			12,170
Adjusted EPS (cents)		74.9			42.1			204.2			225.9

11. RELATED PARTY TRANSACTIONS

There were no related party transactions in the Quarter.

12. CRITICAL ACCOUNTING ESTIMATES

Caledonia's accounting policies are set out in the Consolidated Financial Statements which have been publicly filed on SEDAR. In preparing the Consolidated Financial Statements, management is required to make estimates and assumptions that affect the amounts represented in the Consolidated Financial Statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Discussion of recently issued accounting pronouncements is set out in note 4 of the Consolidated Financial Statements.

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Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the Consolidated Financial Statements is included in the following notes:

i) Indigenisation transaction

The directors of Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”), a wholly owned subsidiary of the Company, performed an assessment, using the requirements of IFRS 10: Unaudited Condensed Consolidated Interim Financial Statements (IFRS 10), and concluded that CHZ should continue to consolidate Blanket and accounted for the transaction as follows:

● Non-controlling interests (“NCI”) are recognised on the portion of shareholding upon which dividends declared by Blanket accrue unconditionally to equity holders as follows:

(a) 20% of the 16% shareholding of National Indigenisation and Economic Empowerment Fund (“NIEEF”); and

(b) 100% of the 10% shareholding of GCSOT.

● This effectively means that NCI is recognised at Blanket at 13.2% of its net assets.

● The remaining 80% of the shareholding of NIEEF is recognised as a non-controlling interest to the extent that its attributable share of the net asset value of Blanket exceeds the balance on the facilitation loans including interest. At December 31, 2021 the attributable net asset value did not exceed the balance on the loan account and thus no additional NCI was recognised.

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

The Employee Trust, which owns BETS, and BETS are structured entities which are effectively controlled and consolidated by Blanket. Accordingly, the shares held by BETS are effectively treated as treasury shares in Blanket and no NCI is recognised.

ii) Site restoration provisions

The site restoration provision has been calculated for Blanket based on an independent analysis of the rehabilitation costs performed in 2021. Estimates and assumptions are made when determining the inflationary effect on current restoration costs and the discount rate to be applied in arriving at the present value of the provision. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates take account of any material changes to the assumptions that occur when reviewed by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs which will reflect the market condition at the time the rehabilitation costs are incurred.  The final cost of the currently recognized site rehabilitation provisions may be higher or lower than currently provided for.

iii) Exploration and evaluation (“E&E”) expenditure

The Group makes estimates and assumptions regarding the possible impairment of E&E properties by evaluating whether it is likely that future economic benefits will flow to the Group, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available. The recoverability of the carrying amounts of exploration and evaluation assets depends upon the availability of sufficient funding to bring the properties into commercial production, the price of the products to be recovered and the undertaking of profitable mining operations. As a result of these uncertainties, the actual amount recovered may vary significantly from the carrying amount.

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iv) Income taxes

Significant estimates and assumptions are required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Caledonia records its best estimate of the tax liability including any related interest and penalties in the current tax provision. In addition, Caledonia applies judgement in recognizing deferred tax assets relating to tax losses carried forward to the extent that there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized or sufficient estimated taxable income against which the losses can be utilized.

v) Share-based payment transactions

The fair value of the amount payable to employees in respect of share-based awards, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period over which the employee becomes unconditionally entitled to payment. The liability is re-measured at each reporting date. Any changes in the fair value of the liability are recognised as a personnel expense in profit or loss. Additional information about significant judgements and estimates and the assumptions used to estimate fair value for cash settled share-based payment transactions are disclosed in note 12 to the Consolidated Financial Statements.

vi) Impairment

At each reporting date, Caledonia determines if impairment indicators exist and, if present, performs an impairment review of the non-financial assets held in Caledonia. The exercise is subject to various judgemental decisions and estimates. Financial assets are also reviewed regularly for impairment.

vii) Depreciation

Depreciation on mine development, infrastructure and other assets in the production phase is computed on the units-of-production method over the life-of-mine based on the estimated quantities of reserves (proven and probable) and resources (measured, indicated and inferred), which are planned to be extracted in the future from known mineral deposits. Where items have a shorter useful life than the life-of-mine, the mine development, infrastructure and other assets are depreciated over their useful life. Confidence in the existence, commercial viability and economical recovery of reserves and resources included in the life-of-mine plan may be based on historical experience and available geological information. This is in addition to the drilling results obtained by the Group and management’s knowledge of the geological setting of the surrounding areas, which would enable simulations and extrapolations to be done with a sufficient degree of accuracy. In instances where management can demonstrate the economic recovery of resources with a high level of confidence, such additional resources are included in the calculation of depreciation.

viii) Mineral reserves and resources

Mineral reserves and resources are estimates of the amount of product that can be economically and legally extracted. In order to calculate the reserves and resources, estimates and assumptions are required about a range of geological, technical and economic factors, including but not limited to quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity prices and exchange rates. Estimating the quantity and grade of mineral reserves and resources requires the size, shape and depth of orebodies to be determined by analysing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological assumptions and calculations to interpret the data. Estimates of mineral reserves and resources may change due to the change in economic assumptions used to estimate mineral reserves and resources and due to additional geological data becoming available during operations.

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The Group estimates its reserves (proven and probable) and resources (measured, indicated and inferred) based on information compiled by a Qualified Person in terms of the Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) relating to geological and technical data of the size, depth, shape and grade of the ore body and suitable production techniques and recovery rates. Such an analysis requires geological and engineering assumptions to interpret the data. These assumptions include:

● correlation between drill-holes intersections where multiple reefs are intersected;

● continuity of mineralisation between drill-hole intersections within recognised reefs; and

● appropriateness of the planned mining methods.

The Group estimates and reports reserves and resources in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards for Mineral Resources and Mineral Reserves. Complying with the CIM code, NI 43-101 requires the use of reasonable assumptions to calculate the recoverable resources. These assumptions include:

● the gold price based on current market price and the Group’s assessment of future prices;

● estimated future on-mine costs, sustaining and non-sustaining capital expenditures;

● cut-off grade;

● dimensions and extent, determined both from drilling and mine development, of ore bodies; and

● planned future production from measured, indicated and inferred resources.

Changes in reported reserves and resources may affect the Group’s financial results and position in several ways, including the following:

● asset carrying values may be affected due to changes in the estimated cash flows;

● depreciation and amortisation charges to profit or loss may change as these are calculated on the unit-of-production method or where useful lives of an asset change; and

● decommissioning, site restoration and environmental provisions may change in ore reserves and resources which may affect expectations about the timing or cost of these activities.

13. FINANCIAL INSTRUMENTS

i) Commodity risk

Caledonia is exposed to fluctuations in the price of gold because Blanket produces and sells gold doré and receives the prevailing spot price for the gold contained therein. On February 17, 2022 the Company entered into a cap and collar hedging arrangement hedging contract for 20,000 ounces of gold over a period of 5 months from March to July 2022. The hedging contract has a cap of $1,940 and a collar of $1,825, meaning that, for the 4,000 ounces of gold per month for the period, Caledonia will receive an effective gold price per ounce of not less than $1,825 or greater than $1,940 and will receive an effective spot gold price between these two levels. On March 9, 2022 in response to a very volatile gold price, the Company purchased a matching quantity of call options at a strike price above the cap in order to limit margin exposure and reinstate gold price upside above the strike price. Refer to note 14 and 41.1 of the Consolidated Financial Statements for more detail on the hedging agreements.

ii) Credit risk

The carrying amount of financial assets as disclosed in the statements of financial position and related notes represents the maximum credit exposure. The trade receivable relates to gold bullion sold before the end of the Quarter and VAT receivables. The amount due in respect of bullion sales was settled in January 2022 as it fell due. The RTGS$ component of the VAT receivable was in arrears at the end of the Quarter. Management continues to engage with the necessary authority to recover the amount due either by cash payment and/or by offset against other tax amounts payable by Blanket.

iii) Impairment losses

None of the trade and other receivables is past due at the period-end date other than a tranche of deferred consideration in respect of the sale of Eersteling and the RTGS$ component of the VAT receivable. Management continues its efforts to recover the RTGS$ component of the VAT receivable either by cash payment and/or offset against other tax amounts payable by Blanket; the amount due in respect of the sale of Eersteling has been fully impaired.

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iv) Liquidity risk

All trade payables and the bank overdraft have maturity dates that are expected to mature in under 6 months. The term loans are repayable as set out in section 7.

v) Currency risk

A proportion of Caledonia’s assets, financial instruments and transactions are denominated in currencies other than the US Dollar. The financial results and financial position of Caledonia are reported in US Dollars in the Consolidated Financial Statements.

The fluctuation of the US Dollar in relation to other currencies will consequently have an impact upon the profitability of Caledonia and may also affect the value of Caledonia’s assets and liabilities and the amount of shareholders’ equity.

As discussed in section 4.9 of this MD&A, the RTGS$ is subject to variations in the exchange rate against the US Dollar. This may result in Blanket’s assets, liabilities and transactions that are denominated in RTGS$ being subject to further fluctuations in the exchange rate between RTGS$ and US Dollars. In addition, the Company may be subject to fluctuations in the exchange rate between the South African Rand and the US Dollar in respect of cash that is held in Rands in South Africa.

vi) Interest rate risk

Interest rate risk is the risk borne by an interest-bearing asset or liability due to fluctuations in interest rates. Unless otherwise noted, it is the opinion of management that Caledonia is not exposed to significant interest rate risk as it has limited debt financing. Caledonia’s cash and cash equivalents include highly liquid investments that earn interest at market rates. Caledonia manages its interest rate risk by endeavouring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. Caledonia’s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.

14. DIVIDEND POLICY

Following the share consolidation on June 26, 2017, the Company announced on July 4, 2017 an increased quarterly dividend of 6.875 United States cents which has been paid at the end of July, October, January and April thereafter. The dividend of 6.875 US cents per share effectively maintained the dividend at the previous level of 1.375 United States cents per share, after adjusting for the effect of the consolidation.

On January 3, 2020, the Company announced a 9.1% increase in the quarterly dividend from 6.875 cents to 7.5 cents per share.

On April 1, 2020, the Company announced the deferral of the quarterly dividend that would ordinarily have been declared and paid in April 2020 due to the uncertainty surrounding the COVID-19 pandemic. On April 29, 2020, the Company announced this dividend would be paid at the end of May 2020 at a rate of 7.5 cents per share.

On June 29, 2020, the Company announced a 13% increase in the quarterly dividend from 7.5 cents to 8.5 cents per share.

On October 1, 2020, the Company announced an 18% increase in the quarterly dividend from 8.5 cents to 10 cents per share.

On January 4, 2021, the Company announced a 10% increase in the quarterly dividend from 10 cents to 11 cents per share.

On April 6, 2021 the Company announced a 9% increase in the quarterly dividend from 11 cents to 12 cents per share.

On July 6, 2021 the company announced an 8% increase in the quarterly dividend from 12 cents to 13 cents per share.

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On October 4, 2021 the company announced an 8% increase in the quarterly dividend from 13 cents to 14 cents per share. This seventh increase represents a cumulative 104% increase in the quarterly dividend since October 2019.

On January 4, 2022, the Company announced a dividend of 14 cents per share payable on January 28, 2022.

The board will consider the continuation of the dividend and any future increases in the dividend as appropriate in line with other investment opportunities and its prudent approach to risk management including: Blanket maintaining a reasonable level of production; receiving payment in full and on-time for all gold sales; being able to make the necessary local and international payments and being able to replenish its supplies of consumables and other items.

15. MANAGEMENT AND BOARD

On February 23, 2021, Ms Geralda Wildschutt was appointed to the board as a non-executive director – she has particular expertise in environmental, social and governance (ESG) compliance and was appointed the chairperson of the ESG Committee. With effect from August 1, 2021 Mr Caxton Mangezi was appointed as Vice President, Operations – Zimbabwe with general responsibility for all operations in country i.e. supervision of all interests of the Group in Zimbabwe, as well as continued oversight of Blanket. Mr Mangezi had previously been the General Manager of Blanket. On December 21, 2021, it was announced that Mr Steve Curtis will retire as Chief Executive Officer with effect from 30 June 2022, and will be succeeded by Mr Mark Learmonth, Caledonia’s current Chief Financial Officer. Mr Curtis will continue to serve as a director of the Company and he will also serve as a consultant until the end of 2023. Following the end of the Year, on January 20, 2022, Mr Dana Roets, Chief Operating Officer, was appointed to the board as an executive director and on February 28, 2022, Mr John McGloin, resigned from the board as a non-executive director of the Company.

16. SECURITIES OUTSTANDING

At March 16, 2022, being the last day practicable prior to the publication of this MD&A, Caledonia had 12,833,126 common shares issued and outstanding options to purchase common shares (“Options”) as follows:

Number of Options	Exercise Price		Expiry Date
	Canadian $
10,000		9.3	25-Aug-24

The Plan allows that the number of shares reserved for issuance to participants under the Plan, together with shares reserved for issue under any other share compensation arrangements of the Company, shall not exceed the number which represents 10% of the issued and outstanding shares from time to time. Accordingly, Caledonia could grant Options on a further 1,273,312 shares at March 17, 2022 on the assumption that all outstanding LTIPs are settled in cash at the request of the LTIP holders.

17. RISK ANALYSIS

The business of Caledonia contains significant risk due to the nature of mining, exploration and development activities. Caledonia’s business contains significant additional risks due to the jurisdictions in which it operates and the nature of mining, exploration and development. Included in the risk factors below are details of how management seeks to mitigate the risks where this is possible.

● COVID-19 pandemic: The COVID-19 pandemic, and measures that may be taken by governments and other parties to counter the spread of the virus may, inter alia, have the following effects on the Company: its workforce may fall ill which could affect operations; restrictions on transport and travel may impede the Company’s ability to procure consumables, equipment and services which may affect operations and progress on capital projects; the banking system may not operate effectively which may impede the Company’s ability to effect domestic and international payments; it may be difficult to secure a route to market for the gold ore produced by Blanket. In response to these risks, management has introduced measures to safeguard its employees from the virus; increased the inventory of consumable stock; engaged closely with its customer, Fidelity, regarding access to refiners and the eventual route to market for Blanket’s production; and management regularly reviews its financial status and projections. However, it must be recognised that the duration and effects of the COVID-19 pandemic are uncertain and therefore not capable of accurate forecasting.

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● Liquidity risk:  The Company aims to generate capital to be able to continue to invest in properties and projects without raising further third-party financing. Caledonia currently has sufficient cash resources and continues to generate sufficient cash to cover all its anticipated investment needs. The primary reason for the secondary listing on the VFEX was to obtain a greater proportion of Blanket’s revenues in US Dollars, as discussed in section 4.9.

● Availability of foreign currency: The Company needs access to foreign currency in Zimbabwe so that it can pay for imported goods and equipment and remit funds to Group companies outside Zimbabwe. At prevailing gold prices and the current rate of production the Company has access to sufficient foreign currency to continue normal mining operations and to fully implement the investment plan as scheduled. The Company requires access to an increased proportion of its revenues in US Dollars to allow Caledonia to remit dividends and loan repayments from Zimbabwe. The Company is in the process of establishing a mechanism that is intended to address this matter. No assurance can be given that sufficient foreign currency will continue to be available.

● Exploration risk: The Company needs to identify new resources to replace ore which has been depleted by mining activities and to commence new projects. No assurance can be given that exploration will be successful in identifying sufficient mineral resources of an adequate grade and suitable metallurgical characteristics that are suitable for further development or production.

● Development risk: The Company is engaged in the implementation of the Central Shaft project as set out in section 4.7 of this MD&A. Construction and development of projects are subject to numerous risks including: obtaining equipment, permits and services; changes in regulations; currency rate changes; labour shortages; fluctuations in metal prices and the loss of community support. There can be no assurance that construction will commence or continue in accordance with the current expectations or at all.

● Production estimates: Estimates for future production are based on mining plans and are subject to change. Production estimates are subject to risk and no assurance can be given that future production estimates will be achieved. Actual production may vary from estimated production for a variety of reasons including un-anticipated variations in grades, mined tonnages and geological conditions, accident and equipment breakdown, changes in metal prices and the cost and supply of inputs and changes to government regulations.

● Mineral rights:  The Company’s existing mining lease, claims, licences and permits are in good standing. The Company must pay fees etc. to maintain its lease, claims and licences. The Company may not make payments by the required date or meet development and production schedules that are required to protect its lease, claims and licences.

● Metal prices: The Company’s operations and exploration and development projects are heavily influenced by the price of gold, which is particularly subject to fluctuation. The Company currently has a hedging arrangement in place for a portion of production for the period from March to July 2022. Management regularly reviews future cash flow forecasts in the context of the prevailing gold price and likely downside scenarios for future gold prices.

● Increasing input costs: Mining companies generally have experienced higher costs of steel, reagents, labour and electricity and from local and national government for levies, fees, royalties and other direct and indirect taxes. Blanket’s planned growth should allow the fixed cost component to be absorbed over increased production, thereby helping to alleviate somewhat the effect of any further price increases.

● Illegal mining: In previous years there were incidences of illegal mining activities on properties controlled by Blanket which resulted in increased security costs and an increased risk of theft and damage to equipment. Blanket has received adequate support and assistance from the Zimbabwean police in investigating such cases. Those properties most at risk from such activity have been sold.

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● Electricity supply: Zimbabwe produces and imports less electricity than it requires and has insufficient funds to adequately maintain or upgrade its distribution infrastructure. This has resulted in frequent interruptions to the power supply at Blanket. Blanket has addressed the issue of interrupted power supply by installing stand-by generators. Production at Blanket has also been adversely affected by the instability of the incoming electricity supply. The Company is installing a solar plant which will provide some of Blanket’s power requirements; it has installed a further auto-tap changer to increase the protection against power surges and it has further increased its diesel generating capacity.

● Water supply: Blanket uses water in the metallurgical process, most of which is obtained from a nearby dam. Blanket is situated in a semi-arid area and rainfall typically occurs only in the period November to February. The most recent rainy season has been better than average and management believes there is enough water in the Blanket dam to maintain normal operations until the next rainy season.

● Succession planning: The limited availability of mining and other technical skills and experience in Zimbabwe and the difficulty of attracting appropriately skilled employees to Zimbabwe creates a risk that appropriate skills may not be available if, for whatever reason, the current skills base at Blanket is depleted. The Caledonia and Blanket management teams have been augmented so that, if required, it could provide appropriate support to Blanket if this is required.

● Country risk: The commercial environment in which the Company operates is unpredictable.  Potential risks may arise from: unforeseen changes in the legal and regulatory framework which means that laws may change, may not be enforced, or judgements may not be upheld; restrictions on the movement of currency and the availability of foreign currency at a realistic exchange rate to make payments from Zimbabwe; risks relating to possible corruption, bribery, civil disorder, expropriation or nationalisation; risks relating to restrictions on access to assets and the risk that the Zimbabwe Government is unable to pay its liabilities to Blanket. Management believes that it has minimised such risks by complying fully with all relevant legislation, by obtaining all relevant regulatory permissions and approvals and by regular and proactive engagement with the relevant authorities.

● Gold marketing arrangements: In terms of regulations introduced by the Zimbabwean Ministry of Finance in January 2014, all gold produced in Zimbabwe must be sold to Fidelity, a company which is owned by the RBZ. The requirement to sell to the Zimbabwe government increases Blanket’s credit risk because it failed to pay Blanket in 2008. The responsibility for making payments to gold producers was transferred from the RBZ to Fidelity in early 2020 following which Blanket has received payments more promptly.

18. FORWARD LOOKING STATEMENTS

Information and statements contained in this MD&A that are not historical facts are “forward-looking information” within the meaning of applicable securities legislation that involve risks and uncertainties relating, but not limited to, Caledonia’s current expectations, intentions, plans, and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “target”, “intend”, “estimate”, “could”, “should”, “may” and “will” or the negative of these terms or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Examples of forward-looking information in this MD&A include: implementation schedules for, and other uncertainties inherent in, the Central Shaft project; production guidance; estimates of future/targeted production rates; planned mill capacity increases; estimates of future metallurgical recovery rates and the ability to maintain high metallurgical recovery rates; timing of commencement of operations; plans and timing regarding further exploration, drilling and development; the prospective nature of exploration and development targets; the ability to upgrade and convert mineral resources to mineral reserves; capital and operating costs; our intentions with respect to financial position and third party financing; and future dividend payments. This forward-looking information is based, in part, on assumptions and factors that may change or prove to be incorrect, thus causing actual results, performance or achievements to be materially different from those expressed or implied by forward-looking information. Such factors and assumptions include, but are not limited to: failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, success of future exploration and drilling programs, reliability of drilling, sampling and assay data, assumptions regarding the representativeness of mineralization being inaccurate, success of planned metallurgical test-work, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, changes in government regulations, legislation and rates of taxation, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors.

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Security holders, potential security holders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Such factors include, but are not limited to: risks relating to estimates of mineral reserves and mineral resources proving to be inaccurate, fluctuations in gold price and payment terms for gold sold to Fidelity, risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, power outages, fire, explosions, landslides, cave-ins and flooding), risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business, inadequate insurance, or inability to obtain insurance, to cover these risks and hazards, employee relations, relationships with and claims by local communities and indigenous populations, political risk, risks related to natural disasters, terrorism, civil unrest, public health concerns (including health epidemics or outbreaks of communicable diseases such as the coronavirus (COVID-19)), availability and increasing costs associated with mining inputs and labour, the speculative nature of mineral exploration and development, including the risks of obtaining or maintaining necessary licenses and permits, diminishing quantities or grades of mineral reserves as mining occurs, global financial condition, the actual results of current exploration activities, changes to conclusions of economic evaluations, and changes in project parameters to deal with un-anticipated economic or other factors, risks of increased capital and operating costs, environmental, safety or regulatory risks, expropriation, the Company’s title to properties including ownership thereof, increased competition in the mining industry for properties, equipment, qualified personnel and their costs, risks relating to the uncertainty of timing of events including targeted production rate increase and currency fluctuations. Security holders, potential security holders and prospective investors are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia reviews forward-looking information for the purposes of preparing each MD&A; however, Caledonia undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

19. CONTROLS

The Company has established and maintains disclosure controls and procedures (“DC&P”) designed to provide reasonable assurance that material information relating to the Company is made known to the Chief Executive Officer and the Chief Financial Officer by others, particularly during the period in which annual filings are being prepared, and that information required to be disclosed in the Company’s annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified by such securities legislation.

The Company’s management, along with the participation of the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the Company’s DC&P as of December 31, 2021. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, at December 31, 2021, the Company’s DC&P were effective.

The Company also maintains a system of internal controls over financial reporting (“ICFR”) designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS; however, due to inherent limitations, ICFR may not prevent or detect all misstatements and fraud. The board of directors approves the financial statements and ensures that management discharges its financial responsibilities. The Audit Committee, which is composed of independent directors, meets periodically with management and auditors to review financial reporting and control matters and reviews the financial statements and recommends them for approval to the board of directors.

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The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate ICFR and evaluating the effectiveness of the Company’s ICFR as at each fiscal year end. Management has used the 2013 Internal Control–Integrated Framework from the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO”) to evaluate the effectiveness of the Company’s ICFR at December 31, 2021. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that at December 31, 2021, the Company’s ICFR was effective.

There have been no changes in the Company’s ICFR during the period ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR. In January 2021 Leonet Steyn joined the Group as Internal Auditor; this is expected to enhance the Company’s ICFR for future reporting periods.

20. QUALIFIED PERSON

Mr. Dana Roets (B Eng (Min), MBA, Pr..Eng, FSAIMM, AMMSA) is the Company’s qualified person as defined by Canada’s National Instrument 43-101. Mr. Roets is responsible for the technical information provided in this MD&A except where otherwise stated. Mr. Roets has reviewed the scientific and technical information included in this document and has approved the disclosure of this information for the purposes of this MD&A.

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