Hello and welcome to the Caledonia Mining Results for the Quarter Ended the June 30, 2018. My name is Bella and I’ll be your coordinator for today’s event. For the duration of this call, you will be on listen-only however at the end you will have the opportunity to ask questions. [Operator Instructions] I’m now handing over to your host, Steve Curtis to begin today’s conference. Thank you.

Thank you very much, and good afternoon, ladies and gentlemen. Welcome to this call. I’m joined by Mark Learmonth, the CFO; Dana Roets, COO; and Maurice Mason, our VP in charge of Investor Relations and Business Development. We’re going to talk specifically about the second quarter and we will assume that the presentation that we have produced on the website has been reviewed. We will run through some specifics and then we will take some question at the end. From an overall point of view, the financial results are pleasing in the fact that profitability was there, cash generation as an operational level was there and we managed to have – for the quarter a reasonable average gold price. This is in gold mining companies are very aware now that the gold prices is under threat and there are issues that we as operators will have to deal with. We’ll get into specifics around some of the issues that we raised in our MD&A around me of the more specific issues that are happening at the mine in terms of grades and tonnage. But I can’t ignore the fact that outside of the reporting period, but inside of the period that we’re talking about from an MD&A point of view, we did have another fatality unfortunately at Blanket mine. And I just wanted to show that our shareholders and investors and service providers all understand that we take the issues of safety, very, very seriously at Blanket. And we have initiated many, many programs at the mine to ensure that we take nothing for granted and that the staff an employee that we have a Blanket and we are now past the 1,400 level of number of employees at the mine. A number of those are more recently employed and…

Thanks, Steve. We have posted a very brief results presentation on the website a few days ago, shortly after the published results so that’s all based on publically disclosed information. I’m assuming that people are seeing method of access and then post to sensitive in areas to the pages on that. Steve already mentioned safety, so I don’t really think anymore to that. The income statement is reproduced and that just simply reflects what the profit and loss was. Revenue is quite simply the gold price, gold production. I’ll ask Dana in a few moments to comment on the tons and the grade. I think that’s a matter of relevance. And the other real issue, I propose to focus in the financial results will be the working capital issues, as Steve referred to. So if anybody has any specific questions we can come back to those and deal with those later. So I’m going to ask Dana to talk about the production and the effects on production of plants and particular grade in the quarter and half year.

Good afternoon. I just want to just give some background. When we announced last year that we are going to deepen the shop even more of those good expedition results. We mentioned that for the next two years since 2017, talking about 2018 and 2019 we are going to see more than what we achieved in 2017. And the guidance we gave out was 55,000 to 59,000 ounces. More relation to certain ounces that we – of tons that we did last year and helping for a slight increase in grade as we get into the bank theory and was slightly higher and improving the grade C slight improvement in the ounces. And during the quarter we had some problem with our tons move, we were was 3% less than the comparison six month last year and that was mainly due to first of all, we add some low grade periods in Lima and we had to redevelop or re-establish some in that period. And we had some logistical constraints at – especially at Eroica, where we had some local issues and we had to solve those issues because we had some saving and the parts of the open of such, which we have to get to the draw point which also gave us problems with dilution as well as pairing the tons to the shop. And in we are – issue in AR South as well low that area on the agents of AR South as we engage to the sale of AR South, which we will see especially in this state towards the end of this quarter and the last quarter will gradually improve again. So, after the particular loss, we decided that in the Blanket area where we used unhand serving metals that for site regions we…

So Dana, did you mention the recoveries in the Oxygen plant?

Yes, I did mentioned the recovery, but I didn’t mention the Oxygen plant. As far the recoveries is that our current Oxygen plant is currently inefficient, it’s been old, the factory, we stopped operating it. And we sign contracts and we really positioned in new oxygen plant and we hope that will be installed in operational by end of this year.

So yes, $3 million down for the $8 million project we raised funding for that – from Stanbic in Zimbabwe and so it really don’t comes down to making sure the foreign exchange is available from Zimbabwe to – from the purchase of that. But that should underpin a recovery in [indiscernible] In addition, the oxygen some remaining it no longer me to use liquid oxygen which we currently importing and this is significant, this side as well as sort of an improved recovery in a savings for that. So that’s production widely on Page 7 of the presentation, there is a limit bit of information about production costs. Labor was down on the quarter, compared to the comparable quarter. And that’s notwithstanding of 2.9% across the board pay rise, which back dated to the 1 of January this year and also we’re employing quite a few more people, 5% more people than we’re in quarter two compared to the previous the comparable quarter in 2017, but notwithstanding by the few factors, the overall labor charge has come down because given – the type of performance of the production is not quite well as expected to be. So in first half, there is no production bonus that explains why the labor is down. Consumables are up quite a bit. We had indicated that the increased use – increased production coming from the declines I think about 25% of overall production that comes in declines of others. Moves it we are making much greater use of a business equipment that we haven't previously – sorry, intensively of the market, but an increased maintenance and sort of consumable costs that are only temporary. So when the Central Shaft is completed, we go back to our traditional mining methodology, which won't include the…

[Operator Instructions] We currently have no questions coming though – we have a question which comes the line of [indiscernible]. You are now unmuted. Please go ahead.

Hello, everybody.

Hello, Harry [ph].

Could you please explain what the tax payments will be when you charge administrative fees from South Africa to Zimbabwe, I didn’t follow that clearly?

Hi, it’s Steve. So South Africa provides services to Zimbabwe, and Zimbabwe perhaps to pay South Africa than a services, right?

Right.

The problem you have is many of this is usually characterized the management fee. The miners haven’t helped themselves over the past decades, mining companies no sales jurisdictions, management fee is very aggressive management fee district profit about African countries, and move gross profits to places like other than Jersey wherever, okay? So tax – African countries are quite widely somewhat skeptical of management fees, and all management fee has been quite high, but that’s because it represents a very substantial amount of work has been done by South Africa to for granted. So we’re absolutely comfortable that there’s no difficulty with the quantum that we charged, okay? The problem we have in Zimbabwe, the management we’ve been charging about $4 million a year, only 1% or 2% or 3% of that actually qualifies the tax deductions in Zimbabwe, okay? So it means that effectively you don’t get tax deductions in Zimbabwe for effectively the real cost if actually Blanket wasn’t particularly services in Caledonia, went out and particularly services from the third party, just a general engineering consultancy or whatever those costs would be allowable for tax in Zimbabwe, okay? That’s the first issue. The second problem we have is that all of that elements of the management seeing that is not deductible of income tax is deemed by the Zimbabwean authorities as a dividend. And so effectively then what happens is that you’ve got to pay 15% withholding tax on that deemed dividend payment, and that’s an addition to other withholding taxes. So it’s a very inefficient structure, if we simply and never frustrated, as long as the Blanket is in a healthy dividend paying position from Caledonia’s perspective, we actually don’t care whether you get money about management fees or money about dividend, it makes almost the dollar, makes it different at all, the difficult we have if we suddenly stop these management fees, the Zimbabwe tax authority will turn us, and say, hey you stop pay management fee, and all those management fees even charging since 2012 that clearly been fictitious, and therefore we’re going to know for them. Other side of the call, with the South African revenue, but now become accustomed to seeing management fees arriving in South Africa which does crystallize a modest tax liability here in South Africa, but again basically we’ve done with South African revenue service’s calling out that risk, now before we know where we are, we go Zimbabwean numbers and South Africans calling away for us and we were going to work them. So it is quite a naughty problem, and so our objective is try and over time reduce the level of management fees, sort of try and release the unnecessary tax leakage, but it can’t be done other night, because you can’t talk jump the system. So that’s quite a long answer to what is quite a complex situation.

Effectively to start a managerial fee is an after tax fee, because the Zimbabweans – that’s how you say it, are not permitting an expense deduction because of that, then they are charging a second fee, let’s say 15% on dividends or that’s the differed taxes.

Yes, yes.

For what? And then South Africa that wants to charge you tax also.

Yes. I think the dividend, the management fees we did lot in South Africa create taxable profit here in South Africa, obviously the cost in South Africa they get deduction from that, and that – so historically we have seen a modest tax liability in South Africa, which in this quarter worked and exist, so it isn't helpful. We have many submissions at the very highest level in Zimbabwe to draw our attention to the situation, which we think genuine answeris thesetdifferent senses to the companies like us to invest in Zimbabwe, because one of the reasons why we have to provide such a high level of support from South Africa into Zimbabwe, because the availabilityof skills in Zimbabwe is very limited, and so there is just the competitive skills locally, you got to get more offshore. We hope that we will get a positive reception, but the fact is it's very difficult for cash throughout African countries to walk away from a source of revenue when – because the competition and another…

Yes, it’s sounds on my mind, that’s addressable for cash. I understand that, you are almost being tax tripling.

Yes you are. That’s not a tax charge has been quite high and we over time, we need to try and it's not going to quick, but we're going to try and identify a tax structure which mitigates, just to leave it open to this particular tax burn, obviously other side of the corner I’m going to say, if the Zimbabwe taxes also looking very aggressive in terms of looking at our structures, not helped by some extremely unhelpful third-party country from well informed, well advised, script commentators based in UK we seem to have really to the width of a storm for thatcompanies – the coal mining companies not paying their share of taxes, they are very comfortable to pay tax on our operating profits, what we'reretreating is going to start paying tax on things really are certain target that you’ve seen – just fort the thing kind of spectacles, I think that’s in a context with that.

You have been tarred with the same brush as people do abuse the system, and how do you accrue – account for these taxes, now do you set up some accruals?

Yes, we accrued for tax, yes.

You do. So it shows up in a public statements, even though there is a transactions between two – associated entities.

Yes. Why, we break it down is, we actually show the tax, over the tax charges are arising in Zimbabwe, in South Africa, and elsewhere we have them, but it's not elsewhere anymore.

I know what happens, if you set up a different managerial company say in Mauritius or the British Virgin Islands which are far away?

The problem that how does the all of our technical people have to do look in the BVI, [indiscernible] convenience of having the technical staff clearly understood is very significant – practical even difficult.

You couldn’t even move to Mauritius, because that would relatively a large move.

No, I think that’s too difficult.

Yes. I think this is going to drag on for some time how you describe it?

We are just going to find away as soon as we develop the company over the next sort of few years to see if we can find a structure that the mitigate in, very much the same way when we moved the company out of Canada, because we could say relatively easy way it’s not complex basically, but we did not sort of section of avoid – not the tax avoidance, so which is an attempt to make it cleaner and simpler and just avoid unnecessary tax leakage, as I say…

[Indiscernible] in Canada, you are basically listing that’s all I had there.

Yes, we are still incurred in withholding taxes and there was another taxes rising on the realization of the value for the facilitation rules.

Other than new Prime Minister, would have been overstay whether ordered you every 15 months, even though you added, they are really add to commercial, good thing you moved out. Okay, that clarifies my puzzle. Thanks.

Okay. Thank you.

See you in Colorado.

Yes. Any other questions?

There are no further questions in the queue. [Operator Instructions]

Okay. I think there are no more questions. Thank you once again for attending this call. And we look forward to talking to you again in some future period. And yes, Caledonia will continue to do what you need to do, the project continues to advance and we will file the necessary reports as and when appropriate. So thank you once again, and good afternoon to you all.

Thank you for joining today’s conference. You may disconnect your handsets. Hosts please stay on the line.