23.1

Equity-settled share-based expense

The Group has expensed the following Equity-settled share-based payment arrangements for the year ended

December 31

	Note	2017		2016		2015
Share option programmes	23.1(a)		29		170		24
Facilitation and advanced dividend loan modification	23.1(b)		806		-		-
			835		170		24

(a) Share option programmes

The Omnibus Equity Incentive Compensation Plan (“OEICP”) was established for grants after

May 2015.

Share options issued before

May 2015

were issued in terms of the

Rolling Stock Option Plan (“RSOP”), which was superseded by the OEICP

In accordance with the OEICP, options are granted at an exercise price equal to

the greater of volume weighted average trading price for the

five

days prior to grant or the closing price on the day immediately prior to the date of grant. The options

vest according to dates set at the discretion of the Compensation Committee of the Board of Directors at the date of grant. All outstanding option awards that have been granted, pursuant to the plan, vest immediately.

Terms and conditions of share option programmes

The maximum term of the options under the OEICP is

years and under the RSOP

years. The terms and conditions relating to the grant of options under the RSOP are that all options are to be settled by physical delivery of shares. Equity settled share based payments under the OEICP will also be settled by physical delivery of shares. Under both plans the aggregate number of shares that

may

be issued pursuant to the grant of options, or under any other share compensation arrangements of the Company, will

not

exceed

10%

of the aggregate issued and outstanding shares issued of the Company.

December 31, 2017,

the Company has the following options outstanding:

Number of Options		Exercise Price		Expiry Date
		Canadian $
	5,000		4.00	Oct 8, 2020
	18,000		11.50	Oct 13, 2021
	5,000		8.10	May 30, 2022
	28,000

The continuity of the options granted, exercised, cancelled and expired under the Plan were as follows:

	Number of Options *			Weighted Avg. Exercise Price
				Canadian $ *
Options outstanding and exercisable at January 1, 2015		513,184			5.55
Expired or forfeited		(88,000	)		5.55
Granted		23,000			3.65
Options outstanding and exercisable at December 31, 2015		448,184			5.40
Expired or forfeited		(232,200	)		6.50
Granted		18,000			11.50
Exercised		(141,704	)		4.15
Options outstanding and exercisable at December 31, 2016		92,280			5.85
Granted		5,000			8.10
Exercised		(69,280	)		4.50
Options outstanding and exercisable at December 31, 2017		28,000			9.55

* Amounts stated after the

1:5

share consolidation, refer note

19.

The weighted average remaining contractual life of the outstanding options is

3.72

years (

2016:

3.08

years;

2015:

2.46

years).

Inputs for measurement of grant date fair values

The fair value of share-based payments noted above was estimated using the Black-Scholes Option Pricing Model as the fair value of the services could

not

be estimated reliably. Service and non-market performance conditions attached to the arrangements were

not

taken into account in measuring fair value. The following assumptions were used in determining the fair value of the options:

	2017	2016	2015	2015
Options granted	*5,000	*18,000	90,000	25,000
Grant date	May 30, 2017	October 13, 2016	December 21, 2015	October 7, 2015
Risk-free interest rate	2.40%	0.53%	0.53%	0.53%
Expected stock price volatility (based on historical volatility)	118%	119%	41,2%	39,6%
Expected option life in years	3	5	5	5
Exercise price	* CAD 8.10	* CAD 11.50	CAD 0.74	CAD 0.80
Share price at grant date	* CAD8.10	* CAD 11.50	CAD 0.74	CAD 0.79
Fair value at grant date	* USD 5.81	* USD 9.45	USD 0.27	USD 0.27

May 30, 2017

a grant of

5,000

share options was made to Mr. J Staiger, who provides investor relations services in continental Europe for the Company. The exercise price was determined as the prevailing Toronto Stock Exchange share price on the day of the grant. Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price. The expected term has been based on historical experience. The share based payment expense relating to the grant amounted to

$29.

* Amounts stated after the

1:5

share consolidation, refer note

19.

(b) Facilitation and advance dividend loan modification

June 23, 2017,

the Group, Blanket Mine and the Indigenous Shareholders reached agreement to change the interest rate on the facilitation and advanced dividend loans from the previously agreed

month LIBOR +

10%

to the lower of a fixed rate of

7.25%

per annum, payable quarterly or

80%

of the dividends paid in the financial quarter. The modification was beneficial to the Indigenisation Shareholders and resulted in an equity-settled share-based payment expense of

$806.

The Monte Carlo simulation approach was followed to value the fair value of the Indigenisation Shareholders’ equity before and after the modification date. The fair value of the Indigenisation Shareholders’ equity was based on simulating the future Blanket Mine dividend yields.

The following assumptions were used in determining modification of the expense:

Modification date	June 23, 2017
Blanket Mine dividend yield	23.70%	-	89.88%
Risk free interest rate	USD swap curve
Group market capitalisation at grant date ($’000)	USD 68,436

23.2

Cash-settled share-based expense

The Group has expensed the following Cash-settled share-based payment arrangements for the year ended

December 31

	Note	2017		2016		2015
Restricted Share units and Performance Share Units	23.2(a)		853		618		-
Caledonia Mining South Africa employee incentive scheme	23.2(b)		123		-		-
			976		618		-

(a) Restricted Share units and Performance Share Units

Certain key management members were granted Restricted Share units (“RSU’s”) and Performance Share Units (” PSU’s”) pursuant to provisions of the

2015

Omnibus Equity Incentive Compensation Plan. All RSU’s and PSU’s were granted and approved by the Compensation Committee of the Board of Directors.

The RSU’s will vest

three

years after grant date given that the service condition of the relevant employees are fulfilled. The value of the vested RSU’s will be the number of RSU’s vested multiplied by the fair market value of the Company’s shares, as specified by the plan, on date of settlement.

The PSU’s have a service condition and a performance period of

three

years. The performance condition is a function of production cost, gold production and central shaft depth targets on certain specified dates. The number of PSU’s that will vest will be the PSU granted multiplied by the Performance Multiplier, which will reflect the actual performance in terms of the performance conditions compared to expectations on the date of the award.

RSU holders are entitled to receive dividends over the vesting period. Such dividends will be reinvested in additional RSU’s at the then applicable share price calculated at the average Bank of Canada noon rate immediately preceding the dividend payment. PSU’s have rights to dividends only after they have vested.

The fair value of the RSU’s, at the reporting date, was based on the Black Scholes option valuation model. The fair value of the PSU’s, 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

94%

probability that the performance conditions will be met and therefore a

94%

performance multiplier was used in calculating the estimated liability. The liability as at

December 31, 2017

amounted to

$1,782

(

2016:$618

). Included in the liability as at

December 31, 2017

is an amount of

$311

(

2016:Nil;

2015:

Nil

) that was expensed and classified as production costs, refer note

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

December 31:

		*2017					*2016
		RSUs		PSUs			RSUs		PSUs
Fair value (USD)	$	7.37	$	7.17		$	5.50	$	5.25
Share price (USD)	$	7.37	$	7.37		$	5.50	$	5.50
Performance multiplier percentage		-		94	%		-		100	%

Share units granted:

	RSUs		PSUs		RSUs		PSUs
Grant - January 11, 2016		60,645		242,579		60,645		242,579
Grant - March 23, 2016		10,965		43,871		10,967		43,871
Grant - June 8, 2016		5,117		20,470		5,117		20,470
Grant - January 19, 2017		4,443		17,774		-		-
RSU dividend reinvestments		7,324		-		3,505		-
Total awards at December 31		88,494		324,694		80,234		306,920

* Amounts are presented after the

1:5

share consolidation that took place on

June 26, 2017.

All fractional entitlements due to the share consolidation were rounded down. RSU’s and PSU’s were all granted in

2016

and

not

applicable in

2015.

(b)

Caledonia Mining South Africa employee incentive scheme

July, 2017

the Group granted

37,330

cash-settled share awards to certain employees based in South Africa. These cash-settled share awards will vest in

equal tranches on

November 30, 2017,

2018

and

2019

subject to the employees fulfilling their service condition. 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

£5.10

at the reporting date. The liability relating to these cash-settled share based payment awards amounted to

$44

(

2016:Nil;

2015:Nil

) and the expense amounted to

$123

(

2016:Nil;

2015:Nil

) for the year ended

December 31, 2017.

12,447

of the cash-settled share awards vested on

November 30, 2017

and an amount of

$79

was paid out to these employees.