Caledonia Mining Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

April 30, 2012

FORM 20-F

ANNUAL REPORT

(Mark One)

o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ……………………………… to ………………………………

Commission file number   013345

OR

o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ……………………………………………

CALEDONIA MINING CORPORATION

(Exact name of Registrant as specified in its charter)

Caledonia Mining Corporation is variously referred to in this Report

as “Caledonia”, “the Corporation” or “the Company”

 Canada

(Jurisdiction of incorporation or organization)

24 Ninth Street, Lower Houghton, Johannesburg, Gauteng 2198, South Africa

(Address of principal executive offices)

Carl R. Jonsson, 1710-1177 West Hastings Street,

Vancouver, BC V6E 2L3, Canada;  tel: (604) 640-6357;  fax: (604) 681-0139

email:  jonsson@securitieslaw.bc.ca

(Name, telephone, email and/or facsimile number and address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

(Title of Class)

(Title of Class)

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Caledonia Mining Corporation

Securities registered or to be registered pursuant to Section 12(g) of the Act

Title of each class Name of each exchange on which registered

Common shares Toronto Stock Exchange

London Stock Exchange Alternative Investment Market

U.S. OTCQX

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the closing of the period covered by the annual report

507,299,303

Indicate by check mark if the registration is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes_______________            No _________x_________                               

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes_______________            No _________x_________                             

Note – checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days

Yes _______x_______            No  __________________                              

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ______  Accelerated filer _________   Non-accelerated filer _____x_____                                           

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

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Caledonia Mining Corporation

U.S. GAAP …… International Financial Reporting Standards as issued by the International Accounting Standards Board X

Other: __________         

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow

Item 17 __________________                            Item 18  ____________                                          

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes __________________                                  No __________x___________                  

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes ____________                                No_________________                                

NOTE:  All references to monies herein are to Canadian dollars unless otherwise specifically indicated

FORWARD LOOKING STATEMENTS

The Company cautions readers regarding forward looking statements found in this Annual Report and in any other statement made by, or on behalf of the Company, whether or not in future filings with the United States Securities Exchange Commission.  Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments.  Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by or on behalf of the Company.  The Company disclaims any obligation to update forward looking statements.

PART 1

1. IDENTITY of DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not required as this is an annual report under the Securities Exchange Act of 1934 (“Exchange Act”).

However, the information required above can readily be determined from Caledonia’s Proxy and Information Circular dated April 15, 2011 attached as Exhibit #14b.  Information is also given in Section 14A.

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Caledonia Mining Corporation

2.            OFFER STATISTICS AND TIMETABLE

Not required as this is an annual report under the Exchange Act.

3.            KEY INFORMATION

Selected Financial Data

Table 3 A shows the applicable selected financial data for 2010 and 2011 pursuant to IFRS and for the 3-year period 2007 to 2009 in Canadian Generally Accepted Accounting Principles

Table 3 A (i)shows the applicable selected financial data for the 3-year period 2007 to 2009 in United States Generally Accepted Accounting Principles.

Table 3 A (ii) shows the US$exchange rates against the Canadian $ for each of the 5-year periods indicated, for the period end and average exchange rate and the range of high and low rates for each year and the high and low exchange rates for the individual  months ending April 30, 2012.

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Caledonia Mining Corporation

Table 3A - Selected Financial Information prepared for 2011and 2010 pursuant to IFRS and for three preceding years pursuant to Canadian Generally Accepted Accounting Principles - the figures presented being as of the end of each such year.

	IFRS		Canadian GAAP
Financial – All in C$ 000’s unless otherwise indicated	2011	2010	2009	2008	2007
Revenue from Sales	55,705	22,388	11,559	7,696	10,039
Gross Operating Profit (Loss)	29,115	6,360	2,916	3,039	166
Expense - (General and administration,  interest and foreign exchange including  provisions and impairments)	(8,359)	(3,866)	(6,007)	(7,543)	(4,195)
Net loss from discontinued operations	-	-	-	(436)	(582)
Net Income /(Loss) – after income taxes	12,130	1,455	(3,950)	(4,940)	(4,615)
Cash and cash equivalent	9,686	1,145	1,623	3,652	76
Current Assets	18,154	6,176	5,917	5025	4,408
Assets	52,402	38,159	22,090	23,657	29,492
Current Liabilities	4,566	4,629	2,759	1,308	4,343
Long Term Liabilities	7,822	7,050	2,589	1,153	1,054
Working Capital	13,588	1,547	3,158	3,717	65
Shareholders’ Equity	40,014	26,480	16,742	21,196	24,095
Total Capital Expenditures including Mineral Properties	8,528	7,304	1,547	3,023	3,250
Financing Raised (repaid)	(279)	159	588	1,106	4,380

Share Information

Market Capitalization ($ Thousands) at December 31	55,060	80,021	32,508	32,511	53,666
Shares Outstanding (Thousands)	500,549(1)	500,169	500,169	500,169	487,869
Warrants & Options (Thousands)	42,540	32,580	32,580	46,430	34,026
Basic and diluted net income (loss) per share for continuing operations	$0.024	$0.003	($0.008)	($0.010)	($0.009)
Basic and diluted net income (loss) per share for discontinued operations	-	-	-	($0.000)	($0.000)
Basic and diluted net income (loss) per share for the year	$0.024	$0.003	$(0.008)	$(0.010)	$(0.009)

(1)            During 2011 the Company issued 380,000 shares for a cash price of $0.09 per share.

Table 3A (i) - Selected Financial Information – prepared pursuant to United States Generally Accepted Accounting Principles for the years 2007 – 2009 - the figures presented being as of the end of each such year

	US GAAP
	2009	2008	2007
- In Thousands of Canadian Dollars except per share amounts
Revenue from Operations	11,559	7,696	10,039
Gross Profit (Loss)	3,930	851	(2,467)
Expenses (General and Administration, Interest and foreign exchange)	6,247	7,543	4,195
Net Income (Loss) from continuing operations	(3,176)	(6,692)	(6,662)
Loss from discontinued operations	-	(436)	(582)
Net Income(Loss)	(3,176)	(7,128)	(7,248)
Cash	1,622	3,652	76
Current Assets	5,917	5,025	4,408
Total Assets	12,691	13,484	21,507
Current Liabilities	2,759	1,308	4,343
Long Term Liabilities	2,589	1,153	1,054
Working Capital (Deficiency)	3,158	3,717	65
Shareholders’ Equity (Deficiency)	7,343	11,023	16,110
Capital Expenditures (excluding Mineral Property expenditure)	830	136	571
Expenditures on Mineral Properties	650	-	45
Financing Raised (repaid)	588	1,119	4,380
Deemed Dividends	-	-	134

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Caledonia Mining Corporation

Table 3A (ii) - Summary of Exchange Rates for the 5-year Period -2007 to 2011

The following table sets forth, for each of the years indicated, the exchange rate of the United States dollar into Canadian currency at the end of such year, the average exchange rate during each such year and the range of high and low rates for each such year as supplied by the Bank of Canada.

Exchange Rate	2011	2010	2009	2008	2007
Rate at the End of the Period(1)	0.9767	0.9999	1.049	1.218	0.982
Average Rate (2)	0.9892	1.03	1.14	1.066	1.0744
High Rate (1)	1.0468	1.0766	1.036	0.9711	1.185
Low Rate (1)	0.9748	0.9966	1.2907	1.3008	0.9145

Notes:

(1)   The rate of exchange is the Bank of Canada closing rate for the period.

(2)   The average rate means the average of the exchange rates during the year.

The high and low rates of exchange for each of the 5 months from December 2011 to 20 April 2012 are as follows:

	Dec. 2011	Jan 2012	Feb 2012	March 2012	April 2012
Closing	1.0198	1.0039	0.9967	0.9972	0.9800
Average	1.0236	1.0154	0.9978	0.9931	0.9934
Hi	1.0384	1.0285	1.0013	1.0005	1.0031
Low	1.0098	1.0017	0.9927	0.9870	0.9800

C. Risk Factors

An investment in the securities involves a high degree of risk.  Investors need to carefully consider the following risk factors, in addition to the other information contained in this document and the Exhibits hereto.

Industry Competition

The mining industry is a highly diverse and competitive international business.  The selection of geographic areas of interest are only limited by the degree of risk a company is willing to accept by the acquisition of  properties in emerging or developed markets and/or prospecting in explored or virgin territory.  Mining, by its nature, is a competitive business with the search for fresh ground with good exploration potential and the raising of the requisite capital to move projects forward to production.  Globally the mining industry is prone to cyclical variations in the price of the commodities produced by it, as dictated by supply and demand factors, speculative factors and industry-controlled marketing cartels.  Nature provides the ultimate uncertainty with geological and occasionally climatic surprises. Commensurate with the acceptance of this risk profile is the potential for high rewards.

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Caledonia Mining Corporation

Exploration and Development

  Exploration, development and production activities are subject to political, economic and other risks, including:

-              cancellation or renegotiation of contracts;

-              changes in local and foreign laws and regulations;

-              changes in tax laws;

- delays or refusal in granting prospecting permissions, mining authorizations and work permits for foreign management staff;

-              environmental controls and permitting

-              expropriation or nationalization of property or assets;

-               foreign exchange controls;

government mandated social expenditures;

- import and export regulation, including restrictions on the sale of their production in foreign currencies;

-               industrial relations and the associated stability thereof;

-               inflation of cost that is not compensated for by a currency devaluation;

- requirement that a foreign subsidiary or operating unit have a domestic joint venture partner, which, possibly, the foreign company must subsidize;

- restrictions on the ability of local operating companies to sell their production for foreign currencies, and on the ability of such companies to hold these foreign currencies in offshore and/or local bank accounts;

- restrictions on the ability of a foreign company to have management control of exploration and/or development and/or mining operations;

-               restrictions on the remittance of dividend and interest payments offshore;

-               retroactive tax or royalty claims;

-               risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism;

-               royalties and tax increases or claims by governmental entities;

-               unreliable local infrastructure and services such as power, communications and transport links;

-               demands or actions by native or indigenous groups;

- other risks arising out of foreign sovereignty over the areas in which operations are conducted.

- lack of uninterrupted power supplies

- lack of investment funding

Such risks could potentially arise in any country in which Caledonia operates.  In Southern Africa, Black Economic Empowerment Legislation and a number of economic and social issues may result in increased political and economic risks of operating in that area.

Zimbabwe brought its Indigenisation and Economic Empowerment Act into law in March 2008. The law requires that a majority stake (at least 51%) in all companies is held by indigenous Zimbabweans. On February 20, 2012 the Company signed a Memorandum of Understanding (“MOU”) with the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe (the “Government of Zimbabwe”) pursuant to which Caledonia has agreed that Indigenous Zimbabweans will acquire an effective 51% of the Blanket Mine in Zimbabwe (“Blanket”) for a paid transactional value of U.S. $30.09 million on the following basis:

·   16% will be sold to the National Indigenisation Economic Empowerment Fund;

·   10% will be sold to a Management and Employee Trust for the benefit of the present and future managers and employees of Blanket;

·   15% will be sold to identified Indigenous Zimbabweans;  and

·   10% will be donated to the Gwanda Community Share Ownership Trust.  Caledonia will also make a non-refundable donation of US $1,000,000 to the Trust as soon as it has been established.

Caledonia will facilitate the vendor funding of these transactions which will be repaid by way of future dividends from Blanket.

Caledonia has undertaken to complete the implementation of all the components of the indigenisation transaction as soon as possible  - which is currently underway.  The Government of Zimbabwe has agreed that implementation of the terms of the MOU will constitute full compliance by Blanket and Caledonia with the requirements of the Indigenisation Act.  However, there is no assurance that the implementation of the terms can be achieved without further difficulties – nor when the completion of the implementation will occur.

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Caledonia Mining Corporation

Effective January 1, 2012, Zimbabwe increased the gross royalty payable to the Zimbabwe Government from 4.5% to 7% of the gross revenues received by mining companies operating in Zimbabwe from gold sales.

In January 2008 the Zambian government announced the following changes to its tax laws that would have had a bearing on the Nama Project.  The key changes were:

·Increase in mineral royalty from 0.6% to 3%

·Increase in profit tax rate from 25% to 30%

·Introduction of variable profits tax of 15% for net profits above 8%

·Introduction of a windfall profit tax for copper and cobalt mines

·Capital allowances reduced from 100% to 25%

These measures were highly controversial with mining companies, many of which invested in the country under specific tax incentives and formalized their business models accordingly. Various representations were made by the mining companies both directly and through the Chamber of Mines to the government following the budget announcement at the end of January 2008. The Zambian government in January 2009 announced improvements to the taxation of mining companies, in particular:

·   the abolition of windfall tax

·   the return of capital allowances back to 100%.

Whilst these changes are welcome, the royalty remains unchanged at 3% and we make the observation that at low cobalt prices, the royalty can give rise to a very significant tax burden on the project.

As a result of the foregoing, Caledonia’s exploration, development and production activities in Zambia and Zimbabwe may be substantially affected by factors beyond Caledonia’s control, any of which could materially adversely affect Caledonia’s financial position or results from operations. Furthermore, in the event of a dispute arising from such activities, Caledonia may be subject to exclusive jurisdiction of courts outside North America or may not be successful in subjecting persons to the jurisdiction of the courts in North America, which could adversely affect the outcome of a dispute.

History of Losses; Accumulated Deficit; No Assurance of Revenue or Operating Profit

Since inception in February 1992, Caledonia has recorded a loss in every year except 1994, 2000, 2010 and 2011.  As at December 31, 2011, the consolidated accumulated deficit was $158.4 million.

Write-downs on capital assets and mineral properties are typical for the mining industry.  Caledonia’s policy is to review the assets relative to current market conditions on an annual basis.

Fluctuating Minerals Prices and Foreign Currency Exchange Rates

As Caledonia’s activities primarily relate to the exploration, development and production of minerals, the fluctuating World prices for such minerals have a significant potential effect on the Company’s future activities and the profitability of any of its minerals production activities.  There is never any assurance, when activities are undertaken, or production operations are commenced, that the World price of the minerals involved will continue at a sufficiently high price to justify the ongoing activities or the continuation of the production.

Most costs incurred by the Company in its exploration, development and production activities in southern Africa have to be paid in local currencies.  However, mineral prices are generally quoted in United States dollars.  The profitability of any production operations of the Company and the potential profitability of its exploration and development activities will therefore be seriously affected by adverse changes in the currency exchange rates.

Black Empowerment and Indigenization

The governments of the southern African countries in which the Company operates have, or are proposing, legislation (typically referred to as “black empowerment”) requiring companies to allow participation in their shareholdings and business enterprises by the indigenous (i.e. black) population.  In not all instances is it assured that such interests will have to be paid for at full fair value.  In Zimbabwe, when Caledonia purchased the Blanket Mine, it agreed to establish a trust for the benefit of the employees of the Blanket Mine into which up to 30% of the issued shares of the wholly owned subsidiary which it acquired and is operating the Blanket Mine would be placed.  As a result of the Indigenisation Law which has been passed by the Government of Zimbabwe it is now expected that the proposed trust will be established during the second quarter of 2012, but only at 10% of the issued shares.

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Caledonia Mining Corporation

Need for Additional Funds

The Company expects that for at least 2012 and 2013, it can fund all of its exploration, development and production operations from internal funds – and that it will not have to seek externally sourced funding for those years.

Joint Venture Negotiations

Two of the three Rooipoort platinum prospecting rights applied for have been granted to prospect for PGMs on major portions of the Mapochsgronde tribal trust land and are currently in the process of registration.  The remaining property to the north of the area where the current rights are under appeal with the DME and its decision is awaited.

When the exploration rights are registered joint venture partners will be sought for this project.

Dependence upon Key Personnel

Caledonia’s success depends (i) on the continued contributions of its directors, executive officers, management and consultants, and (ii) on Caledonia’s ability to attract new personnel whenever Caledonia seeks to implement its business strategy.   There is no assurance that the Company will always be able to locate and hire all of the personnel that it may consider that it requires.  The Company, where it considers it appropriate, engages consulting and service companies to undertake some of the work function.

Chris Harvey retired from his position as Technical Director in December 2005, but continues as a Director and was appointed as a member of the Audit Committee in June 2009. James Johnstone retired from his position as Chief Operating Officer in September, 2006, also continues as a Director and was appointed as a member of the audit committee in December 2010.

Steven Curtis was appointed Vice President Finance and Chief Financial Officer in April 2006, and was appointed as a Director on June 1, 2008. Mark Learmonth, previously a Director of Macquarie First South, was appointed as VP Corporate Development and Investor Relations on July 10, 2008.

Stefan Hayden stepped down as the Chairman in 2005 but continues as a Director and as President and CEO.

Carl Jonsson, a Director was appointed Chairman of the Board in December 2010. Robert W. Babensee was appointed as a Director and a member of the Audit Committee on October 31, 2008 and became Chairman of the Audit Committee in December 2010.

Absence of Dividends

The Company has never paid or declared any dividends and has no dividend policy.

Possible Volatility of Share Price

Market prices for mining company securities, by their nature, are volatile. Factors, such as rapidly changing commodity prices, political unrest globally and in countries where Caledonia operates, speculative interest in mining stocks etc. are but a few factors affecting the volatility of the share price.   Caledonia listed its shares on the London Stock Exchange’s Alternative Investment Market (“AIM”) in June 2005 – and secured the quotation of its shares in the U.S. on the OTCQX commencing  October 10, 2011.

4   INFORMATION ON THE COMPANY

A.           History and Development of Caledonia

Caledonia was incorporated, effective February 05, 1992, by the amalgamation of three predecessor companies.  It exists pursuant to the Canada Business Corporations Act

Following the creation of Caledonia its shares were listed for trading on the Toronto Stock Exchange and quoted on the NASDAQ small caps market.   On October 16th 1998, Caledonia announced that NASDAQ would no longer quote Caledonia’s securities for trading.  Caledonia’s common stock then commenced trading on NASDAQ’s OTC Bulletin Board system.  In June 2005 Caledonia was admitted to the London Stock Exchange’s AIM market under the ticker symbol “CMCL”.  Its Toronto Stock Exchange trading symbol is “CAL”.  Effective October 10, 2011 the shares commenced trading in the U.S. on the OTCQX under the ticker symbol CALVF.

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Caledonia Mining Corporation

The addresses and telephone numbers of Caledonia’s three principal offices are:

African Office - South Africa	Representational Offices - Canada
Greenstone Management Services	67 Yonge Street, Suite 1201
24, 9th Street, Lower Houghton	Toronto, Ontario, Canada
Johannesburg, Gauteng, 2198	M5E 1J8
South Africa	(416) 369-9507
(27) 11 447 2499
	1710-1177 West Hastings Street
	Vancouver, B.C. , Canada V6E21
	(604) 640-6357

Exploration activities – since 1995

In 1995 the Company acquired ownership of the shares of the companies which owned the Barbrook and Eersteling Mines in South Africa.  The original acquisition was of only 96.4% of the issued shares of Eersteling Gold Mining Company Ltd. - with the remaining 3.6% being acquired in mid 2004. On May 31, 2008 an agreement to sell Barbrook Mine was concluded and Caledonia was paid the full purchase price of $9,130,000 by Eastern Goldfields SA (Pty) Ltd.

Effective April 1, 2006 the Company purchased 100% of the issued shares of the Zimbabwean company “Blanket Mine (1983) (Private) Limited, the owner of the operating Blanket Gold Mine.  The purchase consideration was $1,000,000 (U.S.) and the issuance to the vendor of 20,000,000 shares in the capital of Caledonia.  Because the Company bought the shares of the company owning the Blanket Mine it thereby acquired all of the assets of that company and assumed all of its liabilities.

From time to time Caledonia receives mineral property and business proposals from third parties for review as potential investment opportunities.  With the potential of improved political conditions in other Southern African countries, Caledonia’s management is reviewing mining opportunities in certain of these countries.

Pages 23,24 and 25 are maps respectively of northern South Africa, Zimbabwe and Zambia – which show the locations of the Company’s exploration and operating  properties in those countries.

B.           Business Overview

Mining and Exploration Ac tivities:

Gold Production

Blanket Mine (1983) Private Limited (“Blanket”) - Gold

Blanket exports its gold production to Rand Refineries in Johannesburg, South Africa and receives 100% of the sale proceeds in US dollars within 5 days of sale.  Cash flow at Blanket continues to improve as gold production increases and the production unit costs decrease.

Background

Blanket is wholly owned by the Corporation. The mine is located approximately 560 km south of Harare, the capital city of Zimbabwe and 150 km south of Bulawayo, the country’s second largest city.  The town of Gwanda, the provincial capital of Matabeleland South, is located 16 km east of the mine and is approximately 197 km north north-west of the South African border post of Beit Bridge.  The mine is situated in the Gwanda Greenstone Belt from which gold was first produced in the 1800’s.  Blanket holds extensive exploration properties throughout this belt. The Blanket property was first staked in 1904 with mining and metallurgical plant operations starting in 1906 and has since produced over a million ounces of gold.

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Caledonia Mining Corporation

Geological Setting

In common with most of the gold mines in Zimbabwe, Blanket is situated in a typical greenstone terrain, the 70 km long by 15 km wide Gwanda Greenstone belt.  This terrain comprises supra crustal metavolcanic rocks similar to those found in the Barberton area of South Africa and the Abitibi area of Canada.  The Blanket property is the largest of the three remaining large gold producers on the Gwanda Belt, an area that has given rise to no less than 268 gold mines.

Property Geology

Blanket is part of the group that makes up the North Western Mining camp also called the Sabiwa group of ore zones extending from Sabiwa and Jethro in the south, through Blanket itself to the Feudal, AR South, AR Main, Sheet, Eroica and Lima ore bodies.  The geological sequence strikes north-south, dips vertically and consists, from east to west, of a basal felsic unit which is not known to carry mineralization.  It is generally on this lithology type that the various mine tailings disposal sites are located.  Above this unit is the ultramafic unit that includes the banded iron formations hosting the eastern dormant cluster of mines and the ore bodies of the adjacent Vubachikwe mine complex.   The active Blanket ore bodies are found in the mafic lavas, while the andesitic unit which lies to the west, caps this whole stratigraphy.  A regional dolerite sill cuts the entire sequence from Vubachikwe through Blanket to the Smiler prospect.  Ore bodies at Blanket are epigenetic and are associated with a later, regionally developed deformation zone characterized by areas of high strain, wrapping around relatively under formed remnants of the original basaltic lava flows.  It is within this higher strain regime (highly sheared rocks) that the wider of the ore bodies are located.

Production Operations

Mining

Subsequent to the completion of the No. 4 Shaft Expansion Project during Q3 2010, the underground mining areas can now produce up to 1,100 tonnes of ore daily using predominately long-hole open stoping methods. Certain ore handling limitations still existed at the underground on 18 and 22 Levels at the year end. These limitations have been partially addressed by raise boring an ore pass connecting 18 Level to the No. 2 ore bin grizzly tip on 22 Level. The 120 metre long and 1.5 metre diameter ore pass has dramatically improved the efficiency of delivering ore to the new underground crushing and hoist loading station by eliminating the previous necessity to double handle ore and waste generated on 18 Level down to 22 Level via the No 6 winze before it is crushed and hoisted from the underground loading station to surface.  The raise boring operations had an adverse impact on gold production in the first quarter of 2011resulting in 7,322 ounces being produced which was lower than the increased capacity target equivalent of 10,000 ounces per quarter. The second quarter production was higher than the first quarter but the planned annualized gold production rate of 40,000 ounces was not be achieved in 2011as a result of the lower production rates in the first and second quarters.

Metallurgical Process

The present crushing and milling circuit has been expanded from 600 tonnes per day to about 1,800 tonnes per day capacity. This is more than sufficient to handle the planned increases in mine production from the No. 4 Shaft Expansion Project, and, in future, from any ore mined from the satellite exploration properties currently being developed.

All run of mine (“ROM”) ore is crushed  underground to minus 80mm, hoisted to surface and crushed to minus 12mm in the surface 2-stage crushing circuit.  This material is then fed into two 1.8m by 3.6m rod mills where it is milled down to approximately 70% passing 75 microns, after which the milled slurry is pumped through two 30 inch Knelson Gravity Concentrators where approximately 49% of total mill gold production is recovered as ‘gravity’ gold.  The Knelson Concentrator tails are pumped through cyclones whose underflow reports to the  open-circuit regrind ball mill.  The product from the Knelson tails cyclone overflow and the regrind mill discharge are pumped into a carbon-in-leach (“CIL”) plant consisting of eight, 600 cubic meter leach tanks where alkaline-cyanide leaching and simultaneous absorption of dissolved gold onto granular activated carbon takes place.  Elution of the gold from the loaded carbon and subsequent electro-winning is done on site.  During electro winning the gold is deposited on wire wool cathodes, the loaded cathodes are acid-digested and the resultant gold solids from acid digestion and the re-dressed gold concentrate from Knelson Concentrators are smelted into bars. The granular activated carbon is kiln regenerated before it is recirculated back to the CIL section. The gold bullion, in the form of Dore bars is delivered, as required by Zimbabwean gold-mining law, to the Government-operated Fidelity for sampling and onward delivery to the Rand Refineries in South Africa.  Rand Refineries undertakes the final refining and sells the resultant gold with 100% of the proceeds being credited to Blanket’s Zimbabwean bank account in US dollars within 5 days of sale.

The CIL plant has an overall design capacity of 3,800 tonnes of milled ore per day, from its previous use for reclaimed tailings processing.  The plant tailings from CIL are reduced in cyanide content and deposited on two licensed tailing impoundment areas sited close to the plant. The maximum amount of tailings water is pumped back to the metallurgical plant for re-use.  Daily management and operation of the tailing deposition area is contracted out to the Zimbabwean subsidiary of specialized South African company “Fraser Alexander Tailings”

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Mineral Reserve Calculations

The Company has had the Blanket Mine gold reserve calculations verified.  The work was done by the South African based independent consulting company, MSA Geoservices (Pty) Ltd. ("MSA").  MSA has completed a technical report on the Blanket Mine dated June 28, 2011.  A summary of the Report - including the reserve calculations - is attached as Exhibit 14.e.  The full Report can be viewed on the Company's website at www.caledoniamining.com.  It can also be viewed on SEDAR at www.sedar.com.

Since the calculation of the above December 31, 2010 figures the Company has mined approximately 298,758 tonnes with an average gold grade of 4.01 grams per tonne from within the reserves and resource figures set out above.  Management of Blanket Mine has concluded that on-going work and exploration on the property has resulted in the establishment of replacement reserves and resources.  An updated calculation of Blanket’s reserves and resources as at December 31st 2011 has been prepared by Blanket’s Technical Department and the results are presented in the following table.

MINERAL RESERVES – December 31, 2011

Classification	Tonnes	Grade (Au g/t)	Gold Content-ounces
Proven Ore
Total Proven Ore including pillars*	1,495,000	3.86	185,500
Probable Ore
Operating and Development Areas	2,234,000	3.79	272,200
Total Proven + Probable Ore	3,729,000	3.82	457,700

Reserve estimate is based on a gold price of US$1,500/oz.

MINERAL RESOURCES

Classification	Tonnes	Grade (Au g/t)	Gold Content-ounces
Indicated	454,000	3.82	55,700
Inferred	2,344,000	5.28	**

Tonnages and ounces are rounded to the nearest 1000 and 100 respectively

Resource estimate is based on a gold price of US$1,500/oz.

Note *                        Pillar tonnages have been discounted by 50%

Note **                      In keeping with the requirements of NI 43-101, Inferred Resources are reported without estimates of metal quantities

(i)            1 tonne = 1,000 kilograms = 2,205.6 pounds

(ii)           Some numbers may not add due to rounding

Cautionary note to U.S. Investors concerning estimates of Inferred and Indicated Resources.  The above table uses the terms “inferred resources” and “indicated resources.”  While these terms are recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize them.  They have a great amount of uncertainty as to their existence, and great uncertainty as to their economic feasibility.  It cannot be assumed that all or any part of an Inferred or Indicated Mineral Resources will ever be upgraded to a higher category.  Investors are cautioned not to assume that part or all of an inferred or indicated resource exists or is economically mineable.

Dr. T. N. Pearton, BSc Eng. (Mining Geology), PhD (Geology), and Fellow of the Geological Society of South Africa is the “Qualified Person” for Blanket’s reserves and resources as required by National Instrument 43-101 of the Canadian Securities Administrators.

Relative to the previous and independent estimate of reserves and resources as at December 2010, the Reserves have decreased by 2.0% in terms of contained gold.  Resources expressed in terms of tonnage have declined by 4.1% over the same period.

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DISCONTINUED OPERATIONS

Eersteling Gold Mining Company Limited

The mine is no longer disclosed as “held for sale” but the Board’s decision to sell remains intact. The change in disclosure is as a result of no offer being made for the mine since 2008.  No additional impairment has been made against the carrying value as the previously offered price by a 3rd party potential buyer was significantly higher than the carrying value and the Corporation has rejected a purchase offer also in excess of the carrying value.  Interested parties continue to investigate the merits of purchasing the mine and the Corporation continues to seek a suitable purchaser.

MARKETING

During 2009 Blanket became entitled to export and sell its entire gold production in its own name.   Blanket has since then delivered and sold its gold production to Rand Refineries Limited in South Africa.

KEY PERFORMANCE FACTORS

During 2011, the US$ gold price per ounce continued to increase and the increased gold production from Blanket has enabled Blanket to remain cash-flow positive throughout 2011. The cash flow, together with a loan facility from Blanket’s Zimbabwean bankers, allowed Blanket to fund all of the 2011 capital expenditure at the mine. Subsequent to the completion of the No. 4 Shaft Expansion Project the mining of the Level 22 Haulage Extension Project, has recommenced.  This project will allow for the further up-dip and down-dip exploration of the Blanket mine-site’s known ore bodies and, provided this exploration is successful, will also allow for the rapid commencement of mining on the new mining areas defined and an increase in the mine’s mineral reserves and resources.   It is expected that the remaining 1,500metres of the 2,400 metre long Level 22 Haulage Development Project will be completed by the end of 2013.  The frequency of electrical supply interruptions has decreased significantly since the new supply agreement was signed with ZESA in December 2010. Nevertheless the Company installed four 2.5MVA diesel generator sets and the associated transformers, switchgear, and diesel storage to ensure continuous power supply is available to the entire surface and underground operations in the event of any power interruption.

OPERATIONAL REVIEW AND RESULTS OF OPERATIONS

The plans for the non-revenue generating exploration projects continue to be determined by the availability of funds and are more fully described below.

8.1         Gold Production

Blanket Mine – Zimbabwe

The operational statistics reported below refer to the period from January 1 to December31, 2011.

Capital Projects

Ore Pass from 18 Level (630m) to 22 Level

A 115 meter long by 1.5 metre diameter ore pass was raise-bored which has improved the efficiency and reduced the costs of moving mined ore from 18 Level to the underground crushing station.  Sustained production at a continuous 1,000 tonnes per day has been achieved since this ore pass and its 18 Level tipping station were completed in April 2011.

22 Level (750m) Haulage Development Project - from Blanket #4 shaft  to Lima shaft

The 22 level Haulage Development Project is currently behind the original schedule in the mine plan due to the decision taken in 2010 to concentrate financial resources on completing the No. 4 Shaft Expansion Project.  Work on this Project will now be recommenced to link the Blanket and Lima shafts.  Included in the work is a 230 meter ventilation raise that was raise bored to improve ventilation in this area and that will allow for double-shift blasting if required.. As the 22 level haulage project advances, crosscuts (short side tunnels) will be mined each with a length of up to several hundred meters in order to provide the required drilling platforms from which the deeper ore bodies above and below the 22 level can be drilled, evaluated and developed.  It is planned that all of the work on the 22 Level Haulage Project and its cross-cuts will be done  alongside normal mining production and should be completed by the end of 2013.  The budgeted cost of the 22 level Project utilizing internal resources is about US$ 900 per meter advanced and equipped for the planned 1,500m plus lateral tunnels totalling about $US 2.2 million to be funded from internal cash flows.

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Mine Operations

Quarterly gold production has increased since mining and milling operations were resumed from 2,746 ounces in Q2 of 2009 to 10,533 ounces in Q4 of 2011.  Monthly production and costs have however been subject to significant fluctuations largely due to the incidence of interruptions to electrical power, particularly prior to the installation of new electrical generators, and the increased labour costs.

Annual Production Results		2011	2010	2009*
Ore mined	Tonnes	314,698	149,372	94,714
Development advance (ROM)	Meters	3,013	2,455	1,267
Development advance (Capital)	meters	548	365	165
Ore milled	Tonnes	298,759	153,500	103,444
Head grade	grams/tonne	4.01	3.9	3.75
Recovery	percentage	92.90	92.00	90.96
Gold produced	Ounces	35,826	17,707	11,295
Gold Sold	Ounces	35,504	17,598	10,517
Average gold price per ounce sold	USD	1,577	1,273	1,099
Production cost per ounce	USD	581	751	744

* Figures given are for 9 months April to December 2009 as production was suspended from October, 2008 until April, 2009.

Underground

The AR South ore body above 18 Level (630m below surface datum) remains the most productive mining area and provided 30% of the total ore mined during the Quarter.   Production from this area benefitted from the completion in the preceding quarter of the new raise bored ore pass which enabled ore to be moved from the draw points on 18 Level to the 18 Level grizzlies and dropped directly via the new ore pass onto the 22 Level grizzlies feeding the ore bins above the crushing station and automated skip loading system.  The more widespread use of long-hole stoping has increased mining productivity, but at the expense of a marginal dilution in achieved grade.

Production from AR South between 22 Level and 18 Level provided approximately 21% of production in the Quarter.  Long-hole stoping was successfully introduced to this area and has resulted in increased production tonnages albeit with some associated grade dilution which has been exacerbated by some faulting in the current mining areas.  It is anticipated, however, that the planned delivered ore grades will be achieved during the remainder of 2012.

The balance of mining production (approximately 49%) came from the AR Main, Blanket, Lima and Eroica ore bodies.

The main development activities include:

•               Extension of the 14 Level haulage (510m below surface datum) to link the Eroica and Lima ore bodies to provide access to resources at Lima between 510m and 230m;

•               Development at Eroica to open the resource block between 630m and 510m; and

•               Development at AR Main to provide access between 630m and 510m.

•              An existing crosscut on 18 Level has been refurbished and equipped and will now be used to carry out resource drilling below 750m pending further development of the Level 22 Haulage.

Management is confident that the development work outlined above and the recent and continuing improvements to the underground haulages and other infrastructure will allow mine production to be sustained at the average target rate of 1,000 tonnes per day.

Gold Production

Gold produced in Q4 of 2011 was 10,533oz, an 8.1% increase on the 9,743oz produced in the preceding quarter and a 69% increase on the 6,227oz produced in the comparative 2010 quarter.  This was the seventh consecutive quarterly increase in gold production.  Total gold production in 2011 was 35,826oz, a 102% increase over the annual gold production in 2010 of 17,707oz.

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The tonnes milled, average mill feed grades, plant gold recovery and gold produced during January and February 2012, the whole 2011 year, the fourth quarter of 2011 and the preceding four quarters are shown in the table below.

Blanket Mine Production Statistics
	Year	Tonnes Milled (t)	Gold Head (Feed)  Grade (g/t)	Gold Recovery	Gold Produced (oz)	Average sales  price per ounce of gold sold (US$/oz)
February	2012	26,206	3.71	93.1%	2,914	1,734
January	2012	27,410	3.30	92.8%	2,695	1,675
TOTAL 2011	2011	298,759	4.01	92.9%	35,826	1,577
Fourth quarter qqquarterOctober	2011	90,967	3.86	93.4%	10,533	1,681
Third quarter	2011	85,442	3.81	93.1%	9,743	1,740
Second quarter	2011	60,913	4.52	92.9%	8,226	1,512
First quarter	2011	61,437	4.02	92.2%	7,322	1,397
TOTAL 2010	2010	153,500	3.90	92.0%	17,707	1,273

Gold production during Q4 was higher than in previous quarters reflecting the higher mined tonnages which resulted from improved efficiencies in the underground operations and improvement in the ore transportation on the 630 and 750 levels.  This resulted from the completion in the preceding quarters of the raise-bored ore pass between these major ore transporting levels, improvements to the track condition of the main underground haulages and maintenance of underground ore production and transport equipment.

The gold head grade in Q4 2011 was 3.86g/t which was consistent with the mine plan for Q4; the average grade achieved in 2011 was 4.01g/t Au, which was somewhat better than the planned grade of 3.85g/t Au.  The reduction in gold grades during the last 2 quarters of 2011, which has continued into early 2012, is the result of a combination of factors which include: the mining of lower grade areas which are commercially viable at the prevailing gold price; the more widespread use of long-hole stoping which, whilst allowing increased mining tonnages, has an adverse effect on grade control; and the incidence of some faulting at AR South which had an adverse effect on realised grades.

Plant recoveries showed a further improvement during Q4 2011 increasing to 93.4% compared to a target of 91.0%. This is due to investments made in improvements to the crushing and carbon-in-leach (CIL) sections earlier in the year.  The two new gyratory crushers and the associated triple-deck crushed ore sizing screen continued to operate well and are capable of providing adequate sized crushed ore for the mill feed at a rate well in excess of the targeted 1,000 tonnes per day (tpd).  The improved consistency of smaller product ore size delivered to the mills contributed to an improvement in gravity gold recovery circuit.

The CIL plant improvements included new agitator gearboxes and mixers, and the installation of an automated cyanide leach-reagent dosing and control system.

Power availability in Q4 2011 remained reasonably stable although as anticipated, ZESA was unable to maintain a completely uninterrupted supply. The power loss for the Year was significantly lower at 120.5 hours compared to 1,718 hours during 2010.  The standby generators operated as designed for 63.7 hours during Q4 and allowed full operations to continue during the ZESA power interruptions to normal electricity supply.

As advised previously, essential maintenance work on the No. 4 Shaft and head structure had an adverse effect on production during January and February 2012.  However, this work will allow for increased hoisting speeds which will be required to allow increased future production if sufficient ore can be made available from underground.  This No. 4 shaft work had largely been completed by early March and production in March was approximately 3,600 ounces of gold.  Mine production tonnages and gold production thereafter have now improved to the level required to reach the targeted gold production of 40,000oz for 2012.

Outlook

Blanket has achieved its annualized targeted production rate of 40,000 ounces per annum, which is expected to be sustained as a result of the 2011 improvements in the underground handling systems and ongoing mine development.  Essential maintenance work on the No. 4 Shaft and Headgear Structure in early 2012 had a temporary and minor effect on production during that period.  Increased hoisting speeds will soon be possible and these are required to allow increased future production if sufficient ore can be made available from the Blanket underground.

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The surplus capacity of the Blanket crushing and milling plant enables it to immediately treat additional feed material from the Blanket underground and from the GG and Mascot Project Area mines if the planned exploration/development work is successful.

There is significant upward pressure on costs, taxes and regulatory fees in Zimbabwe.  Nevertheless, Blanket has surplus capacity at the metallurgical plant and is sufficiently cash generative that it can invest in projects with a view to further increasing production, thereby helping to maintain downward pressure on the cost per ounce of gold produced.

EXPLORATION AND PROJECT DEVELOPMENT

Base Metals

Copper and Cobalt Base Metals

Nama Project – Zambia

Property

Caledonia Nama Limited (“Nama”), a wholly owned subsidiary of the Corporation, holds four, contiguous large scale mining licenses covering approximately 800 square kilometres on the Zambian Copperbelt.  The northern boundary of Caledonia’s licenced area is the Democratic Republic of Congo (“DRC”) border and the eastern boundary abuts the licence area that is held by a joint venture between Vale and African Rainbow Minerals where a new copper mine is currently under construction.

Prior to the 2011 programme, exploration activities had defined three main styles of mineralization in the Nama Licence area:

a) “A-type” cobalt oxide mineralisation;

b) “D-type’ iron oxide bodies which are mostly enriched in Cobalt; and

c) Copper dominated ore shale hosted copper-cobalt mineralisation, commonly observed elsewhere in the Copperbelt and which is being exploited by neighbouring mines to the east and south of the Nama Licence Areas.

2011 Exploration Programme

The 2010 exploration programme identified two resource targets at Nama (being “Konkola East” and “Kafwira”) which were characterised as belonging to the ore shale-hosted copper-cobalt style of mineralisation.  The 2011 programme was focussed initially on Konkola East where a four-hole diamond drilling programme was carried out with the primary objective of confirming the existence of the Ore Shale member of the Copperbelt stratigraphy.  The results of this programme confirmed the existence of Ore Shale in all holes.  The Ore Shale intersection in holes 1 and 2 was found at depths and copper grades that do not merit further exploration at this stage.

Evaluation of the drill core extracted from holes 3 and 4 identified a zone of mineralisation which occurs at considerably shallower depths than the Ore Shale and does not occupy a specific stratigraphic layer as would be expected.  Assays of the mineralised zones identified in holes 3 and 4 were sufficiently encouraging to warrant a fifth hole that was drilled in late 2011 and which also intersected the newly identified mineralised zone.

Preliminary Evaluation of the Results of the 2011 Drilling Programme

The new mineralised zone identified in holes 3, 4 and 5 is considered to be a contiguous zone.  The assay results for the three intersections have a weighted average of 0.47% copper over a weighted average width of 41 metres at depths between 280 and 450 metres.  Holes 3 and 4 are approximately 1,650 metres apart representing a minimum strike length of the mineralisation. The interpreted structure of the mineralised zone suggests that the zone may extend to surface within the Nama Licence.

Although the copper grades of the newly identified zone are lower than existing mines in the region, the zone is relatively shallow and the ore mineralogy found in holes 3, 4 and 5 is un-oxidised chalcopyrite, a mineral which is readily recoverable by conventional flotation that is recognized as a relatively low-cost metallurgical process.

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2012 Exploration Programme

Caledonia’s Board has reviewed the results of the 2011 exploration programme and the recommendations of management.  Caledonia believes that it should focus on the Konkola prospect and accordingly, it has approved an exploration programme for Nama in 2012 which has the following objectives:

·   Phase 1: Drilling of additional relatively-shallow holes comprising approximately a total 2,400 metres with the objective of identifying a continuation of the newly discovered mineralized zone towards surface.  This phase of the exploration programme is expected to start as soon as ground/weather conditions permit and results of this work are expected 4 to 5 months thereafter.

·   Phase 2: Drilling of additional deeper holes comprising approximately a total of 6,000 metres with the objective of identifying the nature of a deeper continuation of the above mineralised zone.  This work will take place after completion of Phase 1 and is expected to take approximately 8 to 10 months.

·   Phase 3: Provided the results of the Phase 1 programme are positive, a further shallow hole drilling programme focussed on delineating and evaluating resources compliant with NI 43-101 will be presented to the Caledonia Board for approval prior to possible commencement.  This Phase may commence during Phase 2 activities.

Substantial additional exploration work may be required in future years to arrive at a NI 43-101 compliant resource estimate at Nama.

Further information with respect to the Nama properties is given in Exhibits 14c, 14d and 14g.

PGE’s

Rooipoort & Mapochs Platinum, Gold, Palladium /Ni/Cu (“PGM”) Project - South Africa

The Rooipoort rights are held by Maid O’ the Mist, which is a wholly owned subsidiary of the Corporation.  Maid O’ the Mist is the vehicle that will be used to manage the Rooipoort platinum exploration program.

An application in terms of the provisions of the applicable Act is in progress to treat the 5 adjoining prospecting rights at Rooipoort as a single right and to extend the period of this consolidated right for a further three years.

The prospecting rights granted to the Corporation to prospect for Platinum Group Elements (PGE)s on the major portions of the Mapochsgronde tribal trust land are currently in the process of registration.  A further application has been made for an adjoining property to the north of the current rights applied for.  The Corporation is still waiting the issuing of the prospecting right following its registration.

Activities at Rooipoort/Mapochs properties were suspended during 2010 due to the lack of progress on the part of the South African Department of Mineral Resources in registering the licence areas in the names of Caledonia’s local subsidiaries.  This has now been completed but work remains suspended until the prospecting right renewals have been granted.

Further information with respect to the Rooipoort property is given in Exhibits 14c, 14f and 14g.

Gold

Zimbabwe Exploration

The Corporation’s primary exploration activities in Zimbabwe are at the Blanket Mine, which are discussed in section 6.6 (Lima Haulage).  Other than at Blanket Mine itself, Blanket’s current exploration title holdings in the form of registered mining claims in the Gwanda Greenstone Belt total 78 claims, including a small number under option, covering an area of about 2,500 hectares.  Blanket’s main exploration efforts on its satellite properties are focused at this stage on the GG prospect and the Mascot Project Area which are believed to have the greatest potential of success and both of which are within an economic trucking distance of the Blanket plant.

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Drilling programs were carried out at GG over the past eight years.  Seventeen diamond-cored holes were drilled amounting to 4,751 metres of drilling.  Two zones of potentially economic gold mineralization have been established down to a depth of approximately 200m, each with a strike length of approximately 150 metres.  A prospect shaft will be sunk down to a depth of 140 metres and underground development is planned at the 60m and 120m levels to expose the extent of the mineralization.  During 2011 work was suspended pending ZESA’s connection of the project to the electricity grid.  This connection was delayed due to ZESA’s inability to fund the equipment required for the connection.   Blanket has now purchased the required equipment and provided financial assistance to ZESA so that it can complete the construction of this connection.   ZESA expects to complete the GG sub-station by the end of the second quarter of 2012.  In order to accelerate this project a shaft-sinking contractor has been appointed and a camp is currently being built to accommodate its staff.   As soon as the ZESA connection is installed, the deepening of the existing prospect shaft can continue and underground development on the first and second levels will commence to expose the extent of the mineralization and to facilitate its evaluation, sampling and mine planning.  Depending on the successful outcome of exploration work and mining development, it is intended that economic ore extracted would be trucked approximately 7km to the Blanket plant for processing.

The Mascot Project Area comprises three existing shafts (Mascot, Penzance and Eagle Vulture) which extend down to various depths of up to 450 metres. These shafts and other infrastructure are in need of extensive rehabilitation.  Production at these shafts ceased decades ago due to a combination of political difficulties and the limitations of the technology that was then available.  Blanket Mine Management believes that the application of modern exploration and processing techniques may allow some or all of these shafts to operate profitably for a period of time, and not just at the prevailing high gold price.  Priority has been given to the rehabilitation and installation of infrastructure at Mascot and Eagle Vulture shafts.  Work at Eagle Vulture has continued during the Quarter with one development crew.  Work at Mascot was suspended due to the lack of a connection to the electricity grid.  Blanket has now purchased the required equipment and provided financial assistance to ZESA so that it can complete the construction of this connection. Work on this connection has now commenced and ZESA expects to complete this work by the end of April 2012.  Depending on the outcome of exploration work, it is intended that economic ore would be trucked a distance of approximately 40 km to the Blanket Mine plant for processing.

The Blanket Mine metallurgical plant has existing surplus treatment capacity and could immediately handle up to an additional 800 tonnes per day of ore without any further capital investment nor increased overheads.

Blanket is formulating an exploration and project development strategy to prioritize work on its other properties in the Gwanda area.

Outlook

The outlook for the aforementioned exploration properties is not possible to quantify.  Exploration by its nature is speculative with a high degree of risk accompanied by the potential for high returns.  The Corporation manages this risk by using well-qualified exploration professionals.  Continuing lower prices for platinum group metals and reduced investor appetite for South African base metals has resulted in a severe contraction of exploration expenditures for platinum group metals by mining companies and could negatively affect the likelihood of the Corporation negotiating joint venture agreements for its wholly-owned PGE exploration properties.

The Corporation intends, where possible, to continue to focus its exploration activities of prospective properties by developing the properties through strategic alliances with other mining companies and metal producers.

The Zimbabwe economy continues to be depressed and Zimbabwe’s economic capacity may struggle to expand further.  Pressure for unrealistic wage and price increases from labour and Zimbabwean suppliers continues.  There is also continuing pressure for higher taxes, both from national and local government and Blanket has accepted increased supply tariffs from the state-owned electricity utility (ZESA) to secure a more reliable power supply. The resuscitation of the mining industry is a stated high priority of the Government as its ability to quickly generate foreign currency is of paramount importance, but blatant political manoeuvring may over take this.  Notwithstanding these difficulties, and in the absence of any unforeseen changes to the operating and commercial environment, Blanket has now achieved sufficient critical mass and should be able to realise substantial economies of scale and an improvement in its cash-generative capacity.

However, the Government’s aim to foster the rapid regeneration of the Zimbabwean mining sector has been severely undermined by recent regulations and other pronouncements which seek to immediately enforce stringent indigenization requirements which will deter new investment into the Zimbabwean mining industry and result in a further contraction of the mining industry.

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General Comments

Caledonia’s activities are centered in Southern Africa.  Generally, in the gold mining industry the work is not seasonal except where heavy seasonal rainfall can affect surface mining or exploration.  Caledonia is not dependent, to any material extent, on patents, licenses, contracts, specialized equipment or new manufacturing processes at this time.  However, there may be occasions that Caledonia may wish to adopt such patents, licenses, specialized equipment, etc. if these are economically beneficial to its operations.

All mining and exploration activities are conducted under the various Economic, Mining and Environmental Regulations of the country where the operations are being carried out.  It is always Caledonia’s standard that these regulations are complied with by Caledonia.  Otherwise its activities risk being suspended.

(C) Organizational Structure - Subsidiaries

Caledonia Mining Corporation owns 100% of the shares of the following incorporated subsidiary  companies:

Zambia:	Barbados:
- Caledonia Mining (Zambia) Limited	- Blanket (Barbados) Holdings Limited
- Caledonia Western Limited	- Caledonia Holdings (Africa) Limited
- Caledonia Nama Limited
- Caledonia Kadola Limited
South Africa:	Zimbabwe:
- Eersteling Gold Mining Company Limited	- Blanket Mine (1983)(Private)( Limited)
- Greenstone Management Services (Pty)Limited	- Caledonia Holdings Zimbabwe Limited
- Fintona Investments (Pty) Ltd	- Caledonia Mining Services Limited
- Maid O’Mist (Pty) Limited
- Mapochs Exploration (Pty) Ltd
England:	Panama:
- Greenstone Management Services Limited	- Dunhill Enterprises Inc.

(D)          Property, Plant and Equipment

(a)           South Africa:

The  Eersteling gold mine, indirectly owned by the Company through its ownership of 100% of the shares of  Eersteling Gold Mining Company Limited, is essentially a fully equipped mine with all of the underground and surface equipment needed to conduct mining operations and the treatment and concentration of ore mined from the properties.  Due to the lengthy period of care and maintenance at Eersteling there has been some deterioration in the facilities which will require rehabilitation work before operations can be recommenced.  The underground workings at Eersteling were allowed to flood and will require dewatering before mining access can be resumed.  Because the mine is on care and maintenance the Company has no plans to expend further amounts on plant or equipment for them or to in any way expand or improve the facilities.

The sale of Barbrook gold mine indirectly owned by the Company through its ownership of 100% of the shares of Barbrook Mines Limited was concluded on May 31, 2008.

(b)           Zimbabwe:

The Blanket Mine, in Zimbabwe, which the Company indirectly owns through its ownership of 100% of the shares of Blanket Mine (1983) (Private) Limited, the owner and operator of the Mine.  It is a fully equipped mine with all of the necessary plant and equipment to conduct mining operations and the production of gold from the ore mined from the Mine.

5       OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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 A Operating Results

The following information is given for the last two fiscal year-ends of the Corporation:

C$000’s except for earnings per share amounts.	December 31, 2011	December 31, 2010
Revenue from sales	55,705	22,388
Net income (loss) before income tax and discontinued operations :	20,594	2,497
Net Income (loss) before discontinued operations , after tax	12,130	1,455
Net income/(loss) per share - basic and diluted	$0.024	$0.003
Comprehensive Income (loss)	12,395	6
Total assets	52,402	38,159
Total long-term liabilities	7,822	7,050
Cash dividends declared per share	Nil	Nil

The Corporation achieved a gross operating profit of $ 29,115,000 for the year ($6,360,000 – 2010 ) on gold sales of 35,504 ounces (17,598 – 2010 ) at an average gold price of $1,577 ($1,273 – 2010).

Total gold production for the year was 35,826 ounces (17,707 – 2010).

Finance charges paid amounted to $217,000 ($267,000 – 2010) and were as a result of Blanket requiring borrowed funding.

During 2011, the Corporation invested $8,528,000 in capital assets and mineral properties ($7,304,000 in 2010).   Of the amount invested in 2011, Blanket accounted for $5,768,000 ($6,706,000 - 2010), Nama accounted for $2,709,000 ($609,000 - 2010) and Rooipoort accounted for $30,000 ($37,000 - 2010).

The basic and diluted net income per share for 2011 was $0.024 ($0.003 in 2010). This has been calculated using a weighted average number of shares of 500,396,239 (500,169,280 in 2010).

As at December 31, 2011, the Corporation is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy.

	As at December 31, 2011	As at December 31, 2010
	$000	$000
Issued common shares	196,163	196,125
Contributed surplus	3,407	2,306
Other comprehensive income/(loss)	(1,134)	(1,399)
Deficit	(158,422)	(170,552)
Total	40,014	26,480

B.       Trend Information

With the completion of the No. 4 Shaft expansion project, annual gold production will increase from the 2011 level of 35,826 ounces to approximately 40,000 ounces during 2012.  It is anticipated that the employee headcount will increase to approximately 820 employees. The productions costs per ounce are therefore expected to reduce at above the 40,000 ounce production level as the fixed employment costs are amortized over higher monthly production volumes.

The Company does not have a hedging programme.

6.        INVESTING

During 2011, the Corporation invested $8,528,000 in capital assets and mineral properties ($7,304,000 in 2010).   Of the amount invested in 2011, Blanket accounted for $5,768,000 ($6,706,000 - 2010), Nama accounted for $2,709,000 ($609,000 - 2010) and Rooipoort accounted for $30,000 ($37,000 - 2010).

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Caledonia Mining Corporation

7. FINANCING

Caledonia financed its operations, except Blanket, using funds on hand.  No equity raisings programs took place in 2011.  Caledonia’s operations will be financed from existing cash resources and dividend payments from Blanket.  Blanket has a facility of US$2.5 million with its bank in Zimbabwe and had an outstanding balance of $430,000 ($747,000-2010) owing at the year end pursuant to such facility.

8. LIQUIDITY AND CAPITAL RESOURCES

With the increase of production at Blanket, inventory levels of consumables, spares and gold in process have risen to $4,482,000 ($2,624,000 - 2010).  Accounts payable levels of $3,841,000 ($3,882,000 - 2010) have increased accordingly with production.  Blanket had $430,000 ($747,000 – 2010) of bank borrowing outstanding at the year end.  The Rand Refinery payments continue to be cleared within the contracted period thereby assisting cash management.

Caledonia has potential liabilities to do rehabilitation work on the Blanket and Eersteling Mines - if and when those Mines are permanently closed - at an estimated current cost of $1,785,000  ($1,899,000 - 2010).

9.        OFF-BALANCE SHEET ARRANGEMENTS

There are no off balance sheet arrangements.

10.     CONTRACTUAL OBLIGATIONS

	Payments due by Period – in thousands of Canadian Dollars
	Within 1 Year	1-3 years	3-5 years	More than 5 years	Total
Short term debt	430,000		-	-	430,000
Trade and other payables	3,841,000		-	-	3,841,000
Asset retirement obligations	-	-	-	1,785,000	1,785,000

11.      RELATED PARTY TRANSACTIONS

The Corporation had the following related party transactions measured at the exchange amount:

C$ 000s	2011	2010
Fees and allowances paid to a Corporation which provides the services of the Corporation's President and CEO	588	552
Rent for office premises paid to a company owned by members of the President’s family	48	49
Legal fees paid to a law firm where a Director is a partner	97	58
Fees, allowances and interest paid to the past Chairman of the Board	-	38

The Corporation has a management agreement with Epicure Overseas S.A. (“Epicure”), for management services provided by the President and CEO.  The Corporation is required to pay a base annual remuneration and an expense allowance adjusted for inflation and bonuses as set out in the agreement.  In the event of a change of control of the Corporation, Epicure can terminate the agreement and receive a lump sum payment equal to 200% of the remuneration for the year in which the change occurs.

These related party transactions were in the normal course of operations and are recorded at the exchange amount.

On January 1, 2005 the Corporation entered into an agreement with the Corporation’s former Chairman for services as the non-executive Chairman of the Board of Directors of the Corporation. This agreement was terminated in December 2010.

12           CRITICAL ACCOUNTING POLICIES

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Caledonia Mining Corporation

The major areas where accounting estimates are made are asset impairment, asset retirement obligations, share based payments, future tax liabilities and functional currency. As significant impairment provisions have already been made against the assets, and there is a reasonable level of certainty around the estimates, it is considered unlikely that any change in estimates would result in a material impact on the results of Caledonia.  The asset retirement obligations are also considered to be estimated with a reasonable degree of certainty, although the original estimations were calculated some years ago.  The estimation for Blanket was recalculated before December 31, 2009.  The estimations are accreted annually at rates between 1.7% and 5% and thus any change in circumstances is considered unlikely to have a material impact on the results of Caledonia or its operations.

A detailed description of the Company’s accounting policies is contained in Note 4 of the Company’s 2011 audited financial statements which are attached as Exhibit 14a.

The accounting policies set out in Note 4 of the Company’s 2011 audited financial statements been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening IFRS statement of financial position at January 1, 2010 for the purposes of the transition to IFRS, unless otherwise indicated. The accounting policies have been applied consistently by the Group entities.

Recently issued accounting pronouncements issued and not yet effective.

Standard/Interpretation		Effective date
IFRS 7 amendment	Disclosures – Transfers of Financial Assets	Annual periods beginning on or after  July 1, 2011
IFRS 9	Financial Instruments	Annual periods beginning on or after January 1, 2015
IFRS 10	Consolidated Financial Statements	Annual periods beginning on or after January 1, 2013
IFRS 11	Joint Arrangements	Annual periods beginning on or after January 1, 2013.
IFRS 12	Disclosure of Interests in Other Entities	Annual periods beginning on or after January 1, 2013
IFRS 13	Fair Value Measurement	Annual periods beginning on or after January 1, 2013
IAS 1 amendment	Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income	Annual periods beginning on or after July 1, 2012

There are new or revised Accounting Standards and Interpretations in issue that are not yet effective.  Management have considered all of these Standards and Interpretations and have concluded that those that may have an impact on future consolidated financial statements are the following:

The assessment of the impact of the above Standards and Interpretations is as follows:

Amendment to IFRS 7 Financial Instruments: Disclosures

The amendments to IFRS 7 will be adopted by Caledonia Mining Corporation for the first time for its financial reporting period ending December 31, 2012.

In terms of the amendments, additional disclosure will be provided regarding transfers of financial assets that are:

·   Not derecognised in their entirety and

·   Derecognised in their entirety but for which Caledonia Mining retains continuing involvement.

To the extent that Caledonia Mining concludes transactions which involve transfer of its financial assets, it will comply with the required disclosures.

IFRS 9 Financial Instruments

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Caledonia Mining Corporation

IFRS 9 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2015. The standard will be applied retrospectively, subject to transitional provisions.

IFRS 9 addresses the measurement and classification of financial liabilities and will replace the relevant sections of IAS 39.

Under IFRS 9, the classification and measurement requirements of financial liabilities are the same as per IAS 39, except for the following two aspects:

·   fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss that are attributable to the changes in the credit risk of the liability will be presented in other comprehensive income (OCI). The remaining amount of the fair value change is recognised in profit or loss. However, if this requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed.

·   Under IFRS 9 (2010) derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.

IFRS 9 incorporates, the guidance in IAS 39 dealing with fair value measurement and accounting for derivatives embedded in a host contract that is not a financial asset, as well as the requirements of IFRIC 9 Reassessment of Embedded Derivatives.

IFRS 9 may impact the current classification of financial assets from amortised cost to fair value.  The current classification of financial liabilities is not expected to be impacted.

IFRS 10 Consolidated Financial Statements

IFRS 10 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2013. The standard will be applied retrospectively if there is a change in the control conclusion between IAS 27/SIC 12 and IFRS 10.

IFRS 10 introduces a single control model to assess whether an investee should be consolidated. This control model requires entities to perform the following in determining whether control exists:

·   Identify how decisions about the relevant activities are made,

·   Assess whether the entity has power over the relevant activities by considering only the entity’s substantive rights,

·   Assess whether the entity is exposed to variability in returns, and

·   Assess whether the entity is able to use its power over the investee to affect returns for its own benefit

Control should be assessed on a continuous basis and should be reassessed as facts and circumstances change.

IFRS 10 may result in certain subsidiaries no longer being consolidated or others to be consolidated under the new requirements.

IFRS 11 Joint Arrangements

IFRS 11, Joint Arrangements, establishes principles for financial reporting by parties to a joint arrangement. The IFRS is to be applied by all entities that are a party to a joint arrangement. It provides a new definition of joint arrangement focusing on the rights and obligations of the arrangement, rather than its legal form. The IFRS defines joint control as the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (i.e. activities that significantly affect the returns of the arrangement) require the unanimous consent of the parties sharing control. IFRS 11 classifies joint arrangements into two types—joint operations and joint ventures, defines the two types, and requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations arising from the arrangement. IFRS 11 addresses the inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 11 supersedes IAS 21 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Nonmonetary Contributions by Venturers.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2013.

IFRS 12 combines, in a single standard, the disclosure requirements for subsidiaries, associates and joint arrangements, as well as unconsolidated structured entities.

The required disclosures aim to provide information to enable user to evaluate:

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Caledonia Mining Corporation

·   The nature of, and risks associated with, an entity’s interests in other entities, and

 

·   The effects of those interests on the entity’s financial position, financial performance and cash flows.

The adoption of the new standard will increase the level of disclosure provided for the entity’s interests in subsidiaries, joint arrangements, associates and structured entities.

IFRS 13 Fair Value Measurement

IFRS 13 will be adopted by Caledonia for the first time for its financial reporting period ending December 31, 2013. The standard will be applied prospectively and comparatives will not be restated.

IFRS 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets and liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures requirements for fair value measurements. The key principles in IFRS 13 are as follows:

·   Fair value is an exit price

·   Measurement considers characteristics of the asset or liability and not entity-specific characteristics

·   Measurement assumes a transaction in the entity’s principle  (or most advantageous) market between market participants

·   Price is not adjusted for transaction costs

·   Measurement maximises the use of relevant observable inputs and minimises the use of unobservable inputs

·   The three-level fair value hierarchy is extended to all fair value measurements

Currently the impact on the financial statements for Caledonia is expected to be minimal as Caledonia Mining only has limited items measured at fair value.

Amendment to IAS 1 Presentation of Financial Statements

The amendment to IAS 1 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2013.

The company will present those items of other comprehensive income that may be reclassified to profit or loss in the future separately from those that would never be reclassified to profit or loss. The related tax effects for the two sub-categories will be shown separately.

This is a change in presentation and will have no impact on the recognition or measurement of items in the financial statements.

This amendment will be applied retrospectively and the comparative information will be restated.

Additional amendments are of a presentation nature and will not have a significant impact on the Company’s financial statements.

13.            FINANCIAL RISK EXPOSURE AND RISK MANAGEMENT

The Corporation is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on preservation of capital, and protecting current and future Corporation assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.

The Board of Directors has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Corporation’s Audit Committee oversees management’s compliance with the Corporation’s financial risk management policy.

The fair value of the Corporation’s financial instruments approximates their carrying value unless otherwise noted.  The types of risk exposure and the way in which such exposures are managed are as follows:

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Caledonia Mining Corporation

(a)   Currency Risk

As the Corporation operates in an international environment, some of the Corporation’s financial instruments and transactions are denominated in currencies other than the Canadian Dollar, mainly the South African Rand and the US$. The results of the Corporation’s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Corporation are reported in Canadian dollars in the Corporation’s consolidated financial statements.

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

As noted below, the Corporation has certain financial assets and liabilities denominated in foreign currencies. The Corporation does not use any derivative instruments to reduce its foreign currency risks.

Below is a summary of the cash or cash equivalents denominated in a currency other than the Canadian dollar that would be affected by changes in exchange rates relative to the Canadian dollar.  The values are the Canadian dollar equivalent of the respective asset or liability that is denominated in a currency other than the Canadian dollar.

C$‘000s	2011	2010
Cash	9,210	1,067
Bank overdraft	(430)	(747)
Accounts Receivable Receivable	3,474	2,302
Accounts payable	(3,413)	(3,474)

(b)   Interest Rate Risk

Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates.

Unless otherwise noted, it is the opinion of management that the Corporation is not exposed to significant interest rate risk as it is debt free apart from short term borrowings utilized in Zimbabwe.  The Corporation’s cash and cash equivalents include highly liquid investments that earn interest at market rates. The Corporation manages its interest rate risk by endeavouring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. The Corporation’s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.

Cash held in foreign banks is subject to the interest rates ruling in those particular countries and this can have an effect on the results of the Corporation due to higher interest rates being paid in African countries compared to Canada. At December 31, 2011 cash held in interest bearing accounts amounted to $9,686,000 ($1,145,000 - 2010) and short term borrowings in Zimbabwe were $430,000 ($747,000 – 2010).  At December 31, 2011, with all other variables unchanged, a 1% increase in interest rates would result in an increase of interest (income)/expense of ($93,000) (($4,000 – 2010).

Fluctuations in market interest rates have not had a significant impact on the Corporation’s results of operations.

(c)   Concentration of Credit Risk

Credit risk is the risk of a financial loss to the Corporation if a gold sales customer fails to meet its contractual obligation. Current gold sales are made to Rand Refineries in South Africa and the payment terms stipulated in the service delivery contract have been adhered to in all instances.  There are no plans to change the existing relationship with Rand Refineries.

(d)   Liquidity Risk

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due.

The Corporation manages its liquidity by ensuring that there is always sufficient capital to meet its estimated cash requirements, after taking into account cash flows from operations and the Corporation’s holdings of cash and cash equivalents. The Corporation believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities.

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Caledonia Mining Corporation

The Zimbabwean operations are now covered for Public Liability risk, assets all risk and Comprehensive cover on all motor vehicles.

 (e)   Commodity Price Risk

The value of the Corporation’s mineral resource properties is related to the price of gold, platinum and cobalt, and the outlook for these minerals. In addition, adverse changes in the price of certain key or high cost operating consumables can significantly impair the Corporation’s cash flows.

Gold prices historically have fluctuated widely and are affected by numerous factors outside of the Corporation's control, including, but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand because of speculative hedging activities, and macro-economic variables, and certain other factors related specifically to gold. Recent $US gold price movements have been ascending but the effect of devaluation of the US$ against the Canadian $ and the South African Rand has mitigated against the higher US$ gold price.

Caledonia has not hedged any of its past or future gold sales.

14.       CAPITAL MANAGEMENT

The Corporation’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue its mining operations and exploration potential of its mineral properties.

The Corporation’s capital includes short-term debt, long-term debt and equity, comprising issued common shares, contributed surplus, accumulated deficit and accumulated other comprehensive income.

The Corporation’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its ongoing operations, to provide returns for shareholders, accommodate any asset retirement obligation and to pursue growth opportunities.

In order to fund and maximize ongoing exploration efforts, the Corporation does not pay dividends.

15. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A Directors and Senior Management

A brief profile of each of the Directors and the senior management is given below:

Carl Jonsson, LL B- Chairman, Director, Secretary and legal adviser to Caledonia

Mr. Jonsson is a lawyer and has been associated with the resource industry for over 40 years.  In his legal practice he has specialized in securities and corporate work. He has been a director of Caledonia since February 1992 and prior to that date he was a director of one of its predecessor companies.  Mr. Jonsson resides in Vancouver, British Columbia, Canada and is a principal of the law firm Tupper, Jonsson and Yeadon.  Mr. Jonsson acts as the Company’s principal Canadian lawyer.  Mr. Jonsson sits on the board of directors of several public companies in Canada.

Stefan E. Hayden, Director,  President and Chief Executive Officer

Mr. Hayden has extensive experience as a company manager in South Africa. Initially he founded, developed and managed an engineering company that manufactured flameproof mining machinery. He followed this by managing a company holding the Massey Ferguson franchise in the Transvaal and the Orange Free State and returned it to profitability for the then owners Standard Corporate Merchant Bank. He then founded and managed the South African agency for heavy electrical equipment sales and installations for Toshiba Corporation of Japan.  He has been Managing Director of Industrial Brokers, a family company specializing in the procurement of steel and mining machinery, since 1971 and continues in this position.

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Caledonia Mining Corporation

With his wide managerial, electrical and mechanical, and mining experience Mr. Hayden has acted as technical advisor to numerous mines and companies in Southern Africa.  Prior to the Caledonia acquisition, Mr. Hayden as the Chief Executive Officer of Eersteling Gold Mining Company Limited and Barbrook Mines Limited was responsible for both operations. He joined Caledonia in 1995 and was appointed Managing Director, African Operations responsible for the development of Caledonia’s business in Africa. In June 1996, Mr. Hayden was elected as a Director of Caledonia and subsequently appointed Deputy Chairman of Caledonia. In January 1997 he was appointed Chairman of Caledonia and in June 1997 the position of President and Chief Executive Officer was added to his responsibilities. In February 2005 he resigned as Chairman.

James Johnstone, B.Sc., ARCST, P.Eng., Director

A graduate-mining engineer Mr. Johnstone has 40 years experience in mine operations in North America, Africa and Europe. He has experience in both underground and open pit operations.  For the 20 years prior to his retirement he was employed as General Manager or Vice-President Operations for mining companies producing gold, base metals and industrial minerals. Mr. Johnstone has been responsible for the construction, start up and commissioning of two major mines in addition to the commissioning of Caledonia's Filon Sur operation. He has also been involved in the orderly closure of three operations. He has operated successfully in environmentally sensitive areas and has a good understanding of the permitting process in Canada and the United States. Mr. Johnstone joined Caledonia in April 1997 as Vice President Operations and was responsible for Caledonia's operations in Zambia and South Africa and for all activities in Canada. He was elected a Director of Caledonia in June 1997. He retired from active employment with Caledonia in September, 2006.

Christopher Harvey, LRIC, HNC (Chem.), Director

A Chemistry graduate from Wigan Mining College, Mr. Harvey has spent his career in the international mineral processing industry. Prior to immigrating to Canada in 1987 he worked for the Anglo American Group in a number of senior metallurgical positions. These included projects associated with gold and copper/cobalt production, gold, uranium and sulfuric acid production. Mr. Harvey joined Doelcam, a predecessor company of Caledonia in 1989 as Vice-President Operations and was responsible for a number of property evaluations in several countries. He was appointed Senior Vice President of Caledonia at its inception in 1992 and has been a Director since 1993.  He has since held a number of senior positions within the company and was the company's Technical Director until December 2005 when he retired. He continues as a Director of Caledonia.  From late 1996 to the end of September 1998, Mr. Harvey was seconded to Filon Sur in Spain for the construction, commissioning and ongoing operation of the expansion to the heap-leach expansion project. He has also coordinated metallurgical studies for most of the company's projects, such as the Nama copper/cobalt project, the Eureka copper/gold project and the Kadola copper project in Zambia, Barbrook gold mine refractory gold recovery project and the provisional Rooipoort platinum project in South Africa and the Cononish gold project in Scotland.

Steven Curtis, CA(SA)– Director,Vice-President Finance and Chief Financial Officer

Mr. Curtis is a Chartered Accountant with over 24 years experience and has held a number of senior financial positions in the manufacturing industry.  Before joining Caledonia in April 2006, he was Director Finance and Supply Chain for Avery Dennison SA and prior to this, Financial Director and then Managing Director of Jackstadt GmbH South African operation.  Mr. Curtis is a member of the South African Institute of Chartered Accountants and graduated from the University of Cape Town.

Mr. Curtis was appointed Vice-President Finance and Chief Financial Officer of the Company in April, 2006.

Robert W. Babensee – Director

Mr Babensee is based in Toronto, Ontario, Canada and joined Caledonia’s Board in October 2008. He has been a member of the Institute of Chartered Accountants of Ontario, Canada since 1968.

From 1984 until his retirement in 2004, he was a partner of the Canadian accounting firm BDO Dunwoody LLP as an assurance specialist. He served as Chief Financial Officer for Golden China Resources Corporation, a natural resource company, between February 2005 and July 2006.

Mr Babensee was formally a non-executive Director and a member of the audit, compensation and nominating committees of Apollo Gold Corporation (now Brigus Gold Corporation), which is listed on the Toronto, New York and American Stock Exchanges whose business focus is on gold exploration, development and production in North America and has gold exploration, development and producing assets in Canada, the USA and Mexico.

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Caledonia Mining Corporation

Dr. Trevor Pearton – Vice President Exploration

Dr. Pearton has worked for Caledonia since 2001.  During the time, he was responsible for the establishment and management of the resource bases at the Blanket Mine (operating) and the Barbrook and Eersteling Mines (now on care and maintenance) and the assessment of the Nama project, resulting in a reinterpretation of the ore body and an improved definition of the resources and mineralogical characteristics.  This work provided the basis for the 2007 (completed) and the 2008 exploration programs.  Prior to joining Caledonia, Dr. Pearton worked for a number of financial institutions in South Africa as a highly rated gold analyst, as well as consulting to a number of mining companies.  He graduated from the University of the Witwatersrand with a BSc Eng (Mining Geology) and was awarded a PhD in Geology for research into Archaean gold and antimony deposits (Witwatersrand University).  He is a member of the Geological Society of South Africa; elected a Fellow of the Society in 2004, a member of the South African Institute for Mining and Metallurgy and a member of the Witwatersrand University Mining Engineers Association.

Mark Learmonth - Vice President, Corporate Development and Investor Relations

Mr Learmonth joined Caledonia in July 2008. Prior to this, he was a Division Director of Investment Banking at Macquarie First South in South Africa, and has over 17 years experience in corporate finance and investment banking, predominantly in the resources sector. Mr Learmonth graduated from Oxford University and is a chartered accountant.

Caxton Mangezi – General Manager Blanket Mine

Mr Mangezi who holds a Certificate in geology and survey,  a Miner’s Ticket, and a Mine Manager’s Diploma, joined Blanket Mine in February 1969 as a sampler progressing to mine survey and geological technician. He switched to mining as a Learner Mine Official graduating in 1974 and was appointed to the position of overseer miner. He continued to rise through the ranks to the position of Underground Manager in 1981 and                              was appointed Resident  Manager in 1988 and  then  General  Manager/ Director in 1993 the position he still holds today.

Arrangements, Understandings, etc.

To the best knowledge of Caledonia, there are no arrangements or understanding with any major shareholders, customers, suppliers or others, pursuant to which any person referred to above, was selected as a director or member of senior management.

B.           Compensation

The amount of compensation paid, and benefits in kind granted to Caledonia’s directors who are also senior management is given under the "Summary Compensation Table" in the 2011 Information Circular attached as Exhibit # 14b, incorporated herein by reference.

A $25,000 fee is paid to each director annually.

A $5,000 fee is also paid to the Directors who comprise Caledonia’s Audit Committee – and the Chairman is paid a further $5,000.

The Company has a Stock Option Plan pursuant to which it grants options to directors, offices and key employees from time to time.  The numbers of shares covered by the various options granted are determined by the Company’s Compensation Committee subject to approval by the Board of Directors.  One hundred percent (100%) of the share purchase options which are presently outstanding are in favour of directors, offices and key employees of the Company and, in some cases, its subsidiaries, and providers of services to the Company or its subsidiaries.

Caledonia does not have a bonus or profit-sharing plan.  Caledonia does not have a pension, retirement or similar benefits scheme.

C           Board Practices

The directors all hold their positions for an indefinite term, subject to re-election at each annual general meeting of the shareholders.  The officers hold their positions subject to being removed by resolution of the Board of Directors.   The term of office of each Director expires as of the date that an Annual General Meeting of the shareholders is held - subject to the re-election of the Directors at such Annual General Meeting.

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Caledonia Mining Corporation

There are no service contracts between Caledonia and any of the Directors of Caledonia or its subsidiaries except for (i) a "Key Executive Severance Protection Plan" between Caledonia and its President dating from 1996, and (ii) the indirect employment of Caledonia’s president and CEO through a management and administrative agreement.  The Corporation has Appointment Letters with each of the other directors; there is no allowance for any termination benefit in these agreements.

Details concerning Caledonia’s Board Composition, Audit, Compensation, Nominating, Disclosure and Corporate Governance committees are given in the 2011 Information Circular attached as Exhibit #14b.

The following persons – all of whom are Directors – comprise the following committees:

Audit	Compensation	Governance	Nominating	Disclosure
R W Babensee	R W Babensee	S E Hayden	S E Hayden	S E Hayden
F C Harvey	C Jonsson	C Jonsson	C Jonsson	C Jonsson
J Johnstone				S R Curtis

Terms of reference of the Audit Committee are given in the Charter of the Audit Committee.  The Charters of Company Committees are available on the Company’s website at www.caledoniamining.com or, on request, from the Company’s offices listed in Section 4A of this report.

D           Employees – of Caledonia and its subsidiaries

The average, approximate number of employees, their categories and geographic location for each of the last 5 years are summarized in the table below:

 Geographic Location and Number of Employees:

Employee Location etc.	2007		2008		2009		2010		2011
Total Employees
South Africa (African Office)		7		9		8		10		10
Zimbabwe		700		500		750		794		856
South Africa (Mine Security and Operations and Exploration)		1		-		2		1		1
Zambia (Head Office and Security)		8		8		8		8		8
Total Employees at all Locations		715		517		768		813		875

Management and Administration:
Employee Locations:	2007		2008		2009		2010		2011
Canada		-		-		-		-		-
Zimbabwe		4		4		9		30		30
South Africa (African Office)		6		7		7		7		7
South Africa (Exploration and Operations)		1		1		2		2		2
Zambia (Head Office and Security)		4		4		4		4		4
Total Management and Administration		15		15		22		43		43

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Caledonia Mining Corporation

E           Share Ownership

(a)           The direct and indirect shareholdings of the Company’s Directors and Officers are as follows:

Stefan Hayden	-	4,380,000
F. Christopher Harvey	-	1,204,300
Carl R. Jonsson	-	559,469
TOTAL	-	6,143,769

All of the shares held by the Directors are voting common shares and do not have any different voting or other rights than the other outstanding common shares of the Company.  Their aggregate shareholdings amount to 1.21% of the Company’s issued shares.

(b) Share purchase options outstanding as of April 30, 2012:

Name	Exercise Price C$	Expiry Date	Number of Options
FC Harvey	0.07	18 March, 2013	400,000
FC Harvey	0.13	31, January, 2016	1,600,000
SE Hayden	0.07	18 March, 2013	6,000,000
SE Hayden	0.13	31, January, 2016	3,000,000
J Johnstone	0.07	18 March, 2013	400,000
J Johnstone	0.13	31, January, 2016	1,600,000
C Jonsson	0.07	18 March, 2013	1,000,000
C Jonsson	0.13	31, January, 2016	1,600,000
A Lawson	0.07	29 April, 2014	60,000
A Lawson	0.07	18 March, 2013	75,000
A Lawson	0.13	31, January, 2016	75,000
T Pearton	0.07	29 April ,2014	150,000
T Pearton	0.07	18 March, 2013	400,000
T Pearton	0.13	31, January, 2016	250,000
SR Curtis	0.07	11 May, 2016	300,000
SR Curtis	0.07	31 May, 2012	400,000
SR Curtis	0.07	18 March, 2013	2,300,000
SR Curtis	0.13	31, January, 2016	2,500,000
Caledonia Holdings Africa(1)	0.07	31 May, 2012	900,000
Caledonia Holdings Africa(1)	0.07	18 March, 2013	600,000
Caledonia Holdings Africa(1)	0.13	31, January, 2016	2,075,000
R Babensee	0.07	23 March, 2014	500,000
R Babensee	0.13	31, January, 2016	1,750,000
Dr P Maduna	0.07	18 March, 2013	300,000
Dr P Maduna	0.13	31, January, 2016	100,000
M Kater	0.07	18 March, 2013	75,000
M Kater	0.13	31, January, 2016	75,000
M Learmonth	0.07	1 July, 2013	1,000,000
M Learmonth	0.13	31, January, 2016	1,500,000
A Pearton	0.07	18 March, 2013	100,000
A Pearton	0.13	31, January, 2016	75,000
Edmund Merringer	0.07	18 March, 2013	70,000
J Liswaniso	0.07	18 March, 2013	100,000
J Liswaniso	0.13	31, January, 2016	100,000
A Tang	0.07	18 March, 2013	250,000
S Smith	0.13	31, January, 2016	60,000
P Human	0.13	31, January, 2016	100,000
TOTAL			31,840,000

(1)           The options granted to Caledonia Holdings (Africa) Limited – a subsidiary of Caledonia – are for the benefit of certain employees of a subsidiary of Caledonia.

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Caledonia Mining Corporation

16. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Significant shareholders

To the best of Caledonia's knowledge, as of December 31, 2011 there are two known shareholders that beneficially own, directly or indirectly, or exercises control or direction over more than 5% of the voting shares of Caledonia – being Epicure Overseas SA of Panama, which is believed to control 29,470,667 (5.82%) shares of the Company and Pinetree Resource Partnership which is believed to control 50,593,000  (10.0%) shares of the Company

The only shares issued by Caledonia are common shares.    All shareholders have the same voting rights as all other shareholders of Caledonia.

To the best of the knowledge of Caledonia, based on information in its Share Register, the portion of the common shares of Caledonia is held in the following geographic locations:

Geographic Area	Number of Shares Held	Percentage of Issued Shares
Canada	396,602,902	79.35
USA	93,343,931	18.51
Other	10,602,470	2.14

There are 1,830 recorded holders of the Company’s issued shares.

Caledonia is not, to the best of its knowledge, directly or indirectly owned or controlled by another corporation or corporations, by any other natural or legal person or persons severally or jointly or by any foreign government.

Caledonia is not aware of any arrangement, the operation of which may at some subsequent date result in a change of control of Caledonia.

The foregoing information in this paragraph 15 is based exclusively on information with respect to recorded shareholders in the Company’s shareholders register.  The Company does not have actual information available as to who may be the beneficial owners of the Company’s issued shares and, specifically, does not know who are the beneficial owners of the shares registered in two large intermediaries.

B Related party transactions

During 2011 the Company made payments pursuant to what are designated as related party transactions.  Details are provided in Note 26 to the 2011 Annual Financial Statements attached as Exhibit 14.a

There were no loans outstanding as at December 31, 2011 to any Company directors, officers or employees.

17. FINANCIAL INFORMATION

A Consolidated Statements and Other Financial Information

Attached as Exhibit 14a is the 2011 audited Consolidated Annual Financial Statements of Caledonia, which are incorporated herein by reference.

The 2011 consolidated financial statements have been audited by BDO Canada LLP and comprise the following:

Independent Auditor’s Report

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of cash flows

Notes to the consolidated financial statements

Caledonia has no significant ongoing legal or arbitration proceedings at December 31, 2011.

To the best knowledge of Caledonia, neither any of its directors or senior management or its affiliates is a party adverse to Caledonia or its subsidiaries, or has a material interest adverse to Caledonia or its subsidiaries.

The Company has never paid or declared any dividends.

 

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Caledonia Mining Corporation

18. LISTINGS

Caledonia’s stock trades on the Toronto Stock Exchange under the symbol "CAL" on the NASDAQ Stock Exchange’s "Over-the-counter Bulletin Board" under the symbol "CALVF" and since June 2005 on the AIM market in London, England under the symbol “CMCL”

The trading history is as follows:

(a)   5 Year Market Trading Record - for the following calendar years:

Stock Exchange	2007			2008			2009			2010			2011
TORONTO ($Cdn.)
High		0.23			0.20			0.095			0.17			0.145
Low		0.09			0.03			0.05			0.055			0.065
Volume (1000s)		105,226			119,534			99,885			77,420			37,313
NASDAQ/OTCQX(US$)
High		0.20			0.205			0.084			0.16			0.158
Low		0.07			0.03			0.045			0.052			0.063
Volume (1000s)		187,988			170,944			79,107			59,282			54,098
LONDON
(UK pence)
High		9.0	p		10.0	p		6.2	p		9.5	p		9.9	p
Low		4.09	p		2.5	p		2.5	p		3.5	p		4.5	p
Volume (1000s)		8,530			2,099			1,031			1,068			6,579

(b)   2 Year Market Trading Record by Quarter for the last 8 quarters – ending March 31, 2012

Stock Exchange	London AIM						TSE				NASDAQ
Share Price	High			Low			High		Low		High		Low
2010  - 2nd Qtr		4.8	p		4.1	p	$	0.07	$	0.06	$	0.075	$	0.053
2010  - 3rd Qtr		4.8	p		3.5	p	$	0.07	$	0.055	$	0.07	$	0.052
2010  - 4th Qtr		9.5	p		4.8	p	$	0.17	$	0.07	$	0.16	$	0.07
2011  - 1st Qtr		9.99	p		7.1	p	$	0.145	$	0.115	$	0.158	$	0.124
2011 – 2nd Qtr		8.75	p		6.0	p	$	0.14	$	0.09	$	0.151	$	0.101
2011 – 3rd Qtr		6.75	p		5.5	p	$	0.11	$	0.07	$	0.118	$	0.072
2011 – 4th Qtr		7.75	p		4.75	p	$	0.13	$	0.06	$	0.121	$	0.063
2012 – 1st Qtr		8.75	p		5.88	p	$	0.13	$	0.08	$	0.125	$	0.084

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Caledonia Mining Corporation

(c)   6 Month Market Trading Record by Month – October 2011 to March 2012

Stock Exchange	London AIM						TSE				NASDAQ/OTCQX(1)
Share Price	High			Low			High		Low		High		Low
October 2011		6.6	p		5.5	p	$	0.09	$	0.07	$	0.089	$	0.063
November 2011		8.0	p		5.3	p	$	0.13	$	0.08	$	0.1209	$	0.088
December 2011		7.0	p		6.0	p	$	0.115	$	0.08	$	0.114	$	0.084
January 2012		8.8	p		5.5	p	$	0.13	$	0.08	$	0.125	$	0.084
February 2012		8.3	p		6.3	p	$	0.14	$	0.11	$	0.125	$	0.11
March 2012		7.9	p		5.9	p	$	0.11	$	0.08	$	0.12	$	0.09

(1) The figures shown are a combination of the trading figures in the U.S. on NASDAQ – and on the OTCQX on which the Company’s shares commenced trading on October 10, 2011.

19. ADDITIONAL INFORMATION

A Memorandum and Articles

Copies of the Memorandum and Articles of Caledonia may be obtained upon request being made to one of Caledonia’s offices shown in section 4A of this document.

B Material contracts

There are no material contracts other than contracts entered into in the ordinary course of business that create obligations.

C Exchange controls

There are no governmental laws, decrees or regulations existing in Canada (where Caledonia is incorporated), which restrict the export or import of capital, or the remittance of dividends, interest or other payments to non-resident holders of Caledonia's securities.  Nor does Canada have foreign exchange currency controls.  Nor do any such restrictions exist in Zimbabwe.

D Taxation

To the best of Caledonia's knowledge, there are no taxes or similar levies which holders of Caledonia's shares resident in the United States are subject to.  However, Caledonia understands that pursuant to a Canada - U.S. tax treaty, any dividends which Caledonia might declare will be subject to such Canadian withholding taxes as the then current provisions of the treaty may require.

E Documents on display

The documents referred to in this report are either attached as “Exhibits” to this report or can be viewed at Caledonia’s offices whose addresses are given in section 4 of this report – or can be viewed on the Company’s website:  www.caledoniamining.com.

F Subsidiary information

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Caledonia Mining Corporation

To the best knowledge of Caledonia there is no other information related to Caledonia's subsidiaries that requires to be provided.

20 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As Caledonia is considered to be a “small business issuer” as defined, information is not required to be provided for this section.

21 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Caledonia has no outstanding – nor is it registering any – securities other than its common shares.

PART 2

22 DEFAULTS, DIVIDEND ARREARAGES and DELINQUENCIES

There have been no material defaults in the payment of interest or principal or any dividend arrearages or material delinquencies.

23 MATERIAL MODIFICATIONS to the RIGHTS of SECURITY HOLDERS and USE OF PROCEEDS

There has been no material modification to the rights of Caledonia's or subsidiaries security holders.

24           CONTROLS AND PROCEDURES

a)           Evaluation of disclosure controls and procedures.   The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, and assessed the design of the Company’s internal control over financial reporting as of December 31, 2011.  As required by Rule 13(a)-15 under the Exchange Act, in connection with this annual report on Form 20-F, under the direction of our Chief Executive Officer, we have evaluated our disclosure controls and procedures as of December 31, 2011, and we have concluded our disclosure controls and procedures were ineffective and that certain disclosable material weaknesses existed, as at December 31, 2011 as disclosed below.

Based on that evaluation the CEO and CFO have determined that the Company still has insufficient personnel to ensure appropriate segregation of duties within the Financial Reporting and Review Process. Specifically, the responsibilities assigned to the Company’s CFO include substantially all financial statement and note creation functions. No additional personnel in the Company, apart from the members of the Audit Committee, perform functions at a level of precision and involvement that would adequately prevent or detect material misstatements on a timely basis. As an additional result of the insufficient personnel the Company did not maintain formal policies and procedures regarding end-user computing control over the access to, completeness, accuracy, validity, and review of, certain spreadsheet information that supports the financial reporting process.

Management has concluded that, despite the lack of segregation of duties and computing controls, a material misstatement in financial reporting is not a “reasonable possibility” (as defined in applicable SEC guidance).  The Blanket Mine (which is operated by the Company’s wholly owned subsidiary Blanket Mine (1983) (Private) (Limited) is the Company’s only operating mine and preparation of its operating results are performed by the CFO of the subsidiary and an accounting team in Zimbabwe. These results are reviewed by Company management and then incorporated into the consolidated financial statements of the Company.

 The Company has a Disclosure Committee consisting of three Directors , and has disclosure controls and procedures which it follows in an attempt to ensure that it complies with all required disclosures on an adequate and timely basis.  The Company’s Directors and Management, and the Disclosure Committee, are making all reasonable efforts to ensure that the Company’s disclosures are made in full compliance with the applicable rules and requirements.  All reasonable efforts are also being made to ensure that the Company’s disclosure controls and procedures provide reasonable assurance that the material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s Certifying Officers by others within those entities and to allow timely decisions regarding required disclosures.

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Caledonia Mining Corporation

(b)           Management’s annual report on internal control over financial reporting (“ICFR”)

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting by the Company. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Corporation's President and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure.  Management of the Corporation, with the participation of the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the Corporation's disclosure controls and procedures as at December 31, 2010 as required by Canadian securities laws pursuant to the certification requirements of Multilateral Instrument 52-109.

The Corporation's internal controls over financial reporting (“ICFR”) are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable IFRS.

Because of its inherent limitations, the Corporation's ICFR may not prevent or detect any or all misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Corporation has engaged independent consultants to carry out an assessment of the effectiveness of its internal controls over financial reporting using an internationally acceptable framework.  Prior to this engagement, management concluded that the following disclosable material weakness existed and still exist as at December 31, 2011.

Based on the above and having carried out a review of the independent consultants report on the effectiveness of the Corporation's internal controls over financial reporting, management concluded that our internal control over financial reporting was not effective as of December 31, 2011, due to the existence of material weakness as described in greater detail below.

Segregation of duties

Due to limited personnel resources at the Corporation’s Africa office in Johannesburg, adequate segregation of duties within the accounting group was not achieved.  This created a risk that inaccurate entries could be made and not identified or corrected on a timely basis.  The result is that the Corporation was highly reliant on the performance of mitigating procedures during its financial close processes in order to ensure the financial statements are presented fairly in all material respects.  The Corporation continues to enhance and monitor this process to ensure that its financial accounting reporting system is able to prevent and detect potentially significant errors.

Additional accounting staff  have been recruited to the Corporation’s Africa office in Johannesburg and the Blanket Mine in Zimbabwe. This has improved but not entirely eliminated the deficiency in the segregation of duties and lightened the work load of existing staff and improved control of the accounting function.

Management has concluded, and the Audit Committee has agreed that the hiring of additional staff to correct segregation of duties weakness and excessive workloads need to be addressed at this time.  There have been no changes in the Corporation’s  internal controls over financial reporting since the year ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

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Caledonia Mining Corporation

The Corporation has a Disclosure Committee consisting of three Directors, and has disclosure controls and procedures which it follows in an attempt to ensure that it complies with all required disclosures on an adequate and timely basis.  The Corporation’s Directors and Management, and the Disclosure Committee, are making all reasonable efforts to ensure that the Corporation’s disclosures are made in full compliance with all of the applicable rules, regulations and requirements.  All reasonable efforts are also being made to ensure that the Corporation’s disclosure controls and procedures provide reasonable assurance that material information relating to the Corporation, including its consolidated subsidiaries, is made known to the Corporation’s Certifying Officers by others within those entities.

(c)           Attestation Report of registered public accounting firm

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report.

(d)           Changes in internal controls over financial reporting.

There were no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of 17 CFR 240.13a-15 or 240.15d-15 that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.   See also the information given in section 5A with respect to critical accounting policies.

25A           Audit Committee Financial Expert

(a) Caledonia’s Board of Directors has determined that the three members of its Audit Committee are all financially literate and one of the members can be considered to be an expert.

(b) The financial expert serving on the audit committee is Mr. Robert W. Babensee.  Mr. Babensee, and Messrs. F.C Harvey  and J. Johnstone  are all independent directors under the NASDAQ rules.

25B           Code of Ethics

(a) On April 8, 2004 the registrant’s Board of Directors adopted a code of ethics that applies to the registrant’s Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, or persons performing similar functions.

(b) The registrant has filed a copy of this code of ethics that applies to the registrant’s Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, or persons performing similar functions.  The code of ethics was filed as Exhibit 1 to the 2003 Form 20F Annual Report and is incorporated herein by reference.  It has not been amended.

(c) The text of this code of ethics has been posted on the Company website at http://www.caledoniamining.com

25C           Fees charged by principal auditors

(a)             The fees charged or estimated for the past two fiscal years for auditing and the other services  by the Company’s auditors have been:

	2011 $-Cdn.		2010 $-Cdn.
Audit fees		261,540		181,772
Audit – related fees		62,000		17,800
Tax fees		-		-
All other fees		-		-
TOTAL		323,540		199,572

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Caledonia Mining Corporation

 (b) Prior to the start of the audit process, Caledonia’s Audit Committee receives an estimate of the costs, from its auditors and reviews such costs for their reasonableness. After their review and pre-approval of the fees, the Audit Committee recommend to the board of directors to accept the estimated audit fees given by the auditors.

25D         Exemptions from the Listing Standards for Audit Committees

Nil.

25E          Purchases of Equity Securities by the Issuer and Affiliated Purchasers

There were no purchases made by or on behalf of the issuer or any “affiliated purchaser“ of shares or other units of any class of the issuer’s equity securities that are registered by the issuer pursuant to section 12 of the Exchange Act.

PART 3

26.           FINANCIAL STATEMENTS

The audited consolidated financial statements and related notes of Caledonia at December 31, 2011 and 2010  are attached as Exhibit 14a by reference.

27. FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. These are the Group’s first consolidated financial statements prepared in accordance with IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Group is provided in note 30.

28.         EXHIBITS

The following are attached to and form part of this

Statement and are incorporated herein by reference:

12.   Certifications Pursuant to Rule 13a-14(a)(17CFR240.13a-14(a) or Rule 15d-14(a)(17CFR240.15d-14(a).

13.           A Certification Pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

14.a                      Caledonia Mining Corporation, 2011 Consolidated Annual Audited Financial Statements.

14.b                      Proxy and Information Circular

14.c                      Mineral Properties.

14.d                      Summary of Report on Nama Property

14.e                      Summary of Report on Blanket Mine Property

14.f          Summary of Report on Rooipoort property

14.g                      Property and Claims Information with respect to the Blanket, Nama and Rooipoort properties

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Caledonia Mining Corporation

SIGNATURE

The Company hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Amended Annual Report on its behalf.

DATED at Johannesburg, South Africa, on the 30th day of April, 2012.

CALEDONIA MINING CORPORATION

Per: (Signed)                      Stefan Hayden

            President, Chief Executive Officer and Director

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Caledonia Mining Corporation

EXHIBIT #12

CALEDONIA MINING CORPORATION

CERTIFICATIONS

42

Caledonia Mining Corporation

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stefan E. Hayden, certify that:

1.             I have reviewed this annual report on Form 20-F of Caledonia Mining Corporation (the “Company”).

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company, and have:

a.      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is likely to materially affect, the company’s internal control over financial reporting; and

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the Audit Committee of the Company’s Board of Directors (or persons performing the equivalent function);

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b. Any, fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:           April 30, 2012                                                                           (signed) S.E. Hayden

       President and Chief

       Executive Officer

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Caledonia Mining Corporation

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I  Steven Curtis, certify that:

1.             I have reviewed this annual report on Form 20-F of Caledonia Mining Corporation (the “Company”).

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company, and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the company’s disclosure controls and procedures  and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function);

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to  adversely affect the company’s ability to record, process, summarize and report financial information; and

b. Any, fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:  April 30, 2012                                                                      (signed) Steven Curtis

         Vice- President Finance and Chief

         Financial Officer

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Caledonia Mining Corporation

EXHIBIT #13

CALEDONIA MINING CORPORATION

Certifications Pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Caledonia Mining Corporation

Exhibit 13a

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F of Caledonia Mining Corporation (the “Company”) for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), that I, Stefan E. Hayden, President and Chief Executive Officer of  Caledonia , certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code 18 U.S.C.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

By:           (signed) S. E. Hayden

Stefan E. Hayden, President and Chief Executive Officer

Caledonia Mining Corporation

Date:       April 30, 2012

A signed original of this written statement required by Section 906 has been provided by Stefan E. Hayden and will be retained by Caledonia Mining Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F of Caledonia Mining Corporation (the “Company”) for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), that I, Steven Curtis, Vice President Finance and Chief Financial Officer of  Caledonia , certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code 18 U.S.C.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1                      The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.                      The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

By:   (signed) Steven Curtis

Steven Curtis, Vice President Finance and Chief Financial Officer

Caledonia Mining Corporation

Date:           April 30, 2012

A signed original of this written statement required by Section 906 has been provided by Steven Curtis and will be retained by Caledonia Mining Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Caledonia Mining Corporation

EXHIBIT #14a

CALEDONIA MINING CORPORATION

2010 ANNUAL AUDITED CONSOLIDATED FINANCIAL

STATEMENTS

47

Caledonia Mining Corporation

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION

To the Shareholders of Caledonia Mining Corporation:

Management has prepared the information and representations in this annual report. The consolidated financial statements of Caledonia Mining Corporation (“Company”) have been prepared in conformity with International Financial Reporting Standards (“IFRS”) 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.

Financial information used elsewhere in the Annual Report is consistent with that in the consolidated financial statements. The Management Discussions and Analysis (MD&A) also includes information regarding the impact of current transactions and events, sources of liquidity and 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 Company maintains adequate systems of internal accounting and administrative controls, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that relevant and reliable financial information is produced. Our independent auditor has the responsibility of auditing the annual consolidated financial statements and expressing an opinion on them.

Management have concluded that as a result of the relatively small size of the Company’s head office finance department personnel, the Internal Controls over Financial Reporting (“ICFR”) assessment concluded that there were limited resources to adequately segregate duties and to permit or necessitate the comprehensive documentation of all policies and procedures that form the basis of an effective design of ICFR.

In order to mitigate the risk of material misstatement in the Company’s consolidated financial statements, the Company implemented additional cash flow review and monitoring controls at head office on a monthly basis and as part of their monitoring and oversight role the Audit Committee performs additional analysis and other post-closing procedures. No material exceptions were noted based on the additional year end procedures and no evidence of fraudulent activity was found.

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 unrelated directors. This Committee meets periodically with management and the external auditor to review accounting, auditing, internal control and financial reporting matters.

The consolidated financial statements have been audited on behalf of the shareholders by the Company’s independent auditor, BDO Canada LLP, in accordance with Canadian generally accepted auditing standards and the standards of the Public Accounting Oversight Board (United States).  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,  2011 were approved by the Board of Directors and signed on its behalf on March 29,  2012.

S. E. Hayden                                                                                                                              S. R. Curtis

President and Chief Executive Officer                                                                Vice-President, Finance and Chief Financial Officer

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Caledonia Mining Corporation

INDEPENDENT AUDITOR'S REPORT

OF REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders of Caledonia Mining Corporation

We have audited the accompanying consolidated financial statements of Caledonia Mining Corporation, which comprise the consolidated statements of financial position as at December 31, 2011, December 31, 2010 and January 1, 2010, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2011 and December 31, 2010, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Caledonia Mining Corporation as at December 31, 2011, December 31, 2010 and January 1, 2010, and its financial performance and its cash flows for the years ended December 31, 2011 and December 31, 2010, in accordance with International Financial Reporting Standardsas issued by the International Accounting Standards Board.

(Signed) BDO Canada LLP

Chartered Accountants, Licensed Public Accountants

Toronto, Ontario

March 29, 2012

49

Caledonia Mining Corporation

Consolidated statements of comprehensive income and (loss)

(In thousands of Canadian dollars except for earnings per share amounts)

For the years ended  December 31,	Note	2011	2010
		$	$
Revenue	4k	55,705	22,388
Less: Royalty		(2,514)	(825)
Production costs	7	(21,093)	(12,617)
Depreciation		(2,983)	(2,586)
Gross profit		29,115	6,360
Administrative expenses	8	(3,677)	(2,807)
Share-based payment expense		(1,101)	(354)
Foreign exchange (loss)/gain		303	359
Impairment	12	(3,884)	-
Other (expenses)/income	9	-	(1,064)
Results from operating activities		20,756	2,494
Finance income	10	55	270
Finance cost	10	(217)	(267)
Net finance (costs)/income		(162)	3
Profit before income tax		20,594	2,497
Income tax expense	11	(8,464)	(1,042)
Profit for the year		12,130	1,455
Other comprehensive (loss)/income
Revaluation of investments to fair value		-	(45)
Foreign currency translation differences for foreign operations		265	(1,404)
Other comprehensive income for the year, net of income tax		265	(1,449)
Total comprehensive income for the year		12,395	6
Earnings per share
Basic earnings per share	18	0.024	0.003
Diluted earnings per share		0.024	0.003

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Caledonia Mining Corporation

Consolidated statements of financial position
(In thousands of Canadian dollars)
		December 31,		December 31,	January 1,
As at	Note	2011		2010	2010
		$		$	$
Assets
Property, plant and equipment	12	33,918		31,978	28,219
Other investments	13	5		5	59
Trade and other receivables	15	-		-	810
Deferred tax asset	11	325		-	-
Total non-current assets		34,248		31,983	29,088
Inventories	14	4,482		2,624	2,587
Prepayments		334		93	130
Trade and other receivables	15	3,652		2,314	1,552
Cash and cash equivalents	16	9,686		1,145	1,622
Total current assets			18,154	6,176	5,891
Total assets			52,402	38,159	34,979
Equity and liabilities
Share capital	17	196,163		196,125	196,125
Contributed surplus		3,407		2,306	1,952
Accumulated other comprehensive income/(loss)		(1,134)		(1,399)	50
Accumulated deficit		(158,422)		(170,552)	(172,007)
Total equity		40,014		26,480	26,120
Liabilities
Provisions	21	1,785		1,899	1,789
Deferred tax liability	11	6,037		5,151	4,313
Total non-current liabilities		7,822		7,050	6,102
Trade and other payables	22	3,841		3,882	2,169
Income taxes payable		295		-	-
Bank overdraft	16	430		747	588
Total current liabilities			4,566	4,629	2,757
Total Liabilities			12,388	11,679	8,859
Total equity and liabilities			52,402	38,159	34,979

On behalf of the Board:

“S.E. Hayden”                                                          Director

“Robert W. Babensee”                                           Director

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Caledonia Mining Corporation

Consolidated statements of changes in equity

(In thousands of Canadian dollars)

	Note	Share capital	Investment  Revaluation Reserve	Translation reserve	Contributed surplus	Accumulated deficit	Total
		$	$	$	$	$	$
Balance at January 1, 2010	30	196,125	50	-	1,952	(172,007)	26,1201
Comprehensive income/(loss) for the year			(45)	(1,404)		1,455	6
Share-based compensation expense	20				354		354
Balance at December 31, 2010		196,125	5	(1,404)	2,306	(170,552)	26,480
Comprehensive income for the year				265		12,130	12,395
Shares issued		38					38
Share-based compensation expense	20				1,101		1,101
Balance at December 31, 2011		196,163	5	(1,139)	3,407	(158,422)	40,014

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Caledonia Mining Corporation

Consolidated statements of cash flows
(In thousands of Canadian dollars)
For the years ended  December 31,	Note	2011	2010
		$	$
Cash flows from operating activities
Profit for the year		12,130	1,455
Tax paid		(8,005)	(1)
Adjustments to reconcile net cash from operations	23	16,648	4,210
Interest paid		(162)	(3)
Changes in non-cash working capital	23	(3,183)	950
Cash flows provided from continuing operations		17,428	6,611
Cash flows from investing activities
Property, plant and equipment additions		(8,528)	(7,304)
Proceeds on sale of investment		-	51
Net cash used in investing activities		(8,528)	(7,253)
Cash flows from financing activities
Bank overdraft increase (decrease)		(317)	159
Proceeds from the issue of share capital	17	38	-
Net cash from (used in) financing activities		(279)	159
Net increase/(decrease) in cash and cash equivalents		8,621	(483)
Cash and cash equivalents at  beginning of year		1,145	1,622
Effect of exchange rate fluctuations on cash held		(80)	6
Cash and cash equivalents at year end	16	9,686	1,145

53

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

1          Reporting entity

Caledonia Mining Corporation is a company domiciled in Canada. The address of the Company’s registered office is Suite 1201, 67 Yonge Street, Toronto, Ontario M5E 1J8 Canada. The consolidated financial statements of the Company as at and for the year ended December 31, 2011 comprise the Company and its subsidiaries (together referred to as the “Group” or “Company” and individually as “Group entities”). The Group primarily is involved in the operation of a gold mine and the acquisition, exploration and development of mineral properties for the exploration of base and precious metals.

2          Basis for preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. These are the Group’s first consolidated financial statements prepared in accordance with IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Group is provided in note 30.

The consolidated financial statements were authorised for issue by the Board of Directors on March 29, 2012.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following item in the statement of financial position:

·   available for sale financial assets are measured at fair value

(c) Presentation currency

These consolidated financial statements are presented in Canadian dollar, which is the Company’s functional currency. All financial information presented in Canadian dollar has been rounded to the nearest thousand.

3          Use of estimates and judgements

Management makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

3          Use of estimates and judgements

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the consolidated financial statements are discussed below:

i)Rehabilitation Provisions

Rehabilitation provisions have been created based on the Company’s internal estimates. 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 into account any material changes to the assumptions that occur when reviewed regularly 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 of the rehabilitation costs are actually incurred.  The final cost of the currently recognized rehabilitation provisions may be higher or lower than currently provided for.

ii)Exploration and Evaluation (“E&E”)Expenditure

The application of the Company’s accounting policy for exploration and evaluation expenditure when determining when E&E properties are impaired requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalized, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalized is written off in the profit or loss in the period the new information becomes available.

iii)Title to Mineral Property Interests

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

55

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

3          Use of estimates and judgements – (continued)

iv)Income Taxes

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

In addition, the Company recognizes 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. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

v)Share-based Payment Transactions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on 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 and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 20.

vi)Impairment

At each accounting period end the Company determines if impairment indicators exist, and if present, performs an impairment review of the non-monetary assets held in the Group. The exercise is subject to various judgement decisions and estimates. Financial assets are also reviewed regularly for impairment. Further details of the judgements and estimates made for these reviews are set out in Note 4(g).

vii)Functional currency

The functional currency of each entity in the Group is determined after considering various primary and secondary indicators which require management to make numerous judgement decisions. The determination of the functional currency will have a bearing on the translation process and ultimately other comprehensive income.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4          Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening IFRS statement of financial position at January 1, 2010 for the purposes of the transition to IFRS, unless otherwise indicated. The accounting policies have been applied consistently by the Group entities.

 (a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of Group entities have been changed when necessary to align them with the policies adopted by the Group.

(ii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency

(i) Functional currencies

The functional currencies of Caledonia Mining Corporation and its subsidiaries are the Canadian dollar, US dollar and South African Rand (“ZAR”). These consolidated financial statements have been translated into the Canadian dollar in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. This standard requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period).When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized in OCI.

When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in OCI related to the foreign operation are recognized in profit or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in OCI related to the subsidiary are reallocated between controlling and non-controlling interests.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4          Significant accounting policies - (continued)

All resulting translation differences are reported in other comprehensive income.

(ii) Foreign currency translation

In preparing the financial statements of the Group entities, transactions in currencies other than the Group entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each statement of financial position date, monetary assets and liabilities are translated using the year end 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 for the year.

(c) Financial instruments

(i) Non-derivative financial assets

The Group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial assets: trade and other receivables, cash and cash equivalents, and available-for-sale financial assets.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.  The impairment loss on receivables is based on a review of all outstanding amounts at period end. Bad debts are written off during the year in which they are identified. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4          Significant accounting policies – (continued)

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

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or that are not classified in any other categories of financial assets. The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets.

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for sale equity instruments, are recognised in other comprehensive income and presented within equity in accumulated other comprehensive income. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

(ii) Non-derivative financial liabilities

Financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial liabilities: bank overdrafts 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.

 (d) Share capital

Common shares

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and share options are recognised as a deduction from equity, net of any tax effects.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4          Significant accounting policies – (continued)

(e) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets.

Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation expenditures (“E&E”) are capitalized in addition to the acquisition costs. These direct expenditures include such costs as materials used, surveying costs, drilling costs, payments made to contractors and depreciation on plant and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year in which they occur.

Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development. Exploration and evaluation assets are also tested for impairment before the assets are transferred to mine under development.

All direct costs related to the acquisition, exploration and development of mineral properties are capitalized until the properties to which they relate are ready for their intended use, sold, abandoned or management has determined there to be impairment. If economically recoverable ore reserves are developed, capitalized costs of the related property are reclassified as mineral properties being depleted and depreciated.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised within other income in profit or loss.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4          Significant accounting policies – (continued)

(e) Property, plant and equipment – (continued)

(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 over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, except for mineral properties, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. On commencement of commercial production, depreciation of each mineral property and development is provided for on the unit-of-production basis using estimated proven and probable reserves. Where the total reserves are not determinable because ore bearing structures are open at depth or are open laterally, the straight-line method of depreciation is applied over the estimated life of the mine. Land is not depreciated.

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

·   buildings 10 to 15 years

·   plant and equipment 10 years

·   fixtures and fittings 5 to 10 years

·   computer equipment 4 to 5 years

·   motor vehicles 4 years

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

(f) 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, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of gold in process, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the common course of business, less the estimated costs of completion and selling expenses.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

(g) Impairment

(i) Financial assets (including receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost provides objective evidence of impairment.

The Group considers evidence of impairment for receivables at both the specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income and presented in accumulated other comprehensive income in equity, to profit or loss. The cumulative loss that is removed from other comprehensive income and recognised in profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to time value are reflected as a component of interest income.

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Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

(g) Impairment – (continued)

If, in a subsequent period, the fair value of an impaired available-for-sale debt security or receivable increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories, prepayments and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. Fair value is considered to be the price that would be paid by a knowledgeable market participant. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or CGU”).

The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset 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 are recognised in profit or loss. Impairment losses recognised in respect of Gus are allocated to reduce the carrying amount of other assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been an indication of reversal and a change in the estimates used to determine the recoverable 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.

The test for recoverability of E&E assets can combine several Gus as long as the combination is not larger than a segment. The definition of a CGU does, however, change once development activities have begun. There are special impairment triggers for E&E assets. Despite certain relief in respect of impairment triggers and the level of aggregation, the impairment standard is applied in measuring the impairment of E&E assets. Reversals of impairment losses are permitted in the event that the circumstances that resulted in impairment have changed.

63

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

(g) Impairment – (continued)

E&E assets are only assessed for impairment when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount and upon transfer to development assets (therefore there is no requirement to assess for indication at each reporting date until the entity has sufficient information to reach a conclusion about the commercial viability and technical feasibility of extraction). Indicators of impairment include the following:

·   The entity's right to explore in the specific area has expired or will expire in the near future and is not expected to be renewed

·   Substantive expenditure on further E&E activities in the specific area is neither budgeted nor planned

·   The entity has not discovered commercially viable quantities of mineral resources as a result of E&E activities in the area to date and has decided to discontinue such activities in the specific area

·   Even if development is likely to proceed, the entity has sufficient data indicating that the carrying amount of the asset is unlikely to be recovered in full from successful development or by sale

(h) Employee benefits

(I) 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 is due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

(ii) Share-based payment transactions

The grant date fair value of share-based payment awards granted to employees and directors is recognised as an employee expense, with a corresponding increase in equity, over the vesting period of the award. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market vesting conditions at the vesting date.

64

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

(h) Employee benefits – (continued)

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period or immediately for awards already vested.

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

(iii) Short term employee benefits

The cost of all short term employee benefits is recognised during the period in which the employee renders the related service.

(I) 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. The unwinding of the discount is recognised as finance cost.

(j) Site restoration

The Company 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 the assets.  The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to mineral properties along with a corresponding increase in the rehabilitation provision in the period incurred.  Discount rates using a pre-tax rate that reflects the time value of money are used to calculate the net present value.    The Company’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.  Changes resulting from production, excluding changes in the Company’s estimates of rehabilitation costs, are charged to profit and loss for the period.  The costs of rehabilitation projects that were included in the rehabilitation provision are recorded against the provision as incurred.  The cost of on-going current programs to prevent and control pollution is charged against profit and loss as incurred.

65

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

 (k) Revenue

Revenue from the sale of precious metals is recognized when the metal is accepted at the refinery, risk and benefits of ownership are transferred and the receipt of proceeds are substantially assured.

 (l) Finance income and finance costs

Finance income comprises interest income on funds invested and gains on the disposal of available-for-sale financial assets. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on the rehabilitation provisions and impairment losses recognised on financial assets and also includes interest on bank overdraft balances.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

(m) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date.

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 and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. 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 Company intends to settle its current tax assets and liabilities on a net basis.

66

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

 (n) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to  common shareholders and the weighted average number of common shares outstanding, adjusted for own shares held, for the effects of all dilutive potential common shares, which comprise share options granted to employees and directors.

(o) Standards, amendments and interpretations not yet adopted

Standard/Interpretation		Effective date
IFRS 7 amendment	Disclosures – Transfers of Financial Assets	Annual periods beginning on or after  July 1, 2011
IFRS 9	Financial Instruments	Annual periods beginning on or after January 1, 2015
IFRS 10	Consolidated Financial Statements	Annual periods beginning on or after January 1, 2013
IFRS 11	Joint Arrangements	Annual periods beginning on or after January 1, 2013.
IFRS 12	Disclosure of Interests in Other Entities	Annual periods beginning on or after January 1, 2013
IFRS 13	Fair Value Measurement	Annual periods beginning on or after January 1, 2013
IAS 1 amendment	Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income	Annual periods beginning on or after July 1, 2012

67

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

There are new or revised Accounting Standards and Interpretations in issue that are not yet effective.  Management have considered all of these Standards and Interpretations and have concluded that those that may have an impact on future consolidated financial statements are the following:

The assessment of the impact of the above Standards and Interpretations is as follows:

Amendment to IFRS 7 Financial Instruments: Disclosures

The amendments to IFRS 7 will be adopted by Caledonia Mining Corporation for the first time for its financial reporting period ending December 31, 2012.

In terms of the amendments, additional disclosure will be provided regarding transfers of financial assets that are:

Not derecognised in their entirety and

Derecognised in their entirety but for which Caledonia Mining retains continuing involvement.

To the extent that Caledonia Mining concludes transactions which involve transfer of its financial assets, it will comply with the required disclosures.

IFRS 9 Financial Instruments

IFRS 9 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2015. The standard will be applied retrospectively, subject to transitional provisions.

IFRS 9 addresses the measurement and classification of financial liabilities and will replace the relevant sections of IAS 39.

Under IFRS 9, the classification and measurement requirements of financial liabilities are the same as per IAS 39, except for the following two aspects:

fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss that are attributable to the changes in the credit risk of the liability will be presented in other comprehensive income (OCI). The remaining amount of the fair value change is recognised in profit or loss. However, if this requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed.

Under IFRS 9 (2010) derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.

IFRS 9 incorporates, the guidance in IAS 39 dealing with fair value measurement and accounting for derivatives embedded in a host contract that is not a financial asset, as well as the requirements of IFRIC 9 Reassessment of Embedded Derivatives.

IFRS 9 may impact the current classification of financial assets from amortised cost to fair value.  The current classification of financial liabilities is not expected to be impacted.

68

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

IFRS 10 Consolidated Financial Statements

IFRS 10 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2013. The standard will be applied retrospectively if there is a change in the control conclusion between IAS 27/SIC 12 and IFRS 10.

IFRS 10 introduces a single control model to assess whether an investee should be consolidated. This control model requires entities to perform the following in determining whether control exists:

Identify how decisions about the relevant activities are made,

Assess whether the entity has power over the relevant activities by considering only the entity’s substantive rights,

Assess whether the entity is exposed to variability in returns, and

Assess whether the entity is able to use its power over the investee to affect returns for its own benefit

Control should be assessed on a continuous basis and should be reassessed as facts and circumstances change.

IFRS 10 may result in certain subsidiaries no longer being consolidated or others to be consolidated under the new requirements.

IFRS 11 Joint Arrangements

IFRS 11, Joint Arrangements, establishes principles for financial reporting by parties to a joint arrangement. The IFRS is to be applied by all entities that are a party to a joint arrangement. It provides a new definition of joint arrangement focusing on the rights and obligations of the arrangement, rather than its legal form. The IFRS defines joint control as the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (i.e. activities that significantly affect the returns of the arrangement) require the unanimous consent of the parties sharing control. IFRS 11 classifies joint arrangements into two types—joint operations and joint ventures, defines the two types, and requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations arising from the arrangement. IFRS 11 addresses the inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 11 supersedes IAS 21 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Nonmonetary Contributions by Venturers.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2013.

IFRS 12 combines, in a single standard, the disclosure requirements for subsidiaries, associates and joint arrangements, as well as unconsolidated structured entities.

The required disclosures aim to provide information to enable user to evaluate:

The nature of, and risks associated with, an entity’s interests in other entities, and

The effects of those interests on the entity’s financial position, financial performance and cash flows.

69

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

4           Significant accounting policies – (continued)

The adoption of the new standard will increase the level of disclosure provided for the entity’s interests in subsidiaries, joint arrangements, associates and structured entities.

IFRS 13 Fair Value Measurement

IFRS 13 will be adopted by Caledonia for the first time for its financial reporting period ending December 31, 2013. The standard will be applied prospectively and comparatives will not be restated.

IFRS 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets and liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures requirements for fair value measurements. The key principles in IFRS 13 are as follows:

Fair value is an exit price

Measurement considers characteristics of the asset or liability and not entity-specific characteristics

Measurement assumes a transaction in the entity’s principle  (or most advantageous) market between market participants

Price is not adjusted for transaction costs

Measurement maximises the use of relevant observable inputs and minimises the use of unobservable inputs

The three-level fair value hierarchy is extended to all fair value measurements

Currently the impact on the financial statements for Caledonia is expected to be minimal as Caledonia Mining only has limited items measured at fair value.

Amendment to IAS 1 Presentation of Financial Statements

The amendment to IAS 1 will be adopted by Caledonia Mining for the first time for its financial reporting period ending December 31, 2013.

The company will present those items of other comprehensive income that may be reclassified to profit or loss in the future separately from those that would never be reclassified to profit or loss. The related tax effects for the two sub-categories will be shown separately.

This is a change in presentation and will have no impact on the recognition or measurement of items in the financial statements.

This amendment will be applied retrospectively and the comparative information will be restated.

Additional amendments are of a presentation nature and will not have a significant impact on the Company’s financial statements.

70

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

5          Financial risk management

Overview

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

·   Currency risk

·   Interest rate risk

·   Credit risk

·   Liquidity risk

·   Commodity price risk

This note presents information about the Group’s exposure to each of the above risks, 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 preservation of capital, and protecting current and future Group assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.

The Board of Directors has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Group’s Audit Committee oversees management’s compliance with the Group’s financial risk management policy.

The fair value of the Group’s financial instruments approximates their carrying value unless otherwise noted. The types of risk exposure and the way in which such exposures are managed are as follows:

(a) Currency Risk

As the Group operates in an international environment, some of the Group’s financial instruments and transactions are denominated in currencies other than the Canadian Dollar. The results of the Group’s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Group are reported in Canadian dollars in the Group’s consolidated financial statements.

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

As noted below, the Group has certain financial assets and liabilities denominated in foreign currencies. The Group does not use any derivative instruments to reduce its foreign currency risks. To reduce exposure to currency transaction risk, the Group maintains cash and cash equivalents in the currencies used by the Group to meet short‐term liquidity requirements.

71

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

5          Financial risk management – (continued)

Below is a summary of the cash and cash equivalents denominated in a currency other than the Canadian dollar that would be affected by changes in exchange rates relative to the Canadian dollar. The values are the Canadian dollar equivalent of the respective asset or liability that is denominated in a currency other than the Canadian dollar.

	2011	2010
	$	$
Cash	9,210	1,054
Bank overdraft	(430)	(747)
Trade receivables	3,474	2,302
Trade payables	(3,413)	(3,474)

 (b) Interest Rate Risk

Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates.

Unless otherwise noted, it is the opinion of management that the Group is not exposed to significant interest rate risk as it is debt free apart from short term borrowings utilized in Zimbabwe.  The Group’s cash and cash equivalents include highly liquid investments that earn interest at market rates. The Group manages its interest rate risk by endeavouring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. The Group’s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.

Cash held in foreign banks is subject to the interest rates ruling in those particular countries and this can have an effect on the results of the Group due to higher interest rates being paid in African countries compared to Canada. Cash held in interest bearing accounts amounted to $9,686 (2010: $1,145) and short term borrowings in Zimbabwe were $430 (2010: $747). At December 31, 2011, with all other variables unchanged, a 1% change in interest rates would result in an increase of interest (income)/ expense of $(93) (2010: $(4))  which is insignificant.

 Fluctuations in market interest rates have not had a significant impact on the Group’s results of operations.

(c) Concentration of Credit Risk

Credit risk is the risk of a financial loss to the Group if a gold sales customer fails to meet its contractual obligation. Current gold sales are made to Rand Refineries in South Africa and the payment terms are stipulated in the service delivery contract and are adhered to in all instances.

72

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

5          Financial risk management – (continued)

(d) Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group manages its liquidity by ensuring that there is sufficient capital to meet its likely cash requirements, after taking into account cash flows from operations and the Group’s holdings of cash and cash equivalents. The Group believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities.

Since the inception of dollarization in Zimbabwe, certain insurance cover has been reinstated. The Zimbabwean operations are now covered for Public Liability risk,  Assets all risk and comprehensive cover on all motor vehicles. Further insurance cover is currently under review.

6          Capital Management

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue the mining operations and exploration potential of the mineral properties.

The Group’s capital includes shareholder’s equity, comprising issued common shares, contributed surplus, accumulated other comprehensive income, accumulated deficit and bank loans.

 The Group’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its ongoing operations, to provide returns for shareholders, accommodate any rehabilitation provisions and to pursue growth opportunities.

In order to maximize ongoing exploration efforts, the Company does not pay dividends.

As at December 31, 2011, the Group is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy.

7              Production costs

	2011	2010
	$	$
Wages	6,197	4,909
Consumable materials	12,117	5,969
Site restoration	50	44
Exploration	21	34
Safety	290	145
Administration	2,418	1,516
	21,093	12,617

73

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

8              Administrative expenses

	2011	2010
	$	$
Investor  relations	196	145
Indigenisation of Blanket	326	-
Management contract fee	779	689
Audit fee	298	244
Legal fee	103	106
Accounting services fee	41	27
Listing fees	270	69
Directors fees	145	168
Salaries and wages	1,368	1,237
Other	151	122
	3,677	2,807

9              Other expenses

	2011	2010
	$	$
Impairment loss on trade receivables	-	1,064
	-	1,064

10              Finance income and finance costs

Recognised in profit or loss
	2011	2010
	$	$
Finance income	55	270
Interest expense on financial liabilities measured at amortised cost	(217)	(267)
Net finance costs recognised in profit or loss	(162)	3

74

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

11              Income tax expense

	2011	2010
	$	$
Current tax expense
Current period	8,005	1
Deferred tax expense
Origination and reversal of temporary differences	785	1,041
Change in previously unrecognised deductible temporary differences	(120)	-
Recognition of previously unrecognised tax losses	(206)	-
	459	1,041
Total income tax expense	8,464	1,042

Reconciliation of tax provision

	2011	2011	2010	2010
	%	$	%	$
Profit for the period		12,130		1,455
Total income tax expense		8,464		1,042
Profit excluding income tax		20,594		2,497
Income tax using Company's domestic tax rate	28.25%	5,818	31%	774
Tax rate difference		(1,476)		(214)
Foreign currency difference		1,075		(185)
Withholding taxes		2,589		-
Permanent differences		613		219
Losses expired		-		5,467
Change in unrecognized temporary differences		(155)		(5,019)
Income tax expense		8,464		1,042

Changes in the applicable domestic tax rate are the result of enacted tax rate changes in Canada.

75

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

11              Income tax expense – (continued)

Deferred tax assets and liabilities

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

	2011	2010
	$	$
Deductible temporary differences	3,427	3,399
Tax loss carry - forward	9,826	10,115
	13,253	13,514

The Company has not recognised deferred tax liabilities in respect of unremitted earnings in foreign subsidiaries as it is not considered probable that this temporary difference will reverse in the foreseeable future. At December 31, 2011, these earnings amount to $8,151(2010 - $2,151).

The tax losses expire as set out below. The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from. In 2011 $737 of previously unrecognised tax losses and $430 of deductible temporary differences were recognised as management considered it probable that future taxable profits will be available against which they can be utilised.

Year	Amount
2031	2,134
2030	1,617
2029	1,661
2028	2,260
2027	3,054
2026	2,780
2015	1,863
2014	1,583
No expiry	20,694
	37,646

76

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

11              Income tax expense – (continued)

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

	Assets		Liabilities		Net
	2011	2010	2011	2010	2011	2010
	$	$	$	$	$	$
Property, plant and equipment	-	-	(6,466)	(5,595)	(6,466)	(5,595)
Unrealised foreign exchange	119	-	-	9	119	9
Inventories	-	-	59	40	59	40
Provisions	-	-	373	384	373	384
Other items			(3)	-	(3)	-
Tax loss carry-forwards	206	-	-	11	206	11
Tax (assets) liabilities	325	-	(6,037)	(5,151)	(5,712)	(5,151)

Movement in deferred taxes on temporary difference during the year

	Balance January 1	Recognised in profit and loss	Recognised in other comprehensive income	Balance December 31
	$	$	$	$
2011
Property, plant and equipment	(5,595)	(759)	(112)	(6,466)
Unrealised foreign exchange	9	110	-	119
Inventories	40	18	1	59
Provisions	384	(19)	8	373
Other items	-	(3)	-	(3)
Tax loss carry-forwards	11	194	1	206
	(5,151)	(459)	(102)	(5,712)
2010
Property, plant and equipment	(4,735)	(1,083)	223	(5,595)
Unrealised foreign exchange	-	9		9
Inventories	33	9	(2)	40
Provisions	366	35	(17)	384
Tax loss carry-forwards	23	(11)	(1)	11
	(4,313)	(1,041)	203	(5,151)

77

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

12              Property, plant and equipment

	Land and buildings	Mineral properties being depleted	Mineral properties not being depleted	Plant and equipment	Fixtures and fittings	Motor vehicles	Total
	$	$	$	$	$	$	$
Cost
Balance at January 1, 2010	4,161	6,950	8,085	11,851	1,054	724	32,825
Additions	112	2,376	631	4,073	38	74	7,304
Disposals	-	-	-	-	-	-	-
Foreign exchange movement	(127)	(326)	(180)	(381)	(9)	(28)	(1,051)
Balance at December 31, 2010	4,146	9,000	8,536	15,543	1,083	770	39,078
Balance at January 1, 2011	4,146	9,000	8,536	15,543	1,083	770	39,078
Additions	93	757	2,726	4,485	91	376	8,528
Disposals	-	-	-	-	-	(4)	(4)
Impairment (1)	-	-	(3,884)	-	-	-	(3,884)
Foreign exchange movement	(39)	177	65	(30)	(22)	13	164
Balance at December 31, 2011	4,200	9,934	7,443	19,998	1,152	1,155	43,882

(1) The full carrying value of the Rooipoort platinum property in South Africa has been impaired as, despite the timely application for the renewal of the prospecting right, no formal right has yet been granted. As a consequence of the delay in the receipt of the valid right, no funding has been allocated to this project for the foreseeable future.

78

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

12           Property, plant and equipment - (continued)

	Land and buildings	Mineral properties being depleted	Mineral properties not being depleted	Plant and equipment	Fixtures and fittings	Motor vehicles	Total
Depreciation and Impairment losses
Balance at January 1, 2010	237	412	-	2,787	824	346	4,606
Depreciation for the year	250	453	-	1,734	40	109	2,586
Foreign exchange movement	(18)	(33)		(22)	(3)	(16)	(92)
Balance at December 31, 2010	469	832	-	4,499	861	439	7,100
Balance at January 1, 2011	469	832	-	4,499	861	439	7,100
Depreciation for the year	250	659	-	1,833	87	154	2,983
Disposals	-	-	-	-	-	(4)	(4)
Foreign exchange movement	18	37	-	(154)	(25)	9	(115)
Balance at December 31, 2011	737	1,528	-	6,178	923	598	9,964
Carrying amounts
At January 1, 2010	3,924	6,538	8,085	9,064	230	378	28,219
At December 31, 2010	3,677	8,168	8,536	11,044	222	331	31,978
At December 31, 2011	3,463	8,406	7,443	13,820	229	557	33,918

79

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

12           Property, plant and equipment (continued)

Recoverability

The recoverability of the carrying amount of the South African and Zambian mineral properties (if not impaired) is dependent upon the availability of sufficient funding to bring the properties into commercial production, the price of the products to be recovered, the exchange rate of the local currency relative to the US dollar and the undertaking of profitable mining operations. As a result of these uncertainties, the actual amount recovered may vary significantly from the carrying amount.

13              Other investments

	December 31, 2011	December 31, 2010	January 1, 2010
	$	$	$
Current investments
Available for sale financial assets	5	5	59

On May 9, 2002, the Group participated in a private placement of the purchase of shares of Motapa Diamonds Inc. (“Motapa”) at a cost of $79.  The shares of Motapa were listed on the TSX Venture Exchange in Canada prior to Motapa being acquired by Lucara (LUC.V).  In terms of the transaction one Motapa share was exchanged for 0.9055 Lucara shares. The Group sold the Lucara shares in 2010.

The fair value of the shares held in Old Mutual Plc is $5(2010: $5 and January 1, 2010: $5).

The Group's exposure to credit and currency risks related to other investments is disclosed in note 5 and note 24.

14              Inventories

	December 31, 2011	December 31, 2010	January 1, 2010
	$	$	$
Consumable stores	3,899	2,041	2,089
Gold in progress	583	583	498
	4,482	2,624	2,587

Inventory is comprised of gold in circuit at Blanket and consumable stores utilised by Blanket Mine. Consumables stores are disclosed net of any write downs or provisions of obsolete items. The inventories expensed in the year amounted to $23,262 (2010 - $14,571)

80

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

15              Trade and other receivables

	December 31, 2011	December 31, 2010	January 1, 2010
	$	$	$
Bullion sales receivable	2,278	893	691
VAT receivable	694	902	749
Deposits for stores and equipment	680	519	112
Current portion	3,652	2,314	1,552
Non-current portion	-	-	810
Total trade and other receivables	3,652	2,314	2,362

The bullion receivable is received shortly after the delivery of the gold and no provision for non-recovery is required.

At January 1, 2010 a Bond was shown at the estimated recoverable amount of $810.  In arriving at this recoverable amount the Company estimated the weighted average probability of the Bond being redeemed over periods of up to 5 years and applied a discount factor of 43%.

The Bond plus interest is guaranteed by RBZ on maturity. The Group was unable to sell the Bond at an acceptable amount and the RBZ did not redeem the Bond on the initial maturity date, or any date thereafter, and with the lack of information coming from the RBZ the Bond has been written down to    $ nil in 2010, whilst Blanket Mine continues to retain legal ownership of the RBZ debt.

The Group's exposure to credit and currency risks, and impairment losses related to trade and other receivables is disclosed in note 5 and note 24.

16              Cash and cash equivalents

	December 31, 2011	December 31, 2010	January 1, 2010
	$	$	$
Bank balances	9,686	1,145	1,622
Cash and cash equivalents	9,686	1,145	1,622
Bank overdrafts used for cash management purposes	(430)	(747)	(588)
Cash and cash equivalents in the statement of cash flows	9,256	398	1,034

81

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

16              Cash and cash equivalents – (continued)

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed in note 5 and note 24.

The bank overdraft facility of US$2.5 million bears interest at 8% above the 30 day LIBOR rate. The facility is unsecured and valid for 12 months and is renewable. The facility is repayable on demand.

17              Equity

Share capital

Authorised
Unlimited number of common shares of CAD of no par value
Unlimited number of preference shares of CAD of no par value.
Issued	Number of common shares	Amount
January 1, 2010	500,169,280	196,125
Issued during the year	-	-
December 31, 2010	500,169,280	196,125
Issued during the year	380,000	38
December 31, 2011	500,549,280	196,163

Common shares and preference shares

The holders of common shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. Holders of preference shares receive a non-cumulative dividend per share at the Company’s discretion, or whenever dividends to common shareholders are declared. They do not have the right to participate in any additional dividends declared for common shareholders.

Preference shares do not carry the right to vote. All shares rank equally with regard to the Company’s residual assets, except that preference shareholders participate only to the extent of the face value of the shares.

Investment Revaluation Reserve

The investment revaluation reserve arises from the valuation of investments at fair value through other comprehensive income.

82

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

17              Equity – (continued)

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.

Contributed surplus

The contributed surplus comprises the cumulative net change resulting from share based payments.

18              Earnings per share

Basic earnings per share

The calculation of basic earnings per share at December 31, 2011 was based on the profit/ loss attributable to common shareholders of $12,130 (2010: $1,455), and a weighted average number of common shares outstanding of 500,396,239 (2010: 500,169,280), calculated as follows:

Weighted average number of common shares

(In number of shares)		Note	2011	2010
Issued common shares at January 1	17		500,169,280	500,169,280
Issues during the year on May 27			226,959	-
Weighted average number of common shares at December 31			500,396,239	500,169,280

Diluted earnings per share

The calculation of diluted earnings per share at December 31, 2011 was based on the profit attributable to common shareholders of $12,130 (2010: $1,455), and a weighted average number of common shares and potentially dilutive shares outstanding of 509,879,875 (2010: 500,169,280), calculated as follows:

Weighted average number of common shares

(In number of shares)	2011	2010
Weighted average number of common shares (basic) at December 31	500,396,239	500,169,280
Effect of dilutive options	9,483,636	-
Weighted average number of common shares (diluted) at December 31	509,879,875	500,169,280

83

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

18              Earnings per share – (continued)

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 period during which the options were outstanding. The potential dilutive effect of 16,460,000 (2010 – 26,080,000) were excluded from the above calculations because these options were anti-dilutive.

19              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 makes a matching contribution plus an inflation levy as a fixed percentage of eligible earnings of these employees. The total contribution by Blanket for the year ended December 31, 2011 was $ 288 (2010: $277).

20              Share-based payments

Description of the share-based payment arrangements

At December 31, 2011 the Group has the following share-based payment arrangement:

Share option programme (equity-settled)

The Group has established incentive stock option plans (the "Plans") for employees, officers, directors, consultants and other service providers. In accordance with these programmes, options are granted at the market price of the shares at the date of grant.

Terms and conditions of share option program

The terms and conditions relating to the grants of the share option program are as follows; all options are to be settled by physical delivery of shares. Under the current plan, the maximum term of the options is 5 years.  Under the Plans, the aggregate number of shares that may be issued will not exceed 10% of the number of the shares issued of the Group, and as at December 31, 2011, the Group has the following options outstanding:

Number of Options	Exercise Price	Expiry Date
	$
9,450,000	0.07	April 24, 2012
1,300,000	0.07	May 31, 2012
13,320,000	0.07	March 18,2013
1,000,000	0.07	July 1, 2013
210,000	0.07	April 29, 2014
500,000	0.07	Mar 23, 2014
16,460,000	0.13	Jan 31, 2016
300,000	0.07	May 11, 2016
42,540,000	0.093

84

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

20              Share-based payments – (continued)

Disclosure of share option program

The continuity of the options granted, exercised, cancelled and expired under the Plans during 2011 and 2010 are as follows:

	Number of Options		Weighted Avg. Exercise Price
		$
Options outstanding at January 1, 2010	32,580,000	0.1706
Granted	-
Forfeited or expired	-
Options outstanding and exercisable at December 31, 2010	32,580,000	0.07(1)
Granted	16,460,000	0.13
Forfeited or expired	(6,500,000)	0.07
Options outstanding and exercisable at December 31, 2011	42,540,000	0.093

(1)   As a result of the re-pricing of the options in 2010, the weighted average exercise price was changed to $0.07.

The weighted average remaining contractual life of the outstanding options is 2.16 years (2010: 2 years).

The vesting of options is made at the discretion of the board of directors at the time the options are granted. As of December 31, 2011 there are 7,514,928 stock options available to grant (2010: 17,436,928 stock options)

Employee expenses

	2011	2010
	$	$
Share options modified in 2010	-	354
Share options granted in 2011	1,101	-
Total expense recognised as employee costs	1,101	354

Inputs for measurement of grant date fair values

The fair value of share based payments noted above was estimated using the Black-Schöles Option Pricing Model with the following assumptions for the years ended December 31, 2011 and 2010.

85

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

20              Share-based payments – (continued)

	2011	2010
Fair value of share options and assumptions
Risk-free interest rate	1.1%	1-2%
Expected dividend yield	Nil	Nil
Expected stock price volatility	60.47%	45-55%
Expected option life in years	5	1.7-5.8
Exercise price	0.13	0.07
Share price at grant date	0.13	0.07
Fair value at grant date	0.067	0.011
Expected forfeiture rate	0%	0%

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

21              Provisions

	Site restoration
	$
Balance at January 1, 2010	1,789
Foreign currency adjustment	(48)
Unwind of discount	44
Adjustment made during the period	114
Balance at December 31, 2010	1,899
Balance at January 1, 2011	1,899
Foreign currency adjustment	(47)
Unwind of discount	50
Adjustment made during the period	(117)
Balance at December 31, 2011	1,785
Non-current	1,785
Current	-

The non-credit adjusted discount rates currently applied in the calculation of the net present value of the provision is 1.96% and 5% (2010 – 1.25% and 5%)

86

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

21              Provisions – (continued)

Site restoration

Site restoration relates to the net present value of the estimated cost of closing down the mine and site and environmental restoration costs, estimated to be paid in 2024 based on the estimated life of mine. Site restoration costs are capitalised to mineral properties at initial recognition and amortised systematically over the estimated life of the mine.

22              Trade and other payables

	2011	2010	January 1, 2010
	$	$	$
Other trade payables	3,087	3,316	1,789
Non-trade payables and accrued expenses	754	566	380
	3,841	3,882	2,169

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 5 and note 24.

The Directors consider the carrying amounts of trade and other payables as a reasonable approximation of their fair values.

23              Cash flow

Items not involving cash are as follows:

	2011	2010
	$	$
Net finance costs (income)	162	3
Income tax expense	8,464	1,042
Profit on sale of investment	-	(43)
Site restoration	67	(158)
Share-based payment expense	1,101	354
Depreciation	2,983	2,586
Impairment	3,884	-
Write down of RBZ Bond and accrued interest	-	1,064
Interest accrued on RBZ bond	-	(264)
Foreign exchange loss	(303)	(359)
Other	290	(12)
	16,648	4,210

87

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

23              Cash flow – (continued)

Net changes in non-cash working capital

	2011	2010
Trade and other payables	(41)	1,712
Income taxes payable	295	-
Trade and other receivables	(1,338)	(762)
Inventories	(1,858)	(37)
Prepayments	(241)	37
	(3,183)	950

24               Financial instruments

Credit risk

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Carrying amount	2011	2010	January 1, 2010
	$	$	$
Available-for-sale financial assets	5	5	59
Trade and other receivables	3,652	2,314	2,362
Cash and cash equivalents	9,686	1,145	1,622
	13,343	3,464	4,043

The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:

Carrying amount	December 31, 2011	December 31, 2010	January 1, 2010
	$	$	$
Canada	8	11	-
Other regions	3,644	2,303	2,362

88

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

24               Financial instruments – (continued)

The maximum exposure to credit risk for trade and other receivables at the reporting date by type of counterparty was:

	December 31,  2011	December 31, 2010		January 1,  2010
	$	$		$
Bullion sales receivable	2,278		893	1,501
VAT receivable	694		902	749
Deposits for stores and equipment	680		519	112
	3,652		2,314	2,362

The Group’s most significant customer accounts for $2,278 of the trade and other receivables carrying amount at December 31, 2011 (2010: $893; January 1, 2010: $691).

Impairment losses

The aging of trade and other receivables at the reporting date was:

	Gross	Impairment		Gross	Impairment		Gross	Impairment
	2011			2010			January 1, 2010
	$		$	$		$	$		$
Not past due	3,652		-	2,314		-	1,552		-
Past due 0-30 days	-		-	-		-	-		-
Past due 31-120 days	-		-	-		-	-		-
More than one year	-		-	-		-	3,280		2,470
	3,652		-	2,314		-	4,832		2,470

Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements. The Group early applied the exemption in IFRS 1 that allows an entity not to provide comparative information for periods ending before December 31, 2010 in respect of the liquidity disclosures below.

89

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

24               Financial instruments – (continued)

December 31, 2011	Carrying amount	6 months or less	6-12 months	1-2 years	2-5 years	More than 5 years
	$	$	$	$	$	$
Non-derivative financial liabilities
Trade and other payables	3,841	3,841	-	-	-	-
Bank overdraft	430	430	-	-	-	-
	4,271	4,271	-	-	-	-
December 31, 2010
Non-derivative financial liabilities
Trade and other payables	3,882	3,882	-	-	-	-
Bank overdraft	747	747	-	-	-	-
	4,629	4,629	-	-	-	-

Currency risk

Exposure to currency risk

The Group's exposure to foreign currency risk was as follows:

The values are the Canadian dollar equivalent of the respective asset or liability that is denominated in a currency other than the Canadian dollar.

	December 31, 2011		December 31, 2010	January 1, 2010
		$	$	$
Trade receivables		3,474	2,302	2,362
Trade payables		(3,413)	(3,474)	(1,869)
Cash and cash equivalents		9,210	1,067	1,221
Bank overdraft		(430)	(747)	(588)
Gross statement of financial position exposure		8,841	(852)	1,126

90

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

24               Financial instruments – (continued)

The following exchange rates applied during the year:

	Average rate		Reported date spot rate
	2011	2010	December 31,  2011	December 31,  2010	January 1,  2010
(In Canadian dollars)	$	$	$	$	$
USD 1	1.0236	1.0308	1.0199	1.0002	1.0494

Sensitivity analysis

A strengthening/ weakening of the Canadian dollar, as indicated below, against the USD at      December 31 would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2010, all be it that the reasonably possible foreign exchange rate variances were different, as indicated below.

	Equity	Profit or loss
(Effect in thousands of Canadian dollars)	$	$
December 31, 2011
USD (1 percent strengthening)	389	98
December 31, 2010
USD (1 percent strengthening)	221	26

Interest rate risk

At the reporting date the interest rate of the Group’s interest-bearing financial instruments was insignificant.

In the monetary policy statement announced by the Governor of the Reserve Bank of Zimbabwe (“RBZ”) in February 2009, the debt owing by RBZ to Blanket Mine was converted into a Special Tradable Gold-Backed Foreign Exchange Bond, with a term of 12 months and an 8% interest rate.

At January 1, 2010 the Bond was shown at the estimated recoverable amount of $810.  In arriving at this recoverable amount the Company estimated the weighted average probability of the Bond being redeemed over periods of up to 5 years and applied a discount factor of 43%.

91

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

24              Financial instruments – (continued)

The Bond plus interest is guaranteed by RBZ on maturity.  Blanket has been unable to sell the Bond at an acceptable discount rate and the RBZ did not redeem the Bond on the initial maturity date nor any subsequently advised maturity dates.  As a result of the uncertain redemption date and the lack of information coming from the RBZ, the Bond has been written down to nil whilst Blanket continues to retain legal ownership of the RBZ debt.

The basis for determining all other fair values is disclosed in note 4.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The Group early applied the exemption in IFRS 1 that allows an entity not to provide comparative information for periods ending before December 31, 2010 in respect of the fair value hierarchy disclosures below.

The different levels have been defined as follows:

·   Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

·   Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

·   Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	Level 1	Level 2	Level 3	Total
	$	$	$	$
December 31, 2011
Available-for-sale financial assets	5	-	-	5
December 31, 2010
Available-for-sale financial assets	5	-	-	5

25              Contingencies and commitments

The Group is subject to various claims that arise in the normal course of business. Management believes that the aggregate contingent liability of the Group arising from these claims is immaterial and therefore no provision has been made.

Commitment to purchase plant and equipment at year end is $309 (2010 - $2,197)

92

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

26              Related parties

Transactions with key management personnel

Key management personnel compensation:

In addition to their salaries, the Group also contributes to a defined contribution plan on behalf of eligible employees. For the terms of the plan refer to note 19: Defined Contribution Plan.

Employees, officers, directors, consultants and other service providers also participate in the Group's share option program (see note 20).

Key management personnel compensation comprised.

	2011	2010
	$	$
Salaries and wages	1,289	1,109
Share-based payments	947	308
	2,236	1,417

Key management personnel and director transactions:

A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities.

A number of these entities transacted with the Group in the reporting period. The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows:

93

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

26              Related parties – (continued)

		Transactions		Balance outstanding
	Year ended Dec 31,			As at Dec 31,		As at Jan 1,
	Note	2011	2010	2011	2010	2010
		$	$	$	$	$
Management fees, allowances and bonus paid or accrued to a company which provides the services of the Company’s President	i	588	552	-
Rent for office premises paid to a company owned by members of the President’s family		48	49	-
Legal fees paid to a law firm where a Director is a partner		97	58
Fees, allowances and interest paid to the past Chairman of the Board	ii	-	38	-
Owing to  directors for unpaid salaries and directors’ fees		-		-	155	172

(i) The Group has entered into a management agreement with Epicure Overseas S.A. (“Epicure”), a Panamanian Group, for management services provided by the President.  The Group is required to pay a base annual remuneration adjusted for inflation and bonuses set out in the agreement. In the event of a change of control of the Group, Epicure can terminate the agreement and receive a lump sum payment equal to 200% of the remuneration for the year in which the change occurs.

(ii) On January 31, 2005, the Group entered into an agreement (the “Chairman’s Agreement”) with the Group’s former Chairman for services as the non-executive Chairman of the board of directors of the Group.  This agreement was terminated in December 2010.

94

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

27              Group entities

			Ownership interest
	Country of  incorporation	December 31 2011	December 31, 2010	January 1, 2010
Significant subsidiaries		%	%	%
Caledonia Holdings Zimbabwe (Private) Limited	Zimbabwe	100	100	100
Caledonia Mining Services Limited	Zimbabwe	100	100	100
Caledonia Kadola Limited	Zambia	100	100	100
Caledonia Mining (Zambia) Limited	Zambia	100	100	100
Caledonia Nama Limited	Zambia	100	100	100
Caledonia Western Limited	Zambia	100	100	100
Eersteling Gold Mining Corporation Limited	South Africa	100	100	100
Fintona Investments (Proprietary) Limited	South Africa	100	100	100
Greenstone Management Services (Proprietary) Limited	South Africa	100	100	100
Maid O’ Mist (Pty) Ltd	South Africa	100	100	100
Mapochs Exploration (Pty) Ltd	South Africa	100	100	100
Caledonia Holdings (Africa) Limited	Zimbabwe	100	100	100
Blanket (Barbados) Holdings Limited	Barbados	100	100	100
Blanket Mine (1983) (Private) Limited	Zimbabwe	100	100	100

28               Operating Segments

The Group's operating segments have been identified based on geographic areas.

The Group has four reportable segments as described below, which are the Group's strategic business units. The strategic business units are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Company’s CEO reviews internal management reports on at least a quarterly basis. The following geographical areas describe the operations of the Group's reportable segments: Corporate, Zimbabwe, South Africa and Zambia.

The accounting policy of the reportable segments is the same as described in note 4.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management report that are reviewed by the Group's CFO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

95

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

28               Operating Segments – (continued)

Information about reportable segments

2011	Corporate	Zimbabwe	South Africa	Zambia	Total
	$	$	$	$	$
External Revenue	1	55,704	-	-	55,705
Royalty	-	(2,514)	-	-	(2,514)
Production costs	-	(20,489)	(604)	-	(21,093)
Administrative and share-based payment expenses	(3,411)	(305)	(1,062)	-	(4,778)
Depreciation	-	(2,773)	(210)	-	(2,983)
Impairment	-	-	(3,884)	-	(3,884)
Finance income	-	-	55	-	55
Finance cost	-	(217)	-	-	(217)
Foreign exchange gain/(loss)	173	130	-	-	303
Segment profit before income tax	(3,237)	29,536	(5,705)	-	20,594
	-
Income tax expense	-	(8,791)	327	-	(8,464)
Segment profit after income tax	(3,237)	20,745	(5,378)	-	12,130
Geographic segment assets:
Current	8,703	7,629	1,779	43	18,154
Non Current	55	25,753	1,159	7,281	34,248
Expenditure on property, plant and equipment	-	5,768	51	2,709	8,528
Geographic segment liabilities
Current	(691)	(3,535)	(333)	(7)	(4,566)
Non-current	-	(7,502)	(320)	-	(7,822)

96

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

28               Operating Segments – (continued)

2010	Corporate	Zimbabwe	South Africa	Zambia	Total
	$	$	$	$	$
External revenues	-	22,388	-	-	22,388
Royalty	-	(825)	-	-	(825)
Production costs	-	(12,204)	(413)	-	(12,617)
Administrative and share-based payment expenses	(1,924)	(274)	(963)	-	(3,161)
Depreciation	-	(2,367)	(219)		(2,586)
Other (expenses)/income	-	(1,064)			(1,064)
Finance income	-	269	1		270
Finance expense	-	(267)			(267)
Foreign exchange gain/(loss)	8	(539)	890	-	359
Segment profit before income tax	(1,916)	5,117	(704)	-	2,497
Income tax expense	-	(1,042)			(1,042)
Segment profit after income tax	(1,916)	4,075	(704)	-	1,455
Geographic segment assets:
Current	1,070	4,380	684	42	6,176
Non-current	56	22,388	5,057	4,482	31,983
Expenditure on property, plant and equipment		6,706	(11)	609	7,304
Geographic segment liabilities
Current	(408)	(3,244)	(970)	(7)	(4,629)
Non-current	-	(6,688)	(362)	-	(7,050)

97

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

28               Operating Segments – (continued)

Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items

	2011	2010
	$	$
Revenues
Total revenue for reportable segments	65,036	30,086
Elimination of inter-segment revenue	(9,331)	(7,698)
Consolidated revenue	55,705	22,388

Profit or loss
Total profit or loss before tax for the reportable segments	21,685	6,255
Elimination of inter-segment profits	1,091	773
Consolidated profit before income tax	20,594	5,482
Assets
Total assets for reportable segments	54,128	39,174
Elimination of inter-segment profits	(1,726)	(1,015)
Consolidated total assets	52,402	38,159
Liabilities
Total liabilities for reportable segments	12,388	11,679

Other material items 2011

	Reportable segment totals	Elimination of  inter-segment profits	Consolidated totals
	$	$	$
Finance income	55	-	55
Finance cost	(217)	-	(217)
Expenditure on property, plant and equipment	9,413	885	8,528
Depreciation	(3,157)	174	(2,983)

98

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

28               Operating Segments – (continued)

Other material items 2010

	Reportable segment totals	Elimination of  inter-segment profits	Consolidated totals
	$	$	$
Finance income	270	-	270
Finance cost	(267)	-	(267)
Expenditure on property, plant and equipment	7,801	497	7,304
Depreciation	(2,610)	24	(2,586)

Major customer

Revenues from one customer of the Group's Zimbabwe segment represents approximately $55,848 (2010: $22,388) of the Group's total revenues.

29                Subsequent events

In 2008 the Zimbabwean parliament passed the Indigenisation and Economic Empowerment Act 2007 (“Act”) that stipulated that 51% ownership of all companies had to reside in the hands of Indigenous Zimbabwean citizens.

On February 20, 2012Caledonia announced it has signed a Memorandum of Understanding (“MoU”) with the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe pursuant to which Caledonia has agreed that Indigenous Zimbabweans will acquire an effective  51% ownership interest of the Blanket Mine for a paid transactional value of US$30.09 million on the following basis:

·   16% will be sold to the National Indigenisation and Economic Empowerment Fund;

·   10% will be sold to a Management and Employee Trust for the benefit of the present and future managers and employees of Blanket;

·   15% will be sold to identified Indigenous Zimbabweans; and

·   10% will be donated to the Blanket Gwanda Community Trust.  Blanket will also make a non-refundable donation of US$1.0 million to the Trust as soon as it has been established.

Caledonia will facilitate the vendor funding of these transactions (other than the 10% interest which will be donated to the Community Trust) which will be repaid by way of future dividends from Blanket.

Caledonia has undertaken to complete the implementation of all the components of the indigenisation transaction as soon as possible.  The Government of Zimbabwe has agreed that implementation of the terms of the MoU will constitute full compliance by Blanket and Caledonia with the requirements of the Act.

99

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

29               Subsequent events – (continued)

Further details of the MoU are subject to a confidentiality agreement.

The above transactions are anticipated to be accounted for in accordance with IFRS 2, Share based payments, however an estimate of the financial statement effects is dependent on the finalisation of the various agreements related to the above transactions.
 

30               Explanation of transition to IFRS 1

As stated in note 2(a), these are the Group's first consolidated financial statements prepared in accordance with IFRS, as issued by the International Accounting Standards Board.

In the preparation of the quarterly IFRS compliant financial statements, certain interpretations of IFRS were applied. Having now completed the first annual financial statements under IFRS, some presentations adopted in the quarterly financial statements have been amended. The areas affected are:

·   The cumulative translation difference at the date of transition was not taken to accumulated deficit although the IFRS 1 exemption was adopted at transition, this has now been done in these annual financial statements.

·   The cumulative effect of exploration activities expensed in the subsidiary accounts were not capitalised in the quarterly IFRS financial statements in accordance with the Group’s accounting policies. The exploration expenses attributable to the Rooipoort platinum property in South Africa have been fully impaired in these annual financial statements.

The accounting policies set out in note 3 have been applied in preparing the consolidated financial statements for the year ended  December 31, 2011, the comparative information presented in these financial statements for the year ended December 31, 2010 and in the preparation of an opening IFRS statement of financial position at January 1, 2010 (the Group's date of transition).

IFRS 1 First-time Adoption of International Financial Reporting Standards sets forth guidance for the initial adoption of IFRS. Under IFRS 1 the standards are applied retrospectively at the transitional statement of financial position date with all adjustments to assets and liabilities taken to retained earnings unless certain exemptions are applied. The Company has applied the following exemptions to its opening statement of financial position dated January 1, 2010.

 (a) Business Combinations

IFRS 1 indicates that a first-time adopter may elect not to apply IFRS 3 Business Combinations retrospectively to business combinations that occurred before the date of transition to IFRS. The Company has taken advantage of this election.

100

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

30          Explanation of transition to IFRS 1 – (continued)

(b) Cumulative translation differences

IFRS 1 allows a first-time adopter to not comply with the requirements of IAS 21 The Effects of Changes in Foreign Exchange Rates for cumulative translation differences that existed at the date of transition to IFRS. The Company has chosen to apply this election and has eliminated the cumulative translation difference and adjusted accumulated deficit at the date of transition to IFRS.

(c) Share-based payment transactions

IFRS 1 encourages, but does not require, first-time adopters to apply IFRS 2 Share-based Payments to equity instruments that were granted on or before November 7, 2002, or equity instruments that were granted subsequent to November 7, 2002 and vested before the later of the date of transition to IFRS and January 1, 2005. The Company has elected not to apply IFRS 2 to awards that vested prior to January 1, 2010.

(d) Borrowing Costs

The Company has elected to apply the transitional provisions of IAS 23 Borrowing Costs which permits prospective capitalization of borrowing costs on qualifying assets whose construction commenced after the Transition Date.

In preparing its opening IFRS statement of financial position, the Group has not made any adjustments for borrowing costs in amounts reported previously in financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the Group’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.

IFRS employs a conceptual framework that is similar to Canadian GAAP. However, significant differences exist in certain matters of recognition, measurement and disclosure. While adoption of IFRS has not changed the Company’s actual cash flows, it has resulted in changes to the Company’s reported financial position and financial performance. In order to allow the users of the financial statements to better understand these changes, the Company’s Canadian GAAP statement of operations, statement of comprehensive income, statement of financial position and statement of cash flows for the year ended December 31, 2010 have been reconciled to IFRS, with the resulting differences explained.  In addition, a revised statement of financial position was prepared at the date of transition (January 1, 2010) with the resulting differences explained.

(A) Estimates

In accordance with IFRS 1, an entity’s estimates under IFRS at the date of transition to IFRS must be consistent with estimates made for the same date under previous GAAP, unless there is objective

101

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

30          Explanation of transition to IFRS 1 – (continued)

evidence that those estimates were in error. The Company’s IFRS estimates as of January 1, 2010 are consistent with its Canadian GAAP estimates for the same date.

(B) Severe Hyperinflationary Environment for Blanket

In recent years, Zimbabwe has been a severe hyperinflationary economy and Caledonia’s Blanket Mine has been specifically impacted by this. As a result of the situation in Zimbabwe, IAS 29 Financial Reporting in Hyperinflationary Economies was not applied because there was neither a reliable price index nor exchangeability of the Zimbabwean Dollar into a stable foreign currency (i.e. US Dollar).

During 2009, the commonly used currency in Zimbabwe changed from Zimbabwean Dollar to US Dollar. As a result, the operations of Blanket Mine ceased to be subject to severe hyperinflation on this date.

Caledonia has elected to measure Blanket’s assets and liabilities in accordance with IFRS1.D29, which has been early adopted, and to recognise the difference as an adjustment to opening deficit.

As a consequence of the above, the carrying values under IFRS increased over the amount under Canadian GAAP.

With the resultant higher carrying value for Blanket Mine’s property, plant and equipment, and the same application of the same depreciation rates, the depreciation amount under IFRS increased over the amount under Canadian GAAP. In addition the deferred tax liability related to Blanket Mine’s property, plant and equipment increased under IFRS over the amount under Canadian GAAP.

(C) Share-based payment

IFRS

• Each tranche of an award with different vesting dates is considered a separate grant for the calculation of fair value, and the resulting fair value is amortized over the vesting period of the respective tranches.

• Forfeiture estimates are recognized in the period they are estimated, and are revised for actual forfeitures in subsequent periods.

Canadian GAAP

• The fair value of stock-based awards with graded vesting are calculated as one grant and the resulting fair value is recognized on a straight-line basis over the vesting period.

• Forfeitures of awards are recognized as they occur.

102

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

30          Explanation of transition to IFRS 1 – (continued)

No change resulted in the figures because of these differences.

(D) Provision for environmental rehabilitation

An obligation exists to perform certain site rehabilitation resulting from the Group's operations. Under IFRS, a liability can arise as a result of a constructive and/or legal obligation. However Canadian GAAP only requires a liability to be raised if there is a legal obligation.

IFRS

• The provision for environmental rehabilitation must be adjusted for changes in the discount rate.

Canadian GAAP

• The provision for environmental rehabilitation is not adjusted for changes in the discount rate.

A small change in the figures resulted from this difference.

(E) Deferred tax asset/liability

IFRS

• All deferred tax assets and liabilities must be classified as non-current and offset to the extent that they relate to the same entity and same taxation authority.

Canadian GAAP

• Deferred tax assets and liabilities can be classified as current or non-current as appropriate.

As a result of the transition to IFRS the carrying amounts of various assets and liabilities have been adjusted (see B above).  There has not been a corresponding change to the tax basis of these assets and liabilities. As a result of the change in the carrying values of the Blanket assets, and other changes, the deferred tax liability has also increased.

(F) Other comprehensive income (loss)

Other comprehensive income (loss) consists of the change in the accumulated other comprehensive income(loss) (“AOCI”). Due to other IFRS adjustments, the balances that are used to calculate the AOCI are different in accordance with IFRS than in accordance with Canadian GAAP. As a result, AOCI and other comprehensive income (loss) are different in accordance with IFRS than in accordance with Canadian GAAP.

103

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

30               Explanation of transition to IFRS 1 – (continued)

(G) Impairment

IFRS – If an indication of impairment is identified, the asset’s carrying value is compared to the asset’s recoverable amount, being the higher of fair value less cost to sell and the value in use. If the recoverable amount is less than the carrying value, the asset is impaired by an amount equal to the difference between the recoverable amount and the carrying value.

Canadian GAAP - If indication of impairment is identified, the asset’s carrying value is compared to the asset’s undiscounted cash flows. If the undiscounted cash flows are less than the carrying value, the asset is impaired by an amount equal to the difference between the fair value and the carrying value.

The Company completed an analysis of its assets at January 1, 2010 and concluded that the assets were not impaired in accordance with IFRS.

(H) Presentation

The presentation of the cash flow statement in accordance with IFRS differs from the presentation of the cash flow statement in accordance with Canadian GAAP.

In preparing its opening IFRS statement of financial position, the Group has adjusted amounts reported previously in financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the Group’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.

(I)   Functional currency

Under IFRS the functional currencies of certain subsidiaries differed from the determination under Canadian GAAP. Accordingly the values for the non-monetary assets and liabilities have been adjusted on the transition to IFRS.

104

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

30               Explanation of transition to IFRS 1 – (continued)

Reconciliation of equity                                                                                               January 1, 2010

	Note	Canadian GAAP	Effect of   transition to IFRS	IFRS
		$	$	$
Assets
Property, plant and equipment	B,I	15,304	12,915	28,219
Other investments		59	-	59
Trade and other receivables		810	-	810
Total non-current assets		16,173	12,915	29,088
Inventories		2,590	(3)	2,587
Prepayments	I	158	(28)	130
Trade and other receivables		1,547	5	1,552
Cash and cash equivalents		1,622	-	1,622
Total current assets		5,917	(26)	5,891
Total assets		22,090	12,889	34,979
Equity and liabilities
Share capital		196,125	-	196,125
Contributed surplus		1,952	-	1,952
Accumulated other comprehensive income/(loss)	F,I	(551)	601	50
Accumulated deficit	B,D,E	(180,784)	8,777	(172,007)
Total equity		16,742	9,378	26,120
Liabilities
Provisions	D,I	1,730	59	1,789
Deferred tax liability	B	859	3,454	4,313
Total non-current liabilities		2,589	3,513	6,102
Trade and other payables		2,171	(2)	2,169
Bank overdraft		588	-	588
Total current liabilities		2,759	(2)	2,757
Total Liabilities		5,348	3,511	8,859
Total equity and liabilities		22,090	12,889	34,979

105

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

30               Explanation of transition to IFRS 1 – (continued)

Reconciliation of equity		December 31, 2010
	Note	Canadian GAAP	Effect of  transition to IFRS	IFRS
		$	$	$
Assets
Property, plant and equipment	B,I	21,289	10,689	31,978
Other investments		5	-	5
Total non-current assets		21, 294	10,689	31,983
Inventories		2,626	(2)	2,624
Prepayments	I	114	(21)	93
Trade and other receivables		2,309	5	2,314
Cash and cash equivalents		1,145	-	1,145
Total current assets		6,194	(18)	6,176
Total assets		27,488	10,671	38,159
Equity and liabilities
Share capital		196,125	-	196,125
Contributed surplus		2,306	-	2,306
Accumulated other comprehensive income/(loss)	F,I	(1,062)	(337)	(1,399)
Accumulated deficit	B,D	(178,527)	7,975	(170,552)
Total equity		18,842	7,638	26,480
Liabilities
Provisions	D,I	1,731	168	1,899
Deferred tax liability	B	2,286	2,865	5,151
Total non-current liabilities		4,017	3,033	7,050
Trade and other payables		3,882	-	3,882
Bank overdraft		747	-	747
Total current liabilities		4,629	-	4,629
Total Liabilities		8,646	3,033	11,679
Total equity and liabilities		27,488	10,671	38,159

106

Caledonia Mining Corporation

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

30               Explanation of transition to IFRS 1 – (continued)

Reconciliation of comprehensive income for the year ended December 31, 2010
	Note	Canadian GAAP	Effect of  transition to IFRS	IFRS
(In thousands of Canadian dollars except earnings per share amounts)		$	$	$
Continuing operations
Revenue	I	22,401	(13)	22,388
Royalty		(825)	-	(825)
Production costs	I,D	(13,298)	681	(12,617)
Depreciation	B,I	(566)	(2,020)	(2,586)
Gross profit		7,712	(1,352)	6,360
Administrative expenses	I	(3,978)	(247)	(4,225)
Foreign exchange (loss)/gain	I	(50)	409	359
Results from operating activities		3,684	(1,190)	2,494
Finance income		270	-	270
Finance cost		(267)	-	(267)
Net finance costs		3	-	3
Profit before income tax		3,687	(1,190)	2,497
Income tax expense	B,E	(1,430)	388	(1,042)
Profit for the year		2,257	(802)	1,455
Other comprehensive income(loss)
Reclassification adjustment of other investment		(45)	-	(45)
Foreign currency translation differences for foreign operations	I	(466)	(938)	(1,404)
Other comprehensive income for the year, net of income tax		(511)	(938)	(1,449)
Total comprehensive income for the year		1,746	(1,740)	6

107

30               Explanation of transition to IFRS 1 – (continued)

	Canadian GAAP	Effect of  transition to IFRS	IFRS
	$	$	$
Earnings per share
Basic and diluted earnings per share	0.005	(0.002)	0.003

Material adjustments to the statement of cash flows for 2010

Consistent with the Group's accounting policy choice under IAS 7, Statement of Cash Flows, there were several reclassifications required as a result of the requirements for reporting finance income, finance cost and tax paid. There are no material differences between the statement of cash flows presented under IFRS and the statement of cash flows presented under Canadian GAAP.

 

108

Directors and Management at March 29, 2012
BOARD OF DIRECTORS	OFFICERS
C. R. Jonsson  (2) (3) (4) (5)  - Chairman	C. R. Jonsson  - Chairman
Principal of Tupper Jonsson& Yeadon	Corporate Secretary
Barristers & Solicitors	Principal of Tupper Jonsson& Yeadon
Vancouver, British Columbia,	Barristers & Solicitors
Canada	Vancouver, British Columbia,
	Canada
S. E. Hayden(3) (4) (5)	S. E. Hayden
President and Chief Executive Officer	President and Chief Executive Officer
Johannesburg, South Africa	Johannesburg, South Africa
J. Johnstone (1)	S. R. Curtis
Retired Mining Engineer	Vice-President Finance and Chief Financial Officer
Gibsons, British Columbia, Canada	Johannesburg, South Africa
F C. Harvey (1)	Dr.  T. Pearton
Retired Executive	Vice-President Exploration
Oakville, Ontario, Canada	Johannesburg, South Africa
R. W. Babensee (1) (2)	J.M. Learmonth
Chartered Accountant - Retired	Vice-President Business Development
Toronto, Ontario, Canada	Johannesburg, South Africa
S. R. Curtis (5)
Vice-President Finance and Chief Financial officer
Johannesburg, South Africa
BOARD COMMITTEES
(1)  Audit Committee
(2)  Compensation Committee
(3)  Corporate Governance Committee
(4)  Nominating Committee
(5)  Disclosure Committee

109

CORPORATE DIRECTORY	SOLICITORS
CORPORATE OFFICES	Tupper, Jonsson & Yeadon
Canada - Head Office	1710-1177 West Hastings St, Vancouver,
Caledonia Mining Corporation	British Columbia V6E 2L3 Canada
Suite 1201, 67 Yonge Street
Toronto, Ontario M5E 1J8 Canada	Borden Ladner Gervais LLP
Tel:(1)(416) 369-9835 Fax:(1)(416) 369-0449	Suite 4100, Scotia Plaza
info@caledoniamining.com	40 King Street West
	Toronto, Ontario M5H 3Y4 Canada
South Africa – Africa Office
Greenstone Management Services (Pty) Ltd.AUDITORS	AUDITORS
P.O. Box 834BDO Dunwoody LLP	BDO Canada LLP
Saxonwold 2132Chartered Accountants	Chartered Accountants
South AfricaSuite 3300, 200 Bay Street	Suite 3300, 200 Bay Street
Tel: (27)(11) 447-2499 Fax: (27)(11) 447-2554	Royal Bank Plaza, South Tower
	Toronto, Ontario M5J 2J8 Canada
Zambia
Caledonia Mining (Zambia) Limited	REGISTRAR & TRANSFER AGENT
P.O. Box 36604	Equity Transfer Services Inc.
Lusaka, ZambiaSuite 400 200 University Ave	Suite 400 200 University Ave.
Tel:(260)(1) 29-1574 Fax(260)(1) 29-2154	Toronto, Ontario M5H 4H1 Canada
	Tel: (416) 361 0152 Fax: (416) 361 0470
	BANKERS
Zimbabwe	Canadian Imperial Bank of Commerce
Caledonia Holdings Zimbabwe (Limited)	6266 Dixie Road
P.O. Box CY1277	Mississauga, Ontario L5T 1A7 Canada
Causeway, Harare
Zimbabwe	NOMADS AND BROKERS (AIM)
Tel: (263) (4) 701 152/4 Fax: (263)(4) 702 248	Collins Stewart Europe Limited
	88 Wood Street
CAPITALIZATION at March 29, 2012RBC Capital Markets	London EC2V 7QR
Authorised: Unlimited71 Queen Victoria Street	Fax: +44 20 7523 8134
Shares, Warrants and Options Issued:
Common Shares:       500,549,280Tel: +44 20 7653 4000	SHARES LISTED
Warrants:                                                              Nil	Toronto Stock Exchange Symbol “CAL”
Options:                       42,540,000	NASDAQ OTC BB Symbol "CALVF"
	London “AIM” Market Symbol “CMCL”
	Web Site: http://www.caledoniamining.com

110

EXHIBIT #14b

CALEDONIA MINING CORPORATION

PROXY AND INFORMATION CIRCULAR

111

Notice of Annual General and Special

Meeting of Shareholders

to be held May 26, 2011

Proxy and Information Circular

CALEDONIA MINING CORPORATION

April 15, 2011

Information about Caledonia Mining Corporation may be viewed on its website at www.caledoniamining.com

112

INFORMATION CIRCULAR

SOLICITATION OF PROXIES

This Management Proxy Circular is furnished in connection with the solicitation by and on behalf of the management of Caledonia Mining Corporation (the "Company") of proxies to be used at the Annual General and Special Meeting (the "Meeting") of Shareholders of the Company to be held on Thursday, May 26, 2011 at 10.00 am local time, in Boardroom 44-01, 44th Floor, Scotia Plaza, 40 King Street West, Toronto, Ontario, Canada for the purposes set forth in the accompanying notice of meeting.  It is expected that the solicitation will be primarily by mail but proxies may also be solicited personally or by telephone by employees or agents of the Company.  The cost of any such solicitation by management will be borne by the Company.

APPOINTMENT AND REVOCATION OF PROXIES

The persons named in the enclosed form of proxy are directors of the Company.  A shareholder desiring to appoint some other person to represent him at the Meeting may do so by inserting such person's name, which need not be a shareholder of the Company, in the blank space provided in the form of proxy and striking out the names of the persons specified or by completing another proper form of proxy.  Proxies may also be submitted electronically pursuant to the Instructions which accompany this Information Circular.  In all cases, the completed proxy is to be deposited at, or supplied to, the offices of Equity Financial Trust Company, Suite 400, 200 University Avenue, Toronto, Ontario, M5H 4H1 not later than 4:30 p.m. (Toronto, Canada local time) on Tuesday, May 24, 2011.

A shareholder giving a proxy has the right to revoke the proxy by instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing and deposited at the registered office of the Company at any time up to and including the last business day preceding the date of the Meeting, or any adjournment thereof, at which the proxy is to be used, or with the Chairman of the Meeting on the date of the Meeting, or any adjournment thereof, or in any other manner permitted by law.

EXERCISE OF DISCRETION BY PROXIES

The persons named in the enclosed form of proxy will vote the shares in respect of which they are appointed in accordance with the direction of the shareholders appointing them.  In the absence of such direction, such shares will be voted FOR  all of the matters referred to in the Notice of Meeting and the re-election of the existing Directors and the election of any new directors.

The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to any amendments or variations to matters identified in the notice of meeting and with respect to other matters which may properly come before the Meeting.  At the time of printing this management proxy circular, management of the Company knows of no such amendments, variations or other matters to come before the Meeting.

113

VOTING SHARES AND PRINCIPAL HOLDERS THEREOF

On April 15, 2011, the Company had issued and outstanding 500,169,280 common shares, each carrying the right of one vote per share.  To the best of the knowledge of the directors and officers of the Company, no person beneficially owns, directly or indirectly, or exercises control or direction over, shares carrying more than 10% of the votes attached to all issued shares of the Company.

The Board of Directors of the Company has fixed the record date as April 19, 2011 for the purpose of determining who is entitled to receive Notice of Meeting.  Shareholders entitled to vote at the meeting will be the shareholders of record at 4:30 p.m. (Toronto, Ontario time) on Tuesday, May 24, 2011.  The failure of any shareholder to receive notice of the Meeting shall not deprive the shareholder of voting at the Meeting.

NON-REGISTERED SHAREHOLDERS

Only registered shareholders or duly appointed proxy holders are permitted to vote at the Meeting.  Most shareholders of the Company are “non-registered” shareholders because the shares they own are not registered in their names but are instead registered in the name of the brokerage firm, bank or trust company through which they purchased the shares.  More particularly, a person is not a registered shareholder in respect of shares which are held on behalf of that person (the “Non-Registered Holder”) but which are registered either: (a) in the name of an intermediary (an “Intermediary”) that the Non-Registered Holder deals with in respect of the shares (Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSP’s, RRIF’s, RESPs and similar plans); or (b) in the name of a clearing agency (such as The Canadian Depository for Securities Limited [“CDS”]) of which the Intermediary is a participant.  Non-registered shareholders are advised that only proxies from shareholders of record will be recognized and voted at the meeting. In accordance with the requirements as set out in National Instrument 54-101 of the Canadian Securities Administrators, the Company has distributed copies of the Notice of Meeting, this Information Circular and the form of Proxy (collectively, the “Meeting Materials”) to the clearing agencies and Intermediaries for onward distribution to Non-Registered Holders.

Intermediaries are required to forward the Meeting Materials to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive them.  Very often, Intermediaries will use service companies to forward the Meeting Materials to Non-Registered Holders.  Generally, Non-Registered Holders who have not waived the right to receive Meeting Materials will either:

(a) be given a form of proxy which has already been signed by the Intermediary (typically by a facsimile, stamped signature), which is restricted as to the number of shares beneficially owned by the Non-Registered Holder but which is otherwise not completed.  Because the Intermediary has already signed the form of proxy, this form of proxy is not required to be signed by the Non-Registered Holder when submitting the proxy.  In this case, the Non-Registered Holder who wishes to submit a proxy should otherwise properly complete the form of proxy and deposit it with the Company’s Registrar and Transfer Agent as provided above; or

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(b) more typically, be given a voting instruction form which is not signed by the Intermediary, and which, when properly completed and signed by the Non-Registered Holder and returned to the Intermediary or its service company, will constitute voting instructions (often called a “proxy authorization form”) which the Intermediary must follow.  Typically, the proxy authorization form will consist of a one page pre-printed form.  Sometimes, instead of the one page pre-printed form, the proxy authorization form will consist of a regular printed proxy form accompanied by a page of instructions, which contains a removable label containing a bar-code and other information.  In order for the form of proxy to validly constitute a proxy authorization form, the Non-Registered Holder must remove the label from the instructions and affix it to the form of proxy, properly complete and sign the form of proxy and return it to the Intermediary or its service company in accordance with the instructions of the Intermediary or its service company.

In either case, the purpose of this procedure is to permit a Non-Registered Holder to direct the voting of the shares which they beneficially own.  Should a Non-Registered Holder who receives one of the above forms wish to vote at the Meeting in person, the Non-Registered Holder should strike out the names of the management proxy holders named in the form and insert the Non-Registered Holder’s name in the blank space provided.  In either case, Non-Registered Holders should carefully follow the instructions of their Intermediary, including those regarding when and where the proxy or proxy authorization form is to be delivered.

ELECTION OF DIRECTORS

All of the nominees are now members of the Board of Directors and have been since the dates indicated.  Management does not contemplate that any of the nominees will be unable to serve as a director but, if that should occur for any reason prior to the Meeting, the persons named in the enclosed form of proxy reserve the right to vote for another nominee in their discretion.  Each director elected will hold office until the next annual meeting or until he ceases to be a director.  The names of the persons who will be nominated at the meeting for election as directors are set out below.

Name, Office Held and Municipality of Residence	Principal Occupations during past 5 years	Director Since	Number of Shares Beneficially Owned, Controlled or Directed
Carl R. Jonsson,(2)(3)(4)(5) Director, Chairman & Secretary Vancouver, British Columbia, Canada	Principal of Tupper, Jonsson & Yeadon, Barristers & Solicitors.	1992	59,469
Stefan E. Hayden, (3)(4)(5) President, Chief Executive Officer  & Director Johannesburg, South Africa	President and Chief Executive Officer of the Company and Director of all Caledonia’s subsidiary companies.	1996	Nil
James Johnstone,(1) Director Gibsons, British Columbia, Canada	Retired.  Formerly Chief Operating Officer of the Company and Director of various subsidiary companies until September 30, 2006.	1997	Nil
F. Christopher Harvey, (1) Director Oakville, Ontario, Canada	Retired.  Until 31 December 2005 employed as Technical Director and Secretary of the Company and Director of various subsidiary companies.	1993	204,300
Robert W. Babensee (1)(2) Director Toronto, Ontario, Canada	Retired Chartered Accountant.  Formerly an assurance specialist in the Canadian accounting firm of BDO Dunwoody LLP (retired December 31, 2004).  Formerly the CFO of Golden China Resources Ltd.	2008	Nil
Steven Curtis (5) VP Finance, Chief Financial Officer & Director Johannesburg, South Africa	Financial Director Avery Dennison SA (Pty) Ltd. until March 2006___.  Since April 2006 VP Finance,  Chief Financial Officer and Director of Caledonia	2008	Nil

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Notes:

(1) Member of Audit Committee, (2) Member of Compensation Committee, (3) Member of Corporate Governance Committee,

(4) Member of Nominating Committee, (5) Member of Disclosure Committee.

The information as to shares beneficially owned or controlled or directed, not being within the knowledge of the Company, has been furnished by the respective nominees individually.

In compliance with applicable disclosure requirements - C.R. Jonsson has been, within the past 10 years, a director and/or officer of three companies the shares of which were/are listed on the TSX Venture Exchange and its predecessor, in Canada, that were the subject of Cease Trade Orders issued by Provincial Securities Regulators having jurisdiction over them.  In the case of each company Mr. Jonsson held the positions incidental to his acting as the Solicitor for the companies:

- Director and Secretary, August 1987 - August 2003, of Global CT & T Telecommunications Ltd.  Cease Trade Order was issued against it for failure to file and distribute financial statements - which has not been rescinded.

- Director and Secretary of Global Net Entertainment Corp. until July 4, 2008.   Cease Trade Order was issued against it for failure to file and distribute financial statements - which was rescinded when the financial statements were filed.

- Director until February 4, 2005 of TelcoPlus Enterprises Ltd.  Cease Trade Order was issued against it for failure to file and distribute financial statements - which was rescinded when the financial statements were filed.

At the date of this Information Circular Caledonia Directors are also directors of the following public issuers:

Stefan Hayden    -           none	Chris Harvey                             -           none
Jim Johnstone     -           none	Steven Curtis                             -          none
Carl Jonsson       -           Bonterra Energy Ltd.                     -           Comet Industries Ltd.                     -           Acrex Ventures Ltd.                     -           Dolly Varden Resources Inc.                     -           Geomark Exploration Ltd.                     -           Pine Cliff Energy Ltd                     -             Alita Resources Ltd.                -             Astorius Resources Ltd.	Robert W. Babensee -                          none

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APPOINTMENT OF AUDITORS

The shareholders will be asked to vote for the appointment of BDO Canada LLP(formerly named BDO Dunwoody LLP) as Auditors of the Company, to hold office until the next annual meeting of shareholders or until their successors are duly elected or appointed,  at remuneration to be fixed by the Board of Directors.  Approval of the ordinary resolution requires the affirmative vote of a majority of the votes cast in respect thereof by holders of Common Shares represented at the meeting.

INTERESTS OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON

None of the directors or executive officers of the Company, no proposed nominee for election as a director of the Company, none of the persons who have been directors or executive officers of the Company since the commencement of the Company's last completed financial year and no associate or affiliate of any of the foregoing persons has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting.

REAPPROVAL OF SHAREHOLDER RIGHTS PLAN

On April 10, 2008, the Company implemented a Shareholders Rights Plan (the “Rights Plan”), the terms and conditions of which are set out in the Shareholders Rights Plan Agreement dated April 10, 2008 - with Equity Transfer Services Inc., as Rights Agent.  The Rights Plan was submitted to – and approved by – the general meeting of the shareholders held May 16, 2008.  The Rights Plan has a term of approximately three years and will remain in effect until the completion of the first annual meeting of shareholders of the Company occurring following three years from May 16, 2008, unless extended by the shareholders. The Rights Plan will therefore expire May 26, 2011 unless the shareholders vote to reapprove it and extend it.  The Rights Plan is similar to plans adopted by other Canadian public companies and approved by their shareholders.

Purpose of the Rights Plan

The Rights Plan has been designed to protect shareholders of the Company from unfair, abusive or coercive take-over strategies, including the acquisition of control of the Company by a bidder in a transaction or series of transactions that does not treat all shareholders equally or fairly or provide all shareholders an equal opportunity to share in the premium paid on an acquisition of control.  The Rights Plan provides management and the Board with more than the 35 day statutory minimum period under Canadian securities laws to review the terms of a take-over bid and solicit alternative offers.  The Rights Plan is not intended to prevent a take-over or deter fair offers for securities of the Company.  Rather, it is designed to encourage anyone seeking to acquire control of the Company to make an offer that represents fair value to all holders of common shares.

The Rights Plan could cause substantial dilution to a person or group who attempts to acquire control of the Company other than through a Permitted Bid (as defined below) or on terms approved by the Board.  The Rights Plan provides that take-over bids that meet predetermined standards of fairness will be Permitted Bids and will proceed without triggering the potentially dilutive effects of the Rights Plan.  The Permitted Bid concept, which is found in most shareholder rights plans, ensures that senior management of the Company and the Board do not impair the rights of shareholders to obtain, review and accept or decline take-over bids.  The Rights Plan is designed to afford the Board the opportunity to present to the shareholders of the Company a detailed analysis of a bid and additional time to consider alternatives to an unfair or inadequate proposal and, if it considers such action to be in the best interests of all shareholders, to commence an orderly auction of the shares or assets of the Company for the benefit of all shareholders.

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If a bidder does not wish to make a Permitted Bid, the bidder can negotiate with and obtain prior approval of the Board to make an offer on terms that the Board considers fair to all shareholders.  In such circumstances, the Board may redeem the Rights or waive the application of the Rights Plan, thereby allowing such offer to proceed without dilution to the bidder.  The adoption of the Rights Plan does not relieve the Board of its fiduciary duties to act in the best interests of all shareholders and does not prevent a take-over bid or merger or other business combination that the Board, in the exercise of its fiduciary duties, determines to be in the best interests of the Company and its shareholders.  Moreover, the Rights Plan does not inhibit the use of the proxy solicitation rules under applicable legislation to promote a change in the management or direction of the Company.

The reapproval and extension of the Rights Plan is not being proposed by the Board in respect to or in anticipation of any specific take-over bid or proposed bid or other transaction.  Rather, the Rights Plan is intended to address the Board’s concern that, in the current business and legal environment in which the Company operates, there is the potential for unfair treatment of shareholders that should be guarded against to the extent practicable.  The Board is concerned that under current law an acquirer could use coercive or other abusive take-over practices to obtain control of the Company without paying a fair price and without negotiating with the Board acting on behalf of all shareholders. The Board also believes that the timetable for take-over bids prescribed by the Canadian securities laws could impair the Board’s ability to ensure that all other alternatives to maximize shareholder value are thoroughly explored.

In response to these concerns, the Board considered the desirability and the practicability of various strategies to deter unfair or abusive take-over practices and, in particular, whether a shareholder rights plan would be in the best interests of the Company and its shareholders and, if so, what the appropriate characteristics of such a shareholder rights plan would be.  The Board concluded that the adoption of the Rights Plan was appropriate.

In considering whether to approve the adoption of the Rights Plan, the Board considered the current legislative framework in Canada governing take-over bids.  Under provincial securities legislation a take-over bid generally means an offer to acquire voting or equity shares of a person or persons, where the shares subject to the offer to acquire, together with shares already owned by the bidder and parties related to the bidder, an aggregate of 20% or more of the outstanding shares.

Summary of the Rights Plan

The following is a summary of the principal terms of the Rights Plan which is qualified in its entirety by reference to the text of the Rights Plan.

Grant of Rights

Following the creation of the Rights Plan in 2008, share purchase rights (each a “Right”), were issued to each of the holders of common shares of the Company (each, a “Share”) at the rate of one Right for each Share outstanding.  Until the Separation Time (as defined below), the Rights will be attached to and are transferred only with the Shares.  As such, no certificates representing Rights have been issued.

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Rights Exercise Privilege

After a person (an “Acquiring Person”) acquires 20% or more of the Shares of the Company or commences a take-over bid to acquire Shares of the Company, other than by way of a Permitted Bid (the “Separation Time”), the Rights will separate and trade separately from the Shares and will be exercisable.  The acquisition by an “Acquiring Person” of 20% or more of the Shares, other than by way of a Permitted Bid, is hereinafter referred to as a “Flip-in Event”.  Any Rights held by an Acquiring Person will become void upon the occurrence of a Flip-in Event.

Ten business days after the occurrence of a Flip-in Event, each Right (other than those held by the Acquiring Person), will permit its holder to purchase shares at a significant discount to the market price of the Company’s common shares.

The issue of the Rights is not initially dilutive.  However, upon a Flip-in Event occurring and the Rights separating from the Shares, reported earnings per share on a fully diluted or non-diluted basis may be affected.  Holders of Rights not exercising their Rights upon the occurrence of a Flip-in Event may suffer substantial dilution.

Certificates and Transferability

Prior to the Separation Time, the Rights will be evidenced by a legend imprinted on certificates for Shares issued from and after the Effective Date and will not be transferable separately from the Shares.  Promptly following the Separation Time, separate certificates evidencing the Rights (the “Rights Certificates”) will be mailed to holders of record of Shares as of the Separation Time and the separate Rights Certificates will evidence the Rights.

Permitted Bids

The requirements for a Permitted Bid include the following:

(a)           the take-over bid must be made by way of a take-over bid circular;

(b)           the take-over bid must be made to all holders of Shares;

(c) Shares tendered pursuant to the take-over bid may be taken up only after the expiry of not less than 60 days and then only if at such time more than 50% of the Shares held by shareholders other than the bidder, its affiliates and persons acting jointly or in concern with the bidder (“Independent Shareholders”) have been tendered to the take-over bid and not withdrawn;

(d) shareholders who tender their shares to the take-over bid must be permitted to withdraw their shares prior to the shares being taken up and paid for;  and

(e) if more than 50% of the Shares held by Independent Shareholders are tendered to the take-over bid within the 60 day period, the bidder must make a public announcement of that fact and the take-over bid must remain open for deposits of Shares for an additional 10 business days from the date of such public announcement.

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The Rights Plan allows for a competing Permitted Bid (a “Competing Bid”) to be made while a Permitted Bid is in existence.  A Competing Bid must satisfy all the requirements of the Permitted Bid except that it may expire on the same date as the Permitted Bid, subject to the statutory requirement that it be outstanding for a minimum period of 35 days.

Waiver and Redemption

The Board may, prior to the Flip-in Event, waive the dilutive effects of the Rights Plan in respect of a particular Flip-in Event resulting from a take-over bid made by way of a take-over bid circular to all holders of Shares of the Company, in which event such waiver would be deemed also to be a waiver in respect of any other Flip-in Event occurring under a take-over bid made by way of a take-over bid circular to all holders of Shares.  The Board may also waive the Rights Plan in respect of a particular Flip-in Event that has occurred through inadvertence, and may, in such circumstances require that the Acquiring Person that inadvertently triggered such Flip-in Event reduce its beneficial holders to less than 20% of the outstanding Shares of the Company prior to such waiver being granted.  With the majority consent of shareholders or Rights holders at any time prior to the occurrence of a Flip-in Event, the Board may at its option redeem all, but not less than all, of the outstanding Rights at a price of $0.0001 each.

Exemption for Investment Advisors

Investment managers (for client accounts), trust companies (acting in their capacities as trustees and administrators), statutory bodies (managing investment funds for employee benefit plans, pension, plans, insurance plans or various public bodies), administrators and trustees of pension bunds, securities depositories and Crown agents, any of whom acquire greater than 20% of the Shares of the Company, are exempted from triggering a Flip-in Event provided that they are not making, or are not part of a group making, a take-over bid.

Supplements and Amendments

The Company is authorized to make amendments to the Rights Plan to correct any clerical, typographical error or subject to subsequent ratification by shareholders or Rights holders, to maintain the validity of the Rights Plan as a result of changes in law, or at the request of the Exchange.  The Company will issue a news release relating to any significant amendment made to the Rights Plan Agreement prior to the Meeting and will advise the shareholders of any such amendment at the Meeting.  Other amendments or supplements to the Rights Plan may be made with the prior approval of shareholders or Rights holders and, if necessary, the Exchanges.

Shareholder Approval

The Company is seeking, at the Meeting by way of ordinary resolution, shareholder reapproval of the Rights Plan and the extension of the Plan until the date of the Company’s 2014 annual general meeting.

The Board has concluded that the reapproval and extension of the Rights Plan is in the best interests of the Company and the shareholders.  The Board unanimously recommends that shareholders vote in favour of the resolution reapproving and extending the Rights Plan.

The Rights Plan may be viewed on SEDAR at www.sedar.com. and the Company’s website.  Copies are also available on request.

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REAPPROVAL OF STOCK OPTION PLAN AND OF AMENDMENTS TO PLAN

The shareholders will be asked to reapprove the Company’s Stock Option Plan (“Plan”) dated April 10, 2007, as amended March 31, 2011, and the amendments the Board approved effective March 31, 2011.  Pursuant to the rules of The Toronto Stock Exchange (“Exchange”), option plans must be submitted to the shareholders for reapproval not less often than every 3 years and amendments to plans must also be approved by the shareholders.  The Plan was reapproved by the shareholders at the Annual General Meeting held May 16, 2008.

The Company proposes reapproval of the Plan and the amendments.  The principal terms of the Plan - which is considered to be a “rolling plan” - are that:

(a) the total number of options that the Company has outstanding at any one time can never be as to a number of shares which exceed 10% of the number of issued shares of the Company;

(b) the terms and the exercise prices of options granted will at all times be entirely within the policies and rules of the Exchange.  The Board determines the exercise prices of new options granted; provided that they may not be less than the closing price of the Company’s shares on the Exchange on the last trading day prior to the granting of the options.

(c) options will be only granted to Company - and subsidiary Company - directors, officers, employees and service providers;

(d) options will only be granted which have been approved by the Compensation Committee and the Board;

(e) vesting of options will be determined at the discretion of the Board;

(f) the maximum term of an option will be 5 years from the date of the grant of the option;

(g) in the case of the death of an optionee the estate of the deceased optionee will be allowed to exercise the options for 1 year following the date of death;

(h) if an optionee’s relationship with the Company is terminated for cause, his option will cease to be exercisable as of the date of termination.  If the relationship is terminated by the optionee the option will cease to be exercisable 30 days after the termination;

(i) options are non-assignable.

As the Company, as of the date of this Information Circular, has 500,169,280 issued shares, options cannot be granted on this date as to more than 10% of the issued shares - being 50,016,928 shares of the Company.  As of this date the Company has granted options to its - and its Subsidiaries’ - directors, officers and service providers as to a total of 42,540,000 shares (being approximately 8.5%) of the Company.  Therefore, the Company could, based on the present issued share capital, issue options as to a further 7,476,928 shares (approximately 1.5%) - which are available for issuance until May 16, 2011 - and after May 26, 2011 if the Plan is reapproved at the Meeting.

As of March 31, 2011 the Board adopted a number of minor non-material amendments to the Plan - for the purpose of having it more specifically refer to certain provisions in the Rules of the Exchange.  A copy of the Plan, as amended, is attached as Appendix “C” with the amendments highlighted for identification by the shareholders.  The amendments consist generally of the following:

(a) the addition of a limit, of 10% of the outstanding common shares of the Company, on the number of shares that may be optioned or made issuable to insiders of the Company at any time, or within any one year period under all security based compensation arrangements;

(b) the addition of a provision which allows the Board to make any changes to the Plan without shareholder approval except in the circumstances where (1) the number of shares made issuable under the Plan are changed;  (2) the exercise price of an option is reduced;  (3) the term of an option is extended beyond the original expiry date;  or (4) the number of options to any class or category of optionees is changed;

(c) the addition of a provision that allows for the expiry date of an option to be extended in the circumstances where an option would otherwise expire due to a share trading blackout period imposed by the Company;  and

(d) an addition to allow the Company to withhold taxes on the exercise of options in accordance with new rules imposed by Canada Revenue Agency.

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The shareholders will first be asked to pass a general resolution approving the amendment.  The shareholders will then be asked to pass a second general resolution reapproving the Plan as amended.  The shareholders who hold options that have been granted to them pursuant to the Plan will not be entitled to vote on the reapproval resolution.

Regardless of the outcome of the vote with respect to the approval of the Plan all previously granted options will continue in existence.  If the Plan is not reapproved the Company will not be able to grant any further options.

QUORUM REQUIREMENTS

The quorum requirement is that there be two members present in person or by proxy and that there be shareholder representation in person or by proxies of shareholders holding at least 5% of the issued shares of the Company.  As the Company has 500,169,280 shares issued the requirement for the forthcoming meeting will be that there be shareholder representation of at least 25,008,464 shares.

OTHER MATTERS TO BE ACTED UPON

The Company will consider and transact such other business as may properly come before the Meeting or any adjournment thereof. The Management of the Company knows of no other matters to come before the Meeting other than those referred to in the Notice of Meeting. Should any other matters properly come before the Meeting, the shares represented by the proxy solicited hereby will be voted on such matters in accordance with the best judgment of the persons voting by proxy.

REPORT ON EXECUTIVE COMPENSATION

Compensation of Named Executive Officers

The following table, presented in accordance with the requirements of Canadian National Instrument 51-102, sets forth all annual and long term compensation for services in all capacities to the Company and its subsidiaries for the fiscal years ended December 31, 2008, 2009 and 2010 in respect of the Company’s named executive officers:  A named executive officer (“NEO”) means each of the following individuals:

 (a)           The Chief Executive Officer;

 (b)           the Chief Financial Officer;

 (c) each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000, as determined in accordance with subsection 1.3(6), for that financial year.

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Summary Compensation Table

Name and principal position (a)	Year (b)	Salary ($) (c)	Share- based awards ($) (d)	Option- based awards ($) (e)	Non-equity incentive plan compensation ($) (f)		Pension value ($) (g)	All other compensa-tion ($) (h)	Total compensa- tion ($) (i)
					Annual incentive plans (f1)	Long-term incentive plans (f2)
Stefan Hayden(1) Chief Executive Officer	2010 2009 2008	456,396 450,540 444,750	- - -	- - -	- - -	- - 66,780	- - -	95,591 107,833 89,148	551,987 558,373 600,678
Steve Curtis(2) Chief Financial Officer	2010 2009 2008	242,050 246,240 216,950	- - -	- - -	- - -	- 7,779 122,000	- - -	22,406 - -	264,456 254,019 338,950
Rupert Pardoe(3) Chairman of the Board	2010 2009 2008	- - -	- - -	- - -	- - -	- - -	- - -	38,000 150,000 275,865	38,000 150,000 275,865
Mark Learmonth VP Business Development and Investor Relations	2010 2009	179,458 162,601	-	-	-	-	-	14,937	194,395 162,601
Trevor Pearton VP Exploration	2010 2009	179,458 161,141	-	-	-	- 6,203	-	8,962	188,420 167,344

(1) Mr. S. E. Hayden is employed indirectly by the Company through a management and administrative agreement with a private Company.  The amounts shown are the amounts paid to the private Company.

(2) Mr. Curtis was appointed Chief Financial Officer on April 3, 2006 and a Director June 1, 2008

(3)  Rupert Pardoe resigned as a Director and Chairman December 10, 2010

Outstanding share-based awards and option-based awards

This table shows, for each NEO, for all awards outstanding at the end of the most recently completed financial year – December 31, 2010.

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	Option-based Awards				Share-based Awards
Name (a)	Number of securities underlying unexercised options (#) (b)	Option exercise price ($) (c)(2)	Option expiration date (d)	Value of unexercised in-the-money options ($) (e)(1)	Number of shares or units of shares that have not vested (#) (f)	Market or payout value of share-based awards that have not vested ($) (g)(1)
Stefan Hayden	4,000,000 6,000,000	$0.07 $0.07	April 24, 2012 Feb. 11, 2013	340,000 510,000	- -	- -
Steve Curtis	300,000    400,000 2,300,000	$0.07 $0.07 $0.07	May 11, 2016 May 31, 2012 Feb. 12, 2013	25,500 34,000 195,500	- - -	- - -
Mark Learmonth	1,000,000	$0.07	Jul. 1, 2013	85,000	-	-
Trevor Pearton	150,000 400,000	$0.07 $0.07	Apr. 29, 2014 Feb. 12, 2013	12,750 34,000	- -	- -

(1) Values in column (e) are calculated based on the difference between the option exercise price of $0.07 per share and $0.155 - the price at which the Company’s shares closed on December 31, 2010.

(2)  All of the options described above were originally exercisable at various prices between $0.11 and $0.26 per share.  Effective August 10, 2010 the exercise prices of all of the options were reduced to $0.07 per share.

Option Repricing NEO Name (a)	Date of Repricing (b)	Securities under Options/SARs Repriced or Amended (#)(c)	Market Price of Securities at Time of Repricing or Amendment ($/Security) (d)	Exercise Price at Time of Repricing or Amendment ($/Security) (e)	New Exercise Price ($/Security) (f)	Length of Original Option Term Remaining at Date of Repricing (Days) (g)
Stefan Hayden	Aug. 10/2010	4,000,000	0.055	0.235	0.07	623
	Aug. 10/2010	6,000,000	0.055	0.155	0.07	951
Steven Curtis	Aug. 10/2010	300,000	0.055	0.13	0.07	2,100
	Aug. 10/2010	400,000	0.055	0.1125	0.07	659
	Aug. 10/2010	2,300,000	0.055	0.155	0.07	951
Rupert Pardoe	Aug.10/2010	4,000,000	0.055	0.11	0.07	1,636
	Aug. 10/2010	2,500,000	0.055	0.155	0.07	951
Mark Learmonth	Aug. 10/2010	1,000,000	0.055	0.155	0.07	1,056
Trevor Pearton	Aug. 10/2010	150,000	0.055	0.26	0.07	1,358
	Aug. 10/2010	400,000	0.055	0.155	0.07	951

On August 5, 2009 the Board of Directors resolved to reduce the exercise price of all of the options which were then outstanding to $0.07 per share.  At that date all of the outstanding options had exercise prices in excess of $0.07 per share - which means that they were - and had been for some time - “out of the money”.  The repricing of the options required the approval of the shareholders - which was granted at the annual general shareholders meeting, held May 18, 2010.  The repricing was subsequently approved by the Exchange and the Company resolved to make the repricing effective August 10, 2010.

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Incentive plan awards – value vested or earned during the year

During the fiscal year ended December 31, 2010 no incentive plan awards were granted to any of the NEOs.

Compensation Discussion and Analysis

The Company pays – and rewards – its NEO’s in the amounts specifically detailed in the Tables above.  The following comments with respect to the remuneration of the NEO’s are provided pursuant to the requirements of Canadian Securities National Instrument 51-102:

(a) In providing the compensation, and structuring it with the various elements, the Company’s objective is to reward the NEO’s generously enough that they are sufficiently happy with their remuneration that they are keen to stay in the service of the Company and motivated to provide the highest quality services possible.

(b) The compensation packages of the NEO’s contain various elements, as follows:

(i) Mr. Hayden’s compensation contains a number of elements:

A. His compensation is provided through an agreement with a management services contract with Epicure Overseas S.A., a private Panamanian company (“management company”), which contain requirements for the payment of the equivalent of a basic salary, an annual increase in the basic rate of pay based on increases in the annual Canadian Cost Of Living Index, and bonuses for reaching certain specified benchmarks.  The benchmarks are the achievement of various defined elements of success with respect to progress in the Company’s development of its mineral properties, securing financing for the Company and achieving the completion of certain agreements that would be of particular benefit to the Company.  For each benchmark achieved the management company is entitled to receive a bonus equal to 7.5% of the base remuneration paid for the year in which the benchmark is achieved.  The remuneration paid to the management company for 2008 included two benchmark bonuses of $33,390 each – total $66,780.   No benchmark bonuses were paid to the management company during 2010.  The agreement with the management company also provides for the payment to it of a monthly amount to compensate for the personal expenses incurred by Mr. Hayden in performing his services for the Company - in lieu of having to keep records and present invoices for the detailed expenses.  The monthly approved unvouchered expense allowance for 2010 in total was $98,484 (U.S.) and the amount is also increased annually by the annual increase in the South African cost of living index;

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B. His remuneration also includes grants of share purchase options;

C. Indirectly Mr. Hayden receives a further element of compensation in that the Company rents its Johannesburg office facilities from a private company, the shares of which are owned by members of Mr. Hayden’s family.

 

(ii) The remuneration for Messrs. Curtis, Learmonth and Pearton consists of – a salary, discretionary bonus and share purchase options;

(iii) Mr. Rupert Pardoe resigned as a Director and Chairman of the Company effective December 10, 2010.  Mr. Pardoe’s remuneration, being renegotiated annually, was agreed to be $38,000 for 2010.

(c) While the NEO’s have all been granted share purchase options they were, for most of the period until they were repriced to $0.07 per share, effective August 10, 2010, “out of the money” and had not resulted in the NEO’s receiving any benefits from the options.   Messrs. Hayden and Curtis are also paid the same per annum directors’ fees (currently $20,000 per annum) that are paid to all of the Directors.

(d) The various elements of the compensation of the NEO’s have been chosen to make the compensation packages competitive with what is offered by other comparable companies.  The actual amounts are settled by negotiations with the NEO’s from time to time.

(e) In settling the agreed amounts of the compensation payable to Mr. Curtis, and to Mr. Hayden’s management company, consideration was given to the fact that both of them work out of the Company’s office in Johannesburg, South Africa with minimal office support personnel – with the result that it is expected that they will, on average, work substantially longer than what might be considered normal hours for executives, and perform a wider variety of services for the Company than might otherwise be expected from people holding their positions.

Director compensation table

This table shows all amounts of compensation paid or provided to the Directors – exclusive of the NEO’s whose compensation is detailed in the Summary Compensation Table on page 5 - for the Company’s financial year ended December 31, 2010.

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Name (a)	Directors Fees earned ($) (b)	Share- based awards ($) (c)	Option- based awards ($) (d)(1)	Non-equity incentive plan compensation ($) (e)	Pension value ($) (f)	All other compensation ($) (g)	Total ($) (h)
James Johnstone	20,000	-	-	-	-	-	-
Christopher Harvey	20,000	-	-	-	-	-	-
Carl R. Jonsson	20,000	-	-	-	-	-	-
Robert Babensee	20,000	-	-	-	-	-	-

(1)           Options were outstanding in favour of all of the Directors listed above - which were granted during previous years and were exercisable at various prices.  Effective August 10, 2010 the option exercise prices were all reduced to $0.07 per share.

 (2)           Carl R. Jonsson is a principal of the Vancouver law firm of Tupper, Jonsson & Yeadon which acts as the Company’s principal lawyers.  Mr. Jonsson’s services to the Company are rendered through Tupper Jonsson & Yeadon and he, accordingly, indirectly shares in fees paid to that firm for services rendered.  Mr. Jonsson does not get paid any other direct remuneration.

The Company does not have a long-term incentive plan, a pension plan or other form of defined benefit plan – other than its Stock Option Plan.

The Compensation Committee reviews the compensation paid to directors annually. Based on compensation paid to Directors at other companies comparable to Caledonia and on the additional risks and responsibilities assumed by the directors it recommends compensation paid to Caledonia’s directors.  From July 1, 2004 to June 30, 2009 the fees paid to Directors were $10,000 per year, an hourly amount for preparation and participating in telephone board meetings and a per diem fee for travel time to, and participating in, board meetings.  Since June 1, 2009 the fees have been changed to a flat $20,000 per year - plus reimbursement for out-of-pocket expenses incurred in relation to attendance at Board or Committee meetings.  In addition to their Directors fees the Chairman of the Audit Committee receives annual fees of $10,000 and each member of the Audit Committee receives annual fees of $5,000.

Since June, 2003 the Company has maintained Directors and Officers liability insurance for directors and officers of the Company and its affiliates with coverage of $2,000,000 Canadian per occurrence and in the aggregate.

Termination of Employment, Change of Responsibilities and Employment Contracts

There are no service contracts between Caledonia and any of the Directors of Caledonia or its subsidiaries except for:

(a)(i)  a "Key Executive Severance Protection Plan" between Caledonia and. S.E. Hayden dating from 1996 and (ii) the indirect employment of Mr. S.E.Hayden through a management and administrative agreement.  The “Severance Plan” calls for severance payments to Mr. Hayden if his employment is terminated as a result of a change of control of Caledonia;

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          (b) there are letters of appointment dated May 10, 2005 with Messrs. Harvey and Jonsson.  Caledonia has also entered into Indemnification Agreements with its Directors and Senior Officers.

         (c) a service agreement between Caledonia and Mr. Curtis dated April 1, 2008.

Composition of the Compensation Committee

The Company has a Compensation Committee (“Committee”) - presently comprised of two directors - Carl Jonsson (Chairman) and Robert Babensee.   All issues as to compensation of  the Officers are considered by the Committee, the members of which, during portion of the fiscal year ended December 31, 2010, were Rupert Pardoe (Chairman), Carl Jonsson  and  Robert Babensee.  Mr. Pardoe abstained from voting on compensation matters pertaining to himself.  Mr. Pardoe provided the Company with consulting services for which he was compensated.   He was therefore a service provider within the past three years but was nevertheless considered independent.   Mr. Jonsson continues to provide the company with legal services and as a Director, Officer and Committee member.   He has therefore been a service provider within the past three years and is not considered an independent director.   Mr. Babensee is independent.

PERFORMANCE GRAPH

The following graph and table compares the year-end value of the common shares of the Company with the TSX Composite Index for the last five years on the basis of cumulative total return.

Caledonia Shares vs TSX Composite at December 31, 2010 (assuming $100 of Caledonia shares were purchased on January 1, 2006:

Notwithstanding the fact that the value of the Company’s shares has, in some years, declined on the markets on which the shares trade, the compensation levels of the Company’s NEO’s have increased by amounts which were at, or in excess of, the inflation rates experienced in the countries in which the Company conducts its business activities and in which its shares trade.  The compensation of the Company’s NEO’s has never been determined in relation to the prices at which its shares have traded.

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CORPORATE GOVERNANCE PRACTICE

The Company is subject to Canadian National Instrument 58-101 (“NI 58-101”) Disclosure of Corporate Governance Practices. This Instrument requires a company to include in its management information circular the disclosure required by Form 58-101F1.  The Company's Statement of Corporate Governance Practices, which has been prepared by the Corporate Governance Committee follows:

Mandate of the Board

The Board of Directors of the Company is responsible for the overall stewardship of the Company, and has full power and authority to manage and control the affairs and business of the Company.  The mandate of the Board of Directors is detailed in the “Charter of the Board of Directors” which can be viewed on the Company’s website at www.caledoniamining.com.

Amongst other things, the Board is responsible for:

1.   supervising the officers of the Company in their management of the business and affairs of the Company;

2. adoption of and managing the Company's strategic planning process;

3. identifying and managing principal risks to the Company's business;

4. succession planning including the appointment, training, monitoring and appraisal of senior officers of the Company;

5. overseeing the administration of a policy for communications by the Company with shareholders, the investment community, the media, governments and the general public;

6. examination, through its Audit Committee, of the effectiveness of the company’s internal control processes and management information systems.  The Board consults with the VP Finance and management of the Company to ensure the integrity of these systems;

7.   developing position descriptions and terms of reference for the Board, the President and Chief Executive Officer and the committees of the Board; and

8.   ensuring that Directors may hire outside advisors, at the expense of the company, in appropriate circumstances.

The Board holds regular meetings and additional meetings to address special items of business.  The frequency of meetings, as well as the nature of agenda items, changes depending upon the state of the Company's affairs and in light of opportunities or risks which the Company faces. On average the Board has met approximately six times per year during the past five years, including a board meeting at the time of the AGM in Toronto when all the directors are normally present in person.

As part of the Board's responsibility for the strategic planning process of the Company, the Board considers and, where appropriate, adopts the goals of the business that are proposed by Management and the strategies and policies within which the Company is managed.  Management is required to seek the approval of the Board for material deviations, financial or otherwise, from the approved business goals, strategies and policies of the Company.

Board Composition

The Board believes that the extensive knowledge of both the independent and the non-independent Directors of the Company's business is beneficial to the other directors and their participation as directors contributes to the effectiveness of the Board.  The Board further believes that the business knowledge and experience, particularly in the context of activities in Southern Africa, brought by Messrs. Hayden and Curtis is most valuable to the other directors and to the Company as a whole.

Caledonia’s Board members consider that the Board’s current composition is efficient and appropriate considering the extent of the Company’s activities and the location of the properties on which most of its activities are conducted.  The Board has concluded that three of the six directors, Messrs. Harvey, Johnstone and Babensee, are independent directors within the meaning of the NI 58-101 definitions.

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The Company does not have a significant shareholder, defined by the TSX as a shareholder with the ability to exercise a majority of votes for the election of directors.

Board Committees

The Board of Directors has five standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance Committee, the Nominating Committee and the Disclosure Committee.

Audit Committee

The Audit Committee, comprised of Messrs.Johnstone, Harvey and Babensee – and is chaired by Mr. Babensee.   Until he resigned effective December 10, 2010 Rupert Pardoe was a member of, and Chairman of, the Audit Committee.  Mr. Johnstone was appointed to the Audit Committee effective December 10, 2010. The members of the Audit Committee, the internal accounting staff and the external auditors have unrestricted direct access to, and communication with, each other to assist them in carrying out their respective duties.  The Audit Committee is responsible for reviewing and making recommendations to the Board on:

1.   financial statements and the related reports of management and external auditors;

2. accounting and financial reporting procedures and methods;

3. internal audit procedures and reports, and matters relating to external auditors, including the appointment and terms of engagement of external auditors and their reports relating to accounting, financial and internal audit matters.

The Board has adopted a “Charter of the Audit Committee” which is attached as Appendix “A”.

Corporate Governance Committee

Attached as Appendix “B” is Form 58-101F1 - which is to provide certain Corporate Governance disclosure.

Composition of Other Committees

The composition of the Committees not detailed above is:

-           Nominating Committee                                                                -           Stefan Hayden - Chairman

 Carl Jonsson

-           Corporate Governance Committee                                             -           Carl Jonsson - Chairman

 Stefan Hayden

-           Disclosure Committee                                                                 -            Stefan Hayden

 Carl Jonsson

 Steven Curtis
 

Additional Information

Additional information relating to the Company is on SEDAR at www.sedar.com and on the Company’s website at www.caledoniamining.com   Financial information is provided in the Company’s comparative financial statements prepared and audited to December 31, 2010 and in its annual MD&A dated March 15, 2011.

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Copies of any of the documents which are described in the Information Circular as being available to be viewed on the Company’s website.  They also can be obtained by contacting the Company at:

Suite 1201, 67 Yonge Street,

Toronto, Ontario, Canada M5E 1J8

Phone:                      1-416-369-9835

email: Jonsson@securitieslaw.bc.ca

BY ORDER OF THE BOARD OF DIRECTORS                                                                                                     DATED:  April 15, 2011

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APPENDIX “A”

CALEDONIA MINING CORPORATION

Charter of the Audit Committee of the Board of Directors

(As adopted November 9, 2006)

I.           Purpose

The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Caledonia Mining Corporation (“Caledonia”) is to assist the Board in its oversight of the:

- integrity, adequacy and timeliness of Caledonia’s financial reporting and disclosure practices;

- processes for identifying the principal financial risks of Caledonia and the control systems in place to monitor them;

- compliance with legal and regulatory requirements related to financial reporting; and

- independence and performance of Caledonia’s independent external auditors (“Auditors”).

The Committee shall be constituted and perform its activities in compliance with all applicable governmental and securities laws, regulations and rules (“Rules”).

The Committee’s role is one of oversight. The financial statements are the responsibility of Management. The Auditors are responsible for performing an audit and expressing an opinion on the fair presentation of Caledonia’s financial statements in accordance with generally accepted accounting principles.

II.           Authority

1. The Committee has the authority to conduct any investigation appropriate to its responsibilities, and it may require the Auditors as well as any officer of Caledonia, or Caledonia’s outside counsel, to attend a meeting of the Committee or to meet with any Members of the Committee (“Members”), or consultants to the Committee.

2. The Committee shall have unrestricted access to Caledonia’s books and records.

3. The Committee has authority to:

(a) engage independent counsel and other advisors as it determines necessary to carry out its duties;

(b) set and pay the compensation for any advisors engaged by the Audit Committee;  and

(c) communicate directly with the internal and external auditors.

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III.           Composition and Meetings

1. The Committee and its Members shall meet all applicable legal, regulatory and listing requirements;

2. Members and the Chairperson shall be appointed by the Board and may be removed by the Board in its discretion. The Committee will be appointed annually at the first Board meeting following the annual general meeting; and in the absence of such appointment, and pending such appointment, the Committee shall continue to be comprised of its existing members;

3. The Committee shall be comprised of three or more directors, one of whom shall serve as the Chairperson;

4. Each member of the Committee shall satisfy the applicable laws and regulations, and the rules of any stock exchange or market upon which the shares of Caledonia are listed or proposed to be listed for trading (hereinafter generally called the “Stock Exchange”), and each member shall be independent as defined by the Rules and free from any relationship that, in the opinion of the Board, could reasonably be expected to interfere with the exercise of his or her independence from Management or the Auditors;

5. All Members shall be, or promptly after appointment shall become, financially literate as defined by the Rules.

6. The Committee shall meet, at the discretion of the Chairperson or a majority of the Members, as circumstances dictate or as may be required by applicable legal or listing requirements, and a majority of the Members shall constitute a quorum;

7. If and whenever a vacancy shall exist, the remaining Members may exercise all of its powers and responsibilities so long as a quorum remains in office;

8. Any matters to be determined by the Committee shall be decided by a majority of votes cast at a meeting of the Committee called for such purpose; actions of the Committee may be taken by an instrument or instruments in writing signed by all of the Members, and such actions shall be effective as though they had been decided by a majority of votes cast at a meeting of the Committee called for such purpose; in the case of a tie the Chairperson shall have a second or tie-breaking vote;

9. The Committee shall maintain minutes of meetings and periodically report to the Board on significant results of the Committee’s activities;

10. The Committee may invite such other persons to its meetings as it deems appropriate; and

11.           The Auditors will have direct access to the Committee on their own initiative.

12. The Chairperson of the Committee (“Chairperson”), or other Member so designated by the Committee may represent the Committee to the extent permitted by applicable legal and listing requirements.

13. The Committee shall review and assess the adequacy of this Charter annually and submit any proposed revisions to the Board for approval.

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IV.      Responsibilities

A.           With Respect to financial disclosure documents:

1. The Committee shall review Caledonia’s interim unaudited and annual audited financial statements and report thereon to the Board prior to their being filed with the appropriate regulatory authorities or published or distributed. With respect to the financial statements, the Committee shall discuss significant issues regarding accounting principles, practices, and judgments of Management with Management and the Auditors as and when the Committee deems it appropriate to do so;

2. The Committee shall review Management’s Discussion and Analysis relating to annual and interim financial statements, and any other public disclosure documents that are required to be reviewed by the Committee under any applicable laws prior to them being filed with the appropriate regulatory authorities or published or distributed;

3. The Committee shall review Management’s earnings releases relating to annual and interim financial statements prior to them being filed with the appropriate regulatory authorities or published or distributed;

4. The Committee shall review the post-audit or management letter containing the recommendations of the Auditors and Management’s response and subsequent follow-up to any identified weaknesses;

5. The Committee shall review the evaluation of internal controls by the Auditors, together with Management’s response;

6. The Committee shall meet no less frequently than annually separately with the Auditors and Caledonia’s Chief Financial Officer to review Caledonia’s accounting practices, internal controls and such other matters as the Committee or Chief Financial Officer deems appropriate;

7. The Committee shall be directly responsible for overseeing the work of the Auditors engaged for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for Caledonia, including the resolution of disagreements between management and the Auditors regarding financial reporting;

8. The Committee must pre-approve all non-audit services to be provided to Caledonia or its subsidiary entities by the Auditors;

9. The Committee must be satisfied that adequate procedures are in place for the review of Caledonia’s public disclosure of financial information extracted or derived from Caledonia’s financial statements, other than the public disclosure referred to in sub-clauses 1, 2 and 3 of Clause IV.A above, and must periodically assess the adequacy of those procedures;

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10. The Committee must establish procedures for:

(a) the receipt, retention and treatment of complaints received by Caledonia regarding accounting, internal accounting controls, or auditing matters;  and

(b) the confidential, anonymous submission by employees of Caledonia of concerns regarding questionable accounting or auditing matters.

11.          The Committee must review and approve Caledonia’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the issuer.

B.           With Respect to the Auditors

1. The Auditors are ultimately accountable to the shareholders of Caledonia. The Board has the authority to nominate the Auditors to be proposed for shareholder approval in any proxy statement. The Board will set the compensation for the Auditors - but only after the Committee has given its recommendations as to their compensation;

2.           The Committee shall review the performance of the Auditors;

3.           The Auditors must report directly to the Committee;

4. The Committee shall annually recommend to the Board the appointment or reappointment of the Auditors, or, as appropriate, the discharge or replacement of the Auditors when circumstances warrant;

5. The Committee shall be responsible for ensuring that the Auditors submit to the Committee (on a periodic basis) a formal written statement delineating all relationships between the Auditors and Caledonia. The Committee is responsible for discussing with the Auditors any disclosed relationships or services that may impact the objectivity and independence of the Auditors and for recommending that the Board take appropriate action in response to the Auditor’s report to satisfy itself of the Auditor’s independence;

6. The Committee shall review the Auditor’s audit plan, including scope, procedures and timing of the audit.

C.           Other Committee Responsibilities

The Committee shall perform any other activities consistent with this Charter and any governing law or regulations as the Committee or the Board deems necessary or appropriate, including:

1. Conducting or authorizing investigations into any matters that the Committee believes is within the scope of its responsibilities;

2. Making enquiries of management and the Auditors to identify significant business, political, financial and control risks and exposures and to assess the steps management has taken to minimize such risks.

DATED: November 9, 2006

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APPENDIX “B”

FORM 58-101F1

CORPORATE GOVERNANCE DISCLOSURE

CALEDONIA MINING CORPORATION

1.  Board of Directors       (a)Disclose the identity of directors who are independent	The Company has determined that 3 of its current 6 directors are “independent”, within the meaning of NI 58-101.  The following directors are “independent”: -           James Johnstone -           Christopher Harvey -           Robert Babensee
(b)Disclose the identity of directors who are not independent, and describe the basis for that determination.	Stefan Hayden, Steven Curtis and Carl R. Jonsson are not “independent” within the meaning of NI 58-101.  Messrs. Hayden and Curtis are full-time paid officers and executives of the Company - and Mr. Jonsson, in his capacity as the Company’s lawyer, receives compensation for his services rendered.
(c)Disclose whether or not a majority of directors are independent, describe what the Board does to facilitate its exercise of independent judgment in carrying out its responsibilities.	As per (a) and (b) above, 50% of the directors of the Company are “independent”, within the meaning of NI 58-101.
(d)If a director is presently a director of any other issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer.	The only director who acts as a director of other reporting issuers is Carl Jonsson.  He is a director of the following named reporting issuers: -           Bonterra Energy Ltd. -           Geomark Exploration Ltd. -           Comet Industries Ltd. -           Acrex Ventures Ltd. -           Dolly Varden Resources Inc. -           Pine Cliff Energy Ltd. -           Alita Resources Ltd. -           Astorius Resources Ltd.

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(e)         Disclose whether or not the independent directors hold regularly schedules meetings at which non-independent directors and members of management are not in attendance.  If the independent directors hold such meetings, disclose the number of meetings held since the beginning of the issuer’s most recently completed financial year. If the independent directors do not hold such meetings, describe what the Board does to facilitate open and candid discussion among its independent directors	The Company holds one regularly scheduled in-person Board Meeting annually - held in conjunction with the AGM - and at least five regularly scheduled telephone conference Board Meetings each year.  The agendas of these meetings occasionally include the holding of a meeting “in camera” which excludes participation by Messrs. Hayden and Curtis as the Directors representing management of the Company.  Open and candid discussion is encouraged at all meetings.  Meetings only include meetings of the independent directors if such a meeting is requested by an independent director. In 2010 there was a total of nine meetings of the board of directors including the scheduled meetings mentioned above - and one meeting of the independent directors.
(f)          Disclose whether or not the chair of the Board is an independent director. If the Board has a chair or lead director who is an independent director, disclose the identity of the independent chair or lead director, and describe his or her role and responsibilities. If the Board has neither a chair that is independent nor a lead director that is independent, describe what the Board does to provide leadership for its independent directors	Mr. Rupert Pardoe was the Chairman of the Board from 2005 until he resigned December 10, 2010.  He was considered “independent” within the meaning of NI 58-101.  Carl Jonsson, who is also the Company’s principal Solicitor and Corporate Secretary and who is not considered independent, was appointed Chairman of the Board December 10, 2010.  The Chairman of the Board has the responsibility of overseeing the efficient operation of the Board and its committees.
(g)         Disclose the attendance record of each director for all Board meetings held since the beginning of the issuer’s most recently completed financial year.	The Company held nine Board meetings in 2010.  All of the Directors attended all of the meetings except that Carl Jonsson did not attend one meeting and Rupert Pardoe, while he was a Director, did not attend two meetings.

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2.  Board Mandate                 Disclose the text of the Board’s written mandate.  If the Board does not have a written mandate, describe how the Board delineates its role and responsibilities.	The Company has a written Charter of the Board of Directors.  It can be viewed on the Company’s website at www.caledoniamining.com
3.  Position Descriptions    (a)         Disclose whether or not the Board has developed written position descriptions for the Chair and the Chair or each Board committee. If the Board has not developed written position descriptions for the Chair and/or the Chair of each Board committee, briefly describe how the Board delineates the role and responsibilities of each such position	The Board has established position descriptions for the Chairman of the Board as well as for the Chairs of each committee. The primary responsibility of the Chairs is to ensure that the Board and its committees are operating effectively and meet the objectives set in their respective charters. Committee chairs report periodically to the Board - usually in Board meetings.  Chairs are expected to report in writing to the Board any matters they consider being of importance.  The composition of the Committees can be found on the Company’s website at www.caledoniamining.com in the Corporate Governance section and on page 12 of the Information Circular.
(b)           Disclose whether or not the Board and CEO have developed a written position description for the CEO.  If the Board and CEO have not developed such a position description, briefly describe how the Board delineates the role and responsibilities of the CEO.	The Board has not established written position descriptions for the President and Chief Executive Officer of the Company.  Nevertheless they are expected to fulfill the responsibilities that normally go with those positions - which includes the following key responsibilities; set the strategic direction of the Company in conjunction with the Board and then execute the strategy; provide leadership; procure the necessary financing to enable the Company to continue its planned work programs and report on a regular basis to the Board and the Company’s shareholders.
4.  Orientation and Continuing Education    (a)         Briefly describe what measures the Board takes to orient new directors regarding (i) the role of the Board, its committees and its directors, and                 (ii) the nature and operation of issuer’s business	The normal orientation for a new director includes meeting with the other directors and the senior management of the Company.  The goal is to provide a new director with a history of the Company and provide him/her with a briefing of the key strategies and issues that the Company is currently facing.  In addition, particularly if the director is new to the role of director, the orientation also includes a briefing of his/her responsibilities, regarding the legal responsibilities of being a director and an insider of the Company.  The orientation includes a discussion on how the Board and its committees function including the anticipated time commitments.  He/she is provided with the relevant documentation including the Company’s corporate governance documents. A new director is invited to meet the key members of management and to study the Company’s material documents and recently published materials.
b)           Briefly describe what measures, if any, the Board takes to provide continuing education for its directors. If the Board does not provide continuing education, describe how the Board ensures that its directors maintain the skill and knowledge necessary to meet their obligations as directors	The Company does not provide continuing education for its directors except if and when a director makes a request.  Other directors periodically discuss the performance of the directors on an informal basis.

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  5.  Ethical Business Conduct      (a)         Disclose whether or not the Board has adopted a written code for the directors, officers and employees.  If the Board has adopted a written code:   (i)  disclose how a person or company may obtain a copy of the code;     (ii)  describe how the Board monitors compliance with its code, or if the Board does not monitor compliance, explain whether and how the Board satisfies itself regarding compliance with its code;  and   (iii)  provide a cross-reference to any material change report filed since the beginning of the issuer’s most recently completed financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the code.      (b)         Describe any steps the Board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.      (c)         Describe any other steps the Board takes to encourage and promote a culture of ethical business conduct.       The Board expects directors and Company employees to behave ethically at all times and has adopted a written code of ethics policy, which includes a “whistleblower” provision.   A copy of the Company’s Code of Business Conduct and Ethics, dated April 8, 2004, can be found on the Company’s website at www.caledoniamining.com in the Corporate Governance Section   The Board does not formally monitor compliance with the Code.  Directors maintain an informal awareness of the Code and would normally be alert to any violation of the Code.  The Board does not have any formal established procedures to alert it to any violations to the Code.   There were no reported incidents relating to the Company’s Code of Ethics/whistleblower policy since its adoption in 2004.   Directors are required to disclose any actual or potential conflict of interest situation.  As such, the director must excuse himself from any such discussions and refrain from voting on any such issues.  The Chair may also request that a director excuse himself or abstain from voting on an issue if he feels that there may be a conflict.   None specifically - except the general prevailing awareness by the Directors that they are expected to cause the Company to maintain ethical business conduct.

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6.  Nomination of directors    (a)         Describe the process by which the Board identifies new candidates for Board nomination.    (b)         Disclose whether or not the Board has a nominating committee composed entirely of independent directors.  If the Board does not have a nominating committee composed entirely of independent directors, describe what steps the Board takes to encourage an objective nomination process.    (c)         If the Board has a nominating committee, describe the responsibilities, powers and operation of the nominating committee.

The Company’s Nominating Committee consists of the Company’s President and CEO, Stefan Hayden and Carl Jonsson, the Company’s Chairman and Secretary.  The Nominating Committee undertakes no activities except if and when the Board determines that a new Director should or must be appointed.  However, all Directors recognize the value of having persons on the Board who can contribute - and all Directors therefore have an open mandate to stay alert to identifying persons who would be potentially valuable additions to the Board and to make recommendations in that regard to the Nominating Committee. The Nominating Committee is comprised entirely of non independent Directors.  As to the Committee’s objectivity see sub-clause (a) above. See above

7.  Compensation    (a)         Describe the process by which the Board determines the compensation for the issuer’s directors and officers    (b)         Disclose whether or not the Board has a compensation committee composed entirely of independent Directors.  If the Board does not have a compensation committee composed entirely of independent Directors, describe what steps the Board takes to ensure an objective process for determining such compensation.

The Company has prepared the Compensation report “Corporation Discussion and Analysis” included in this Information Circular incorporating the new executive compensation disclosure requirements contained in the amendments to National Instrument 51-102 continuous disclosure obligations. The Compensation Committee is comprised of Robert Babensee (who is an “independent” Director, and Carl Jonsson who is considered to be “non-independent”.  Rupert Pardoe was also a member of the Compensation Committee until December 10, 2010.   In considering the annual compensation payable to Mr. Pardoe for 2010 and earlier years he excused himself from the deliberations of the Committee.  With respect to all other compensation generally it is considered by the full Board which has 50% “independent” Directors.

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(c)          If the Board has a compensation committee, describe the responsibilities, powers and operation of the compensation committee.	The principal responsibilities of the Compensation Committee are to review the compensation for the directors, the President and Chief Executive Officer, the Chairman, and the executive officers of the Company, and to prepare the executive compensation report for disclosure to shareholders.
(d)         If a compensation consultant or advisor has, at any time since the beginning of the issuer’s most recently completed financial year, been retained to assist in determining compensation for any of the issuer’s directors and officers, disclose the identity of the consultant or advisor and briefly summarize the mandate for which they have been retained.  If the consultant or advisor has been retained to perform any other work for the issuer, state that fact and briefly describe the nature of the work.	Neither the Company nor the Compensation Committee have at any time retained the services of a compensation consultant or advisor
8.  Other Board Committees If the Board has standing committees other than the audit, compensation and nominating committees, identify the committees and describe their function.	(i)  The primary role of the Corporate Governance Committee is to develop and implement corporate governance principles and policies established by the Board and to ensure that these principles are regularly reviewed, updated and adhered to. (ii)  The function of the Disclosure Committee is to maintain a current awareness of the disclosure requirements applicable to publicly traded companies and as required by the rules of the Toronto Stock Exchange and securities regulatory authorities having jurisdiction.  Then the Committee and its members are expected to ensure that the disclosures by the Company are in compliance with those requirements.
9.  Assessments Disclose whether or not the Board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution.  If assessments are regularly conducted, describe the process used for the assessments. If assessments are not regularly conducted, describe how the Board satisfies itself that the Board, its committees, and its individual directors are performing effectively.	Neither the Board, the Committees nor individual Directors are regularly assessed with respect to their effectiveness and contribution.  In the annual Board Meetings held in conjunction with the Annual General Meeting there was always discussion of the performance of the Board and the Committees and, to date, except with reference to Rupert Pardoe in late 2010, there has always been the unanimous consensus that the Board, it’s Committees and its individual Directors are performing effectively.

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APPENDIX “C”

CALEDONIA MINING CORPORATION

 (the "Corporation")

INCENTIVE STOCK OPTION PLAN

APRIL 10, 2007, as Amended March 31, 2011

(the "Plan")

1. Purpose of this Plan

The purpose of this Plan is to assist the Corporation in attracting, retaining and motivating Directors, employees and service providers  (as those terms are defined or recognized in  the Manual of the Toronto Stock  Exchange (“Exchange”), and which terms are hereinafter collectively referred to as "Directors, employees and other service providers  for itself and its subsidiaries and to closely align the personal interests of such Directors, employees and service providers with those of the  Corporation by providing them with the opportunity, through options, to acquire common shares in the capital of the Corporation.

2. Implementation

This Plan and the grant and exercise of any options under this Plan are subject to compliance with the applicable requirements of each stock exchange or securities market ("Exchanges") on which the shares of the Corporation are listed or quoted at the time of the grant of any options under this Plan and of any governmental authority or regulatory body to which the Corporation is subject.

3.           Administration

This Plan shall be administered by the Board of Directors of the Corporation (“Board”) which shall, without limitation, subject to any necessary approval of the exchanges, have full and final authority in its discretion, but subject to the express provisions of this Plan, to interpret this Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable for the administration of this Plan.  The Board may delegate any or all of its authority with respect to the administration of this Plan and any or all of the rights, powers and discretions with respect to this Plan granted to it hereunder to such committee of Directors as the Board may designate and upon such delegation such committee, as well as the Board, shall be entitled to exercise any or all of such authority, rights, powers and discretions with respect to this Plan.  When used hereafter in this Plan, "Board" shall be deemed to include a committee of Directors acting on behalf of the Board.

4. Shares Issuable Under this Plan

Subject to any requirements of the Exchanges:

(a) the aggregate number of shares (“Optioned Shares”) that may be issuable pursuant to options granted under this Plan will not exceed 10% of the number of issued shares of the Corporation, on an undiluted basis, at the time of the granting of options under this Plan;

(b) no more than 5% of the issued shares of the Corporation, calculated at the date  an option is granted, may be  optioned to any one Optionee (as hereinafter defined);

(c) no more than 2% of the issued shares of the Corporation, calculated at the date the option is granted, may be optioned to any one  service provider;

(d) no more than 10% of the issued shares of the Corporation, calculated, on an undiluted basis, may be issued or made issuable to insiders of the Corporation at any one time or within any one year period, under this and all other security based compensation arrangements of the Corporation.

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5. Eligibility

Options may be granted under this Plan only to Directors, employees and service providers of the Corporation and any of its subsidiaries (collectively the "Optionees" and individually an "Optionee").  Subject to the provisions of this Plan, the total number of Optioned Shares to be made available under this Plan and to each Optionee, the time or times and price or prices at which options shall be granted, the time or times at which such options are exercisable, and any conditions or restrictions on the exercise of options, shall be in the full and final discretion of the Board.

6. Terms and Conditions

All options under this Plan shall be granted upon and subject to the terms and conditions hereinafter set forth.

6.01 Exercise price

The exercise price to each Optionee for each Optioned Share shall be determined by the Board but shall not, in any event, be less than:

(a)           the closing price of the Corporation’s shares on the Exchange on the trading day prior to the date of the grant of the option;  and

(b)           the minimum price allowed by the exchanges.

6.02 Amendments to Plan

(a)           Shareholder approval will be required in respect of any amendment or amendments to the Plan:

(i)           as to the number of shares issuable under the Plan;

(ii)           which reduces the exercise price of an option;

(iii) extending the term of an option beyond its original expiry date, except as otherwise permitted by the Plan;

(iv) of this amending section of the Plan;

(v) as to the number of Options which may be granted to any class or category of optionees;

(vi) amendments required to be approved by shareholders under applicable law.

(b)           Any amendments to the Plan other than those described in sub-clause (a) can be done by the Board of Directors of the Corporation without shareholder approval.

6.03 Option Agreement

All options shall be granted under this Plan by means of an agreement (the "Option Agreement") between the Corporation and each Optionee in the form attached hereto as Schedule "A" or such other form as may be approved by the Board, such approval to be conclusively evidenced by the execution of the Option Agreement by any one director or officer of the Corporation, or otherwise as determined by the Board.

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6.04                      Length of Grant

Subject to sections 6.10 - 6.15 any options granted under this Plan shall expire not later than that date which is 5 years from the date such options are granted.

6.05                 Non-Assignability of Options

An option granted under this Plan shall not be transferable or assignable (whether absolutely or by way of mortgage, pledge or other charge) by an Optionee other than by will or other testamentary instrument or the laws of succession and may be exercisable during the lifetime of the Optionee only by such Optionee.

6.06                 Vesting

At the time of the granting of an option the Board may impose a vesting schedule, and in such case the vesting schedule shall be set forth in the Option Agreement.

6.07                 Right to Postpone Exercise

Each Optionee, upon becoming entitled to exercise an option in respect of any Optioned Shares in accordance with the Option Agreement, shall thereafter be entitled to exercise the option to purchase such Optioned Shares at any time prior to the expiration or other termination of the Option Agreement or the option rights granted thereunder in accordance with such agreement.

6.08                      Exercise and Payment

Any option granted under this Plan may be exercised by an Optionee or, if applicable, the legal representatives of an Optionee, by giving notice to the Corporation specifying the number of shares in respect of which such option is being exercised, accompanied by payment (by cash or certified cheque payable to the Corporation) of the entire exercise price (determined in accordance with the Option Agreement) for the number of shares specified in the notice.  Upon any such exercise of an option by an Optionee the Corporation shall cause its transfer agent and registrar to promptly deliver to such Optionee or the legal representatives of such Optionee, as the case may be, a share certificate in the name of such Optionee or the legal representatives of such Optionee, as the case may be, representing the number of shares specified in the notice.

6.09 Rights of Optionees

Optionees shall have no rights whatsoever as shareholders of the Corporation in respect of any of the Optioned Shares (including, without limitation, voting rights or any right to receive dividends, warrants or rights under any rights offering) other than Optioned Shares in respect of which Optionees have exercised their option to purchase and which have been issued by the Corporation.

6.10                      Third Party Offer

If at any time when an option granted under this Plan remains unexercised with respect to any common shares, an offer to purchase all of the common shares of the Corporation is made by a third party, the Corporation may upon giving each Optionee written notice to that effect, require the acceleration of the time for the exercise of the option rights granted under this Plan and of the time for the fulfilment of any conditions or restrictions on such exercise.

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6.11                 Alterations in Shares

In the event of a stock dividend, subdivision, redivision, consolidation, share reclassification (other than pursuant to this Plan), amalgamation, merger, corporate arrangement, reorganization, liquidation or the like of or by the Corporation, the Board may make such adjustment, if any, of the number of Optioned Shares, or of the exercise price, or both, as it shall deem appropriate to give proper effect to such event.  If such an event is imminent, the Board may, in a fair and equitable manner, determine the manner in which all unexercised option rights granted under this Plan shall be treated including, without limitation, requiring the acceleration of the time for the exercise of such rights by the Optionees and of the time for the fulfilment of any conditions or restrictions on such exercise.  All determinations of the Board under this section shall be full and final.

6.12 Termination for Cause

If an Optionee ceases to be either a Director, employee or service provider of the Corporation or of any of its subsidiaries as a result of having been dismissed from any such position for cause, all unexercised option rights of that Optionee under this Plan shall immediately become terminated and shall lapse, notwithstanding the original term of the option granted to such Optionee under this Plan.

6.13                Termination Other Than For Cause

If an Optionee ceases to be either a Director, employee or  service provider of the Corporation or any of its subsidiaries for any reason other than as a result of having been dismissed for cause as provided in section 6.12 or as a result of the Optionee's death, such Optionee shall have the right for a period of 30 days (or until the normal expiry date of the option rights of such Optionee if earlier) from the date of ceasing to hold such position to exercise the option under this Plan with respect to all Optioned Shares of such Optionee to the extent they were exercisable on the date of ceasing to hold such position .  Upon the expiration of such 30 day period all unexercised option rights of that Optionee shall immediately become terminated and shall lapse notwithstanding the original term of the option granted to such Optionee under this Plan.

6.14                 Deceased Optionee

In the event of the death of an Optionee, the legal representatives of the deceased Optionee shall have the right for a period of one year (or until the normal expiry date of the option rights of such Optionee if earlier) from the date of death of the deceased Optionee to exercise the deceased Optionee's option with respect to all of the Optioned Shares of the deceased Optionee to the extent they were exercisable on the date of death.  Upon the expiration of such period all unexercised option rights of the deceased Optionee shall immediately terminate and shall lapse notwithstanding the original term of the option granted to the deceased Optionee under this Plan.

6.15                 Blackout Period

If an option expires during a trading blackout or within 10 business days after the date on which the blackout ends, then the expiry date of the option will be extended for a period of 10 business days after the date on which the trading blackout ends.

7.             Amendment and Discontinuance of Plan

Subject to any requirement of the exchanges, the Board may from time to time amend or revise the terms of this Plan or may discontinue this Plan at any time, provided that no such action may in any manner adversely affect the rights under any options earlier granted to an Optionee under this Plan without the consent of that Optionee.

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8. No Further Rights

Nothing contained in this Plan nor in any option granted hereunder shall give any Optionee or any other person any interest or title in or to any shares of the Corporation or any rights as a shareholder of the Corporation or any other legal or equitable right against the Corporation whatsoever other than as set forth in this Plan and pursuant to the exercise of any option, nor shall it confer upon the Optionees any right to continue as a Director, employee or service provider.

9.           Compliance with Laws

The obligations of the Corporation to sell shares and deliver share certificates under this Plan are subject to such compliance by the Corporation and the Optionees as the Corporation deems necessary or advisable with all applicable corporate and securities laws, rules and regulations.

10.           Withholding Taxes

Notwithstanding the other provisions and requirements set forth in this Plan the Corporation shall require, as a condition of the exercise of any options granted pursuant to this Plan, that an optionee exercising an option shall pay to the Corporation for remittance to the Canadian taxation authorities such amounts as are, by the tax laws and regulations applicable at the time, required in relation to the option being exercised to be collected and remitted.  The Corporation must upon receiving the required monies from an optionee exercising an option, forthwith remit them to the Canadian taxation authorities accompanied by the appropriate forms to identify the optionee on behalf of whom the payment is being made.

11.           Previous Plans

All options granted under the Corporation’s previous Incentive Stock Option Plans will be deemed to have been granted pursuant to, and subject to the terms of, this Plan, to the extent that the provisions of such previously granted options are not inconsistent with the provisions of this Plan.

DATED:                      April 10, 2007.

 SIGNED FOR IDENTIFICATION

 “Carl R. Jonsson”

 Carl Jonsson, Director and Secretary

146

SCHEDULE “A”

CALEDONIA MINING CORPORATION

INCENTIVE STOCK OPTION PLAN

OPTION AGREEMENT

This Option Agreement is entered into between Caledonia Mining Corporation (the "Company") and the Optionee named below pursuant to the Incentive Stock Option Plan of the Company dated April 10, 200, as amended March 31, 2011 (the "Plan"), and confirms that:

1. on  __________________________, ________;

2. __________________________    (the "Optionee");

3. was granted the option to purchase ________ common shares (the "Optioned Shares") of the Company;

4. for the price of $ __________ per Optioned Share;

5. exercisable from time to time up to but not after _________________, ___________;

all on the terms and subject to the conditions set out in the Plan.

By signing this Option Agreement, the Optionee acknowledges that the Optionee has read and understands the Plan and agrees to the terms and conditions of the Plan and this Option Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Option Agreement as of the ____ day of ____________________, ________.

	CALEDONIA MINING CORPORATION
_____________________________ (the Optionee)	By: _____________________________                                                       Authorized Signatory

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EXHIBIT #14c

CALEDONIA MINING CORPORATION

MINERAL PROPERTIES

The following is a summary of Caledonia’s mineral properties and the capitalized costs as at the 31st December 2011 – in Canadian dollars:
 

Africa:

South Africa -

Zambia 7,443,000

Zimbabwe 9,934,000

$ 17,377,000

NOTE:  The cost of acquisition of mineral properties and all related exploration and development expenditures, less recoveries, are capitalized and carried as an asset to be amortized against income if the property is brought into commercial production or charged to income if the property is, or is to be, abandoned or disposed of. The zero value attributable to South Africa relates to Rooipoort which was fully impaired in 2011.

148

EXHIBIT #14d

SUMMARY OF REPORT

ON THE NAMA PROPERTY IN ZAMBIA

Prepared by Applied Geology Services cc

on behalf of

Caledonia Mining Corporation

May 1, 2008

Qualified Persons who prepared the Report -            David E.C.S. Grant

3 Summary

Caledonia Nama Limited (Caledonia (Nama)), a subsidiary of Caledonia Mining Corporation is the sole owner of a Retention Licence over approximately 80 000ha in the Solwezi District of the Northwestern Province of Zambia in sub-Saharan Africa. The licence has been granted for a period of three years from February 2007 after which it must be converted to mining titles. It lies on the northwestern flank of the Zambian Copperbelt and has potential for high tonnage, low-grade cobalt-copper-nickel mineralisation referred to as the Nama Project. The area is underlain by strata of the Katanga Supergroup but paucity of outcrop and structural complexity has prevented accurate correlation of the stratigraphy intersected in the boreholes except that distinct mixtite units can be correlated with the lower Kundelungu Group. The mineralisation occurs in a deep weathered profile and is probably caused by the oxidation of primary disseminated cobalt-copper-nickel sulphides combined with supergene redistribution and precipitation, especially in the near surface environment. This has produced both flat lying and inclined resource bodies of mineralisation. Caledonia started operations in the area in 1994 and in the ensuing years acquired five Prospecting Licences and undertook an exploration program commencing with soil sampling supported by airborne geophysical surveys and concluded with a drilling campaign. The drilling amounted to 323 reverse circulation holes totalling 38,119 metres followed by five diamond drill holes totalling 1445m. This drilling is in addition to 25 diamond drill holes drilled by Roan Selection Trust, Zamanglo and JCI in the Nama area and on the flank of the Konkola dome and 23 auger holes drilled by Roan Selection Trust. In 2007, Caledonia embarked on a drilling program in the Nama Retention Licence area and some of this drilling was undertaken over the D Anomaly. This report presents an estimation of indicated and inferred resources based on the results of 38 boreholes drilled into the D anomaly in the northeast to east-central parts of the Retention Licence. This resource of the shallow dipping hematite-magnetite body. is summarised in the table below.

Follow-up drilling is required over the D Anomaly to upgrade the known resources and delineate their extensions. Further work is required on the correlation of the stratigraphy in the Nama area to establish the extent that the mixtite units correlated with the lower Kundelungu Group owe their presence in the A Anomaly area to structural disturbance.

Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Resources. This section uses the terms “measured resources” and  “indicated resources”. We advise U.S. investors that these terms are not recognised by the U.S. Securities and Exchange Commission. The estimation of measured resources and indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. U.S. investors are cautioned not to assume that mineral resources in these categories will be converted into reserves.

Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Resources. This section uses the term “inferred resources”. We advise U.S. investors that this term is not recognised by the U.S. Securities and Exchange Commission. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. U.S. investors are cautioned not to assume that inferred mineral resources exist, are economically minable, or will be upgraded into measured or indicated mineral resources.

149

	Volume	Density	Tonnage	Co		Cu		Ni
	m3	Kg/m3	tonnes	%	Tons	%	Tons	%	Tons
Indicated Resource   D1 (iron oxide)	2,627,688	3.5	9,196,906	0.165	15,170	0.067	6,160	0.050	4,600
Inferred
Resource
D1 (iron oxide)	4,092,188	3.5	14,322,656	0.138	19,770	0.054	7,730	0.051	7,300
D2 (peripheral)	2,747,875	3.5	9,617,563	0.041	3,940	0.019	1,830	0.017	1,630
Surface
D3 (elluvial)	2,692,375	2.7	7,269,413	0.055	4,000	0.028	2,040	0.013	950
D4 (elluvial)	6,761,563	2.7	18,256,219	0.035	6,390	0.017	3,100	0.013	2,370
D5 (elluvial)	1,943,125	2.7	5,246,438	0.038	1,990	0.031	1,630	0.022	1,150
Inferred Subtotal	18,237,126		54,712,289	0.066	36,090	0.030	16,330	0.024	13,400

The iron oxide (D1 type) resource is tabled separately from the other resource types on account of its more competent nature and mineralogy. The haematite and magnetite comprising this body are enriched in cobalt and would require a different metallurgical process from that of the other D resource bodies.

The complete Report may be viewed on the Company’s website.

150

SUMMARY OF REPORT

ON THE NAMA PROPERTY IN ZAMBIA

Prepared by Applied Geology Services cc

on behalf of

Caledonia Mining Corporation

March 8, 2007

Qualified Persons who prepared the Report   -           Michael J. Haslett

    -           David E.C.S. Grant

3.           Summary

Caledonia Nama Limited (Caledonia), a subsidiary of Caledonia Mining Corporation holds a Retention Licence over approximately 80000 hectares of ground in the Solwezi District of the Northwestern Province of Zambia in sub-Saharan Africa. It lies on the northwestern flank of the Zambian Copperbelt and has potential for high tonnage, low-grade cobalt-copper-nickel mineralisation. The area is underlain by strata of the Katanga Supergroup but paucity of outcrop and structural complexity has prevented accurate correlation of the stratigraphy intersected in the boreholes except that distinct mixtite units can be correlated with the lower Kundelungu Group.

Caledonia started operations in the area in 1994 and in the ensuing years acquired five Prospecting Licences and undertook an exploration programme commencing with soil sampling supported by airborne geophysical surveys and concluded with a drilling campaign. The drilling amounted to 323 reverse circulation holes totalling 38,119 metres followed by five diamond drill holes totalling 1445m. This drilling is in addition to 25 diamond drill holes drilled by Roan Selection Trust, Zamanglo and JCI in the Nama area and on the flank of the Konkola dome and 23 auger holes drilled by Roan Selection Trust.

Exploration by Caledonia and its predecessors has identified 18 targets of which seven have been drilled to a greater or lesser extent. Most of the drilling activity has focussed on the A or Discovery Anomaly in the central-eastern parts of the Retention Licence area. This work has enabled declaration of an Indicated Resource as per the table below, to a depth of more than 210m below surface. The oxide mineralisation potentially extends below this depth. Other anomalies did not receive as much exploration attention but the data from one target should be re-examined for a resource declaration. Three anomalies require further investigation and the remaining 11 untested targets should be explored.

Initial bench and small bulk sample metallurgical testing has indicated that the oxide material can be upgraded into a concentrate by dense medium and magnetic separation and flotation techniques but this work should be repeated on material representative of the in situ grade of the resources. Further work is also required on the mineralogy of the material both in the near surface and deeper mineralisation to determine the mineral phases in which the cobalt, copper and nickel oxides reside. It is important to establish that the mineralogical and hence processing characteristics of the material are maintained into the deeper parts of the mineralisation.

Block	Tons	Grade (% metal)
		Cobalt	Copper	Nickel
1	9,139,000	0.0446	0.1028	0.0133
2	11,366,000	0.0613	0.0288	0.0067
3	4,305,000	0.0490	0.0730	0.0309
4	18,846,000	0.0572	0.1463	0.0086
Totals	43,656,000	0.055	0.099	0.011

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The complete Report may be viewed on the Company’s website.

Summary of Independent Competent Persons Report

Of the

Nama Retention Licence

In

Northern Zambia

And held by

Caledonian Mining Limited

Effective Date: 1st May 2007

By

David Grant

Pr Sci. Nat., CGeol.

And

Michael Haslett

BSc, MRM

Summary

Caledonia Nama Limited (Caledonia), a subsidiary of Caledonia Mining Corporation holds a Retention Licence over approximately 80 000ha of ground in the Solwezi District of the Northwestern Province of Zambia in sub-Saharan Africa. It lies on the northwestern flank of the Zambian Copperbelt and has potential for high tonnage, low-grade cobalt-copper-nickel mineralisation. The area is underlain by strata of the Katanga Supergroup but paucity of outcrop and structural complexity has prevented accurate correlation of the stratigraphy intersected in the boreholes except that distinct mixtite units can be correlated with the lower Kundelungu Group.

Caledonia started operations in the area in 1994 and in the ensuing years acquired five Prospecting Licences and undertook an exploration programme commencing with soil sampling supported by airborne geophysical surveys and concluded with a drilling campaign. The drilling amounted to 323 reverse circulation holes totalling 38,119 metres followed by five diamond drill holes totalling 1445m. This drilling is in addition to 25 diamond drill holes drilled by Roan Selection Trust, Zamanglo and JCI in the Nama area and on the flank of the Konkola dome and 23 auger holes drilled by Roan Selection Trust.

Exploration by Caledonia and its predecessors has identified 18 targets of which seven have been drilled to a greater or lesser extent. Most of the drilling activity has focussed on the A or Discovery Anomaly in the central-eastern parts of the Retention Licence area. This work has enabled declaration of an Indicated Resource of 43.6Mt of oxide mineralisation with a grade of 0.055%Co and 0.099%Cu to a depth of more than 210m below surface. The oxide mineralisation potentially extends below this depth. Other anomalies did not receive as much exploration attention but the data from one target should be re-examined for a resource declaration. Three anomalies require further investigation and the remaining 11 untested targets should be explored.

Initial bench and small bulk sample metallurgical testing has indicated that the oxide material can be upgraded into a concentrate by dense medium and magnetic separation and flotation techniques but this work should be repeated on material representative of the in situ grade of the resources. Further work is also required on the mineralogy of the material both in the near surface and deeper mineralisation to determine the mineral phases in which the cobalt, copper and nickel oxides reside. It is important to establish that the mineralogical and hence processing characteristics of the material are maintained into the deeper parts of the mineralisation.

Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Resources.   This section uses the terms “measured resources” and  “indicated resources”. We advise U.S. investors that these terms are not recognised by the U.S. Securities and Exchange Commission. The estimation of measured resources and indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. U.S. investors are cautioned not to assume that mineral resources in these categories will be converted into reserves.

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Table 1 Indicated Resources in the Discovery or A Anomaly

Block	Tons	Grade (% metal)
		Cobalt	Copper	Nickel
1	9,139,000	0.0446	0.1028	0.0133
2	11,366,000	0.0613	0.0288	0.0067
3	4,305,000	0.0490	0.0730	0.0309
4	18,846,000	0.0572	0.1463	0.0086
Totals	43,656,000	0.055	0.099	0.011

The above information used to define the four resource blocks at the Discovery or A anomaly can be considered adequate to allow a confident interpretation of the geological framework and to reasonably assume the continuity of the mineralisation. They have thus been classified as an Indicated Resource the quantities of which have been set out Table 1 above.  Tonnages and grades estimated within each of the resource blocks were determined at a cut-off of 0.02% Co.

Table 2 Estimated Indicated Resources in Anomaly C

Resource blocks in Anomaly C	At 0.02% Co cut-off
	Tonnes	%Co	%Cu	%Ni
Block C3	41,637,000	0.0505	0.0173	0.0195
Block C2 North	526,000	0.0245	0.0134	0.0126
Block C2 South	32,511,000	0.0350	0.0053	0.0180
Block C1	3,544,000	0.0261	0.0029	0.0131
Totals	78,218,000	0.043	0.012	0.019

Table 3 Combined Indicated Resources for Anomalies A and C

Anomaly	At 0.02% Co cut-off
	Tonnes	%Co	%Cu	%Ni
A	43,656,000	0.055	0.099	0.011
C	78,218,000	0.043	0.012	0.019
Total	121,874,000	0.047	0.043	0.016

The complete Report may be viewed on the Company’s website.

153

EXHIBIT #14e

SUMMARY OF INDEPENDENT TECHNICAL REPORT ON

 THE BLANKET MINE PROPERTY IN ZIMBABWE

Prepared by The MSA Group

on behalf of

Caledonia Mining Corporation

June 28, 2011

Qualified Persons who prepared the Report – Bruno Bvirakare (primary author)

      Mike Robertson (supervising principal)

3            SUMMARY

MSA Geoservices (Pty) Ltd (“The MSA Group”) was commissioned by Caledonia Mining Corporation (Caledonia) to prepare an Independent Technical Report on the Blanket Mine in Zimbabwe.  The Report was required to verify Caledonia’s calculations of the Blanket Mine mineral reserves and resources on an annual basis.

 On the 20th June 2006 Caledonia acquired the Blanket Gold Mine, located near Gwanda in Zimbabwe, from Kinross Gold Corporation of Canada.  Following a 2 year  period of successful operation of the mine, the mine was forced to close for 6 months owing to the fact that the Zimbabwe Government did not pay for the gold sold to the State refiner. Operations commenced again in April 2009 and production has since risen steadily.

Blanket Mine is situated about 15 km west of Gwanda, approximately 130 km to the south of Bulawayo, in south-western Zimbabwe. The mine has been in operation since 1906 and has reportedly produced 1,073,000 ounces of gold at an average grade of 4.53 g/t. The Mine comprises a series of deposits along a strike length of about 3 km, from Jethro in the south, through Blanket, Feudal, AR South, AR Main, Sheet, Eroica and Lima ore deposits. The gold enrichment occurs in near-vertical shoots spread out along an approximate north−south axis.

The Blanket Mine exploits a fairly typical Archaean greenstone-hosted deposit situated on the northwest limb of the Gwanda Greenstone belt. Most mining activity takes place within AR South, AR Main, Eroica and Lima ore shoots. Two main types of mineralisation are recognised, namely disseminated sulphide replacement (DSR) type mineralisation forming the bulk of the orebodies, and gold-bearing quartz-filled shear zones.

Three types of mining methods are used at the Blanket Mine:

·   Underhand stoping in the narrow ore bodies

·   Shrinkage stoping where blocky sidewalls are evident

·   Longhole stoping in the wider ore bodies, using 15 m sub-levels.

The surrounding country rock at the Blanket Mine, a massive amphibolite, is generally very competent and support such as rock bolts are only installed on rare occasions where fractured rock conditions are encountered. All ore is trammed/tipped to the 22 Level Ore Bins where, after primary crushing, the ore is loaded and hoisted to surface.

The completion of the 4 Shaft expansion project in 2010, which included plant upgrades, has increased the production capacity from 500 tpd to 1000 tpd of ore and consolidation at the higher level is in progress.  The higher throughput rate enables the mine to produce 40,000 oz of gold per annum at the current Reserve grade and quantum over a period of at least 10 years.

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Current mineral reserves and resources are summarised in the table below:

Summary of Mineral Reserves and Resources at Blanket Mine at December 31, 2010

MINERAL RESERVES (based on a Gold Price of US$ 1100/oz)
Classification	Tonnes	Grade (Au g/t)	Gold Content (oz)
Proven Ore
Total Proven Ore including Pillars*	1,326,100	4.02	171,400
Probable Ore
Operating and Development Areas	2,513,700	3.66	295,800
Total Proven + Probable Ore	3,839,800	3.78	467,200
MINERAL RESOURCES (based on a Gold Price of US$ 1100/oz)
Classification	Tonnes	Grade (Au g/t)	Gold Content (oz)
Indicated	510,000	3.79	62,100
Inferred	2,408,200	5.01	**
Tonnages and ounces are rounded to the nearest 100
Note *   Pillar tonnages are discounted by 50% Note ** In keeping with the requirements of NI 43-101, Inferred Resources are reported without estimates of metal quantities.

 (i) 1 tonne = 1,000 kilograms = 2,204.6 pounds

(ii) Some numbers may not add due to rounding

Mr. Mike Robertson, Pr. Sci. Nat., and  Mr. Bruno Bvirakare, Pr. Sci. Nat., both consultants with The MSA Group are the “Independent Qualified Persons” for Blanket’s reserves and resources as required by National Instrument 43-101 of the Canadian Securities Administrators.

Cautionary note to U.S. Investors concerning estimates of Inferred Resources.

The above table uses the term “inferred resources”. We advise U.S. investors that, while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. “Inferred resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or prefeasibility studies, except in rare cases. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally minable.

Cautionary Note to U.S. Investors concerning estimates of Indicated Resources.   The above table uses the term “indicated resources”. We advise U.S. investors that these terms are not recognised by the U.S. Securities and Exchange Commission. The estimation of measured resources and indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. U.S. investors are cautioned not to assume that mineral resources in these categories will be converted into reserves.

Major infrastructure consists of underground workings, a process plant, workshops and a tailings dam.

The ROM process consists of three-stage crushing, twin rod mills, Knelson Concentrators, and a CIL (carbon-in-leach) circuit. Loaded carbon is eluted and electro-won in a compact PG Elution cell. Cathodes from the cell are acid digested and calcined before smelting together with the gravity gold concentrate from the Knelsons. Approximately 50% of the gold is recovered as free gold. Tailings from the CIL stream is pumped to a tailings dam, with the effluent being recycled to the plant.

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Two permits for effluent disposal have been issued to the Blanket Mine, covering the sewage effluent and mill tailings disposals. The Mine has implemented a pollution monitoring system around the current tailings dam with the installation of a number of piezometers, which are routinely monitored on an independent basis by Fraser Alexander personnel from its Harare office.

In terms of the Mining General Regulations, certain closure obligations are to be fulfilled.   These are covered in a Closure Plan initially prepared by Knight Piesold. Management revised the quantum of the provisions in 2009.

The Blanket Mine smelts gold Dore bars twice a month and delivers them to a local refinery which is operated by the Reserve Bank of Zimbabwe. The Dore bars are then sent to Rand Refinery in South Africa for refining and sale.

The Report, authorized by Mike Robertson and Bruno Bvirakare, dated June 28, 2011, can be viewed on the Company’s website:  www.caledoniamining.com pursuant to the links “Investors” and “Technical Reports” - and on SEDAR at: www.sedar.com

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EXHIBIT #14f

Mokopane, Limpopo Province,

South Africa

Summary of Qualified Persons Report

on

Rooipoort PGE

Prepared by RSG Global on behalf of:

Caledonia Mining Corporation

Summary

Maid O’ The Mist (Pty) Ltd (“MoM”)  is a 100% owned subsidiary of Caledonia Mining Corporation and holds 100% of the Rooipoort Pt/Pd/Au/Ni/Cu project which is situated in the Limpopo Province, South Africa, some 250km north of Johannesburg and 5km south of the town of Mokopane (formerly Potgietersrus).  The Rooipoort Project incorporates two adjacent farms, viz. Rooipoort 46KS (the whole farm) and Grasvally 293KR (Portions 9, 11, 13, 14 and 16) comprising a contiguous area of 3687.1948 hectares.  MoM is the holder of the Prospecting Permit and Prospecting Right, issued by the South African Department of Minerals and Energy, to the Rooipoort Project area.

Acquisition of the properties comprising the Rooipoort Project area and the subsequent exploration programme were initiated as the area is underlain by approximately 7km of strike length of the Northern Lobe overlying the floor rocks.  The project area has limited exposure and had been poorly explored in the past, with published extrapolations of the Platreef southwards from Mokopane indicating possible Platreef sub-outcrop along the 7km strike close to the floor rocks.

The Rooipoort Project lies in the southern part of the Northern Lobe of the Bushveld Complex, the largest layered intrusion in the world and the world’s most important resource of platinum group metals.  Thirty kilometres along strike to the north of the Rooipoort Project is the Potgietersrus Platinum’s Ltd opencast Pt/Pd/Au/Ni/Cu mine of Anglo Platinum Corporation Ltd located on the Platreef.  The Platreef forms the lowermost unit of the Northern Lobe of the Bushveld Complex in that area which lies on a floor of Transvaal Supergroup rocks and Basement granites.  The Platreef is unique to the Northern Lobe. The type area of the Platreef extends in outcrop from Mokopane for some 35km to the north. It consists of an assemblage of feldspathic pyroxenites and pyroxenites hosting platinum group metals (PGMs), nickel and copper bearing sulphide mineralization.

Exploration by MoM was undertaken in a phased manner commencing in mid-2003 with the acquisition of airborne geophysical (aeromagnetic) data followed by a soil geochemical survey and two phases of core drilling, culminating in September 2005 with 3D modelling and resource estimation (RSG Global).  The interpretation of the aeromagnetics coupled with soil geochemical data and geological extrapolation provided the basis for positioning of drillholes for the first phase of the core drilling programme.  The interpretation of this drilling programme of 23 drillholes totalling 7,470m of core and 4,886 assays is that the Platreef is not present however several mineralized zones within a 600m to 800m stratigraphic sequence were identified.

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The second phase of core drilling added 31 drillholes totalling 10,979.17m of core and 7,782 assays and allowed for definition of seven previously unidentified PGM and base metal (Ni & Cu) bearing sulphide mineralized zones, as well as the recognition of a stratigraphic sequence of this area.  A local stratigraphic terminology has been developed which does not correlate directly with the established stratigraphic terminology applied to the Bushveld Complex.  Potential correlation with the standard stratigraphy is presented in the context of previous work on the area of Grasvally and adjacent properties to the south of the project area.  The mineralized zones were essentially numbered upwards from the base of the enclosing unit with broader cut mineralization given the suffix ‘S’.

On the project area, a broad, shallow, north plunging synclinal structure is developed, separated by a northerly trending fault zone (the Grasvally Fault) from a westerly dipping unit.  Only mineralized material to the east of the Grasvally fault is considered in this interpretation, although it is clear that additional mineralized material exists to the west of this fault.  This represents upside potential to the resource calculated in this exercise.

The deposit is disrupted by several smaller-scale faults and intruded in the north by an easterly trending bifurcating dyke. The EGMC geological interpretations separate the resource into 3 main zones, the C & G block to the south of the dyke, the B block between the bifurcated limbs of the dyke and the A block to the north of the dyke.  Only mineralization in the Lower Units have been modelled in the A block.  RSG Global has treated all 3 blocks together, as they would have originally been continuous.

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EXHIBIT #14g

Property and Claims Information

THE DATA PROVIDED BELOW FOR THE THREE PROPERTY AREAS IS CONSIDERED THE MATERIAL INFORMATION RELATING TO THE PROPERTIES AND CLAIMS. THE FULL TEXT OF THIS DATA AND INFORMATION IS AVAILABLE IN THE VARIOUS TECHNICAL REPORTS THAT ARE AVAILABLE ON THE COMPANY WEBSITEwww.caledoniamining.com

BLANKET GOLD MINE

a)           Nature of Ownership Interests

Blanket Mine’s claims area is based on 2701 pegged claims.  An application made to the Ministry of Mines to convert the claims area into a mining lease was approved and its issue is awaited.

Blanket’s exploration properties are all pegged claims (see Table 14 g(i)) and held 100% by Blanket although some of the claims are subject to royalties.

b)           Salient Terms of Agreements, Royalties

·   1.5 – 2.0% NSR. Blanket owns the claims totally.

Based on current mining law in Zimbabwe, Blanket’s Mining Lease is valid in perpetuity.

Prospecting claims are renewable on an annual basis (Table 14 g(i)) by payment of a claim fee based on the area of the claim. The claims may also be maintained by carrying out exploration activities on the claims.  Royalties are payable on some of the claims (see Table 14 g(i)).

c)           Mineral Rights – Process of Acquisition

Mineral rights in Zimbabwe may be acquired by pegging claims or by purchasing claims. In the case of the purchase of an operating mine the mining lease/ claim is transferrable together with the related conditions.  Proposed changes to the Mining Law will require that indigenous persons hold a significant interest in mining companies.  Claims are held indefinitely so long as they are serviced in terms of work done or fees paid.

d)           The Claim/Right type and Conditions

Zimbabwe recognises both precious metal (gold) and base metal claims regardless of the nature of the deposit.  In the event of a gold mine being located on base metal claims, the claims can be converted to precious metal claims. The claims are awarded and monitored by the State.  A mining lease is awarded over existing claims on application by the mining company.

e)           Property details

See Table 14 g(i).

f)           Conditions of retention, Payments etc

See Table 14 g(i).  Claim fee payments are made by Blanket Gold Mine (responsible person – V. Naik).

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g)           Property area – see Table 14 g (i)

Table 14 g (1)
CLAIM BLOCK /	NUMBER OF				FEES			AREA
PROPERTY NAME	CLAIM BLOCKS	CLAIM TYPE	CLAIM/BLOCK NUMBERS	EXPIRY DATE/S	(Annual)		ROYALTIES	(ha)
Gwanda Claims
Blanket Mine
Valentine	26	Gold	GA2767-92	21-Mar-11	Not applicable since these claims fall within Blanket's Mining Lease		-	240.6
Oqueil	36	Gold	35928-63	29-Jan-11			-	270.0
Harvard	1	Base	5576BM	02-Feb-11			-	25.0
			GA512, GA547,GA247-8, GA349,
Blanket	11	Gold	GA5030, 1817, 31202, 3958,	06-Apr-11			-	114.0
			6874BM, 9627BM
			31190, 19918, 21065, GA446,
Feudal	6	Gold		10-May-11			-	77.0
			10051BM, 10358BM
			36066-117, 35753-68, 34052-67,
Lima	85	Gold		02-Apr-11			-	828.5
			10925BM
			35628-39, 34744, 34747-51,
Sheet	21	Gold		03-Apr-11			-	179.6
			34856, GA341, 9629BM
			GA281, GA513, 1978, 25610,
Sabiwa	12	Gold &Base	9628BM, 10922-23BM, 10894-	11-Apr-11			-	594.0
			96BM, 10049-50BM
Mbudzane Rock	43	Gold	36160-202	21-May-11			-	353.9
Jethro	1	Gold	19923	30-Nov-10			-	9.0
Smiler	1	Gold	32939	26-Nov-10			-	10.0
Blanket Exploration
Penzance	3	Base	11264BM,11265BM,8838BM	07-Jan-11	$	198	2.5% on 8838	99
Bunny's Luck	6	Base	10443-48BM	15-Jan-11	$	300	-	150
Cinderella	5	Base	11122-23BM,10824-26BM	19-Jan-11	$	856	3% NSR	428
Eagle	1	Base	11266BM	21-Jan-11	$	102	-	51
Spruit	5	Base	10623-24BM, GA532-4BM	24-Feb-11	$	776	-	388
Shakeshake	3	Base	10625-27BM	24-Feb-11	$	576	-	288
Surprise	2	Base	10628-29BM	24-Feb-11	$	392	-	196
Abercorn	2	Base	11269BM,10602BM	11-Mar-11	$	432	-	216
Banshee	1	Base	11093BM	23-Sep-10	$	270	3% NSR	135
Dan's Luck South	3	Base	GA537-38BM, 11268BM	11-Mar-11	$	270	-	135
Abercorn	1	Gold	32251	28-Mar-11	$	8	-	10
Annette	3	Gold	GA3258-60	30-Mar-11	$	19	3% NSR	24
Dan's Luck	2	Gold	32776, GA3769B	13-May-11	$	14	2.5% NSR	18
Eagle Hawk	1	Gold	30544	08-Oct-10	$	8	3% NSR	10
GG	7	Gold	GA3769-75	05-Jun-11	$	42	-	52.9
Gum	2	Gold	GA3060-61	10-Oct-10	$	10	3% NSR	12
Lincoln	1	Gold	30548	20-Oct-10	$	8	3% NSR	10
Mascot	3	Gold	GA 583, 29657, 32756	03-May-11	$	24	2.5% NSR	30
Mazeppa	1	Gold	32769	26-May-11	$	2	2.5% NSR	3
Rubicon	23	Gold	34519-20, 34794-805, 34913-21	23-Jan-11	$	176	-	220
Valentine	3	Gold	GA2994-96	21-Mar-11	$	24	3% NSR	30
Vulture	2	Gold	5031, 8106	13-Jan-11	$	16	3% NSR	20
Will South	1	Gold	33143	30-Sep-10	$	4	2.5% NSR	5
Bubi Claims
Stu	4	Base	12072-74BM, 12021BM	07-Jan-11	$	990	-	495
Chikosi	7	Base	12011-17BM	30-Jan-11	$	999	-	499.5
Sandy	2	Base	12018-19BM	30-Jan-11	$	600	-	300
Ruswayi	6	Base	12022-27BM	30-Jan-11	$	1 088	-	544
Lonely	5	Base	12028-30BM, 12075-76BM	02-Feb-11	$	1 340	-	670
Spawn	3	Base	12031-33BM	30-Jan-11	$	622	-	311
Kadoma Claims
Golden Donkey	2	Gold	1254-55	18-Mar-11	$	6	1.75% NSR	8
Headley NE	3	Gold	1256-58	18-Mar-11	$	24	1.75% NSR	30
Harare
Apollo	27	Gold	17438-46, 28665-79, 28734-36	27-Sep-11	$	166	-	208
Electra	1	Base	19482BM	13-Mar-11	$	24	-	12
Apollo	3	Base	28382-84BM	27-Sep-11	$	192	-	96
TOTAL	387	Claim Blocks					hectares	8406

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ROOIPOORT PLATINUM PROJECT

a)           Nature of Ownership Interests

Caledonia holds via its 100% subsidiary Maid ‘O the Mist, five Prospecting Rights in the Rooipoort area (see Table 14 g (ii)). These rights are currently subject to renewal applications.

b)           Salient Terms of Agreements, Royalties

Prospecting Rights are valid for a period of 5 years.  Thereafter the rights may be extended for a further 2 years on application, and thereafter a right would have to be converted into a Retention Right for a further 5 years. After the above periods the rights would lapse automatically.

Exploration fees are calculated on the area of the Prospecting Right and are payable annually in advance.  The rights are subject only to royalties as enacted by the State.

c)           Mineral Rights – Process of Acquisition

All mineral rights in South Africa are vested in the State.  In terms of the Minerals and Petroleum Resources Development Act governing the administration of the minerals industry in South Africa, companies may apply to the Department of Mineral Resources for Prospecting Rights over areas in which they are interested and for the specific minerals that they are interested in.  On the basis that there are no overlaps in terms of area and minerals and subject to various environmental and landowner concerns, prospecting rights are issued for a period of 5 years renewable for a further 2 years.

d)           The Claim/Right type and Conditions

Exploration in the Rooipoort area is confined the Prospecting Rights (see Table 14 g (ii)).

e)           Property details

See Table 14 g (ii).

f)           Conditions of retention, Payments etc.

See Table 14 g (ii).  Prospecting fee payments are made annually by Maid ‘O the Mist (responsible person – A. Lawson).

g)           Property area – see Table 14 g (ii).

Table 14 g(ii)
PROPERTY NAME/			PROSP. PERMIT				AREA
FARM	FARM PORTIONS	MINERAL	NUMBER	EXPIRY DATE	FEES	ROYALTIES	(ha)
Rooipoort Platinum Project
Rooipoort 46KS	entire farm	Platinum Group Metals	730/2006 PR		R 10 670	State	3771.0
Grasvally 293KR	Ptns 9, 11, 13, 14, 16	Platinum Group Metals	375/2009 PR		R 3 388	State	341.8
	Re 8 & ptn of ptn 29
Grasvally 293KR	(prev ptn 26)	Platinum Group Metals		These rights
			225/2006 PR	have expired	R 1 540	State	42.8
	Ptn of ptn 29 (prev ptn			and the
	28)	Platinum Group Metals		necessary
				applications
	Re of ptn 3, re ptn 6,			have been
Grasvally 293KR	ptn 19 & 24	Platinum Group Metals		lodged for their
				renewal.
Moorddrift 289KR	farm	Platinum Group Metals	225/2006 PR		R 8 800	State	3196.5
Jaagbaan 291KR	farm	Platinum Group Metals
Waterval 297KR	farm	Platinum Group Metals	443/2006 PR		R 6 380	State	1217.3
Platinum Group Metals = Pt, Pd, Rh, Ru, Os, Ir, Au, Ni, Cu

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NAMA COBALT/COPPER PROJECT

a)           Nature of Ownership Interests

Caledonia’s 100% subsidiary, Caledonia Nama Ltd owns four contiguous Mining Licences in the Copperbelt Province of Zambia.

b)           Salient Terms of Agreements, Royalties

The Mining Licences were issued in 2008 and are valid for a period of 25 years and thereafter are renewable for a further period of 25 years.  The retention of the Licences is subject to the development of mining activities on the licences taking into account realistic estimates of economic conditions relating to the development of such mining ventures.  The Licences are subject to no royalties other than that which the State may impose.

c)           Mineral Rights – Process of Acquisition

Mineral rights in Zambia are vested in the State.  The normal process of acquisition is to apply for a Prospecting Licence which is normally issued for a period of three years at which stage at least half the area must be dropped when an application is made to extend the Licence period.  Following a further two year period the prospecting company is required to relinquish a further portion of the property on application for a mining licence.

d)           The Claim/Right type and Conditions

Caledonia holds a Mining Licence over the Nama area.  The right is secured by the development of mining activities on the licence area, subject to the State and Local Council requirements particularly in terms of environmental and local developments issues.

e)           Property details

See Table 14 g (iii).

f)           Conditions of retention, Payments etc.

See Table 14 g (iii).  A once off payment was made on issue of the Mining Licence. No ongoing or annual fees are payable.  When land is demarcated for mine development, this will result in a purchase consideration to the local council.

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g)           Property area – see Table 14 g (iii).

Table 14 g (iii)
			MINING PERMIT			AREA
PROPERTY NAME	FARM PORTIONS	MINERALS	NUMBER	EXPIRY DATE	ROYALTIES	(ha)
NAMA COBALT-COPPER PROJECT
		Cobalt, Copper, Nickel, Iron,
		Manganese, Zinc, Gold and
	Nama (Center)	Uranium	LML70	26/09/2033	State	17 635.6
		Cobalt, Copper, Nickel, Iron,
		Manganese, Zinc, Gold and
	Luamfula (East)	Uranium	LML71	26/09/2033	State	23 364.7
		Cobalt, Copper, Nickel, Iron,
	Ngosa (West)	Manganese, Zinc, Gold and
		Uranium	LML69	26/09/2033	State	21 474.5
		Cobalt, Copper, Nickel, Iron,
	Konkola	Manganese, Zinc, Gold and
		Uranium	LML68	26/09/2033	State	17 017.9
Total Project						79 492.7

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