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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001137171-08-000301.txt : 20080331
<SEC-HEADER>0001137171-08-000301.hdr.sgml : 20080331
<ACCEPTANCE-DATETIME>20080331132654
ACCESSION NUMBER:		0001137171-08-000301
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20080331
FILED AS OF DATE:		20080331
DATE AS OF CHANGE:		20080331

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CALEDONIA MINING CORP
		CENTRAL INDEX KEY:			0000766011
		STANDARD INDUSTRIAL CLASSIFICATION:	GOLD & SILVER ORES [1040]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			A1
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-13345
		FILM NUMBER:		08723094

	BUSINESS ADDRESS:	
		STREET 1:		SUITE 1201 - 67 YONGE STREET
		CITY:			TORONTO
		STATE:			A6
		ZIP:			M5E 1J8
		BUSINESS PHONE:		4163699835

	MAIL ADDRESS:	
		STREET 1:		SUITE 1201 - 67 YONGE STREET
		CITY:			TORONTO
		STATE:			A6
		ZIP:			M5E 1J8

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GOLDEN NORTH RESOURCE CORP
		DATE OF NAME CHANGE:	19920302
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>caledonia6k033108.htm
<DESCRIPTION>CALEDONIA MINING FORM 6-K
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>CC Filed by Filing Services Canada Inc. 403-717-3898</TITLE>
<META NAME="author" CONTENT="rszczype">
<META NAME="date" CONTENT="08/04/2006">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center><B>FORM 6-K<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549</B></P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center><B>Report of Foreign Private Issuer </B></P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center><B>Pursuant to Rule 13a-16 or 15d-16 <BR>
of the Securities Exchange Act of 1934</B></P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">For the month of March 2008</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">Commission File Number: <FONT COLOR=#3F3F3F>000-13345</FONT></P>
<P style="margin:0pt" align=center><B>Caledonia Mining Corporation</B> <BR>
(Translation of registrant's name into English)</P>
<P style="margin:0pt" align=center><b>1710 - 1177 West Hastings Street</b></P>
<P style="margin:0pt" align=center><b>Vancouver</b></P>
<P style="margin:0pt" align=center><b>British Columbia&nbsp; V6E 2L3</b></P>
<P style="margin:0pt" align=center><B>Canada<BR>
</B>(Address of principal executive offices)<BR>
</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.</P>
<P style="margin:0pt" align=center>Form 20-F _X__ Form 40-F_____</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): <U>____</U> </P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): <U>____</U> </P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.</P>
<P style="margin:0pt" align=center>Yes <U>____</U> No <U>__X___</U></P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">If &quot;Yes&quot; is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- <U>_______</U> </P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center><B>Signatures</B></P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:360pt"><B>Caledonia Mining Corporation<BR>
</B>(Registrant)</P>
<P style="margin:0pt; padding-left:360pt; text-indent:144pt">&nbsp;<BR>
</P>
<P style="margin:0pt; padding-left:324pt; text-indent:36pt">By:_/s/ Carl Jonsson</P>
<P style="margin:0pt; padding-left:360pt">Name: Carl Jonsson</P>
<P style="margin:0pt; padding-left:360pt">Title: Director and Secretary</P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt">Dated: &nbsp;&nbsp;March 31, 2008</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>Exhibit Index</B></P>
<P style="margin:0pt"><BR></P>
<P style="margin-top:0pt; margin-bottom:-12pt">Exhibit</P>
<P style="margin:0pt; text-indent:216pt">Description</P>
<P style="margin:0pt"><BR></P>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.1</P>
<P style="margin:0pt; padding-left:216pt"><U><a href="newsrelease.htm">Press Release &nbsp;March
31, 2008</a></U></P>
<P style="margin:0pt">&nbsp;</P>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.2</P>
<p style="margin: 0pt; padding-left: 216pt"><u><a href="financials.htm">Financial
Statements for the Period Ending December 31, 2007</a></u></p>
<P style="margin:0pt">&nbsp;</P>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.3</P>
<p style="margin: 0pt; padding-left: 216pt"><u><a href="mda.htm">Management's
Discussion &amp; Analysis</a></u></p>
<P style="margin:0pt">&nbsp;</P>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.4</P>
<p style="margin: 0pt; padding-left: 216pt"><u><a href="ceocert.htm">CEO
Certification</a></u></p>
<P style="margin:0pt">&nbsp;</P>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.5</P>
<p style="margin: 0pt; padding-left: 216pt"><u><a href="cfocert.htm">CFO
Certification</a></u></p>
<P style="margin:0pt">
<BR></P>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>newsrelease.htm
<DESCRIPTION>NEWS RELEASE
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>CC Filed by Filing Services Canada Inc. 403-717-3898</TITLE>
<META NAME="author" CONTENT="Alexandra Buck">
<META NAME="date" CONTENT="03/31/2008">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="margin:0px"><img border="0" src="caledoniaheader.jpg" align="left" width="629" height="110"><img border="0" src="caledoniarelease.jpg" align="right" width="72" height="897"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px"><BR><BR></P>
<P style="margin:0px">&nbsp;</P>
<P style="line-height:16.4pt; margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:12pt" align=center><B>Caledonia Mining announces its Fourth Quarter and 2007 Annual Results</B></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:16.133px; font-family:Arial; font-size:11pt" align=justify><B>Toronto, Ontario &#150; March 31, 2008: &nbsp;</B>Caledonia Mining Corporation (&#147;Caledonia&#148;) (TSX: CAL, NASDAQ-OTCBB: CALVF, AIM: CMCL) is pleased to announce its fourth quarter and 2007 annual operating and financial results. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:16.133px; font-family:Arial; font-size:11pt" align=justify>The financial results below are reported in thousands of Canadian dollars, except where otherwise stated.</P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:16.133px; font-family:Arial; font-size:11pt" align=justify><B>Financial Highlights </B></P>
<P style="margin:0px"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=255.2></TD><TD width=85.067></TD><TD width=75.6></TD><TD width=83.067></TD><TD width=68.133></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt"><B>$C$ &#145;000s except per share amounts</B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=center><B>Q4 &#145;07</B></P>
</TD><TD style="border-top:1px solid #000000; border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=center><B>Q4 &#145;06</B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=center><B>2007</B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=center><B>2006</B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Revenue</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>3,231</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>9,044</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>10,039</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>13,586</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Operating costs </B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>2,211</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>5,951</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>9,745</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>8,572</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Gross Income (loss)</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>1,020</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>3,093</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>294</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>5,014</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Net income (loss) before discontinued operations</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>494</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>3,841</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>(3,906)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>2,315</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Discontinued operations (loss)</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>(249)</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>(1,283)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>(709)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>(7,990)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Net (loss) after discontinued operations</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>245</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>2,558</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>(4,615)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>(5,675)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Net Income (loss) per share (basic &amp; fully diluted)</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>$0.001</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>$0.006</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>($0.009)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>($0.013)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Cash</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>76</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>1,252</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>76</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>1,252</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="line-height:13pt; margin:0px; padding-left:2.267px; font-family:Arial; font-size:11pt"><B>Total Assets</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>29,492</P>
</TD><TD style="border-right:3px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>31,456</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=83.067><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>29,492</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=68.133><P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=right>31,456</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:16.133px; font-family:Arial; font-size:11pt" align=justify>For the year ended December 31, 2007, Caledonia recorded a gross income of $294,000, revenues of $10.03 million, and a net loss after tax of $3.9 million, which includes an unrealized loss on foreign exchange of $1,012,000 &nbsp;The basic net loss per fully diluted share for the continuing operations is $0.009. Cash available at year end totaled $76,000 (from continuing operations).</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:16.133px; font-family:Arial; font-size:11pt" align=justify>Commenting on the results, Stefan Hayden, President and CEO, said &#147; The extremely challenging economic environment in Zimbabwe caused delays in completing the No 4 shaft expansion at our Blanket Gold Mine, which in turn severely interfered with production and ultimately impacted on the Group&#146;s financial performance. &nbsp;However the Nama Project progressed well, which culminated in the recent signing of four off-take agreements with large Chinese refiners. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>Despite the restrictive economic conditions, the frequent power supply shortages and the continuous delays in receiving foreign currency for gold sale proceeds from the Reserve Bank of Zimbabwe (&#147;RBZ&#148;), Blanket produced 13,985 ounces of gold during the 2007 year. &nbsp;While the prognosis for Zimbabwe remains uncertain, the Blanket mine continues, at this stage, to be self-funding. Blanket will however only be able to return to the 25,000 oz per annum production level once the RBZ restores foreign exchange payments to their correct and legislated levels. &nbsp;Management continues to engage proactively with the RBZ to ensure that gold already delivered is promptly paid for. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>Hopefully during 2008 Blanket will be able to focus on completing the No.4 shaft expansion project in order to realize the planned increase in production to 40,000 oz per annum, and to continue with the underground development necessary to open up sufficient reserves to sustain the planned increase in production, and to further explore ways to control costs in the hyperinflationary environment.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>In Zambia work on the Nama Cobalt Project continued. Further to the &nbsp;two NI 43-101 resource statements published during the year, covered Anomalies &#147;A&#148; and &#147;C&#148;, we anticipate releasing an additional Technical Report once the assay and modeling results from the 2007 drilling program have been fully evaluated. &nbsp;Nama also submitted the Environmental Impact Assessment, covering the new access road and power line routes, to the Zambian authorities for approval. &nbsp;Negotiations with cobalt end-users have recently resulted in the successful conclusion of four off-take agreements to supply a total of 51,560 tonnes of cobalt metal equivalent from 2009 to 2013.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>During the current quarter, I am pleased to announce we have signed agreements for the sale of the Barbrook and Eersteling companies for a total cash consideration of $12.91 million. These transactions are expected to close during the second and third quarter of this year respectively.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>With regards to our platinum assets, we have commenced negotiations with a suitable JV partner as the Corporation&#146;s focus for the next few years will be on Nama. &nbsp;We have also applied for three Prospecting Licences on highly prospective PGE properties located on the Eastern limb of the Bushveld Igneous Complex in South Africa and await the granting of these licences. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>The priority focus for 2008 will be on developing the Nama Cobalt Project by completing a favourable feasibility study and raising sufficient funding with a view to starting operations as early in 2009 as possible.&#148;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:16.267px; font-family:Arial; font-size:11pt" align=justify>The Annual Report including the MD&amp;A for 2007 will be available on SEDAR and on the Caledonia website at <FONT style="color:#0000FF"><U>www.caledoniamining.com</U></FONT> on April 01 2008</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; font-family:Arial; font-size:11pt">The conference call is scheduled for Monday April 7, 2007 at 11:00 hours (EST) </P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>Participants Conference ID number: </P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; text-indent:283.533px; font-family:Arial; font-size:11pt" align=justify>243390#</P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>International Access Number:</P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; text-indent:283.533px; font-family:Arial; font-size:11pt" align=justify>+44 (0) 20 8609 0205</P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>UK Toll-free Number:</P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; text-indent:283.533px; font-family:Arial; font-size:11pt" align=justify>+44 (0) 800 358 2705 &nbsp;</P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>Canadian Toll Number:</P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; text-indent:283.533px; font-family:Arial; font-size:11pt" align=justify>+1 514 315 1023 &nbsp;&nbsp;</P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>Canadian Toll-free Number:</P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; text-indent:283.533px; font-family:Arial; font-size:11pt" align=justify>+1 866 270 8076</P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:-18.933px; font-family:Arial; font-size:11pt" align=justify>USA Toll-free Number:</P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; text-indent:283.533px; font-family:Arial; font-size:11pt" align=justify>+1 866 793 4279</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:4.133px; font-family:Arial; font-size:11pt" align=justify><B>For more information, please contact:</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:-18.933px; padding-right:16.133px; font-family:Arial" align=justify><B>Stefan Hayden, President &amp; CEO</B></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:-18.933px; padding-right:16.133px; text-indent:226.867px; font-family:Arial" align=justify><B>Alex Buck &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
<P style="margin:0px; padding-left:-18.933px; padding-right:16.133px; text-indent:396.933px; font-family:Arial" align=justify><B>Martin Eales</B></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:-18.933px; padding-right:50.133px; font-family:Arial" align=justify>Caledonia Mining</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:-18.933px; padding-right:50.133px; text-indent:226.867px; font-family:Arial" align=justify>BuckBias &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="margin:0px; padding-left:-18.933px; padding-right:50.133px; text-indent:396.933px; font-family:Arial" align=justify>RBC Capital Markets</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:-18.933px; padding-right:34.4px; text-indent:-240px; font-family:Arial">Tel: +27 11 447 2499 </P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:-18.933px; padding-right:34.4px; font-family:Arial">Tel: +27 11 447 2499 &nbsp;&nbsp;&nbsp;</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:-18.933px; padding-right:34.4px; text-indent:226.867px; font-family:Arial">Tel: +44 7932 740 452</P>
<P style="margin:0px; padding-left:-18.933px; padding-right:34.4px; text-indent:359.133px; font-family:Arial">Tel: +44 20 7029 7881</P>
<P style="margin:0px; padding-left:-18.933px; padding-right:16.133px; font-family:Arial" align=justify>&nbsp;</P>
<P style="line-height:13pt; margin:0px; padding-left:-18.933px; padding-right:4.133px; font-family:Arial; font-size:11pt" align=justify>Further information regarding Caledonia&#146;s exploration activities and operations along with its latest financials may be found at <FONT style="color:#0000FF"><U>www.caledoniamining.com</U></FONT><FONT style="font-family:Shruti"></FONT></P>
<P style="margin:0px" align=justify><BR>
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<DESCRIPTION>FINANCIALS
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<TITLE>CC Filed by Filing Services Canada Inc. 403-717-3898</TITLE>
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<META NAME="date" CONTENT="03/31/2008">
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<TR><TD style="background-color:#000000; border:1px solid #000000" valign=top width=638.4><P style="line-height:16pt; margin-top:6.2px; margin-bottom:6.2px; font-family:Shruti; font-size:14pt; color:#FFFFFF" align=justify><font face="Arial">&nbsp;
    MANAGEMENT&#146;S RESPONSIBILITY FOR FINANCIAL INFORMATION</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B>To the Shareholders of Caledonia Mining Corporation:</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Management has prepared the information and representations in this annual report. The consolidated financial statements of Caledonia Mining Corporation have been prepared in conformity with generally accepted accounting principles applied in Canada and, where appropriate, reflect management&#146;s best estimates and judgement. The financial information presented throughout this report is consistent with the data presented in the consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>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 auditors have the responsibility of auditing the consolidated financial statements and expressing an opinion on them.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three unrelated directors. This Committee meets periodically with management and the external auditors to review accounting, auditing, internal control and financial reporting matters.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The consolidated financial statements have been audited on behalf of the shareholders by the Corporation&#146;s independent auditors, BDO Dunwoody LLP, in accordance with generally accepted auditing standards in Canada and the standards of the Public Accounting Oversight Board (United States). &nbsp;The auditors&#146; report outlines the scope of their examination and their opinion on the consolidated financial statements.</P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; text-indent:28.8px; font-size:11pt" align=justify>S. E. Hayden</P>
<P style="line-height:13pt; margin:0px; text-indent:283.533px; font-size:11pt" align=justify>&nbsp;S. R. Curtis</P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; text-indent:28.8px; font-size:11pt" align=justify>President and Chief Executive Officer</P>
<P style="line-height:13pt; margin:0px; text-indent:288px; font-size:11pt" align=justify>Vice-President, Finance and Chief Financial Officer</P>
<P style="margin-top:7.333px; margin-bottom:0px; padding-top:4px; border-top:2px solid #000000" align=right><BR>
<BR></P>
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<P style="line-height:16pt; margin-top:9.333px; margin-bottom:0px; text-indent:28.8px; font-size:14pt" align=right><B>Auditors&#146; Report</B></P>
<P style="margin:0px; padding-bottom:4px; border-bottom:2px solid #000000" align=justify><BR></P>
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<P style="margin:0px; text-indent:28.8px; font-size:11pt" align=justify><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
<P style="margin:0px; font-size:11pt" align=justify><B>To the Shareholders of</B></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Caledonia Mining Corporation</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>We have audited the consolidated balance sheets of Caledonia Mining Corporation as at December 31, 2007 and 2006 and the consolidated statements of changes in shareholders&#146; equity, operations and comprehensive income/(loss) and cash flows for each of the years in the three year period ended December 31, 2007. &nbsp;These consolidated financial statements are the responsibility of the Company&#146;s management. &nbsp;Our responsibility is to express an opinion on these consolidated financial statements based on our audits.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Accounting Oversight Board (United States). &nbsp;&nbsp;Those standards require that we plan and perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. &nbsp;An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. &nbsp;An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2007 in accordance with Canadian generally accepted accounting principles. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>(Signed) BDO Dunwoody LLP</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Chartered Accountants, Licensed Public Accountants</P>
<P style="margin:0px; font-size:11pt" align=justify>Toronto, Ontario</P>
<P style="margin:0px; font-size:11pt" align=justify>March 28 2008</P>
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<P style="line-height:13pt; margin:0px; text-indent:28.8px; font-size:11pt" align=center><B>Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict</B></P>
<P style="margin:0px; padding-bottom:4px; border-bottom:2px solid #000000" align=justify><BR></P>
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<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the consolidated financial statements are affected by conditions and events that cast substantial doubt on the Company&#146;s ability to continue as a going concern, such as those described in the summary of significant accounting policies. The United States reporting standards also require the addition of an explanatory paragraph when changes in accounting policies, such as those described in the summary of significant accounting policies, has a material effect on the consolidated financial statements. Our report to the shareholders dated March 28, 2008 is expressed in accordance with Canadian reporting standards which do not require a reference to such events and conditions in the auditors&#146; report when these are adequately disclosed in the consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>(Signed) BDO Dunwoody LLP</P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify>Chartered Accountants, Licensed Public Accountants</P>
<P style="margin:0px; font-size:11pt" align=justify>Toronto, Ontario</P>
<P style="margin:0px; font-size:11pt" align=justify>March 28, 2008</P>
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<BR></P>
<P style="margin:0px; font-family:Times" align=center>2</P>
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<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Consolidated Balance Sheets</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>(in thousands of Canadian dollars)</B></P>
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<TABLE style="font-size:10pt" cellspacing=0>
  <tr>
    <TD height="20" style="border-bottom: 1 solid #000000">
      <p style="line-height: 100%"><b>December
      31</b></p>
    </TD><TD align="center" height="20" style="border-bottom: 1 solid #000000">
      <p style="line-height: 100%"><b>2007</b></p>
    </TD><TD align="center" height="20" style="border-bottom: 1 solid #000000">2006</TD>
  </tr>
<TR><TD valign=top width=432>
</TD><TD valign=top width=96>
</TD><TD valign=top width=96>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt"><b>Assets</b></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">Current</P>
</TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>76</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,252</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>2,064</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,407</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Inventories</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>2,085</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>5,738</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>17</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Assets held for sale </P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>166</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>315</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>4,408</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>8,773</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt"><b>Capital Assets and Mineral properties held for sale</b> </P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>11,424</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>11,449</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt"><b>Investments</b> (Note 1)</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>22</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>79</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt"><b>Capital assets</b> (Note 2)</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>213</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>212</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt"><b>Mineral properties
    </b> (Note 3)</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>13,425</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>10,943</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;</P></TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>25,084</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>22,683</P>
</TD></TR>
<TR><TD valign=top width=432><P style="padding-left: 12pt">&nbsp;</P></TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>29,492</B></P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>31,456</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=434.733></TD><TD width=93.267></TD><TD width=96></TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt"><b>Liabilities and Shareholders&#146; Equity</b></P>
</TD><TD valign=top width=93.267><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt">Current</P>
</TD><TD valign=top width=93.267><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Bank overdraft</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>13</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable (Note 10)</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>2,743</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>4,248</P>
</TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Liabilities held for sale</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1,587</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,651</P>
</TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt">&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>4,343</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>5,899</P>
</TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt">&nbsp;</P></TD><TD valign=top width=93.267><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt"><b>Long term liability</b>
    (Note 13)</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>11</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>46</P>
</TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt"><b>Asset retirement obligation</b>
    (Note 4)</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>732</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>811</P>
</TD></TR>
<TR><TD valign=top width=434.733><P style="padding-left: 12pt"><b>Asset retirement obligation &nbsp;- held for sale</b>
    (Note 4)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>311</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>364</P>
</TD></TR>
<TR><TD valign=top width=434.733><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>5,397</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>7,120</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=425.267></TD><TD width=103.933></TD><TD width=94.8></TD></TR>
<TR><TD valign=top width=425.267><P style="padding-left: 12pt"><b>Shareholders&#146; Equity</b></P>
</TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=94.8><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=425.267><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Share capital </P>
</TD><TD valign=top width=103.933><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>195,006</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>190,626</P>
</TD></TR>
<TR><TD valign=top width=425.267><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Contributed surplus </P>
</TD><TD valign=top width=103.933><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1,040</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>989</P>
</TD></TR>
<TR><TD valign=top width=425.267><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income/(loss)</P>
</TD><TD valign=top width=103.933><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(57)</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=425.267><P style="padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Deficit</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(171,894)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.8><P style="margin:0px; text-indent:20.4px; font-family:Times" align=right>(167,279)</P>
</TD></TR>
<TR><TD valign=top width=425.267><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>24,095</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>24,336</P>
</TD></TR>
<TR><TD valign=top width=425.267><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>29,492</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>31,456</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-family:Times" align=center>On behalf of the Board:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; text-indent:48px; font-family:Times" align=justify>&#147; S E Hayden&#148; </P>
<P style="margin:0px; text-indent:192px; font-family:Times" align=justify>&nbsp;Director</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; font-family:Times" align=center>&nbsp;</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; text-indent:48px; font-family:Times" align=justify>&#147;G R Pardoe&#148;</P>
<P style="margin:0px; text-indent:192px; font-family:Times" align=justify>&nbsp;Director</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times; font-size:8pt" align=justify>The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>3</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 width="100%"><TR height=0 style="font-size:0"><TD width=649.8></TD></TR>
<TR><TD style="border-top:2px solid #000000" valign=top><P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
</TD></TR>
<TR><TD valign=top><P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Consolidated Statements of Changes in Shareholders&#146; Equity</B></P>
</TD></TR>
<TR><TD valign=top><P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>(in thousands of Canadian dollars )</B></P>
</TD></TR>
</TABLE>
<P style="line-height:14pt; margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-family:Times" align=center><B>For the years ended December 31, 2007 and 2006 &nbsp;&nbsp;&nbsp;</B></P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0>
  <tr>
    <TD width=189.067></TD><TD width=47.267></TD><TD valign=top width=76.333>
</TD><TD valign=top width=82.4>
</TD><TD valign=top width=71.6>
</TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=right>Accumulated </P>
</TD><TD width=72.333></TD><TD width=69.4></TD>
  </tr>
  <tr>
    <TD width=189.067></TD><TD width=47.267></TD><TD valign=top width=76.333>
</TD><TD valign=top width=82.4>
</TD><TD valign=top width=71.6>
</TD><TD valign=top width=103.933>
      <p style="font-family: Times; margin: 0px" align="right">other
</TD><TD width=72.333></TD><TD width=69.4></TD>
  </tr>
  <tr>
    <TD width=189.067></TD><TD width=47.267></TD><TD valign=top width=76.333><P style="margin:0px; font-family:Times" align=right>Share </P>
</TD><TD valign=top width=82.4><P style="margin:0px; font-family:Times" align=right>Contributed</P>
</TD><TD valign=top width=71.6><P style="margin:0px; font-family:Times" align=right>Broker</P>
</TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=right>&nbsp;comprehensive </P>
</TD><TD width=72.333></TD><TD width=69.4></TD>
  </tr>
  <tr>
    <TD width=189.067></TD><TD style="border-bottom:1.333px solid #000000" valign=top width=50.933><P style="margin:0px; font-family:Times" align=right>Note</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=76.333><P style="margin:0px; font-family:Times" align=right>Capital</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=82.4><P style="margin:0px; font-family:Times" align=right>Surplus</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=71.6><P style="margin:0px; font-family:Times" align=right>Warrants</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=103.933><P style="margin:0px; font-family:Times" align=right>&nbsp;income</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=66.2><P style="margin:0px; font-family:Times" align=right>Deficit</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>Total</P>
</TD>
  </tr>
<TR><TD valign=top width=189.067></TD><TD valign=top width=47.267></TD><TD valign=top width=75.6>
</TD><TD valign=top width=85.067>
</TD><TD valign=top width=66.133>
</TD><TD valign=top width=103.933>
</TD><TD valign=top width=72.333>
</TD><TD valign=top width=69.4>
</TD></TR>
<TR><TD valign=top width=189.067><P>&nbsp;</P></TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Balance at December 31, 2004</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>173,304</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>480</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>321</P>
</TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>(151,924)</P>
</TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>22,181</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Shares issued</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>6,588</P>
</TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>6,588</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Stock options expense</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>283</P>
</TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>283</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Warrants exercised </P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>321</P>
</TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>(321)</P>
</TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Compensation warrants issued</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>(160)</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>160</P>
</TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD style="border-bottom:2px solid #000000" valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Net Loss for the year</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=47.267><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=75.6><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=66.133><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>(9,680)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>(9,680)</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Balance at December 31, 2005</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>180,053</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>923</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>(161,604)</P>
</TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>19,372</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Shares issued</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>10,573</P>
</TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>10,573</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Stock options expense</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>81</P>
</TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>81</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Options forfeited</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>(15)</P>
</TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>(15)</P>
</TD></TR>
<TR><TD style="border-bottom:2px solid #000000" valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Net Loss for the year</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=47.267><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=75.6><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=66.133><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>(5,675)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>(5,675)</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Balance at December 31, 2006</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>190,626</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>989</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>(167,279)</P>
</TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>24,336</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Warrants exercised</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=justify>5(d)</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>4,380</P>
</TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>4,380</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times">Adjustment to opening </P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Balance, change in accounting</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Policy</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=justify>1</P>
</TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=right>31</P>
</TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>31</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Stock options expense</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=justify>5 (c)</P>
</TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>61</P>
</TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Options forfeited</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>(10)</P>
</TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>(10)</P>
</TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Investments revaluation</P>
</TD><TD valign=top width=47.267><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P>&nbsp;</P></TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>To fair value</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=justify>1</P>
</TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=85.067><P>&nbsp;</P></TD><TD valign=top width=66.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=right>(88)</P>
</TD><TD valign=top width=72.333><P>&nbsp;</P></TD><TD valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>(88)</P>
</TD></TR>
<TR><TD style="border-bottom:2px solid #000000" valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Net Loss for the year</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=47.267><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=75.6><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=66.133><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>(4,615)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>(4,615)</P>
</TD></TR>
<TR><TD style="border-bottom:2px solid #000000" valign=top width=189.067><P style="margin:0px; font-family:Times" align=justify>Balance at December 31, 2007</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=47.267><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>195,006</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>1,040</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; font-family:Times" align=right>(57)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72.333><P style="margin:0px; font-family:Times" align=right>(171,894)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.4><P style="margin:0px; font-family:Times" align=right>24,095</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-family:Times" align=justify>The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>4</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Consolidated Statements of Operations and Comprehensive Income/ (Loss)</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>(in thousands of Canadian dollars except share and per share amounts)</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.65pt; margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=334.8></TD><TD width=97.2></TD><TD width=96></TD><TD width=96></TD></TR>
<TR><TD valign=top width=334.8 style="border-bottom: 1 solid #000000"><b>For the
    years ended December 31</b>
</TD><TD valign=top width=97.2 style="border-bottom: 1 solid #000000" align="center"><b>2007</b>
</TD><TD valign=top width=96 style="border-bottom: 1 solid #000000" align="center">2006
</TD><TD valign=top width=96 style="border-bottom: 1 solid #000000" align="center">2005
</TD></TR>
<TR><TD valign=top width=334.8>
</TD><TD valign=top width=97.2>
</TD><TD valign=top width=96>
</TD><TD valign=top width=96>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Revenue and operating costs</B></P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Revenue from sales</P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>10,039</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>13,586</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>6</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Operating costs</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>9,745</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>8,572</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>757</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Gross profit (loss)</B></P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>294</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>5,014</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(751)</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=334.8></TD><TD width=97.2></TD><TD width=96></TD><TD width=96></TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Costs and expenses</B></P>
</TD><TD valign=top width=97.2><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;General and administrative</P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>2,123</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2,096</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>3,001</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Interest </P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>309</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>54</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Amortization</P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>18</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>40</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>27</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Write-down of mineral properties</P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>750</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Exchange loss/(gain)</P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1,012</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(143)</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>50</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;Other expense (income) (Note 8)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(17)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(82)</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><b>&nbsp;</b></P></TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>4,195</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2,047</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2,997</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=334.8></TD><TD width=97.2></TD><TD width=96></TD><TD width=96></TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Income (loss) before discontinued operations</B></P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(3,901)</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2,967</P>
</TD><TD valign=top width=96><P style="margin:0px; padding-left:4.2px; font-family:Times" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3,748)</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Current Income Tax (Note 6)</B></P>
</TD><TD valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(5)</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(652)</P>
</TD><TD valign=top width=96><P style="margin:0px; padding-left:4.2px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Net income(loss) before discontinued operations</B></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(3,906)</B></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2,315</P>
</TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px; padding-left:4.2px; font-family:Times" align=right>(3,748)</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=334.8></TD><TD width=97.2></TD><TD width=96></TD><TD width=96></TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Discontinued operations (loss)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=bottom width=97.2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(709)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=bottom width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(7,990)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=bottom width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(5,932)</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Net (loss) after discontinued operations</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=97.2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(4,615)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(5,675)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(9,680)</P>
</TD></TR>
<TR><TD valign=top width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Revaluation of Investments to fair value (Note 1)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=bottom width=97.2><P style="font-family: Times; text-indent: 28.8px; margin: 0px" align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(88)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt"><B>Comprehensive (loss) </B></P>
</TD><TD style="border-bottom:2px solid #000000" width=97.2><P style="font-family: Times; text-indent: 28.8px; margin: 0px" align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;(4,703)</B></P>
</TD><TD style="border-bottom:2px solid #000000" width=96><P style="margin:0px; font-family:Times" align=center>&nbsp;&nbsp;&nbsp;(5,675)</P>
</TD><TD style="border-bottom:2px solid #000000" width=96><P style="margin:0px; text-indent:31px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;(9,680)</P>
</TD></TR>
<TR><TD width=334.8><P>&nbsp;</P></TD><TD valign=top width=97.2><P style="text-indent: 28.8px; font-family: Times; margin: 0px" align="right"><b>&nbsp;</b></P></TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">Income/(loss) per share</P>
</TD><TD valign=top width=97.2><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">Basic and diluted from continuing operations</P>
</TD><TD width=97.2><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right><B>(0.008)</B></P>
</TD><TD width=96><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right>0.005</P>
</TD><TD width=96><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right>(0.012)</P>
</TD></TR>
<TR><TD width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">Basic and diluted from discontinued operations</P>
</TD><TD width=97.2><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right><B>(0.001)</B></P>
</TD><TD width=96><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right>(0.018)</P>
</TD><TD width=96><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right>(0.019)</P>
</TD></TR>
<TR><TD width=334.8><P style="font-family: Times; margin: 0px; padding-left: 12pt">Basic and diluted for the year</P>
</TD><TD width=97.2><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right><B>(0.009)</B></P>
</TD><TD width=96><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right>(0.013)</P>
</TD><TD width=96><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times" align=right>(0.031)</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times; font-size:8pt" align=justify>The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>5</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Consolidated Statements of Cash Flows</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>(in thousands of Canadian dollars)</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.65pt; margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=96.4></TD></TR>
  <tr>
    <TD valign=top width=334.8 style="border-bottom: 1 solid #000000"><b>For the
      years ended December 31</b>
</TD><TD valign=top width=97.2 style="border-bottom: 1 solid #000000" align="center"><b>2007</b>
</TD><TD valign=top width=96 style="border-bottom: 1 solid #000000" align="center">2006
</TD><TD valign=top width=96 style="border-bottom: 1 solid #000000" align="center">2005
</TD>
  </tr>
<TR><TD valign=top width=349.667>
</TD><TD valign=top width=83.333></TD><TD valign=top width=94.6></TD><TD valign=top width=96.4></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify><B>Cash provided by (used in)</B></P>
</TD><TD valign=top width=83.333><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD><TD valign=top width=96.4><P>&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=96.4></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify><B>Operating activities</B></P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>&nbsp;&nbsp;Income(loss) before discontinued operations</P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>(3,906)</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,315 </P>
</TD><TD valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(3,748) </P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=96.4></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Adjustments to reconcile net cash from operations (Note 9) </P>
</TD><TD valign=top width=83.333><P style="margin:0px; font-family:Times" align=right><B>685</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; font-family:Times" align=right>187</P>
</TD><TD valign=top width=96.4><P style="margin:0px; font-family:Times" align=right>264</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=96.4></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Changes in non-cash working capital balances (Note 9)</P>
</TD><TD valign=top width=83.333><P style="margin:0px; font-family:Times" align=right><B>1,534</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; font-family:Times" align=right>(644)</P>
</TD><TD valign=top width=96.4><P style="margin:0px; font-family:Times" align=right>653</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=96.4></TD></TR>
<TR><TD valign=top width=349.667><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>(1,687)</B></P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,858 </P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(2,831)</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=96.4></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify><B>Investing activities</B></P>
</TD><TD valign=top width=83.333><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD><TD valign=top width=96.4><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Expenditures on capital assets and mineral properties</P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>(3,250)</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(2,657)</P>
</TD><TD valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(2,040)</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; padding-left:10.933px; font-family:Times" align=justify>Investment in Blanket Mine net of cash received on acquisition (Note 14)</P>
</TD><TD valign=top width=83.333><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(859)</P>
</TD><TD valign=top width=96.4><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=349.667><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>(3,250)</B></P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(3,516)</P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(2,040)</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=96.4></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify><B>Financing activities</B></P>
</TD><TD valign=top width=83.333><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD><TD valign=top width=96.4><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Bank overdraft</P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>13</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(3)</P>
</TD><TD valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>3</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Issue of share capital net of issue costs </P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>4,380</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>7,559</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>6,588</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:9.467px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>4,393</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>7,556</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>6,591</P>
</TD></TR>
<TR><TD valign=top width=349.667><P>&nbsp;</P></TD><TD valign=top width=83.333><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD><TD valign=top width=96.4><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:9.467px; font-family:Times" align=justify>Cash flow from discontinued operations</P>
</TD><TD valign=top width=83.333><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD><TD valign=top width=96.4><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:9.467px; font-family:Times" align=justify>Operating activities</P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>(684)</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(4,560)</P>
</TD><TD valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(4,064)</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:9.467px; font-family:Times" align=justify>Investing activities</P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(922)</P>
</TD><TD valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(3,244)</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; text-indent:9.467px; font-family:Times" align=justify>Financing activities</P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>6</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(194)</P>
</TD><TD valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>194</P>
</TD></TR>
<TR><TD valign=top width=349.667><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>(678)</B></P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(5,676)</P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96.4><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(7,114)</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667></TD><TD width=83.333></TD><TD width=94.6></TD><TD width=94.6></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify><B>Increase (decrease) in cash for the year</B></P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>(1,222)</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>222</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>(5,394)</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify><B>Cash and cash equivalents, beginning of year</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>1,298</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,076</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>6,470</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify><B>Cash and cash equivalents, end of year</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>76</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,298</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,076</P>
</TD></TR>
<TR><TD valign=top width=349.667><P>&nbsp;</P></TD><TD valign=top width=83.333><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify><B>Cash and cash equivalents at end of year relate to:</B></P>
</TD><TD valign=top width=83.333><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD><TD valign=top width=94.6><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify><B>Continuing operations</B></P>
</TD><TD valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>76</B></P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,252</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,076</P>
</TD></TR>
<TR><TD valign=top width=349.667><P style="margin:0px; font-family:Times" align=justify><B>Discontinued operations</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>46</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=349.667><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=83.333><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right><B>76</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,298</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:9.467px; font-family:Times" align=right>1,076</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times; font-size:8pt" align=right>The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.</P>
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<P style="margin:0px; font-family:Times" align=center>6</P>
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<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
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<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><b>Nature of Business</b></P>
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<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The Company is engaged in the acquisition, exploration and development of mineral properties for the exploitation of base and precious metals. &nbsp;The ability of the Company to recover the amounts shown for its capital assets and mineral properties is dependent upon the existence of economically recoverable reserves; the ability of the Company to obtain the necessary financing to complete exploration and development; and future profitable production or proceeds from the disposition of such capital assets and mineral properties.</P>
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<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify>The Company operates in a number of operating segments but its assets located in Zimbabwe, including its interests in gold properties, are subject to a hyperinflationary environment and may be subject to sovereign risks, including political and economic instability, government regulations relating to mining, currency fluctuations and inflation, all or any of which may impede the Company's activities in this country or may result in the impairment or loss of part or all of the Company's interest in the properties<B>.</B></P>
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<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Basis of Presentation and Going Concern</B></P>
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<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>These consolidated financial statements have been prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. &nbsp;The Company&#146;s ability to continue as a going concern is dependent upon attaining profitable operations, realising proceeds from the disposal of mineral properties and obtaining sufficient financing to meet its liabilities, its obligations with respect to operating expenditures and expenditures required on its mineral properties.</P>
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<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Measurement Uncertainties</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. &nbsp;The more significant areas requiring estimates relate to mineral resources, future cash flows associated with capital assets and mineral properties. &nbsp;Management&#146;s calculation of reserves and resources and cash flows are based upon engineering and geological estimates and financial estimates including gold prices and operating costs. &nbsp;The amount ultimately recovered could be materially different than the estimated values.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Principles of Consolidation</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The consolidated financial statements include the accounts of the Company together with all its subsidiaries. &nbsp;All significant inter-company balances and transactions have been eliminated on consolidation.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times; font-size:11pt" align=justify>&nbsp;<FONT style="font-size:10pt">The Company&#146;s consolidated subsidiaries (all 100% owned) are:</FONT></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=319></TD><TD width=301.533></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=319><P style="margin:0px; font-family:Times" align=justify>&nbsp;Barbrook Mines Limited (&quot;Barbrook&quot;)</P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=301.533><P style="margin:0px; font-family:Times" align=justify>Blanket (Barbados) Holdings Limited (&#147;Barbados&#148;)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=319><P style="margin:0px; font-family:Times" align=justify>Blanket Mine (1983) (Private) Limited (&#147;Blanket&#148;)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=301.533><P style="margin:0px; font-family:Times" align=justify>Caledonia Holdings (Africa) Limited (&#147;CHA&#148;)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=319><P style="margin:0px; font-family:Times" align=justify>Caledonia Holdings Zimbabwe Limited (&#147;CHZ&#148;)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=301.533><P style="margin:0px; font-family:Times" align=justify>Caledonia Kadola Limited (&#147;Kadola&#148;)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=319><P style="margin:0px; font-family:Times" align=justify>Caledonia Mining Services Limited (&#147;CMS&#148;)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=301.533><P style="margin:0px; font-family:Times" align=justify>Caledonia Mining (Zambia) Limited (&#147;CMZ&#148;)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=319><P style="margin:0px; font-family:Times" align=justify>Caledonia Nama Limited (&#147;Nama&#148;)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=301.533><P style="margin:0px; font-family:Times" align=justify>Caledonia Western Limited (&#147;Western&#148;)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=319><P style="margin:0px; font-family:Times" align=justify>Eersteling Gold Mining Company Limited &nbsp;(&quot;Eersteling&quot;)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=301.533><P style="margin:0px; font-family:Times" align=justify>Fintona Investments (Proprietary) Limited (&#147;Fintona&#148;)</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=319><P style="margin:0px; font-family:Times" align=justify>Greenstone Management Services (Proprietary) Limited (&#147;Greenstone&#148;)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=301.533><P style="margin:0px; font-family:Times" align=justify>Maid O&#146; Mist (Proprietary) Limited (&#147;MOM&#148;)</P>
</TD></TR>
</TABLE>
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<P style="margin:0px; font-family:Times" align=center>7</P>
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<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies (continued)</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Cash and Cash Equivalents</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Cash and cash equivalents represent cash on hand in operating bank accounts, cash in transit at year end between Blanket Mine in Zimbabwe and Greenstone Management Services in South Africa and money market funds with initial maturities less than three months.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Inventories</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:30px; font-family:Times" align=justify>These include gold in circuit (WIP) and bulk consumable stores. &nbsp;WIP is valued at the lower of the cost of production, on an average basis, at the various stages of production or net realisable value if the cost of production exceeds the current gold price. &nbsp;Bulk consumable stores are valued at the lower of cost or net realisable value on an average basis. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:24px; text-indent:4.4px; font-family:Times" align=justify><B>Investments</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:30px; font-family:Times" align=justify>The market securities are recorded at fair value. Changes in fair value are recognized in the statements of operations and comprehensive income.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Revenue Recognition</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Revenue from the sale of precious metals is recognized when the metal is delivered to the respective refineries, benefits of ownership are transferred and the receipt of proceeds is substantially assured. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Capital Assets</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B><I>Producing Assets</I></B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Producing assets are recorded at cost less grants, accumulated amortization and write-downs. &nbsp;Producing plant and equipment assets are amortized using the unit-of-production method on the ratio of tonnes of ore mined or processed to the estimated proven and probable mineral reserves as defined by the Canadian Institute of Mining, Metallurgy and Petroleum. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Other producing assets are amortized using the straight line method basis on the estimated useful lives of the assets. &nbsp;The estimated life of the producing assets ranges up to 10 years. Repairs and maintenance expenditures are charged to operations; major improvements and replacements which extend the useful life of an asset are capitalized and amortized over the remaining useful life of that asset. &nbsp;Barbrook Mine and Eersteling Gold Mine have been put up for sale and are thus presented as assets for sale in these consolidated financial statements. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B><i>Non-Producing Assets</i></B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Non-producing assets are recorded at cost less write downs. &nbsp;At the time of commercial production, the assets are reclassified as producing. &nbsp;During non-producing periods, no amortization is recorded on plant and equipment but vehicles and computer equipment continue to be amortized.</P>
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<P style="margin:0px; font-family:Times" align=center>8</P>
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<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies (continued)</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify><B><I>Assets held for sale and discontinued operations</I></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>During 2006 Barbrook Mine was subjected to extended industrial action which resulted in damage to infrastructure. As a consequence of this Barbrook was placed on care and maintenance and subsequently the decision was taken to sell Barbrook Mine along with Eersteling Gold Mining Company that had been on care and maintenance since 1997.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify>The components held for sale are as follows: </P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=210></TD><TD width=102></TD><TD width=102></TD><TD width=102></TD><TD width=102></TD></TR>
<TR><TD valign=top width=210><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=center>Barbrook Mine</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=center>Eersteling Gold Mine</P>
</TD></TR>
<TR><TD valign=top width=210><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>2007</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=102><P style="margin:0px; font-family:Times" align=right>2006</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>2007</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=102><P style="margin:0px; font-family:Times" align=right>2006</P>
</TD></TR>
<TR><TD valign=top width=210><P>&nbsp;</P></TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=210><P style="margin:0px; font-family:Times" align=justify>Capital Assets and mineral properties</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>10,779</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>10,779</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>645</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>670</P>
</TD></TR>
<TR><TD valign=top width=210><P style="margin:0px; font-family:Times" align=justify>Current Assets</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>88</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>230</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>78</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>85</P>
</TD></TR>
<TR><TD valign=top width=210><P style="margin:0px; font-family:Times" align=justify>Current Liabilities</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>(1,549)</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>(1,581)</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>(38)</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>(70)</P>
</TD></TR>
<TR><TD valign=top width=210><P style="margin:0px; font-family:Times" align=justify>Asset Retirement obligation</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>(107)</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>(124)</P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right><B>(204)</B></P>
</TD><TD valign=top width=102><P style="margin:0px; font-family:Times" align=right>(240)</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>As a consequence of this decision Barbrook and Eersteling Mine&#146;s results for 2006 and preceding years have been disclosed under discontinued operations. Revenue from discontinued operations is $60 ($2,973 in 2006 and $2,636 in 2005). There is no tax applicable to discontinued operations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Mineral Properties</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B><i>Producing Properties</i></B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>When and if properties are placed in production, the applicable capitalized costs are amortized using the unit-of-production method as described above. Blanket Mine was acquired during 2006 and has been consolidated into these results from July 1, 2006 and, as such, has been presented as a producing asset in these consolidated financial statements. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B><i>Non-Producing Properties</i></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times" align=justify>Costs relating to the acquisition, exploration and development of non-producing resource properties which are held by the Company or through its participation in joint ventures are capitalized until such time as either economically recoverable reserves are established or the properties are sold or abandoned</P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>A decision to abandon, reduce or expand activity on a specific project is based upon many factors including general and specific assessments of mineral reserves, anticipated future mineral prices, anticipated costs of developing and operating a producing mine, the expiration date of mineral property leases, and the general likelihood that the Company will continue exploration on the project. &nbsp;However, based on the results at the conclusion of each phase of </P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>an exploration program, properties that are not suitable as prospects are re-evaluated to determine if future exploration is warranted and that carrying values are appropriate.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The ultimate recovery of these costs depends on the discovery and development of economic ore reserves or the sale of the properties or the mineral rights. &nbsp;The amounts shown for non-producing resource properties do not necessarily reflect present or future values.</P>
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<P style="margin:0px; font-family:Times" align=center>9</P>
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<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies (continued)</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify><B>Asset Impairment</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Long-lived assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If changes in circumstances indicate that the carrying amount of an asset that an entity expects to hold and use may not be recoverable, future cash flows expected to result from the use of the asset and its disposition must be estimated. If the undiscounted value of the future cash flows is less than the carrying amount of the asset, impairment is recognised based on the fair value of the assets. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Strategic Alliances</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The Company has entered into various agreements under which the participants earn a right to participate in the mineral property by incurring exploration expenditures in accordance with the conditions of the agreements. Upon satisfaction of the conditions of the agreement a joint venture may be formed with customary joint venture terms and provisions and then accounted for on a proportionate consolidation basis. Until a joint venture is formed only the expenditures on the properties incurred by the Company are reflected in these consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Foreign Currency Translation</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Balances of the Company denominated in foreign currencies and the accounts of its foreign subsidiaries are translated into Canadian dollars as follows:</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:113.4px; text-indent:-47.2px; font-family:Times" align=justify>(i)</P>
<P style="margin:0px; padding-left:113.4px; font-family:Times" align=justify>monetary assets and liabilities at period end rates;</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:113.4px; text-indent:-47.2px; font-family:Times" align=justify>(ii)</P>
<P style="margin:0px; padding-left:113.4px; font-family:Times" align=justify>all other assets and liabilities at historical rates, and</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:114.2px; text-indent:-48px; font-family:Times" align=justify>(iii)</P>
<P style="margin:0px; padding-left:114.2px; font-family:Times" align=justify>revenue and expense transactions at the average rate of exchange prevailing during the period.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Exchange gains or losses arising on these translations are reflected in income in the year incurred. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Blanket is a self-sustaining operation and operates in Zimbabwe in a hyper inflationary economy. Accordingly the results of these operations have been translated into Canadian Dollars using the temporal method. Included in the statement of operations is an exchange loss of $1,203 (gain $291 - 2006) relating to the translation of Blanket Mine.</P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px; padding-left: 28.4px" align=justify><B>Income Taxes</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The Company accounts for income taxes using the asset and liability method. &nbsp;Under the asset and liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. &nbsp;Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply when the asset </P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>is realized or the liability settled. &nbsp;The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment or enactment occurs.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
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<BR></P>
<P style="margin:0px; font-family:Times" align=center>10</P>
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<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies (continued)</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; padding-left:28.4px; text-indent:0.4px" align=justify><B>Equity-based compensation</B> </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times" align=justify>The Company operates a share option plan as described in note 5(c). &nbsp;The Company accounts for equity-based compensation granted under such plans using the fair value method of accounting. Under such method, the cost of equity-based compensation is estimated at fair value and is recognized in the profit and loss statement as an expense. &nbsp;This cost is amortized over the relevant vesting period for grants to directors, officers and employees, and measured in full at the earlier of performance completion or vesting for grants to non-employees. &nbsp;Any consideration received by the Company on exercise of share options is credited to share capital.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify><B>Changes in accounting policy:</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:85.8px; text-indent:-48px; font-family:Times" align=justify>i)</P>
<P style="margin:0px; padding-left:85.8px; text-indent:-29.067px; font-family:Times" align=justify>Financial Instruments</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Recognition and Measurement Section 3855, Disclosure and Presentation Section 3861.These standards set out criteria for the recognition, measurement, disclosure and presentation of financial instruments for fiscal years beginning on or after October 1, 2006. This standard requires all financial instruments within its scope, including derivatives, to be included on a Company&#146;s balance sheet and measured either at fair value or, in certain circumstances when fair value may not be considered most relevant, at cost or amortized cost. Changes in fair value are to be recognized in the statements of operations and comprehensive income.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>All financial assets and liabilities are recognized when the entity becomes a party to the contract creating the item. As such, any of the Company&#146;s outstanding financial assets and liabilities at the effective date of adoption are recognized and measured in accordance with the new requirements as if these requirements had always been in effect. Any changes to the fair values of assets and liabilities prior to October 1, 2006 are recognized by adjusting opening deficit or opening accumulated other comprehensive income.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>All financial instruments are classified into one of the following five categories: held for trading, held-to-maturity, loans and receivables, available-for-sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The various assets and liabilities were classified as follows on adoption:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Times" align=justify>1.</P>
<P style="margin:0px; padding-left:48px; font-family:Times" align=justify>Cash and cash equivalents are classified as &#147;assets held for trading&#148;. They are stated at fair value and any gains/losses arising on revaluation at the end of each period are included in the statement of operations. We have no derivative financial instruments that would have been classified on a similar basis.</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Times" align=justify>2.</P>
<P style="margin:0px; padding-left:48px; font-family:Times" align=justify>Investments are classified as &#147;assets available for sale&#148;. They were previously presented at cost but will now be presented at fair value and the gains/losses arising from their revaluation at the end of each quarter will be included in other comprehensive income. When a decline in fair value is other than temporary, the accumulated loss that had been recognized directly in other comprehensive income is removed from accumulated other comprehensive income and recognized in net income even though the financial asset has not been derecognized.</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Times" align=justify>3.</P>
<P style="margin:0px; padding-left:48px; font-family:Times" align=justify>Trade receivables are classified under &#147;loans and receivables&#148;. They are recorded at their original cost which is deemed their fair value at that time. Subsequent measurement will be at amortized cost using the effective interest rate method.</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Times" align=justify>4.</P>
<P style="margin:0px; padding-left:48px; font-family:Times" align=justify>Bank overdraft is classified as a &#147;financial liability held for trading&#148; as there is a contractual obligation to deliver cash. It is measured at fair value which is book value plus accrued interest. It is stated at fair value </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
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<BR></P>
<P style="margin:0px; font-family:Times" align=center>11</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies (continued)</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:47.267px; font-family:Times" align=justify>and any gains/losses arising on revaluation at the end of each period are included in the statement of operations.</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Times" align=justify>5.</P>
<P style="margin:0px; padding-left:48px; font-family:Times" align=justify>Accounts payable and accrued liabilities and long term debt are classified under &#147;other financial liabilities&#148;. They are recorded at their fair value at that time. Subsequent measurement will be at amortized cost using the effective interest rate method.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Unless otherwise noted, it is the opinion of management that the Company is not exposed to significant interest rate or credit risks arising from its financial instruments. &nbsp;A significant portion of the Company&#146;s assets and liabilities are denominated in South African rand and Zimbabwe dollars. &nbsp;Management do not consider that the fluctuation of the value of the South African Rand to the Canadian Dollar could have a significant impact on the results of operations. Blanket Mine operation is subject to a hyperinflationary environment in Zimbabwe, foreign creditors are denominated in Rands and local costs increase with inflation. As the official exchange rate is fixed and the effective buying power of the Zimbabwe Dollar decreases accordingly there could be a significant impact on the results of the operations. The shareholder loan account in Zimbabwe is denominated in US Dollars and will generate foreign exchange losses 
for Blanket Mine in Zimbabwe Dollar terms but the effect on the consolidated financial statements in Canadian Dollars is unlikely to be significant. &nbsp;The fair values of these financial instruments approximate their carrying values, unless otherwise noted. &nbsp;The Company does not use any derivative instruments to reduce its foreign currency risks.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Below is a summary of the cash or near cash items denominated in a currency other than the Canadian dollar that would be affected by changes in exchanges rates relative to the Canadian dollar. All values are in thousands.</P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=140></TD><TD width=77.533></TD><TD width=122.8></TD><TD width=75.6></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=140><P>&nbsp;</P></TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=77.533><P style="margin:0px; font-family:Times" align=justify>US Dollars</P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=122.8><P style="margin:0px; font-family:Times" align=justify>Zimbabwe Dollars</P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=justify>SA &nbsp;Rand</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="margin:0px; font-family:Times">Cash</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="margin:0px; text-indent:8.6px; font-family:Times" align=right>470</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=122.8><P style="margin:0px; font-family:Times" align=right>(179,738,803)</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="margin:0px; font-family:Times" align=right>331</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="margin:0px; font-family:Times">Accounts Receivable</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="margin:0px; font-family:Times" align=right>1,780</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=122.8><P style="margin:0px; text-indent:7.2px; font-family:Times" align=right>79,027,980</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="margin:0px; font-family:Times" align=right>986</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="margin:0px; font-family:Times">Accounts Payable</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P>&nbsp;</P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=122.8><P style="margin:0px; font-family:Times" align=right>195,488,055</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="margin:0px; font-family:Times" align=right>10,830</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:75.6px; text-indent:-47.2px; font-family:Times" align=justify>ii) </P>
<P style="margin:0px; padding-left:75.6px; text-indent:-18.867px; font-family:Times" align=justify>Comprehensive Income (CICA Handbook Section 1530)</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Comprehensive income is the change in shareholders&#146; equity during a period from transaction and other events from non-owner sources. This standard requires certain gains and losses that would otherwise be recorded as part of the net income/(loss) to be presented in other &#147;comprehensive income&#148; until it is considered appropriate to recognize into net income/(loss). This standard requires the presentation of comprehensive income and its components in a separate financial statement that is displayed with the same prominence as the other consolidated financial statements. Accordingly, the Company now reports a Statement of Operations and Comprehensive Income and a Statement of Shareholders&#146; Equity which includes the account &#147;accumulated other comprehensive income&#148; in the shareholder&#146;s equity section of the consolidated balance sheet.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The adoption of Sections 3855 and 1530 determines how the Company records its investment in Motapa Diamonds Inc. and Old Mutual Plc which are now classified as financial instruments &#147;available for sale&#148; and thus recorded at fair value. The adjustment to opening balance to recognize this was $31 and any further unrealized gains or losses during the year are reported in the current period.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:28.4px; font-family:Times" align=justify>iii) </P>
<P style="margin:0px; padding-left:28.4px; text-indent:28.333px; font-family:Times" align=justify>Equity (Section 3251)</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>Along with the adoption of the above standards, the Company adopted CICA Handbook Section 3251, Equity, effective from the beginning of the current fiscal year. This Standard establishes the presentation of equity and changes in equity during the reported period. The Company now presents a Statement of Changes in Shareholders&#146; Equity as part of the annual consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
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<BR></P>
<P style="margin:0px; font-family:Times" align=center>12</P>
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<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
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<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies (continued)</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:28.4px; text-indent:0.4px; font-family:Times" align=justify>iv)</P>
<P style="margin:0px; padding-left:28.4px; text-indent:19.6px; font-family:Times" align=justify>&nbsp;&nbsp;Foreign Currency Translation (Section 1651)</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times" align=justify>&nbsp;The Company maintains its accounts in Canadian dollars. The accounts of its foreign subsidiaries are maintained in the local currency where the subsidiary is incorporated. The Corporations foreign subsidiaries are considered to be integrated operations. Accordingly, the foreign operations are translated to Canadian dollars using the temporal method. As such, monetary assets and liabilities are translated using the exchange rates in effect at the consolidated balance sheet date and non-monetary assets and liabilities at historical exchange rates. Revenue and expense items have been translated using the average exchange rate prevailing during the year. The gains and losses resulting from changes in exchange rates are recognized in earnings.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:28.4px; font-family:Times" align=justify>v) </P>
<P style="margin:0px; padding-left:28.4px; text-indent:21.067px; font-family:Times" align=justify>&nbsp;Accounting Changes (Section 1506)</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>This new section establishes criteria for changes in accounting policies along with the accounting treatment and disclosures required upon adoption of the new accounting policies, estimates and corrections of errors. The standard is applied prospectively for the Company&#146;s 2007 financial year. The adoption of this standard did not have a material impact on our consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.8px; font-family:Times" align=justify><B>Recently issued accounting pronouncements issued and not yet effective</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:76.4px; text-indent:-48px; font-family:Times" align=justify>(i)</P>
<P style="margin:0px; padding-left:76.4px; text-indent:-19.667px; font-family:Times" align=justify>Financial instruments and capital disclosure:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; padding-right:1.333px; font-family:Times" align=justify>In October 2006, the Accounting Standards Board (&#147;AcSB&#148;) approved disclosure and presentation requirements for financial instruments that revise and enhance the disclosure requirements of Section 3861. These requirements are included in Section 3862, Financial Instruments - Disclosure (&quot;Section 3862&quot;), which replaces Section 3861, and Section 1535, Capital Disclosures (&quot;Section 1535&quot;), which establishes standards for disclosing information about an entity's capital and how it is managed. Section 1535 requires disclosure of an entity's objectives, policies and processes for managing capital, quantitative data about what the entity regards as capital and whether the entity has complied with any capital requirements and, if it has not complied, the consequences of such non-compliance. This standard is effective for the Company for interim and annual consolidated financial statements b
eginning on January 1, 2008. Section 3862 requires disclosures, by class of financial instrument that enables users to evaluate the significance of financial instruments for an entity's financial position and performance, including disclosures about fair value. In addition, disclosure is required of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk. The quantitative disclosures must also include a sensitivity analysis for each type of market risk to which an entity is exposed, showing how net income and other comprehensive income would have been affected by reasonably possible changes in the relevant risk variable. This standard is effective for the Company for interim and annual consolidated financial statements beginning on January 1, 2008. The Company is currently assessing the impact that CICA Section 3862 and Section 1535 will have on the consolidated financial sta
tements. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:28.4px; font-family:Times" align=justify>(ii)</P>
<P style="margin:0px; padding-left:28.4px; text-indent:28.333px; font-family:Times" align=justify>&nbsp;Financial instruments presentation:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>In October 2006, the AcSB approved Section 3863, Financial Instruments - Presentation (&quot;Section 3863&quot;), which replaces Section 3861. The existing requirements on presentation of financial instruments have been carried forward unchanged to Section 3863. This standard is effective for the Company for interim and annual consolidated financial statements beginning on January 1, 2008 and is expected to have no impact on the Company's consolidated financial statements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>13</P>
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<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
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<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Summary of Significant Accounting Policies (continued)</B></P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:28.4px; font-family:Times" align=justify>(iii)</P>
<P style="margin:0px; padding-left:28.4px; text-indent:28.333px; font-family:Times" align=justify>&nbsp;Inventories:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>In May 2007, the AcSB issued Section 3031, Inventories, which supersedes existing guidance on inventories in Section 3030, Inventories. This standard introduces significant changes to the measurement and disclosure of inventories, including the requirement to measure inventories at the lower of cost and net realizable value, the allocation of overhead based on normal capacity, the use of the specific cost method for inventories that are not ordinarily interchangeable or goods and services produced for specific purposes, and the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories. Inventory policies, carrying amounts, amounts recognized as an expense, write-downs and the reversals of write-downs are required to be disclosed. This standard is effective for the Company for interim and annual consolidated financial statements beginning on January 1, 2008. The Company is
 currently assessing the impact that this section will have on its financial position and results of operations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:28.4px; font-family:Times" align=justify>(iv)</P>
<P style="margin:0px; padding-left:28.4px; text-indent:28.333px; font-family:Times" align=justify>&nbsp;General standards of financial statement presentation:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>In May 2007, the AcSB amended Section 1400, General Standards of Financial Statement Presentation, to change the guidance related to management's responsibility to assess the ability of the entity to continue as a going concern. Management is required to make an assessment of an entity's ability to continue as a going concern and should take into account all available information about the future, which is at least, but is not limited to, 12 months from the balance sheet dates. Disclosure is required of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. These amendments are effective for the Company for interim and annual periods beginning on January 1, 2008.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times" align=justify>(v) &nbsp;&nbsp;&nbsp;Goodwill and intangible assets</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times" align=justify>In February 2008, the Canadian Institute of Chartered Accountants (&#147;CICA&#148;) issued Section 3064 Goodwill and intangible assets, replacing Section 3062, Goodwill and other intangible assets.&nbsp; The new Section will be applicable to financial statements relating to fiscal years beginning on or after October 1, 2008.&nbsp; Accordingly, the Company will adopt the new standards for its fiscal year beginning 1 January 2009.&nbsp; It establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises.&nbsp; Standards concerning goodwill are unchanged from the standards included in the previous Section 3062.&nbsp; The Company is currently evaluating the impact of the adoption of this new Section on its consolidated financial statements.</P>
<P style="margin:0px; text-indent:28.8px; font-family:Arial" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>14</P>
<P style="margin:0px" align=justify><BR></P>
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<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; text-indent: 26.933px; font-family: Times; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><b>1.</b></P>
<P style="margin:0px; padding-left:56.8px; font-family:Times" align=justify><B>Investments</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>On May 9, 2002, the Company participated in a private placement of the purchase of shares of Motapa Diamonds Inc. (&#147;Motapa&#148;) at &nbsp;a cost of $79. &nbsp;The shares of Motapa are listed on the TSX Venture Exchange in Canada. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>The adoption of CICA Handbook Sections 3855 and 1530, retrospectively from January 1, 2007, determines that the Company records its investments of in $20 in Motapa Diamonds Inc. and $2 in Old Mutual Plc as financial instruments &#147;available for sale&#148; and they are thus have been recorded at fair value. The adjustment to opening balance to recognize this was $31 and further unrealized losses of $88 in the twelve months ended December 31, 2007 are reported in the current period.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>The fair value of the investment in Motapa Diamonds Inc is $20 ($26 &#150; 2006) and the fair value of the shares held in Old Mutual Plc is $2 ($84- 2006). </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; text-indent: 26.933px; font-family: Times; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><b>2.</b></P>
<P style="margin:0px; padding-left:56.8px; font-family:Times" align=justify><B>Capital Assets</B></P>
<P style="font-family: Times; margin: 0px" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2007</B></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=180></TD><TD width=96></TD><TD width=96></TD><TD width=96></TD></TR>
<TR><TD valign=top width=180><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><U>Cost</U> <FONT style="font-size:8pt"><SUP>(1)</SUP></FONT></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px; font-family:Times" align=center>Accumulated</P>
<P style="margin:0px; font-family:Times" align=center><U>Amortization</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px; font-family:Times" align=center>Net</P>
<P style="margin:0px; font-family:Times" align=center><U>Book Value</U></P>
</TD></TR>
<TR><TD valign=top width=180><P>&nbsp;</P></TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Land &#150; plant sites</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>12</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>12</B></P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Plant and equipment</P>
</TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- producing <FONT style="font-size:8pt"><SUP>(2)</SUP></FONT></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>24</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>23</B></P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- non-producing <FONT style="font-size:8pt"><SUP>(3)</SUP></FONT> </P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>229</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>229</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Office equipment</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>887</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>838</B></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>49</B></P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Vehicles</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>387</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>258</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>129</B></P>
</TD></TR>
<TR><TD valign=top width=180><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1,539</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1,326</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>213</B></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px; text-indent:288px; font-family:Times; font-size:8pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; font-family:Times" align=center>&nbsp;&nbsp;</P>
<P style="font-family: Times; margin: 0px" align=center>&nbsp;2006</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=180></TD><TD width=96></TD><TD width=96></TD><TD width=96></TD></TR>
<TR><TD valign=top width=180><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><U>Cost</U> <FONT style="font-size:8pt"><SUP>(1)</SUP></FONT></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px; font-family:Times" align=center>Accumulated</P>
<P style="margin:0px; font-family:Times" align=center><U>Amortization</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=96><P style="margin:0px; font-family:Times" align=center>Net</P>
<P style="margin:0px; font-family:Times" align=center><U>Book Value</U></P>
</TD></TR>
<TR><TD valign=top width=180><P>&nbsp;</P></TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Land - plant sites</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>12</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>-</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>12</P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Plant and equipment</P>
</TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD><TD valign=top width=96><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- producing <FONT style="font-size:8pt"><SUP>(2)</SUP></FONT></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>25</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>24</P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- non-producing <FONT style="font-size:8pt"><SUP>(3)</SUP></FONT></P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>229</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>229</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Office equipment</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>868</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>823</P>
</TD><TD valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>45</P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0px; font-family:Times" align=justify>Vehicles</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>386</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>255</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>131</P>
</TD></TR>
<TR><TD valign=top width=180><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,520</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,308</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=96><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>212</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:75.6px; text-indent:-18.867px; font-family:Times; font-size:8pt" align=justify><SUP>(1)</SUP></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>Cost is comprised of the original cost of the asset, less write-downs, removal of cost for disposals and government grants.</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:75.6px; text-indent:-18.867px; font-family:Times; font-size:8pt" align=justify><SUP>(2)</SUP></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The producing plant and equipment relates to the Blanket operation.</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:75.6px; text-indent:-18.867px; font-family:Times; font-size:8pt" align=justify><SUP>(3)</SUP><FONT style="font-size:10pt"> </FONT></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The net book value of non-producing plant and equipment represents Zambian operations. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=right><BR></P>
<P style="margin:0px" align=right><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>15</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=right><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>3.</B></P>
<P style="margin:0px; text-indent:56.733px; font-family:Times" align=justify><B>Mineral Properties</B></P>
<P style="font-family: Times; margin: 0px" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2007</B></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=260.6></TD><TD width=79></TD><TD width=110></TD><TD width=94.467></TD></TR>
<TR><TD valign=top width=260.6><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000" valign=top width=79><P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-family:Times" align=center><U>Cost</U> <FONT style="font-size:8pt"><SUP>(1)</SUP></FONT></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=110><P style="margin:0px; font-family:Times" align=center>Accumulated</P>
<P style="margin:0px; font-family:Times" align=center><U>Amortization</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=center>Net <U>Book Value</U></P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>Producing:</P>
</TD><TD valign=top width=79><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Blanket, Zimbabwe - gold property </P>
</TD><TD valign=top width=79><P style="margin:0px; font-family:Times" align=right><B>4,951</B></P>
</TD><TD valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>2</B></P>
</TD><TD valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>4,949</B></P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>Non-producing - exploration:</P>
</TD><TD valign=top width=79><P>&nbsp;</P></TD><TD valign=top width=110><P>&nbsp;</P></TD><TD valign=top width=94.467><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Rooipoort , South Africa</P>
</TD><TD valign=top width=79><P style="margin:0px; font-family:Times" align=right><B>4,236</B></P>
</TD><TD valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>4,236</B></P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Nunavut, Canada <SUP>(2)</SUP></P>
</TD><TD valign=top width=79><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Goedgevonden, South Africa</P>
</TD><TD valign=top width=79><P style="margin:0px; font-family:Times" align=right><B>102</B></P>
</TD><TD valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>102</B></P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Nama, Zambia</P>
</TD><TD valign=top width=79><P style="margin:0px; font-family:Times" align=right><B>3,094</B></P>
</TD><TD valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>3,094</B></P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Mulonga, Zambia<SUP>(2)</SUP></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=79><P style="margin:0px; font-family:Times" align=right><B>1,044</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1,044</B></P>
</TD></TR>
<TR><TD valign=top width=260.6><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=79><P style="margin:0px; font-family:Times" align=right><B>13,427</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=110><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>2</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>13,425</B></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; margin: 0px" align=center>2006</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=260.6></TD><TD width=85></TD><TD width=94.533></TD><TD width=91.467></TD></TR>
<TR><TD valign=top width=260.6><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000" valign=top width=85><P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-family:Times" align=center><U>Cost</U> <FONT style="font-size:8pt"><SUP>(1)</SUP></FONT></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=94.533><P style="margin:0px; font-family:Times" align=center>Accumulated</P>
<P style="margin:0px; font-family:Times" align=center><U>Amortization</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=91.467><P style="margin:0px; font-family:Times" align=center>Net <U>Book Value</U></P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>Producing:</P>
</TD><TD valign=top width=85><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Blanket, Zimbabwe - gold property </P>
</TD><TD valign=top width=85><P style="margin:0px; font-family:Times" align=right>4,317</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2</P>
</TD><TD valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>4,315</P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>Non-producing - exploration:</P>
</TD><TD valign=top width=85><P>&nbsp;</P></TD><TD valign=top width=94.533><P>&nbsp;</P></TD><TD valign=top width=91.467><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Rooipoort , South Africa</P>
</TD><TD width=85><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>4,131</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>4,131</P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Nunavut, Canada</P>
</TD><TD valign=top width=85><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>750</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>750</P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Goedgevonden, South Africa</P>
</TD><TD valign=top width=85><P style="margin:0px; font-family:Times" align=right>79</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>79</P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Nama, Zambia</P>
</TD><TD valign=top width=85><P style="margin:0px; font-family:Times" align=right>624</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>624</P>
</TD></TR>
<TR><TD valign=top width=260.6><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;Mulonga, Zambia</P>
</TD><TD valign=top width=85><P style="margin:0px; font-family:Times" align=right>1,044</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,044</P>
</TD></TR>
<TR><TD valign=top width=260.6><P>&nbsp;</P></TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=85><P style="margin:0px; font-family:Times" align=right>10,945</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=91.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>10,943</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px; font-family:Times" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:61.8px; text-indent:-24px; font-family:Times; font-size:8pt" align=justify><SUP>(1)</SUP></P>
<P style="margin:0px; padding-left:61.8px; font-family:Times" align=justify>Cost is comprised of the original cost of the asset, less write-downs, removal of cost for disposals and government grants, and includes the capitalized value of the estimated asset retirement obligations.</P>
<P style="margin:0px; padding-left:37.8px; font-family:Times" align=center>&nbsp;</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:61.8px; text-indent:-24px; font-family:Times; font-size:8pt" align=justify><SUP>(2)</SUP></P>
<P style="margin:0px; padding-left:61.8px; font-family:Times" align=justify>The Company has entered into <A NAME="OLE_LINK9"></A><A NAME="OLE_LINK10"></A>strategic alliances with third parties on a Canadian property (Nunavut) and a Zambian property (Mulonga) valued at $0 ($750 &#150; 2006) and $1,044 ($1,044 &#150; 2006) respectively. &nbsp;The third parties may earn varying percentage interests in these properties by carrying out exploration work on the properties. <FONT style="font-family:Times New Roman">Due to a lack of recent exploration activity in the Canadian property strategic alliance the carrying value of $750 has been written off.</FONT> The Zambian strategic alliance partner, Motapa Diamonds Inc., has decided to terminate the strategic alliance agreement. The Company has applied for a retention licence over the properties. &nbsp;All interest in the strategic alliance will be transferred to the Company by Motapa Diamonds Inc.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:37.8px; font-family:Times">The recoverability of the carrying amount of the South African and Zambian mineral properties 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. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>16</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>4.</B></P>
<P style="margin:0px; text-indent:66.2px; font-family:Times" align=justify><B>Asset Retirement Obligation</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=287.133></TD><TD width=103.933></TD><TD width=118.333></TD></TR>
<TR><TD valign=top width=287.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B><U>2007</U></B></P>
</TD><TD valign=top width=118.333><P style="margin:0px; font-family:Times" align=center><U>2006</U></P>
</TD></TR>
<TR><TD valign=top width=287.133><P>&nbsp;</P></TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>$</B></P>
</TD><TD valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>$</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times">Continuing operation </P>
</TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>811</B></P>
</TD><TD valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>750</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times">Accretion expense</P>
</TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>35</B></P>
</TD><TD valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>61</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times">Foreign exchange loss (gain)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>(114)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>-</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times">Closing balance &#150; continuing operations </P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>732</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>811</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times" align=justify>Opening balance </P>
</TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>364</B></P>
</TD><TD valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>377</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times" align=justify>Accretion expense</P>
</TD><TD valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>-</B></P>
</TD><TD valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>20</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times" align=justify>Foreign exchange loss (gain)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>(53)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>(33)</P>
</TD></TR>
<TR><TD valign=top width=287.133><P style="margin:0px; font-family:Times" align=justify>Closing balance &#150; held for sale</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=103.933><P style="margin:0px; font-family:Times" align=center><B>311</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=118.333><P style="margin:0px; font-family:Times" align=center>364</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>The asset retirement obligations relate to Blanket Mine $732 ($811 &#150; 2006), Barbrook Gold Mine $107 ($125 - 2006) and Eersteling Gold Mine $204 ($239 - 2006) and are estimates of costs of rehabilitation at the end of the mine life, increased annually for accretion expense at a rate of 5%. As both Barbrook and Eersteling Mines were on care and maintenance no accretion was made in 2007. The undiscounted obligation for the Blanket Mine is $1,499 ($1,160 - 2006).</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>5.</B></P>
<P style="margin:0px; text-indent:66.2px; font-family:Times" align=justify><B>Share Capital</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>(a) </P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>Authorized</P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>An unlimited number of common shares</P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>An unlimited number of preference shares.</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:65.8px; text-indent:-28px; font-family:Times" align=justify>(b)</P>
<P style="margin:0px; padding-left:65.8px; font-family:Times" align=justify>Issued</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=311.133></TD><TD width=132.267></TD><TD width=113.4></TD></TR>
<TR><TD valign=top width=311.133><P>&nbsp;</P></TD><TD valign=top width=132.267><P style="margin:0px; font-family:Times"><U>Number of Shares</U></P>
</TD><TD valign=top width=113.4><P style="margin:0px; padding-right:1.467px; text-indent:48.733px; font-family:Times" align=justify><U>Amount</U></P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; text-indent:0.733px; font-family:Times" align=justify>Common shares</P>
</TD><TD valign=top width=132.267><P>&nbsp;</P></TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Balance, December 31, 2004</P>
</TD><TD style="border-top:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>301,112,286</P>
</TD><TD style="border-top:2px solid #000000" valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>173,304</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Issued pursuant to private placements (i) &amp; (iii)</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>52,738,888</P>
</TD><TD valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>4,733</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Warrants exercised (ii)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>16,863,962</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>2,016</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Balance, December 31, 2005</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>370,715,136</P>
</TD><TD valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>180,053</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Issued pursuant to private placement (iii)</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>15,437,626</P>
</TD><TD valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>1,475</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Issued pursuant to a private placement (iv)</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>34,828,259</P>
</TD><TD valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>3,924</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Issued pursuant to acquisition &nbsp;(Note 14)</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>20,000,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>3,014</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Issued pursuant to a private placement (v)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>17,000,000</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>2,160</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times">Balance - December 31 , 2006</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>457,981,021</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right>190,626</P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times"><B>Warrants exercised (vi)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>29,888,259</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right><B>4,380</B></P>
</TD></TR>
<TR><TD valign=top width=311.133><P style="margin:0px; font-family:Times"><B>Balance - December 31 , 2007</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>487,869,280</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=113.4><P style="margin:0px; padding-left:20.4px; text-indent:8.4px; font-family:Times" align=right><B>195,006</B></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px; padding-left:66.2px; text-indent:-28.4px; font-family:Times; font-size:14pt" align=justify><B>&nbsp;</B></P>
<P style="margin:0px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>(i) &nbsp;&nbsp;&nbsp;In June 2005, Caledonia successfully listed on the London Stock Exchange&#146;s Alternative Investment Market (&#147;AIM&#148;) and placed a small float of shares into the AIM market in conjunction with a financing. &nbsp;The </P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>financing on AIM raised a gross amount $3,534 from the issuance of 34,888,888 units consisting of one common share priced at $0.10. &nbsp;Commissions and expenses paid amounted to $508 and have been charged to share capital in 2005.</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>17</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; border-top:2px solid #000000" align=right>&nbsp;<FONT style="font-size:14pt"><B>Caledonia Mining Corporation</B></FONT></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>(ii) &nbsp;&nbsp;In September 2005, the warrants previously issued in 2004 were re-priced to $0.11 with the date of expiry extended to October 31, 2005. &nbsp;As at that date, 16,863,962 warrants were exercised for gross proceeds of $1,855 while the remaining expired (see 5 (d) below). &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>&nbsp;(iii) &nbsp;During December 2005, the Company commenced a private placement to raise $3,496. &nbsp;As at December 31, 2005, the first closing raised gross proceeds of $1,875 comprising 17,850,000 units. The balance of the offering was received by February 2006 upon completion of the second to fourth closings (see Note 14 below). &nbsp;A total of 33,287,626 units priced at $0.105 were subscribed for all closings. Each unit consisted of one common share and one common share purchase warrant. &nbsp;The common share purchase warrants are exercisable for one common share at $0.20 per whole warrant for a period of 24 months from the date of issuance. &nbsp;</P>
<P style="margin:0px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>The private placement agents were paid a commission of 9% of the gross proceeds raised. Cash commissions paid on the first closing amounted to $168 and has been charged to share capital in 2005.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:normal; margin:0px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>(iv) &nbsp;In April 2006 the company commenced a private placement to raise additional funds<FONT style="font-size:11pt">. </FONT>This placement raised $3,924 after expenses from the sale of 34,828,259 units. &nbsp;Each unit consists of one common share and one share purchase warrant.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>(v) &nbsp;&nbsp;In July 2006 the company completed a private placement to raise additional funds. This placement of 17,000,000 units, each consisting of one common share and one share purchase warrant, was completed in July 2006 and raised $2,160 after expenses.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:66.2px; text-indent:-28.4px; font-family:Times" align=justify>(vi)</P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>In April and May 2007 shareholders holding 29,888,259 warrants at $0.15 each exercised the warrants raising $4,380 after expenses.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:37.8px; font-family:Times" align=justify>&nbsp;(c) </P>
<P style="margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times" align=justify>Stock Option Plans and Stock-Based Compensation</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The Company has established incentive stock option plans (the &quot;Plans&quot;) for employees, officers, directors, consultants and other service providers. Under the current plan the maximum term of the options is 5 years. &nbsp;Under the Plans, as at December 31, 2007, the Company has the following options outstanding:</P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=136.533></TD><TD width=113.4></TD><TD width=145></TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; font-family:Times" align=right><U>Number of Options</U></P>
</TD><TD valign=top width=113.4><P style="margin:0px; font-family:Times" align=right><U>Exercise Price</U></P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><U>Expiry Date</U></P>
</TD></TR>
<TR><TD valign=top width=136.533><P>&nbsp;</P></TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=145><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>803,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>&nbsp;&nbsp;0.330</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>February 9, 2008</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>9,950,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>&nbsp;&nbsp;0.235</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>April 24, 2012</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>225,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>&nbsp;&nbsp;0.345</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>June 2, 2012</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>610,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>&nbsp;&nbsp;0.260</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>April 29, 2014</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>200,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>&nbsp;&nbsp;0.260</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>August 15, 2014</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>4,000,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>&nbsp;&nbsp;0.110</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>February 15, 2015</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,000,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>&nbsp;0.140</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>July 10, 2010</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>300,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>0.125</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>May 11,2016</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>200,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>0.110</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>January 23, 2017</P>
</TD></TR>
<TR><TD valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,100,000</P>
</TD><TD valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>0.1125</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>May 31, 2012</P>
</TD></TR>
<TR><TD style="border-bottom:1px solid #000000" valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>200,000</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>0.1125</P>
</TD><TD valign=top width=145><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>May 31, 2012</P>
</TD></TR>
<TR><TD style="border-bottom:2px solid #000000" valign=top width=136.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>18,588,000</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=113.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>0.198</P>
</TD><TD valign=top width=145><P>&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>18</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="line-height:14pt; margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The continuity of the options granted, exercised, cancelled and expired under the Plans during 2007, 2006 and 2005 are as follows:</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=255.2></TD><TD width=122.8></TD><TD width=179.6></TD></TR>
<TR><TD valign=top width=255.2><P>&nbsp;</P></TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=center><U>Number of Options</U></P>
</TD><TD valign=top width=179.6><P style="margin:0px; font-family:Times"><U>Weighted Avg. Exercise Price</U></P>
</TD></TR>
<TR><TD valign=top width=255.2><P>&nbsp;</P></TD><TD valign=top width=122.8><P>&nbsp;</P></TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>$</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Options outstanding at December 31, 2004</P>
</TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=right>13,108,700</P>
</TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>0.26</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Granted</P>
</TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=right>5,000,000</P>
</TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>0.12</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Forfeited or expired</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=122.8><P style="margin:0px; font-family:Times" align=right>(1,210,700)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>(0.43)</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Options outstanding at December 31, 2005</P>
</TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=right>16,898,000</P>
</TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>0.21</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Granted</P>
</TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=right>450,000</P>
</TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>0.13</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Forfeited or expired</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=122.8><P style="margin:0px; font-family:Times" align=right>(110,000)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>(0.27)</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Options outstanding at December 31, 2006</P>
</TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=right>17,238,000</P>
</TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center>0.21</P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Forfeited or expired</P>
</TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=right><B>(150,000)</B></P>
</TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B>(0.115)</B></P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Granted</P>
</TD><TD valign=top width=122.8><P style="margin:0px; font-family:Times" align=right><B>200,000</B></P>
</TD><TD valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B>0.11</B></P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Granted</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=122.8><P style="margin:0px; font-family:Times" align=right><B>1,300,000</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B>0.1125</B></P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Options outstanding at December 31, 2007</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=122.8><P style="margin:0px; font-family:Times" align=right><B>18,588,000</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B>0.198</B></P>
</TD></TR>
<TR><TD valign=top width=255.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Options exercisable at December 31, 2007</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=122.8><P style="margin:0px; font-family:Times" align=right><B>17,721,333</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=179.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B>0.20</B></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:36px; font-family:Times" align=center>&nbsp;&nbsp;&nbsp;The weighted average remaining contractual life of the outstanding options is 5.8 years (2006 - 6.8 years)</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The options to purchase common shares noted above, have been granted to directors, officers, employees and service providers at exercise prices determined by reference to the market value of the common shares on the date of grant. &nbsp;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, 2007 there are 30,198,928 stock options available to grant.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>During 2007, stock option expense of $61 for the grant of 1,500,000 options was charged to expense and credited to contributed surplus (2006 - $81 for 450,000; 2005 - $283 for 5,000,000). The weighted average grant date fair value of options was $84 (2006 - $81, 2005 - $283).</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The fair value of compensation expenses noted above was estimated using the Black-Scholes Option Pricing Model with the following assumptions for the periods ended December 31, 2007, 2006 and 2005.</P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=177></TD><TD width=67.733></TD><TD width=65.533></TD><TD width=63.333></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=177><P>&nbsp;</P></TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=67.733><P style="margin:0px; font-family:Times" align=center><B>2007</B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.533><P style="margin:0px; font-family:Times" align=center>2006</P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=63.333><P style="margin:0px; font-family:Times" align=center>2005</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=177><P style="margin:0px; font-family:Times">Risk-free interest rate</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=67.733><P style="margin:0px; font-family:Times" align=center><B>3 &#150; 4%</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.533><P style="margin:0px; font-family:Times" align=center>3 - 4%</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=63.333><P style="margin:0px; font-family:Times" align=center>2.25%</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=177><P style="margin:0px; font-family:Times">Expected dividend yield</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=67.733><P style="margin:0px; font-family:Times" align=center><B>Nil</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.533><P style="margin:0px; font-family:Times" align=center>Nil</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=63.333><P style="margin:0px; font-family:Times" align=center>nil</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=177><P style="margin:0px; font-family:Times">Expected stock price volatility</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=67.733><P style="margin:0px; font-family:Times" align=center><B>60 &#150; 65%</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.533><P style="margin:0px; font-family:Times" align=center>70 &#150; 78%</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=63.333><P style="margin:0px; font-family:Times" align=center>73-100%</P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=177><P style="margin:0px; font-family:Times">Expected option life in years</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=67.733><P style="margin:0px; font-family:Times" align=center><B>3 &#150; 5</B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.533><P style="margin:0px; font-family:Times" align=center>3 &#150; 5</P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=63.333><P style="margin:0px; font-family:Times" align=center>2-3</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>Option pricing models require the input of highly subjective assumptions including the expected price volatility. &nbsp;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 Company&#146;s stock options.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>19</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:37.8px; font-family:Times" align=justify>(d)</P>
<P style="margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times" align=justify>Warrants &nbsp;</P>
<P style="line-height:8pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The Company has issued the following common share purchase warrants pursuant to private placements which are outstanding as of December 31, 2007:</P>
<P style="line-height:8pt; margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=141.733></TD><TD width=122.867></TD><TD width=102.2></TD><TD width=134></TD></TR>
<TR><TD valign=top width=141.733><P style="margin:0px; font-family:Times" align=justify><U>Number of Warrants</U></P>
</TD><TD valign=top width=122.867><P style="margin:0px; font-family:Times" align=justify><U>Shares for Warrants</U></P>
</TD><TD valign=top width=102.2><P style="margin:0px; font-family:Times" align=center><U>Exercise Price</U></P>
</TD><TD valign=top width=134><P style="margin:0px; font-family:Times" align=justify><U>Expiry Date</U></P>
</TD></TR>
<TR><TD valign=top width=141.733><P style="margin:0px; font-family:Times" align=center>15,437,626</P>
</TD><TD valign=top width=122.867><P style="margin:0px; font-family:Times" align=center>1 for 1</P>
</TD><TD valign=top width=102.2><P style="margin:0px; font-family:Times" align=center>$0.20 </P>
</TD><TD valign=top width=134><P style="margin:0px; font-family:Times">Various to February 3, &nbsp;2008</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify>The detail of the warrants issued is detailed below.</P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=74.4></TD><TD width=199.6></TD><TD width=113.4></TD><TD width=160.667></TD></TR>
<TR><TD style="border-bottom:1px solid #000000" valign=bottom width=74.4><P style="margin:0px" align=right><B>Number</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=bottom width=199.6><P style="margin:0px"><B>&nbsp;Description</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=bottom width=113.4><P style="margin:0px" align=center><B>&nbsp;Exercise Price </B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=bottom width=160.667><P style="margin:0px" align=center><B>Expiry</B></P>
</TD></TR>
<TR><TD width=74.4><P>&nbsp;</P></TD><TD width=199.6><P>&nbsp;</P></TD><TD width=113.4><P style="margin:0px" align=center>$</P>
</TD><TD width=160.667><P>&nbsp;</P></TD></TR>
<TR><TD width=74.4><P style="margin:0px" align=right>10,000,000 </P>
</TD><TD width=199.6><P style="margin:0px">Common share purchase warrants </P>
</TD><TD width=113.4><P style="margin:0px" align=center>0.20 </P>
</TD><TD width=160.667><P style="margin:0px">Until January 31, 2008 </P>
</TD></TR>
<TR><TD width=74.4><P style="margin:0px" align=right>2,715,476 </P>
</TD><TD width=199.6><P style="margin:0px">Common share purchase warrants </P>
</TD><TD width=113.4><P style="margin:0px" align=center>0.20 </P>
</TD><TD width=160.667><P style="margin:0px">Until February 2, 2008 </P>
</TD></TR>
<TR><TD width=74.4><P style="margin:0px" align=right>2,722,150 </P>
</TD><TD width=199.6><P style="margin:0px">Common share purchase warrants </P>
</TD><TD width=113.4><P style="margin:0px" align=center>0.20 </P>
</TD><TD width=160.667><P style="margin:0px">Until February 3, 2008 </P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:1.35pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify>The continuity of warrants issued and outstanding is as follows:</P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=226.8></TD><TD width=132.267></TD></TR>
<TR><TD valign=top width=226.8><P>&nbsp;</P></TD><TD valign=top width=132.267><P style="margin:0px; font-family:Times" align=center><U>Number of Warrants</U></P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify>Outstanding December 31, 2004</P>
</TD><TD style="border-top:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>39,232,909</P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify>Exercised</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(16,863,962)</P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify>Expired</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(22,368,947)</P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify>Issued pursuant to private placements</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>17,850,000</P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify>Outstanding December 31, 2005</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>17,850,000</P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify>Issued pursuant to private placements</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>67,265,885</P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify>Outstanding December 31, 2006</P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>85,115,885</P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify><B>Exercised</B></P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(29,888,259)</B></P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify><B>Expired</B></P>
</TD><TD valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(39,790,000)</B></P>
</TD></TR>
<TR><TD valign=top width=226.8><P style="margin:0px; font-family:Times" align=justify><B>Outstanding December 31, 2007</B></P>
</TD><TD style="border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=132.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>15,437,626</B></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>20</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-top:4px; text-indent:28.8px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>6. </B></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify><B>Income Taxes</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The following table reconciles the expected income tax recovery at the Canadian statutory income tax rate to the amounts recognized in the consolidated statements of operations for continuing operations:</P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=302.4></TD><TD width=75.6></TD><TD width=56.733></TD><TD width=66.133></TD></TR>
<TR><TD valign=top width=302.4><P>&nbsp;</P></TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>2007</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>2006</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>2005</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Income tax rate</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>36.12%</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>36.12%</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>36.12%</P>
</TD></TR>
<TR><TD valign=top width=302.4><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Income taxes (recovery) at statutory rate</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>(1,409)</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>1,072</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>(1,354)</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Tax rate difference</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>541</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>(167)</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>67</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Foreign currency difference</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>926</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>(28)</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>246</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Permanent differences</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>36</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>170</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>50</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Interest at special rates subject to withholding tax</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>5</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Losses expired</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>216</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>3,681</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Change in tax rate</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>1,153</B></P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>847</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Change in Valuation allowance</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>(1,463)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>(1,242)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>(2,690)</P>
</TD></TR>
<TR><TD valign=top width=302.4><P style="margin:0px; font-family:Times" align=justify>Current income tax </P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>5</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>652</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=66.133><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:66.2px; font-family:Times" align=justify>The following table reflects future income tax assets and liabilities</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=207.933></TD><TD width=94.467></TD><TD width=101.467></TD><TD width=97></TD></TR>
<TR><TD valign=top width=207.933><P>&nbsp;</P></TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>2007</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>2006</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=97><P style="margin:0px; font-family:Times" align=right>2005</P>
</TD></TR>
<TR><TD valign=top width=207.933><P>&nbsp;</P></TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=97><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=207.933><P style="margin:0px; font-family:Times" align=justify>Loss carry forwards</P>
</TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>10,181</B></P>
</TD><TD valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>10,009</P>
</TD><TD valign=top width=97><P style="margin:0px; font-family:Times" align=right>10,066</P>
</TD></TR>
<TR><TD valign=top width=207.933><P style="margin:0px; font-family:Times" align=justify>Unrealized foreign exchange</P>
</TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>(2,956)</B></P>
</TD><TD valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>(857)</P>
</TD><TD valign=top width=97><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=207.933><P style="margin:0px; font-family:Times" align=justify>Site reclamation costs</P>
</TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>137</B></P>
</TD><TD valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=97><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=207.933><P style="margin:0px; font-family:Times" align=justify>Other</P>
</TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>2</B></P>
</TD><TD valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=97><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=207.933><P style="margin:0px; font-family:Times" align=justify>Capital assets</P>
</TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>(3)</B></P>
</TD><TD valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>(328)</P>
</TD><TD valign=top width=97><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=207.933><P style="margin:0px; font-family:Times" align=justify>Valuation allowance</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>(7,361)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>(8,824)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=97><P style="margin:0px; font-family:Times" align=right>(10,066)</P>
</TD></TR>
<TR><TD valign=top width=207.933><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=101.467><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=97><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66px; text-indent:0.2px; font-family:Times" align=justify>The company has available tax losses for income tax purposes of approximately $32,830 (2006 - $30,598 and 2005 - $28,085) which may be carried forward to reduce taxable income derived in future years.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>The expiry of these losses is as follows:</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=94.467></TD><TD width=104></TD></TR>
<TR><TD style="border-bottom:1.333px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=right><B>Year</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104><P style="margin:0px; font-family:Times" align=right><B>Amount</B></P>
</TD></TR>
<TR><TD valign=top width=94.467><P>&nbsp;</P></TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2027</P>
</TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>2,391</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2026</P>
</TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>1,580</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2015</P>
</TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>1,863</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2014</P>
</TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>1,583</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2010</P>
</TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>18,984</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2009</P>
</TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>3,611</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2008</P>
</TD><TD valign=top width=104><P style="margin:0px; font-family:Times" align=right>142</P>
</TD></TR>
<TR><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>No expiry</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=104><P style="margin:0px; font-family:Times" align=right>2,676</P>
</TD></TR>
<TR><TD valign=top width=94.467><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=104><P style="margin:0px; font-family:Times" align=right>32,830</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>&nbsp;&nbsp;</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>21</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-bottom:4px; text-indent:28.8px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>A valuation allowance has been provided as the potential income tax benefits of these carry-forward non-capital losses and deductible temporary differences and the realization thereof is not considered more likely than not.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:66.2px; font-family:Times" align=justify>The Company also has approximately $70,713 in capital losses which can be applied to reduce future capital gains. &nbsp;The right to claim these capital losses is carried forward indefinitely but can only be claimed against capital gains. The Company also has the following expenses which are available to be applied against future income for income tax purposes:</P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=292.933></TD><TD width=94.533></TD></TR>
<TR><TD valign=top width=292.933><P style="margin:0px; font-family:Times" align=justify>Canadian exploration and development expenses</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>7,560</P>
</TD></TR>
<TR><TD valign=top width=292.933><P style="margin:0px; font-family:Times" align=justify>Foreign exploration and development expenses</P>
</TD><TD valign=top width=94.533><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>4,445</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; font-family: Times; margin-top: 0px; margin-bottom: 0px; padding-left: 66.2px" align=justify>For discontinued operations, the company&#146;s effective tax rate, which differs from the Canadian statutory
income tax rate, may be reconciled as follows: </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=246.467></TD><TD width=94.533></TD><TD width=94.467></TD><TD width=74.733></TD></TR>
<TR><TD valign=top width=246.467><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=94.533><P style="margin:0px; font-family:Times" align=right><B>2007</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2006</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=74.733><P style="margin:0px; font-family:Times" align=right>2005</P>
</TD></TR>
<TR><TD valign=top width=246.467><P>&nbsp;</P></TD><TD valign=top width=94.533><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=74.733><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=246.467><P style="margin:0px; font-family:Times" align=justify>Basic rate applied to pre-tax loss</P>
</TD><TD valign=top width=94.533><P style="margin:0px; font-family:Times" align=right><B>(256)</B></P>
</TD><TD valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>(2,886)</P>
</TD><TD valign=top width=74.733><P style="margin:0px; font-family:Times" align=right>(2,143</P>
</TD></TR>
<TR><TD valign=top width=246.467><P style="margin:0px; font-family:Times" align=justify>Losses and other benefits not recognised</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=94.533><P style="margin:0px; font-family:Times" align=right><B>256</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>2,886</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=74.733><P style="margin:0px; font-family:Times" align=right>2,143</P>
</TD></TR>
<TR><TD valign=top width=246.467><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=94.533><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=94.467><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:1px solid #000000" valign=top width=74.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>7.</B></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify><B>Net Income/(Loss) Per Share</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The net income/(loss) per share figures have been calculated using the weighted average number of common shares outstanding during the respective fiscal years which amounted to 477,930,290 (2006 -423,838,628; 2005 &#150; 313,565,142;). &nbsp;Fully diluted income/(loss) per share has also been calculated only for 2006 as the group achieved a profit before discontinued operations. Fully diluted income/(loss) per share have not been calculated for 2007 or 2005 as it would be anti-dilutive. &nbsp;&nbsp;The fully diluted number of shares amounts to 478,553,886 (2006 - 425,984,395 and 2005 &#150; 314,022,657). </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>8.</B></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify><B>Other Expense (Income) before discontinued operations</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times" align=justify>Other expense (income) is comprised of the following:</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=263></TD><TD width=94.6></TD><TD width=94.4></TD><TD width=94.4></TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B><U>2007</U></B></P>
</TD><TD valign=top width=94.4><P style="margin:0px; font-family:Times" align=right><U>2006</U></P>
</TD><TD valign=top width=94.4><P style="margin:0px; font-family:Times" align=right><U>2005</U></P>
</TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Investment income</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(55)</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Other</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(17)</B></P>
</TD><TD valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(27)</P>
</TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(17)</B></P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=94.4><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(82)</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>22</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; text-indent:28.8px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-left:75.6px; text-indent:357.867px; font-family:Times" align=right><B>&nbsp;December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px; padding-bottom:4px; border-bottom:1.333px solid #000000" align=right><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; text-indent: 26.933px; font-family: Times; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>9.</B></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify><B>Statement of Cash Flows</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times" align=justify>Items not involving cash are as follows:</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=293></TD><TD width=66.133></TD><TD width=93.267></TD><TD width=93.267></TD></TR>
<TR><TD valign=top width=293><P>&nbsp;</P></TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B><U>2007</U></B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right><U>2006</U></P>
</TD><A NAME="OLE_LINK6"></A><A NAME="OLE_LINK7"></A><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right><U>2005</U></P>
</TD></TR>
<TR><TD valign=top width=293><P>&nbsp;</P></TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=293><P style="margin:0px; font-family:Times" align=justify>Amortization</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B>18</B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right>40</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>27</P>
</TD></TR>
<TR><TD valign=top width=293><P style="margin:0px; font-family:Times" align=justify>Rehabilitation accretion </P>
</TD><TD valign=top width=66.133><P style="margin:0px; text-indent:20.333px; font-family:Times" align=right><B>35</B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:20.333px; font-family:Times" align=right>81</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>22</P>
</TD></TR>
<TR><TD valign=top width=293><P style="margin:0px; font-family:Times" align=justify>Stock compensation &nbsp;expense</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B>51</B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right>66</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>283</P>
</TD></TR>
<TR><TD valign=top width=293><P style="margin:0px; font-family:Times" align=justify>Blanket long term liability</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right>(35)</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=293><P style="margin:0px; font-family:Times" align=justify>Write down of mineral properties (Note 3)</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B>750</B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=293><P style="margin:0px; font-family:Times" align=justify>Other</P>
</TD><TD valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B>(169)</B></P>
</TD><TD valign=top width=93.267><P style="margin:0px; font-family:Times" align=right>35</P>
</TD><TD valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(68)</P>
</TD></TR>
<TR><TD valign=top width=293><P>&nbsp;</P></TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=66.133><P style="margin:0px; font-family:Times" align=right><B>685</B></P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=93.267><P style="margin:0px; font-family:Times" align=right>187</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=93.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>264</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify>The net changes in non-cash working capital balances for operations are as follows:</P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=263></TD><TD width=94.6></TD><TD width=94.8></TD><TD width=94.8></TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B><U>2007</U></B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; font-family:Times" align=right><U>2006</U></P>
</TD><TD valign=top width=94.8><P style="margin:0px; font-family:Times" align=right><U>2005</U></P>
</TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Accounts payable</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(1,610)</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,400</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>662</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Accounts receivable</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(657)</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,200</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>150</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Inventories</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>3,653</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(3,263)</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Prepaid expenses</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>44</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>334</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(159)</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Assets held for sale</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>104</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(315)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>1,534</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(644)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>653</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="line-height:1.35pt; margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify>Supplemental cash flow Information:</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=263></TD><TD width=94.6></TD><TD width=94.8></TD><TD width=94.8></TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B><U>2007</U></B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; font-family:Times" align=right><U>2006</U></P>
</TD><TD valign=top width=94.8><P style="margin:0px; font-family:Times" align=right><U>2005</U></P>
</TD></TR>
<TR><TD valign=top width=263><P>&nbsp;</P></TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Interest paid </P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>454</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>54</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Tax paid </P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>237</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Withholding tax paid on interest in Zimbabwe</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>5</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=263><P style="margin:0px; font-family:Times" align=justify>Blanket Acquisition (Note 14)</P>
</TD><TD valign=top width=94.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>3,009</P>
</TD><TD valign=top width=94.8><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:1.467px; text-indent:26.933px; font-family:Times" align=justify><B>10.</B></P>
<P style="margin:0px; padding-left:1.467px; text-indent:74.133px; font-family:Times" align=justify><B>Related Party Transactions</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times" align=justify>The Company had the following related party transactions: &nbsp;&nbsp;</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=406.4></TD><TD width=47.2></TD><TD width=47.267></TD><TD width=47.267></TD></TR>
<TR><TD valign=top width=406.4><P>&nbsp;</P></TD><TD valign=top width=47.2><P style="margin:0px; font-family:Times" align=center><B><U>2007</U></B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=center><U>2006</U></P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=center><U>2005</U></P>
</TD></TR>
<TR><TD valign=top width=406.4><P>&nbsp;</P></TD><TD valign=top width=47.2><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=406.4><P style="margin:0px; font-family:Times" align=justify>Management, and allowances paid or accrued to a company which provides the services of the &nbsp;Company&#146;s President<FONT style="font-size:8pt"><SUP>(1)</SUP></FONT></P>
</TD><TD valign=top width=47.2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right><B>560</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>534</P>
</TD><TD valign=top width=47.267><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>441</P>
</TD></TR>
<TR><TD valign=top width=406.4><P style="margin:0px; font-family:Times" align=justify>Consulting fees and reimbursement of travel expenses to the Chairman of the Board </P>
</TD><TD valign=top width=47.2><P style="margin:0px; font-family:Times" align=right><B>46</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>44</P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:10.933px; font-family:Times" align=right>275</P>
</TD></TR>
<TR><TD valign=top width=406.4><P style="margin:0px; font-family:Times" align=justify>Rent paid to a company owned by members of the President&#146;s family</P>
</TD><TD valign=top width=47.2><P style="margin:0px; font-family:Times" align=right><B>46</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>47</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>37</P>
</TD></TR>
<TR><TD valign=top width=406.4><P style="margin:0px; font-family:Times" align=justify>Legal fees paid to a Director of the Company</P>
</TD><TD valign=top width=47.2><P style="margin:0px; font-family:Times" align=right><B>85</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>42</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>17</P>
</TD></TR>
<TR><TD valign=top width=406.4><P style="margin:0px; font-family:Times" align=justify>Consulting fees paid to &nbsp;Directors of the Company</P>
</TD><TD valign=top width=47.2><P style="margin:0px; font-family:Times" align=right><B>19</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>27</P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:10.933px; font-family:Times" align=right>-</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:75.6px; font-family:Times; font-size:8pt" align=justify>(1)</P>
<P style="margin:0px; padding-left:75.6px; text-indent:20.4px; font-family:Times" align=justify>This includes back pay for 2006 amounting to $43 paid to a company that provides the services of the Company&#146;s President</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>23</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-left:28.4px; padding-bottom:4px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=center><BR>
These related party transactions were in the normal course of operations and are recorded at the exchange amount. &nbsp;The Company has the following related party balances:</P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=378></TD><TD width=75.6></TD><TD width=47.267></TD><TD width=47.267></TD></TR>
<TR><TD valign=top width=378><P>&nbsp;</P></TD><TD width=75.6><P style="margin:0px; font-family:Times" align=right><B><U>2007</U></B></P>
</TD><TD width=47.267><P style="margin:0px; font-family:Times" align=center><U>2006</U></P>
</TD><TD width=47.267><P style="margin:0px; font-family:Times" align=center><U>2005</U></P>
</TD></TR>
<TR><TD valign=top width=378><P style="margin:0px; font-family:Times">Included in accounts payable</P>
</TD><TD valign=top width=75.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=378><P style="margin:0px; font-family:Times">- owing to a company that provides the services of the Corporation&#146;s President</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>&nbsp;70</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>&nbsp;-</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right><B>&nbsp;&nbsp;&nbsp;</B>&nbsp;-</P>
</TD></TR>
<TR><TD valign=top width=378><P style="margin:0px; font-family:Times">- owing to the Chairman of the Board for consulting fees and expenses</P>
</TD><TD valign=top width=75.6><P style="margin:0px; text-indent:10.867px; font-family:Times" align=right><B>137</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:10.867px; font-family:Times" align=right>129</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>85</P>
</TD></TR>
<TR><TD valign=top width=378><P style="margin:0px; font-family:Times">- owing to directors/officers for unpaid salaries, consulting &nbsp;and/or directors&#146; fees</P>
</TD><TD valign=top width=75.6><P style="margin:0px; text-indent:10.867px; font-family:Times" align=right><B>374</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:10.867px; font-family:Times" align=right>193</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>&nbsp;&nbsp;&nbsp;137</P>
</TD></TR>
<TR><TD valign=top width=378><P style="margin:0px; font-family:Times">- unsecured loan due to a shareholder <FONT style="font-size:8pt"><SUP>(1)</SUP></FONT></P>
</TD><TD valign=top width=75.6><P style="margin:0px; text-indent:10.867px; font-family:Times" align=right><B>580</B></P>
</TD><TD valign=top width=47.267><P style="margin:0px; text-indent:10.867px; font-family:Times" align=right>450</P>
</TD><TD valign=top width=47.267><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="line-height:10pt; margin:0px; text-indent:49.467px; font-family:Times; font-size:8pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:10pt; margin:0px; padding-left:94.533px; text-indent:-65.8px; font-family:Times; font-size:8pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<SUP>(1)</SUP> This refers to a short term loan received prior to the finalization of a private placement, subsequent to the year end in 2006 and 2007, of which this loan formed a part. The loan is unsecured and bears interest at prime plus 3%. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>11.</B></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify><B>Segmented Financial Information</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The Company has been engaged directly or through subsidiaries in the production of and the exploration for precious metals in various geographical locations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The Company&#146;s operating segments have been identified based on geographic areas as follows:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=right>For the year ended December 31, 2007</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=230.933></TD><TD width=75.267></TD><TD width=76.8></TD><TD width=68.533></TD><TD width=60.467></TD><TD width=54.933></TD></TR>
<TR><TD valign=top width=230.933><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000" valign=top width=75.267><P style="margin:0px; font-family:Times" align=center><B><U>Corporate</U></B></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=76.8><P style="margin:0px; font-family:Times" align=center><B><U>Zimbabwe</U></B></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=68.533><P style="margin:0px; font-family:Times" align=center><B><U>South Africa</U></B></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=60.467><P style="margin:0px; font-family:Times" align=center><B><U>Zambia</U></B></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=center><B><U>Total</U></B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P>&nbsp;</P></TD><TD valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=60.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Revenue from sales</P>
</TD><TD valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>5</B></P>
</TD><TD valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>10,034</B></P>
</TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=60.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>10,039</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Operating costs</P>
</TD><TD valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>(9,288)</B></P>
</TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>(457)</B></P>
</TD><TD valign=top width=60.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(9,745)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">General and administrative</P>
</TD><TD valign=top width=75.267><P style="margin:0px; font-family:Times" align=right><B>(1,697)</B></P>
</TD><TD valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>(151)</B></P>
</TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>(275)</B></P>
</TD><TD valign=top width=60.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(2,123)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Interest</P>
</TD><TD valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>5</B></P>
</TD><TD valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>(316)</B></P>
</TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>2</B></P>
</TD><TD valign=top width=60.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(309)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Amortization</P>
</TD><TD valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>(4)</B></P>
</TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>(14)</B></P>
</TD><TD valign=top width=60.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(18)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Write off of mineral property</P>
</TD><TD valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(750)</B></P>
</TD><TD valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=60.467><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(750)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Other income (expense) incl. foreign exchange gains/(loss)</P>
</TD><TD valign=bottom width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(6)</B></P>
</TD><TD valign=bottom width=76.8><P style="margin:0px; font-family:Times" align=right><B>(1,811)</B></P>
</TD><TD valign=bottom width=68.533><P style="margin:0px; font-family:Times" align=right><B>786</B></P>
</TD><TD valign=bottom width=60.467><P style="margin:0px; font-family:Times" align=right><B>36</B></P>
</TD><TD valign=bottom width=54.933><P style="margin:0px; font-family:Times" align=right><B>(995)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Income (loss) for continuing operations</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=75.267><P style="margin:0px; font-family:Times" align=right><B>(2,443)</B></P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>(1,536)</B></P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>42</B></P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=60.467><P style="margin:0px; font-family:Times" align=right><B>36</B></P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(3,901)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Discontinued operations (loss)</P>
</TD><TD valign=top width=75.267><P>&nbsp;</P></TD><TD valign=top width=76.8><P>&nbsp;</P></TD><TD valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>(709)</B></P>
</TD><TD valign=top width=60.467><P>&nbsp;</P></TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(709)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Income tax expense</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.267><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>(5)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.533><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=60.467><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(5)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Net income (loss) for the year</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.267><P style="margin:0px; font-family:Times" align=right><B>(2,443)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>(1,541)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>(667)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=60.467><P style="margin:0px; font-family:Times" align=right><B>36</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>(4,615)</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Identifiable assets &#150; continuing operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>106</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>9,257</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>4,415</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=60.467><P style="margin:0px; font-family:Times" align=right><B>4,124</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>17,902</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Identifiable assets &#150; discontinued operations Capital and Current assets</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>11,590</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=60.467><P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>11,590</B></P>
</TD></TR>
<TR><TD valign=top width=230.933><P style="margin:0px; text-indent:1.467px; font-family:Times">Expenditures on capital assets &amp; mineral properties continuing operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.267><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=76.8><P style="margin:0px; font-family:Times" align=right><B>616</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.533><P style="margin:0px; font-family:Times" align=right><B>164</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=60.467><P style="margin:0px; text-indent:20.333px; font-family:Times" align=right><B>2,470</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right><B>3,250</B></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=right><BR></P>
<P style="margin:0px" align=center><BR></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; padding-top:4px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-top:4px; border-top:2px solid #000000" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=center>24</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-left:28.4px; padding-bottom:4px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=right><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=right>For the year ended December 31, 2006</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=244.6></TD><TD width=69.333></TD><TD width=73.067></TD><TD width=68.267></TD><TD width=56.733></TD><TD width=54.933></TD></TR>
<TR><TD valign=top width=244.6><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=center><U>Corporate</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=center><U>Zimbabwe</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=center><U>South Africa</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=center><U>Zambia</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=center><U>Total</U></P>
</TD></TR>
<TR><TD valign=top width=244.6><P>&nbsp;</P></TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Revenue from sales</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>8</P>
</TD><TD valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>13,575</P>
</TD><TD valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>3</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>13,586</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Operating costs</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>(8,121)</P>
</TD><TD valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>(451)</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(8,572)</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">General and administrative</P>
</TD><TD valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>(1,787)</P>
</TD><TD valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>(100)</P>
</TD><TD valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>(209)</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(2,096)</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Interest</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>(54)</P>
</TD><TD valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(54)</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Amortization</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>(20)</P>
</TD><TD valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>(20)</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(40)</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Other income (expense) incl. foreign exchange gains/(loss)</P>
</TD><TD valign=bottom width=69.333><P style="margin:0px; font-family:Times" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(276)</P>
</TD><TD valign=bottom width=73.067><P style="margin:0px; font-family:Times" align=right>292</P>
</TD><TD valign=bottom width=68.267><P style="margin:0px; font-family:Times" align=right>128</P>
</TD><TD valign=bottom width=56.733><P style="margin:0px; font-family:Times" align=right>(1)</P>
</TD><TD valign=bottom width=54.933><P style="margin:0px; font-family:Times" align=right>143</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Income (loss) for continuing operations</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>(2,055)</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>5,572</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>(549)</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>(1)</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>2,967</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Discontinued operations (loss)</P>
</TD><TD valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>(7,990)</P>
</TD><TD valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(7,990)</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Income tax expense</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>(652)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(652)</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Net income (loss) for the year</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>(2,055)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>4,920</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>(8,539)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>(1)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(5,675)</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Identifiable assets &#150; continuing operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>965 </P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>12,544</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>4,521</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>1,662</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>19,692</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Identifiable assets &#150; discontinued operations Capital and Current assets</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>11,764</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>11,764</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Expenditures on capital assets &amp; mineral properties continuing operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>1,998</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>382</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; text-indent:20.333px; font-family:Times" align=right>277</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>2,657</P>
</TD></TR>
<TR><TD valign=top width=244.6><P style="margin:0px; text-indent:1.467px; font-family:Times">Expenditures on capital assets &amp; mineral properties &#150; discontinued operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=73.067><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=68.267><P style="margin:0px; font-family:Times" align=right>922</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; text-indent:20.333px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>922</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=center><BR></P>
<P style="margin:0px" align=center><BR></P>
<P style="font-family: Times; margin: 0px" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2005</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=324.8></TD><TD width=69.333></TD><TD width=61.133></TD><TD width=56.733></TD><TD width=54.933></TD></TR>
<TR><TD valign=top width=324.8><P>&nbsp;</P></TD><TD style="border-top:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=center><U>Corporate</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=center><U>South Africa</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=center><U>Zambia</U></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=center><U>Total</U></P>
</TD></TR>
<TR><TD valign=top width=324.8><P>&nbsp;</P></TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Revenue from sales</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>6</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>6</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Operating costs</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>(757)</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(757)</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">General and administrative</P>
</TD><TD valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>(3,001)</P>
</TD><TD valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(3,001)</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Interest</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>(1)</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(1)</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Amortization</P>
</TD><TD valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>(27)</P>
</TD><TD valign=top width=56.733><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(27)</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Other income (expense) incl. foreign exchange gains/(loss)</P>
</TD><TD valign=bottom width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>39</P>
</TD><TD valign=bottom width=61.133><P style="margin:0px; font-family:Times" align=right>(7)</P>
</TD><TD valign=bottom width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD valign=bottom width=54.933><P style="margin:0px; font-family:Times" align=right>32</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Income (loss) for continuing operations</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>(2,962)</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>(786)</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(3,748)</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Discontinued operations (loss)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>(5,932)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(5,932)</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Net income (loss) for the year</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; font-family:Times" align=right>(2,962)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>(6,718)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>(9,680)</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Identifiable assets &#150; continuing operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2,095</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>676</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>1,384</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>4,155</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Identifiable assets &#150; discontinued operations Capital and Current assets</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>18,183</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>18,183</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Expenditures on capital assets &amp; mineral properties continuing operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>1,690</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P style="margin:0px; font-family:Times" align=right>350</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>2,040</P>
</TD></TR>
<TR><TD valign=top width=324.8><P style="margin:0px; text-indent:1.467px; font-family:Times">Expenditures on capital assets &amp; mineral properties &#150; discontinued operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=69.333><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=61.133><P style="margin:0px; font-family:Times" align=right>3,244</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=56.733><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=54.933><P style="margin:0px; font-family:Times" align=right>3,244</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>25</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; text-indent:37.8px; font-family:Times" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:1.35pt; margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; padding-top:4px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-left:28.4px; padding-bottom:4px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; text-indent: 26.933px; font-family: Times; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>12.</B></P>
<P style="margin:0px; text-indent:75.6px" align=justify><B>Contingent Liability</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>In the Share Sale Agreement dated May 12, 2006 pursuant to which the Company purchased 100% of the shares of Blanket, the Company agreed that it would, as soon as reasonably practicable after the Closing of the Agreement, cause Blanket to implement a share incentive scheme considered by the Directors to be in the best interests of Blanket, pursuant to which a percentage of the shares of Blanket will be deposited in a Trust for the benefit of the management and employees of Blanket. &nbsp;As at December 31, 2007 no scheme had been established, nor were any shares of Blanket deposited in a Trust for the purposes of such a scheme. &nbsp;The Company and the Board of Directors of Blanket have delayed the establishment of the required scheme pending clarity of the anticipated Zimbabwe laws relating to the indigenization of the mining industry, as it is recognized that the Zimbabwean laws when passed, will likely have a material impact on t
he structure of the proposed scheme and the percentage of the issued shares of Blanket required to be put into trust for the purposes of the scheme.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; line-height: 14pt; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>13. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
<P style="font-family: Times; margin: 0px; padding-left: 75.6px" align=justify><B>Long Term Liability</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The long term liability refers to a provision for the Service Bonus Fund relating to employees at Blanket Mine in Zimbabwe. The fund was established in 1975 to provide a gratuity to permanent employees of Blanket Mine on cessation of employment at Blanket Mine for any reason apart from dismissal or resignation. The provision is built up by providing 15% of an employee&#146;s basic salary per year up to a maximum of Z$5,000,000. The maximum payout to any employee is Z$5,000,000 (five million Zimbabwe Dollars) in terms of the current rules.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>This fund represents a defined contribution future employee benefit fund for which the funds have not been segregated by the Company. The expense for the year, representing the required contributions in the year, was $2 ($13 &#150; 2006).</P>
<P style="margin:0px" align=justify><BR></P>
<P style="font-family: Times; line-height: 14pt; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>14.</B></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify><B>Acquisition of Blanket Mine</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>During 2006 Caledonia Mining Company through its wholly owned subsidiary Caledonia Holdings (Africa) Limited purchased 100% of the shares in Blanket (Barbados) Holdings Limited (&#147;Barbados&#148;) from Kinross Gold Corporation. &nbsp;&#147;Barbados&#148; owns 100% of the shares in Caledonia Holdings Zimbabwe Limited who owns 100% of the shares in Caledonia Mining Services (Private) Limited (dormant) and Blanket Mine (1983) (Private) Limited.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The effective date of the share sale agreement was April 1, 2006 but Caledonia Mining Corporation effectively only took control after payment of the purchase price and thus the Zimbabwe operations are consolidated into the results of Caledonia Mining Corporation from July 1, 2006. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The purchase price consideration was made up of $1,120 (US$1,000) in cash and by the issue of 20,000,000 shares in Caledonia Mining Corporation at an assigned value of $3,009. This resulted in an effective purchase consideration of $4,129.</P>
<P style="margin:0px" align=justify><BR></P>
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<P style="margin:0px; font-family:Times" align=center>26</P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
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<P style="line-height:14pt; margin:0px; padding-left:28.4px; padding-top:4px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-left:28.4px; padding-bottom:4px; font-family:Times; border-bottom:1.333px solid #000000" align=right><B>December 31, 2007, 2006 and 2005</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; text-indent:2.4px; font-family:Times" align=justify>The allocation of the purchase price is presented in the abridged balance sheet below:</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=304.333></TD><TD width=85.067></TD></TR>
<TR><TD valign=top width=304.333><P>&nbsp;</P></TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=304.333><P style="margin:0px; font-family:Times" align=justify>Current Assets</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>4,548</P>
</TD></TR>
<TR><TD valign=top width=304.333><P style="margin:0px; padding-right:83.267px; font-family:Times" align=justify>Capital Assets and Mineral Properties</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>&nbsp;&nbsp;2,519</P>
</TD></TR>
<TR><TD valign=top width=304.333><P style="margin:0px; font-family:Times" align=justify>Total Assets</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>&nbsp;&nbsp;7,067</P>
</TD></TR>
<TR><TD valign=top width=304.333><P>&nbsp;</P></TD><TD valign=top width=85.067><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=304.333><P style="margin:0px; font-family:Times" align=justify>Current Liabilities</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>(2,107)</P>
</TD></TR>
<TR><TD valign=top width=304.333><P style="margin:0px; font-family:Times" align=justify>Other Long Term Liabilities</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>&nbsp;&nbsp;(831)</P>
</TD></TR>
<TR><TD valign=top width=304.333><P style="margin:0px; font-family:Times" align=justify>Total Liabilities</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>(2,938)</P>
</TD></TR>
<TR><TD valign=top width=304.333><P>&nbsp;</P></TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=304.333><P style="margin:0px; font-family:Times" align=justify>Total Purchase Consideration</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=85.067><P style="margin:0px; font-family:Times" align=right>4,129</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px; padding-left:78px; font-family:Times" align=justify>There are no outstanding purchase price considerations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height: 14pt; font-family: Times; text-indent: 26.933px; margin-top: 0px; margin-bottom: -18.667px; padding-left: 1.467px" align=justify><B>15. </B></P>
<P style="margin:0px; text-indent:75.6px; font-family:Times" align=justify><B>Comparative Figures</B></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The prior period figures have been reclassified to conform to the current presentation.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:75.6px; text-indent:-47.2px" align=justify><B>16.</B></P>
<P style="margin:0px; padding-left:75.6px" align=justify><B>Subsequent Events</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>On February 21, 2008 the Company accepted an offer from Eastern Goldfields Inc. to acquire the entire issued share capital and shareholder loan accounts of Barbrook Mines Limited for approximately $9,100. The final sale of share agreement was signed by the parties on March 27, 2008.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>On March 3, 2008 the Company accepted an offer from a private Canadian company to acquire the entire issued share capital of Eersteling Gold Mining Company Limited for $3,810. The final sale of share agreement was signed by the parties on March 28, 2008.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>During January 2008 10,000,000 warrants expired and during February 5,437,626 warrants also expired.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>In February 2008 the company commenced a private placement to raise additional funds. This placement raised $1,119 after expenses from the sale of 12,300,000 units. &nbsp;Each unit consists of one common share and one share purchase warrant which are valid for 12 months at a price of $0.15 per warrant.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The President of the Republic of Zimbabwe brought the Indigenisation and Economic Empowerment Act into law through decree during March 2008. The law seeks to ensure that a majority stake (at least 51%) in all companies is held by Indigenous Zimbabweans. The acquisition of the 51% would be on a &#147;willing buyer willing seller&#148; basis. Additionally the Mines and Minerals Amendment Bill was presented before the closure of the last session of Parliament but not passed into law and has thus lapsed. The bill if enacted into law also seeks to ensure among other things that a majority stake is held in all mining companies by either indigenous Zimbabweans or the Government of Zimbabwe. This Bill however catered for the appropriation of approximately 25% of the Company. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; padding-right:4.133px; font-family:Times" align=justify>The company has signed four cobalt off-take agreements with large Chinese refiners which brings contractual commitments for the Nama Cobalt Project to a total of 51,560 tonnes (+/-10% at Nama&#146;s option) of cobalt metal equivalent for the period 2009 to 2013, and meets the full anticipated plant capacity currently being designed.</P>
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<P style="margin:0px; font-family:Times" align=center>27</P>
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<P style="line-height:14pt; margin:0px; padding-left:28.4px; padding-top:4px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-left:28.4px; text-indent:-47.2px; font-family:Times" align=right><B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007, 2006 and 2005</U></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>The Zambian government has announced the following proposed changes to their tax laws that will have a bearing on the Nama cobalt project if passed into law. The key&nbsp;changes are:</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 75.6px">&#183;</P>
<P style="font-family: Times; margin-top: 0px; margin-bottom: 5.533px; padding-left: 96px">Increase in mineral royalty from 0.6% to 3%</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 75.6px">&#183;</P>
<P style="font-family: Times; margin-top: 0px; margin-bottom: 5.533px; padding-left: 96px">Increase in profit tax rate from 25% to 30%</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 75.6px">&#183;</P>
<P style="font-family: Times; margin-top: 0px; margin-bottom: 5.533px; padding-left: 96px">Introduction of variable profits tax of 15% for net profits above 8%</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 75.6px">&#183;</P>
<P style="font-family: Times; margin-top: 0px; margin-bottom: 5.533px; padding-left: 96px">Introduction of a windfall profit tax for copper mines</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 75.6px">&#183;</P>
<P style="font-family: Times; margin-top: 0px; margin-bottom: 5.533px; padding-left: 96px">Capital allowances reduced from 100% to 25%</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times" align=justify>These measures have been highly controversial with mining companies, many of which invested in the country under specific tax incentives and&nbsp;formalised their business&nbsp;models accordingly. Some mining companies are threatening legal recourse as they argue their businesses will become unviable. Proposed capital expenditure projects are being reconsidered. Various representations have been made by the mining companies through the Chamber of Mines to the government since the budget announcement at the end of January, however the government has taken a firm position, and we understand that the changes have&nbsp;been approved by parliament.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:56.733px; text-indent:-28.333px; font-family:Times" align=justify><B>17. &nbsp;</B></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify><B>Generally Accepted Accounting Principles in Canada and the United States</B></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>The Company&#146;s accounting policies do not differ materially from accounting principles generally accepted in the United States (&quot;US GAAP&quot;) except for the following:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:28.4px; font-family:Times" align=justify>(a)</P>
<P style="margin:0px; padding-left:28.4px; text-indent:28.333px; font-family:Times" align=justify>Mineral Properties</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>US GAAP requires that expenditures on mineral properties with no proven reserves be reflected as expenses in the period incurred.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=justify>(b) &nbsp;&nbsp;&nbsp;Employee and Directors Stock Options</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>Prior to 2003, the Company accounted for employee and director stock options under APB Opinion No. 25 under which no compensation cost is recognized when the exercise price equals or exceeds the fair value at the date of grant. Effective January 1, 2003, the company has, for US reporting purposes, prospectively applied the fair-value recognition provisions of SFAS 123. Under Canadian GAAP, effective January 1, 2002 on a prospective basis, the Company adopted the new CICA policy of accounting for stock based compensation. Compensation expense on stock options granted to directors, officers and employees, was not recorded. However, disclosure of the effects of accounting for the compensation expense, utilizing the fair value method estimated using the Black-Scholes Option Pricing Model, was disclosed as pro-forma information. For 2002, a compensation expense was shown reflecting the intrinsic value attributable to stock options grant
ed to directors, officers and employees.</P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>Under Canadian GAAP, effective January 1, 2003 on a prospective basis, the Company commenced the expensing of all stock based compensation for new stock option grants applying the fair value method estimated by using the Black-Scholes Option Pricing Model.</P>
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<P style="margin:0px; font-family:Times" align=center>28</P>
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<P style="line-height:14pt; margin:0px; padding-left:28.4px; padding-top:4px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; padding-left:28.4px; text-indent:-47.2px; font-family:Times" align=right><B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007, 2006 and 2005</U></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:56.733px; text-indent:-28.333px; font-family:Times" align=justify>(c)</P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>Warrants</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>Under US GAAP the fair value of the warrants re-priced in 2005 are considered to be a benefit awarded to certain shareholders. This would be considered to be a deemed dividend to these shareholders. The fair value of the warrants was calculated using the Black-Scholes Option Pricing Model. The assumptions used in the calculation are: Risk free interest rate &#150; 2.77%; Expected dividend yield &#150; nil; Expected stock volatility &#150; 38%; Expected warrant life in years &#150; 0.134.&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>In 2007 the expiry period of certain warrants was extended. Under US GAAP the fair value of the warrants </P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>extended are considered to be a benefit awarded to certain shareholders. This would be considered to be a deemed dividend to these shareholders. The fair value of the warrants was calculated using the Black-Scholes Option Pricing Model. The assumptions used in the calculation are: Risk free interest rate &#150; 3%; Expected dividend yield &#150; nil; Expected stock volatility &#150; 62%; Expected warrant life in years &#150; 0.178.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:normal; margin:0px; padding-left:56.733px; text-indent:-28.333px; font-size:11pt" align=justify>&nbsp;<FONT style="font-size:10pt">(d) &nbsp;&nbsp;</FONT><FONT style="font-family:Times; font-size:10pt">&nbsp;Recently Issued United States Accounting Standards</FONT></P>
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<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>(i) On February 15, 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. The FASB's stated objective in issuing this standard is as follows: &quot;to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.&quot;</P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. &nbsp;The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. Statement 159 is effective as of the beginning of an entity&#146;s first fiscal year that begins after November 15, 2007.&nbsp; Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of FASB Statement No. 157. The Company does not expect the adoption of this standard to have a material effect on the consolidated financial statements.
</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>(ii) FASB Statement No. 157, Fair Value Measurements, has been issued by the FASB. This new standard provides guidance for using fair value to measure assets and liabilities. The FASB believes the standard also responds to investors&#146; requests for expanded information about the extent to which companies&#146; measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. Under Statement 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>The provisions of Statement 157 are effective for consolidated financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued consolidated financial statements for that fiscal year, including any consolidated financial statements for an interim period within that fiscal year. The Company does not expect the adoption of this standard to have a material effect on the consolidated financial statements.</P>
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<P style="margin:0px; font-family:Times" align=center>29</P>
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<P style="line-height:14pt; margin:0px; padding-left:28.4px; padding-top:4px; font-family:Times; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; text-indent:28.4px; font-family:Times" align=right><B><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007, 2006 and 2005</u></B></P>
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<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>&nbsp;(iii) In September 2006, the FASB issued SFAS No. 158, &quot;Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R),&quot; which requires employers to: (a) recognize in its statement of financial position an asset for a plan's over-</P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>funded status or a liability for a plan's under-funded status; (b) measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year; and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. These changes will be reported in comprehensive income of a business entity. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending December 15, 2006 for entities with publicly traded equity securities. The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company has no defined benefit pension plans</P>
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<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify><B>&nbsp;</B>(iv)<B> </B>On December 4, 2007, the FASB issued FASB Statement No. 141 (Revised 2007),<I> Business Combinations.</I> Statement 141R will significantly change the accounting for business combinations. Under Statement 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. Statement 141R will change the accounting treatment for certain specific items, including:</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 96px" align=justify>&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; font-family:Times" align=justify>Acquisition costs will be generally expensed as incurred; </P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 96px" align=justify>&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; font-family:Times" align=justify>Non-controlling interests (formerly known as &quot;minority interests&quot; -- see Statement 160 discussion below) will be valued at fair value at the acquisition date; </P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 96px" align=justify>&#183;</P>
<P style="font-family: Times; margin-top: 0px; margin-bottom: 0px; padding-left: 144px" align=justify>Acquired contingent liabilities will be recorded at fair value at the acquisition date
and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies;</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 96px" align=justify>&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; font-family:Times" align=justify>In-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; </P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 96px" align=justify>&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; font-family:Times" align=justify>Restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date; and</P>
<P style="font-family: Symbol; margin-top: 5.533px; margin-bottom: -16px; padding-left: 96px" align=justify>&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; font-family:Times" align=justify>Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. </P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>Statement 141R also includes a substantial number of new disclosure requirements. Statement 141 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier adoption <I>is prohibited.</I> Accordingly, a calendar year-end company is required to record and disclose business combinations following existing GAAP until January 1, 2009. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>(v) On December 4, 2007, the FASB issued FASB Statement No. 160,<I> Non-controlling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51.</I> Statement 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a non-controlling interest (minority interest) as equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement. Statement 160 clarifies that changes in a parent's ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a </P>
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<P style="margin:0px; font-family:Times" align=center>30</P>
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<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; text-indent:28.4px; font-family:Times" align=right><B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007, 2006 and 2005</U></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment on the deconsolidation date. Statement 160 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. Statement 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Like Statement 141R discussed above, earlier adoption is prohibited.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:56.733px; font-family:Times" align=justify>The impact of the foregoing on the consolidated financial statements is as follows:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:61.8px; text-indent:-24px; font-family:Times" align=justify>(a)</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:61.8px; font-family:Times" align=justify>Income Statement</P>
<P style="margin:0px; padding-left:61.8px; text-indent:371.667px; font-family:Times" align=justify>&nbsp;</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=370.2></TD><TD width=72></TD><TD width=72></TD><TD width=72></TD></TR>
<TR><TD valign=top width=370.2><P>&nbsp;</P></TD><TD valign=top width=72><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B><U>2007</U></B></P>
</TD><TD valign=top width=72><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><U>2006</U></P>
</TD><TD valign=top width=72><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><U>2005</U></P>
</TD></TR>
<TR><TD valign=top width=370.2><P>&nbsp;</P></TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Income/(Loss) for continuing operations per Canadian GAAP</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(3,906)</B></P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>2,315</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(3,748)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Mineral property expenditure with no proven reserves (expensed) or previously expensed under US GAAP</P>
</TD><TD valign=top width=72><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right><B>(2,633)</B></P>
</TD><TD valign=top width=72><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>(659)</P>
</TD><TD valign=top width=72><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>(2,040)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Net income (loss) from continuing operations </P>
</TD><TD style="border-top:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(6,539)</B></P>
</TD><TD style="border-top:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>1,656</P>
</TD><TD style="border-top:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(5,788)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Loss from discontinued operations</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(709)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(7,990)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(5,932)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Net income (loss)</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(7,248)</B></P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(6,334)</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(11,720)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Deemed Dividend</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(134)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>-</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(171)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Net income (loss) available for common shareholders</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(7,382)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(6,334)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(11,891)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Net income (loss)</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(7,248)</B></P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(6,334)</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(11,720)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Other comprehensive (loss)/gain</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(88)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>85</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(18)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Total comprehensive loss</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(7,336)</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(6,249)</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=72><P style="margin:0px; font-family:Times" align=right>(11,738)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Basic and diluted income/(loss) per share continuing operations</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(0.01)</B></P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(0.00)</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(0.02)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Basic and diluted income/(loss) per share &nbsp;discontinued operations</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(0.00)</B></P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(0.02)</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(0.02)</P>
</TD></TR>
<TR><TD valign=top width=370.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Basic and diluted income/(loss) per share for the year</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right><B>(0.01)</B></P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(0.02)</P>
</TD><TD valign=top width=72><P style="margin:0px; font-family:Times" align=right>(0.04)</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:61.8px; text-indent:-24px; font-family:Times" align=justify>(b)</P>
<P style="margin:0px; padding-left:61.8px; font-family:Times" align=justify>Balance Sheet</P>
<P style="margin:0px" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=387.467></TD><TD width=75.6></TD><TD width=75.6></TD></TR>
<TR><TD valign=top width=387.467><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B><U>2007</U></B></P>
</TD><TD valign=top width=75.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><U>2006</U></P>
</TD></TR>
<TR><TD valign=top width=387.467><P>&nbsp;</P></TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Total assets per Canadian GAAP</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>29,492</B></P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>31,456</P>
</TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Unrealised loss on marketable securities</P>
</TD><TD valign=top width=75.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD valign=top width=75.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>31</P>
</TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Mineral properties with no proven reserves expensed</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>(7,985)</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>(5,352)</P>
</TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Total assets per US GAAP</P>
</TD><TD style="border-bottom:3px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>21,507</B></P>
</TD><TD style="border-bottom:3px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>26,135</P>
</TD></TR>
<TR><TD valign=top width=387.467><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Total liabilities per Canadian and US GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>5,397</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>7,120</P>
</TD></TR>
<TR><TD valign=top width=387.467><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Shareholders&#146; equity</P>
</TD><TD valign=top width=75.6><P>&nbsp;</P></TD><TD valign=top width=75.6><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Shareholders&#146; equity per Canadian GAAP</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>24,095</B></P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>24,336</P>
</TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Mineral properties with no proven reserves expensed</P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>(7,985)</B></P>
</TD><TD valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>(5,352)</P>
</TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Accumulated other comprehensive income/(loss)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>31</P>
</TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Shareholders&#146; equity per US GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right><B>16,110</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P style="margin:0px; font-family:Times" align=right>19,015</P>
</TD></TR>
<TR><TD valign=top width=387.467><P>&nbsp;</P></TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P>&nbsp;</P></TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.6><P>&nbsp;</P></TD></TR>
<TR><TD valign=top width=387.467><P style="margin:0px; font-family:Times" align=justify>Total liabilities &amp; shareholder&#146;s equity per US GAAP</P>
</TD><TD style="border-bottom:3px solid #000000" valign=top width=75.6><P style="margin:0px; text-indent:10.933px; font-family:Times" align=right><B>21,507</B></P>
</TD><TD style="border-bottom:3px solid #000000" valign=top width=75.6><P style="margin:0px; text-indent:10.933px; font-family:Times" align=right>26,135</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>31</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; padding-left:28.4px; font-family:Times; font-size:14pt" align=right><B>Notes to the Consolidated Financial Statements</B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times" align=right>(in thousands of Canadian Dollars unless otherwise indicated and except for share and per share amounts) </P>
<P style="margin:0px; text-indent:28.4px; font-family:Times" align=right><B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007, 2006 and 2005</U></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; padding-left:61.8px; text-indent:-24px; font-family:Times" align=justify>(c)</P>
<P style="margin:0px; padding-left:61.8px; font-family:Times" align=justify>Cash Flow</P>
<P style="margin:0px; padding-left:37.8px; text-indent:251.667px" align=justify>&nbsp;</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=338.2></TD><TD width=2></TD><TD width=85.067></TD><TD width=0.933></TD><TD width=84.133></TD><TD width=75.867></TD></TR>
<TR><TD valign=top colspan=2><P>&nbsp;</P></TD><TD valign=top colspan=2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><B><U>2007</U></B></P>
</TD><TD valign=top width=84.133><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><U>2006</U></P>
</TD><TD valign=top width=75.867><P style="margin:0px; text-indent:28.8px; font-family:Times" align=center><U>2005</U></P>
</TD></TR>
<TR><TD valign=top colspan=2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Cash provided by (used in)</P>
</TD><TD valign=top width=85.067><P style="margin:0px; font-family:Times" align=right><B>$</B></P>
</TD><TD valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>$</P>
</TD><TD valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>$</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Operating activities for continuing operations per Canadian GAAP</P>
</TD><TD valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>(1,687)</B></P>
</TD><TD valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>1,858</P>
</TD><TD valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>(2,831)</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Mineral properties expenditure by continuing operations</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>(2,633)</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>(659)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>&nbsp;&nbsp;&nbsp;(2,040)</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Operating activities per US GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>(4,320)</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>1,199</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>(4,871)</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Investment activities for continuing operations per Canadian GAAP</P>
</TD><TD valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>(3,250)</B></P>
</TD><TD valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>(3,516)</P>
</TD><TD valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>(2,040)</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Mineral properties expenditure</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right><B>2,633</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>659</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>2040</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Investment activities per US GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>(617)</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>(2,857)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Financing Activities per Canadian and US GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>4,393</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>7,556</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>6,591</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Increase (decrease) in cash for continuing operations</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>(544)</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>5,898</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>1,720</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Operating activities for discontinued operations per Canadian GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right><B>(684)</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>(4,560)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>(4,064)</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Investment activities for discontinued operations per Canadian and US GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right><B>-</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>(922)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>(3,244)</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Financing activities for discontinued operations per Canadian and US GAAP</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right><B>6</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>(194)</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times" align=right>194</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Increase (decrease) in cash for the year</P>
</TD><TD valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>(1,222)</B></P>
</TD><TD valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>222</P>
</TD><TD valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>(5,394)</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; text-indent:1.467px; font-family:Times" align=justify>Cash and cash equivalents, beginning of year</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right><B>1,298</B></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top colspan=2><P style="margin:0px; font-family:Times" align=right>1,076</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=75.867><P style="margin:0px; font-family:Times" align=right>6,470</P>
</TD></TR>
<TR><TD valign=top width=338.2><P style="margin:0px; font-family:Times" align=justify>Cash and cash equivalents, end of year</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top colspan=2><P style="margin:0px; text-indent:18px; font-family:Times" align=right><B>76</B></P>
</TD><TD style="border-bottom:2px solid #000000" valign=top colspan=2><P style="margin:0px; text-indent:28.8px; font-family:Times" align=right>1,298</P>
</TD><TD style="border-bottom:2px solid #000000" valign=top width=75.867><P style="margin:0px; text-indent:18px; font-family:Times" align=right>1,076</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>32</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:1.35pt; margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=638.4></TD></TR>
<TR><TD style="background-color:#000000; border:1px solid #000000" valign=top width=638.4><P style="line-height:16pt; margin-top:6.2px; margin-bottom:6.2px; text-indent:28.8px; font-family:Shruti; font-size:14pt" align=justify><font face="Arial"><B>D</B><FONT style="color:#FFFFFF"><B>irectors and Management at March 31, 2008 </B></FONT></font></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">BOARD OF DIRECTORS</font></B></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><B><font face="Arial">OFFICERS</font></B> </P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">G.R. Pardoe (1) (2) (3) (4)(5)</font></P>
<P style="text-indent: 336px; font-family: Shruti; margin: 0px" align=justify><font face="Arial">S. E. Hayden (2) (3) (5)</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Chairman of the Board,</font></I></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><I><font face="Arial">President and Chief Executive Officer</font></I></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Johannesburg, South Africa</font></I></P>
<P style="text-indent: 336px; font-family: Shruti; margin: 0px" align=justify><I><font face="Arial">Johannesburg, South Africa</font></I></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">S. E. Hayden (2) (3) (5)</font></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><font face="Arial">&nbsp;S. R. Curtis (5)</font></P>
<P style="margin-top:0px; margin-bottom:-16px; font-family:Shruti"><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>President and Chief Executive Officer</I></font></P>
<P style="text-indent: 336px; font-family: Shruti; margin: 0px" align="justify"><I><font face="Arial">Vice-President Finance and Chief Financial officer</font></I></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.4px; font-family:Shruti" align=justify><I><font face="Arial">Johannesburg, South Africa</font> </I></P>
<P style="text-indent: 336px; font-family: Shruti; margin: 0px" align=justify><I><font face="Arial">Johannesburg, South Africa</font></I></P>
<P style="margin:0px; text-indent:480px; font-family:Shruti" align=justify><I><font face="Arial">&nbsp;&nbsp;</font></I></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">J. Johnstone (5)</font></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><font face="Arial">Dr. &nbsp;T. Pearton</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Retired Mining Engineer</font></I></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><I><font face="Arial">Vice President Exploration</font></I></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Gibsons, British Columbia, Canada</font></I></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><I><font face="Arial">Johannesburg, South Africa</font></I></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">F C. Harvey</font> </P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><B><font face="Arial">BOARD COMMITTEE MEMBERS</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Retired Executive</font></I></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><font face="Arial">(1) &nbsp;Audit Committee</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Oakville, Ontario, Canada</font></I></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:192px; font-family:Shruti" align=justify><I><font face="Arial">&nbsp;&nbsp;</font></I></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:336px; font-family:Shruti" align=justify><font face="Arial">(2) &nbsp;Compensation Committee</font></P>
<P style="margin:0px; text-indent:624px; font-family:Shruti" align=justify><I><font face="Arial">&nbsp;</font></I></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">&nbsp;</font></I></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><font face="Arial">(3) &nbsp;Corporate Governance Committee</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">C. R. Jonsson &nbsp;(2) (3) (5)</font></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti" align=justify><font face="Arial">(4) &nbsp;Nominating Committee</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Principal of Tupper Jonsson&amp; Yeadon</font></I></P>
<P style="text-indent: 336px; font-family: Shruti; margin: 0px" align=justify><font face="Arial">(5) &nbsp;Disclosure Committee</font></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Barristers &amp; Solicitors</font></I></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Vancouver, British Columbia,</font></I></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Canada</font></I></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">R. Liverant (1)</font></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Retired Executive</font></I></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Vancouver, British Columbia, Canada</font></I></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">L.A. Wilson (1)</font></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><I><font face="Arial">Director of Companies</font></I></P>
<P style="margin:0px; padding-left:28.4px; font-family:Shruti"><I><font face="Arial">Westport, Connecticut, United States of America</font></I></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px"><font face="Arial"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Arial">33</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
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<P style="line-height:16pt; margin:0px; padding-left:28.4px; font-family:Shruti; font-size:14pt"><B><font face="Arial">Corporate Directory</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">CORPORATE OFFICES</font></B></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><B><font face="Arial">SOLICITORS</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">Canada - Head Office</font></B></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><B><font face="Arial">Borden Ladner Gervais LLP</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">Caledonia Mining Corporation</font></B></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><font face="Arial">Suite 4100, Scotia Plaza</font></P>
<P style="margin-top:0px; margin-bottom:-16px; font-family:Shruti" align=justify><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suite 1201, 67 Yonge Street</font></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><font face="Arial">40 King Street West</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">Toronto, Ontario M5E 1J8 Canada</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><font face="Arial">Toronto, Ontario M5H 3Y4 Canada</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">Tel:(1)(416) 369-9835 Fax:(1)(416) 369-0449</font></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><B><font face="Arial">Tupper, Jonsson &amp; Yeadon</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti; color:#0000FF" align=justify><U><font face="Arial">info@caledoniamining.com</font></U></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><font face="Arial">1710-1177 West Hastings St, Vancouver,</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti"><font face="Arial">British Columbia V6E 2L3 Canada</font></P>
<P style="margin:0px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">South &#193;frica &#150; &#193;frica Office</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">Greenstone Management Services (Pty) Ltd.</font></B></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><B><font face="Arial">AUDITORS &nbsp;</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">P.O. Box 834</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><B><font face="Arial">BDO Dunwoody LLP</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">Saxonwold 2132</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><B><font face="Arial">Chartered Accountants</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">South Africa</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><font face="Arial">Suite 3300, 200 Bay Street</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">Tel: (27)(11) 447-2499 Fax: (27)(11) 447-2554</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:288px; font-family:Shruti" align=justify><font face="Arial">&nbsp;&nbsp;&nbsp;</font></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><font face="Arial">Royal Bank Plaza, South Tower</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:192px; font-family:Shruti" align=justify><font face="Arial">&nbsp;&nbsp;&nbsp;</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><font face="Arial">Toronto, Ontario M5J 2J8 Canada</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">Zambia</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:192px; font-family:Shruti" align=justify><font face="Arial">``</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.4px; font-family:Shruti"><B><font face="Arial">Caledonia Mining (Zambia) Limited</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:368.6px; font-family:Shruti"><B><font face="Arial">REGISTRAR &amp; TRANSFER AGENT</font></B></P>
<P style="margin:0px; text-indent:624px; font-family:Shruti"><B><font face="Arial">&nbsp;</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">P.O. Box 36604</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:144px; font-family:Shruti" align=justify><B><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></B></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:336px; font-family:Shruti" align=justify><B><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></B></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><B><font face="Arial">Equity Transfer Services Inc</font></B><font face="Arial">.</font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><font face="Arial">Lusaka, Zambia</font></P>
<P style="margin:0px; padding-left:38.4px; text-indent:333.6px; font-family:Shruti" align=justify><font face="Arial">Suite 400 200 University Ave</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><font face="Arial">Tel:(260)(1) 29-1574 Fax(260)(1) 29-2154</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:336px; font-family:Shruti" align=justify><font face="Arial">&nbsp;&nbsp;</font></P>
<P style="margin:0px; text-indent:372px; font-family:Shruti" align=justify><font face="Arial">Toronto, Ontario M5H 4H1 Canada</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:192px; font-family:Shruti"><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti"><font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tel: (416) 361-0152 Fax:(416) 361-0470</font></P>
<P style="margin-top:0px; margin-bottom:-16px; text-indent:28.8px; font-family:Shruti" align=justify><B><font face="Arial">Zimbabwe</font></B></P>
<P style="margin:0px; text-indent:288px; font-family:Shruti" align=justify><font face="Arial">&nbsp;&nbsp;&nbsp;</font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><B><font face="Arial">Caledonia Holdings Zimbabwe (Limited)</font></B></P>
<P style="margin:0px; padding-left:67.2px; text-indent:304.8px; font-family:Shruti" align=justify><B><font face="Arial">BANKERS</font></B></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><font face="Arial">P.O. Box CY1277</font></P>
<P style="margin:0px; padding-left:67.2px; text-indent:304.8px; font-family:Shruti" align=justify><B><font face="Arial">Canadian Imperial Bank of Commerce</font></B></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><font face="Arial">Causeway, Harare</font></P>
<P style="margin:0px; padding-left:67.2px; text-indent:304.8px; font-family:Shruti" align=justify><font face="Arial">6266 Dixie Road</font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><font face="Arial">Zimbabwe</font></P>
<P style="margin:0px; padding-left:67.2px; text-indent:304.8px; font-family:Shruti" align=justify><font face="Arial">Mississauga, Ontario L5T 1A7 Canada</font></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:67.2px; text-indent:-38.8px; font-family:Shruti" align=justify><font face="Arial">Tel:</font></P>
<P style="font-family: Shruti; text-indent: 28.8px; margin-top: 0px; margin-bottom: -16px" align=justify><font face="Arial">(263)(4) 701 151/4 Fax:(263)(4) 702 248<B> &nbsp;</B></font></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><font face="Arial"><B>SHARES LISTED</B> &nbsp;</font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><B><font face="Arial">CAPITALIZATION
</font> </B><font face="Arial">at March 31, 2008</font></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><font face="Arial">Toronto Stock Exchange Symbol &#147;CAL&#148;</font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><font face="Arial">Authorised: Unlimited &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><font face="Arial">NASDAQ OTC BB Symbol &quot;CALVF&quot;</font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><B><font face="Arial">Shares, Warrants and Options Issued:</font></B></P>
<P style="text-indent: 372px; font-family: Shruti; margin: 0px" align=justify><font face="Arial">London &#147;AIM&#148; Market Symbol &#147;CMCL&#148;</font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: 0px" align=justify><font face="Arial">Common Shares:&nbsp;&nbsp;
500,169,280</font> </P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: -16px" align=justify><font face="Arial">Warrants:&nbsp;</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<font face="Arial">12,300,000</font></P>
<P style="margin:0px; padding-left:372px; font-family:Shruti" align=justify><font face="Arial"><B>Web Site: </B><U>http://www.caledoniamining.com</U></font></P>
<P style="text-indent: 28.8px; font-family: Shruti; margin-top: 0px; margin-bottom: 0px" align=justify><font face="Arial">Options:&nbsp;</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<font face="Arial">32,953,000</font></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times" align=center>34</P>
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<HEAD>
<TITLE>CC Filed by Filing Services Canada Inc. 403-717-3898</TITLE>
<META NAME="author" CONTENT="Stefan Hayden">
<META NAME="date" CONTENT="03/31/2008">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=324.467></TD><TD width=316.867></TD></TR>
<TR><TD style="background-color:#000000; border:1px solid #000000" valign=top colspan=2><P style="line-height:16pt; margin-top:6.2px; margin-bottom:6.2px; font-family:Shruti; font-size:14pt; color:#FFFFFF"><B><font face="Arial">2007 OBJECTIVES and ACHIEVEMENTS</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin:0px; font-family:Shruti" align=center><B><font face="Arial">2007 Objectives</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=center><B><font face="Arial">2007 Achievements</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Complete the planned metallurgical test work on Nama mineralization, and conclude the long term cobalt purchase agreements.</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Completed the planned test work and have signed four 5 year Cobalt Hydroxide Sales Agreements for over 10,000 tonnes of cobalt metal per annum with large Chinese refiners.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Arrange necessary financing to support the activities required to meet these objectives.</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Raised $4,380,000 from the exercise of 29,888,259 warrants.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Conclude the sale of Barbrook and Eersteling Gold Mines.</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Accepted offers of $9,100,000 from Eastern Goldfields for Barbrook and $3,810,000 for Eersteling from a private Canadian company in the first quarter of 2008.</font> </P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Complete the No. 4 shaft expansion project at Blanket Mine, expand the milling rate from 600 tonnes per day to 1,000 tonnes per day, and increase gold production from 25,000 ounce per annum to approximately 40,000 ounces per annum</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Shaft equipping and commissioning from surface down to 825 meter level completed. The shaft bottom loading infrastructure and crusher stations will be completed once outstanding foreign exchange for gold sold is received from the Reserve Bank of Zimbabwe.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Further explore the PGE, Ni, Cu resource on the Rooipoort and Grasvally properties which form the Rooipoort PGE/Ni/Cu Exploration Project in South Africa</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Completed the soil sampling program on the Jaagbaan, Moorddrift and Grasvally properties acquired from Falconbridge.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Finalise agreement with joint-venture partner to carry out additional exploration programs at the Kadola copper/cobalt and the Eureka copper/gold properties in Zambia.</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Protracted negotiations with potential JV partner were eventually terminated by the Corporation. Negotiations with the Ministry to convert Kadola licenses to retention licenses continue.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Conclude necessary agreements to satisfy the South Africa Black Economic Empowerment (&#147;BEE&#148;) requirements.</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Agreement reached with suitable BEE partners which will be implemented as required by the exploration projects.</font> </P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="margin-top:0px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol"><font face="Arial">&#183;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Pursue possible acquisitions and/or strategic partnerships to expand the Corporation&#146;s portfolio of properties in Southern Africa.</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=316.867><P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Application has been made for three additional PGE exploration licenses on the Eastern Limb of the Bushveld complex in South Africa.</font> </P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR>
<BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=623.733></TD></TR>
<TR><TD style="background-color:#000000; border:1px solid #000000" valign=top width=623.733><P style="line-height:16pt; margin-top:5.333px; margin-bottom:5.333px; font-family:Shruti; font-size:14pt; color:#FFFFFF"><font face="Arial">2008 OBJECTIVES</font></P>
</TD></TR>
</TABLE>
<P style="margin-top:3.333px; margin-bottom:0px" align=justify><font face="Arial"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=641.733></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:0px; text-indent:28.8px; font-family:Shruti" align=center><B><font face="Arial">2008 Objectives</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Recruit a suitable CEO and management team for Caledonia Nama Limited</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Complete the re-construction of portions of the existing access road into Nama to facilitate easier access into the Project Area.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Complete the 2008 trenching programs on &#147;A ore body&#148; with a view to confirming the mining grade, and on the newly identified Anomaly &#147;R- Clinic&#148; which was pitted during the 2007 exploration program.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Complete the conversion of Nama Retention License to a Large Scale Mining License.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Complete and have approved by the Zambian authorities the Environmental Impact Assessment for the operations at Nama.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Amend the National Instrument (&#147;NI&#148;) 43-101 Resource Statements on Nama Project Anomaly A and C based on 2007 Drilling Program and 2008 trenching program.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Commission a Chinese Feasibility Study (&#147;CFS&#148;) on the Nama Project and then complete the Bankable Feasibility Study (&#147;BFS&#148;).</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Commence and complete the planned 2008 Exploration and Drilling Programs at Nama.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Dependent and based on the successful BFS, complete the financing requirement for the establishment of the mining and metallurgical operations at Nama.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings"><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti"><font face="Arial">Upon completion of the financing arrangements establish the Nama mine site as rapidly as possible.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Commence operations at Nama as early in 2009 as possible, and thereafter build the Nama operations to full production as quickly as practical.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Complete the Blanket No.4 Shaft Expansion Project to be able to produce 40,000 oz of gold per annum, subject to the economic situation in Zimbabwe.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Conclude the sales of the Barbrook and Eersteling Gold mines in South Africa.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Conclude a JV for the Mulonga Plain diamond exploration project and renew the Mulonga Plain and Kashiji River licenses.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Drill the central zone targets identified on the Rooipoort project.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=641.733><P style="margin-top:3.333px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Wingdings" align=justify><font face="Arial">&#167;</font></P>
<P style="margin:0px; padding-left:48px; font-family:Shruti" align=justify><font face="Arial">Conclude a JV Agreement on the platinum group metals, gold and nickel and copper base metals (&#147;PGE&#148;) Projects in South Africa.</font></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin-top:3.333px; margin-bottom:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:5.333px" align=justify><font face="Arial"><BR></font></P>
<P style="margin-top:3.333px; margin-bottom:0px" align=justify><font face="Arial"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Arial">2</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin-top:3.333px; margin-bottom:0px" align=justify><font face="Arial"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=234></TD><TD width=51.267></TD><TD width=5.533></TD><TD width=45.267></TD><TD width=50.667></TD><TD width=40.667></TD><TD width=9.067></TD><TD width=54.8></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top colspan=8><P style="margin-top:3.333px; margin-bottom:0px; font-family:Shruti" align=justify><B><font face="Arial">PERFORMANCE HIGHLIGHTS</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:6pt; margin:0px; text-indent:1.467px; font-family:Shruti; font-size:6pt"><B><font size="1" face="Arial">Financial &#150; C$ 000&#146;s</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:6pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt"><B><font size="1" face="Arial">2007</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:6pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">2006</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:6pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">2005(2)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:6pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">2004(2)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:6pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">2003(1)(2)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Revenue from Sales</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">10,039</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">13,586</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">6</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">3</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">58</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Gross Income (Loss)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">294</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">5,014</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(751)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(466)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(94)&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">(Expenses)/Income (General and Administration, &nbsp;Interest , Amortization and foreign exchange)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">(4,195)</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(2,047)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(2,997)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(2,304)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">14,476)&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Net Income (Loss) &#150; before Write-Downs, tax and discontinued operations</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">(3,901)</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2.967</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(3,748)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(2,770)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(4,811)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:6pt; margin:0px"><font size="1" face="Arial"><BR></font></P>
<P style="line-height:6pt; margin:0px; text-indent:1.467px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Discontinued Operations</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">(709)</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(7,990)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(5,932)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(7,222)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(36)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Income (Loss) - after Write-Downs and discontinued operations.</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">(4,615)</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(5,675)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(9,680)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(9,979)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(14,496)&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Cash</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">76</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,252</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,076</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">6,470</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">4,179&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Current Assets</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">4,408</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">8,773</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2,264</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">7,481</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">4,573&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Assets</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">29,492</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">31,456</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">22,338</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">23,666</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">19,530&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Current Liabilities</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">4,343</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">5,899</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2,589</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,062</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">790&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Long Term Liabilities</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">1,054</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,221</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">377</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">423</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,089&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Working Capital surplus/(Deficiency)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">65</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2,874</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(325)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">6,419</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">3,783</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Shareholders&#146; Equity</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">24,095</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">24,336</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">19,372</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">22,181</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">17,651</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Total Capital Expenditures including Mineral Properties</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">3,250</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">3,579</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">5,284</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">3,813</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2,279&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Expenditures on Mineral Properties</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">2,633</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">659</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2,583</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2,298</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">2,042&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Financing Raised</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">4,380</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">7,559</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">6,588</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">14,314</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">9,511&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><B><font size="1" face="Arial">Share Information</font></B></P>
</TD><TD colspan=5></TD><TD colspan=2>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Market Capitalization ($ Thousands)</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">53,666</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">45,798</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">42,632</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">39,145</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">105,955&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Shares Outstanding (Thousands)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">487,869</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">457,981</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">370,715</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">301,112</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">252,274</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Warrants &amp; Options (Thousands)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">35.148</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">102,354</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">34,748</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">52,342</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">27,348</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Basic and diluted eps from continuing operations</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">(0.008)</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.005</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.012)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.010)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.06)&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Basic and diluted eps from discontinued operations</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">(0.001)</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.018)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.019)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.024)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.00)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Basic and diluted eps for the year</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">(0.009)</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.013)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.031)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.034)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">(0.06)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">TSE Share Price High</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">0.23</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.23</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.18</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.465</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.610</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">TSE Share Price Low</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">0.09</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.095</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.10</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.12</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.215</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">TSE Share Volume (Thousands)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">101,156</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">132,323</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">61,214</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">56,934</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">99,233</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">NASDAQ Share Price High (US$)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">0.20</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.204</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.15</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.37</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.39</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">NASDAQ Share Price Low (US$)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">0.074</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.082</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.08</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.10</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">0.16</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">NASDAQ Share Volume (Thousands)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">194,192</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">212,028</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">105,151</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">210,251</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">440,811</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:6pt; margin:0px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">AIM Share Price High (pence)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">8.0</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">13.0</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">6.25</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:6pt; margin:0px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">AIM Share Price Low (pence)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">4.1</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">4.9</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">4.50</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:6pt; margin:0px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">AIM Share Volume (Thousands)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">8,710</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=45.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">12,162</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">856</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><B><font size="1" face="Arial">Operating Results<SUP> (1) (3)</SUP></font></B></P>
</TD><TD colspan=5></TD><TD colspan=2>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Gold Production (Ounces)</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=51.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">13,985</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">12,437</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">4,951</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,693</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,187&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Silver Production (Ounces)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=51.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">1,332</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">1,038</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">264</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
<P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">66</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-&nbsp;</font></P>
<P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">42&nbsp;</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=234><P style="line-height:7.55pt; margin-top:0px; margin-bottom:1.933px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">Year End Gold Resource (Thousand Ounces) &#150; Blanket Mine</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=51.267><P style="line-height:8pt; margin:0px; font-family:Shruti; font-size:6pt" align=right><B><font size="1" face="Arial">441</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">500</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=50.667><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" colspan=2><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000"><P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt" align=right><font size="1" face="Arial">-</font></P>
</TD></TR>
<TR><TD width=234><P><font size="1" face="Arial">&nbsp;</font></P></TD><TD width=51.267><P><font size="1" face="Arial">&nbsp;</font></P></TD><TD colspan=2><P><font size="1" face="Arial">&nbsp;</font></P></TD><TD width=50.667><P><font size="1" face="Arial">&nbsp;</font></P></TD><TD colspan=2><P style="margin:0px"><font size="1" face="Arial"><BR></font></P>
<P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">-</font></P>
</TD><TD><P style="margin:0px"><font size="1" face="Arial"><BR></font></P>
<P style="line-height:8pt; margin:0px; text-indent:9.467px; font-family:Shruti; font-size:6pt"><font size="1" face="Arial">-</font></P>
</TD></TR>
</TABLE>
<P style="line-height:8pt; margin-top:0px; margin-bottom:-10.667px; font-family:Shruti; font-size:6pt"><font face="Arial">&nbsp;(1)</font></P>
<P style="line-height:8pt; margin:0px; text-indent:18.933px; font-family:Shruti; font-size:6pt"><font face="Arial">Restated for the adoption of the Asset Retirement Obligations change in accounting policy</font> </P>
<P style="line-height:8pt; margin-top:0px; margin-bottom:-10.667px; font-family:Shruti; font-size:6pt"><font face="Arial">(2) &nbsp;</font></P>
<P style="line-height:8pt; margin:0px; text-indent:18.933px; font-family:Shruti; font-size:6pt"><font face="Arial">Restated to reflect the discontinued operations nature of Barbrook and Eersteling Mines</font></P>
<P style="line-height:8pt; margin-top:0px; margin-bottom:-10.667px; font-family:Shruti; font-size:6pt"><font face="Arial">(3)</font> </P>
<P style="line-height:8pt; margin:0px; text-indent:18.933px; font-family:Shruti; font-size:6pt"><font face="Arial">2006 reflects Blanket Mine only, 2005 and before are historical numbers reflecting Barbrook and Eersteling Mines</font> </P>
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<P style="margin:0px; font-family:Times" align=center><font face="Arial">3</font></P>
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<P style="line-height:16pt; margin:0px; font-family:Shruti; font-size:14pt"><B><font face="Arial">Letter to Shareholders</font></B></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">The 2007 Financial Year proved to be a difficult year particularly for the Blanket Mine in Zimbabwe. &nbsp;For the financial year ended December 31, 2007 the Corporation recorded a gross profit of $294,000 from revenues of $10,039,000, which translated into a loss of $4,615,000 and a diluted loss of $0.009 per share.</font></P>
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<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">The extremely challenging economic environment in Zimbabwe caused delays in completing the No 4 shaft expansion project as planned, which in turn severely interfered with production at the Blanket Gold Mine. &nbsp;Despite the restrictive economic conditions, the frequent power supply shortages and the continuous delays in receiving foreign currency for gold sale proceeds from the Reserve Bank of Zimbabwe (&#147;RBZ&#148;), Blanket produced 13,985 ounces of gold during the 2007 year. &nbsp;The No.4 shaft expansion could not be completed as planned due entirely to the delays in receiving US dollar funds from the RBZ and the frequent power cuts. &nbsp;These delayed payments caused an unplanned three month extension of the shaft expansion project timetable which then ran from February until the end of July 2007. &nbsp;During this period Blanket had to focus on processing lower grade sands rather than ore in order to achieve gold productio
n. &nbsp;Since then and as a direct result of the ongoing delays in receiving foreign exchange payments Blanket has been unable to restore gold production to the 25,000 oz per year level or to complete the No 4 shaft expansion project</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">While the prognosis for Zimbabwe remains problematic, the Blanket mine continues, at this stage, to be self-funding. Blanket will however only be able to return to the 25,000 oz per annum production level once the RBZ restores foreign exchange payments to their correct and legislated levels. &nbsp;Management continues to engage proactively with the RBZ to ensure that gold already delivered is promptly paid for. &nbsp;Hopefully at some stage during 2008 Blanket will be able to focus on completing the No.4 shaft expansion project in order to realize the planned increase in production to 40,000 oz per annum, and to continue with the underground development necessary to open up sufficient reserves to sustain the planned increase in production, and to further explore ways to control costs in the hyperinflationary environment.</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">In Zambia, the Nama Cobalt Project continued to progress well and the focus for this year will be on advancing the project through to the development phase, provided the Chinese Feasibility Study and the subsequent Bankable Feasibility Study allow sufficient funds to be raised. &nbsp;Two National Instrument (&#147;NI&#148;) 43-101 resource statements, compiled by a qualified independent, covering Anomaly A and C were published in 2007. &nbsp;Drilling programs were undertaken in 2007 and a total of 4,099 meters diamond drilling and 5,560 meters of reverse circulation drilling was completed. The assay and modeling results from the 2007 drilling program are being evaluated along with the historic drill results and a further Independent Technical Report will be issued once the 2007 drilling evaluation is completed. &nbsp;The Environmental Impact Assessment for Nama, covering the new access road and power line routes, was completed and has
 been submitted to the Zambian authorities for approval.</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Negotiations with cobalt end-users continued during the year and have recently resulted in the successful conclusion of four off-take agreements to supply a total of 51,560 tonnes of cobalt metal equivalent from 2009 to 2013.</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Turning to our other assets, we recently signed agreements for the sale of the Barbrook and Eersteling companies including their liabilities of $1.59 million for a total cash consideration of $12.91 million. These transactions are expected to close during the second and third quarter of this year respectively.</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">The sale of Eersteling has necessitated the transfer of the Rooipoort platinum interest from Eersteling into our 100% South African subsidiary Maid O&#146; The Mist (Pty) Ltd, a process which is well underway. &nbsp;We have also applied for three Prospecting Licenses on highly prospective PGE properties located on the Eastern limb of the Bushveld Igneous Complex in South Africa and await the granting of these licenses. &nbsp;We have commenced negotiations with a suitable JV partner for our platinum interests as the Corporation&#146;s focus for the next few years will be on Nama. &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">Looking to the year ahead, the Corporation&#146;s priority focus will be on developing the Nama cobalt project by completing a favorable feasibility study and raising sufficient funding with a view to starting operations as early in 2009 as possible. &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Arial"><BR></font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">On behalf of the Board of Directors,</font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial"><B>S. E. Hayden </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31 March, 2008</font></P>
<P style="margin:0px; font-family:Shruti" align=justify><font face="Arial">President and Chief Executive Officer</font></P>
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<P style="margin:0px; font-family:Times" align=center><font face="Arial">4</font></P>
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<P style="line-height:16pt; margin-top:0px; margin-bottom:-21.333px; padding-left:192px; text-indent:-192px; font-family:Shruti; font-size:14pt"><B><font face="Arial">CALEDONIA MINING CORPORATION</font></B></P>
<P style="line-height:16pt; margin:0px; padding-left:192px; text-indent:144px; font-family:Shruti; font-size:14pt" align="right"><B><font face="Arial">March 31, 2008</font></B></P>
<P style="line-height:16.15pt; margin-top:0px; margin-bottom:15.533px; padding-right:165.533px; font-size:14pt" align=justify><B><font face="Times New Roman">Management&#146;s Discussion and Analysis</font> </B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">This discussion and analysis of the consolidated operating results and financial condition of Caledonia Mining Corporation (&quot;the Corporation&#148;) for the fiscal years ended December 31, 2007, December 31, 2006 and December 31, 2005 should be read in conjunction with the Consolidated Financial Statements and Press Releases issued by the Corporation, all of which are available from the System for Electronic Data Analysis and Retrieval at <FONT style="color:#0000FF"><U>www.sedar.com</U></FONT> or from the Corporation&#146;s website at <FONT style="color:#0000FF"><U>www.caledoniamining.com</U></FONT>. &nbsp;The Consolidated Financial Statements and related notes have been prepared in accordance with Canadian Generally Accepted Accounting Principles (&#147;GAAP&#148;).</font> </P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Note that all currency references in this document are to Canadian dollars.</font> </B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">All figures are in thousands of Canadian Dollars unless otherwise specified.</font></B></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Overall Performance</font></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:19.733px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation was formed in February 1992 and is listed on the Toronto Stock Exchange as &#147;CAL&#148;, on NASDAQ-OTCBB as &#147;CALVF&#148;, and on London&#146;s AIM as &#147;CMCL&#148;.</font> </P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">1. &nbsp;&nbsp;&nbsp;&nbsp;VISION AND STRATEGY</font></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation is an exploration, development and mining company with a large primary cobalt deposit in Zambia, a producing gold operation in Zimbabwe, two non-producing gold mines in South Africa which are in the process of being sold, and a diversified exploration portfolio of PGE projects in South Africa, diamond projects in Canada, Zambia and South Africa, one of which is in joint venture with an unrelated company. &nbsp;The Corporation&#146;s objective is to develop its asset base into a significant diversified international mining company through profitable cobalt and gold production and successful exploration activity, focused primarily on Southern Africa.</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation&#146;s business model is to identify and acquire properties or projects early in the development cycle which have the potential to become low cost operations, and then add value by developing the asset, either as an operator or through a joint venture agreement. &nbsp;The possibility of divestiture in whole or part will be considered at different points in time and will be governed by the benefit to shareholders. Where appropriate, the Corporation will seek strategic alliances with well-managed exploration or operating companies through existing or new joint ventures.</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation has a strong management team and Board of Directors with diverse expertise in mineral exploration, mine development, finance, production and marketing.</font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:19.733px; font-size:11pt" align=justify><font face="Times New Roman">With the expectation of continuing high levels of commodity prices over the long term, the Corporation is following the strategy of diversification through its current exploration activities for cobalt, gold, platinum group metals, base metals and diamonds. &nbsp;With the potential of improved political conditions in many Southern African countries, the Corporation is reviewing mining opportunities in these countries. &nbsp;&nbsp;</font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:19.733px; font-size:11pt" align=justify><font face="Times New Roman">The sales of the Barbrook and Eersteling Gold mines in South Africa are expected to be completed during the second and third quarter of 2008 respectively.</font> </P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OPERATIONS</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Blanket Mine (1983) Private Limited - Gold &nbsp;</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Blanket Mine owned by the Corporation&#146;s 100% held subsidiary Caledonia Holdings Zimbabwe is located 560 km south of Harare the capital city of Zimbabwe and 150 km south of Bulawayo, the country&#146;s second largest city. &nbsp;The town of Gwanda, the provincial capital of Matabeleland South, is located 16 km from the mine. &nbsp;The mine is situated in the Gwanda Greenstone Belt from which gold was first produced in the 1800&#146;s. &nbsp;Blanket Mine owns extensive claims throughout this belt. The mine property was first pegged</font> </P>
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<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">5</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">in 1904 with mining and metallurgical plant operations starting in 1906. The mine to date has produced over a million ounces of gold. &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:2.133px; margin-bottom:2px; font-size:11pt" align=justify><B><font face="Times New Roman">Geological Setting</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Like most of the gold mines in Zimbabwe, the Blanket Mine is situated in a typical greenstone terrain, the 70 km long by 15 km wide Gwanda Greenstone belt. &nbsp;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 one of three remaining large, gold producers, from a belt that has had no less than 268 operating mines over time. &nbsp;The other two current producers are the neighbouring Vubachikwe mine owned and operated by Forbes and Thompson and the Jessie mine on the south eastern end of the belt and owned by F. A. Stewart Pvt. Ltd.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Property Geology</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Blanket mine is part of the group that makes up the North Western Mining camp also called the Sabiwa group of mines extending from Jethro to the south, through Blanket itself, &nbsp;to the currently defunct Feudal, AR South, AR Main, Sheet, Eroica and Lima mines. Gold showings from Sabiwa, Jean, Provost, Redwick, Old Lima and Smiler form a northern continuation of the Vubachikwe property where gold is hosted by banded iron formations.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">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 mineralisation. &nbsp;It is generally on this lithology type that the various 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 nearby Vubachikwe mine complex. &nbsp;The active Blanket ore bodies are found on the next unit, the mafics. An andesitic unit which lies to the west, caps this whole stratigraphy. &nbsp;A regional dolerite sill cuts the entire sequence from Vubachikwe through Blanket to Smiler.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Ore bodies at Blanket are epigenetic. They are associated with a later, regionally developed deformation zone characterized by areas of high strain, wrapping around relatively underformed remnants of the original basaltic lava flows. It is within the higher strain regime (highly sheared rocks) that the wider of the ore bodies are located.</font></P>
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<P style="margin:0px; font-family:Times" align=justify><B><font face="Times New Roman">Summary of Reserves and Resources at Blanket Mine at December 31, 2007</font></B></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=248.133></TD><TD width=113></TD><TD width=113.4></TD><TD width=122.867></TD></TR>
<TR><TD style="border-left:1px solid #000000; border-top:1px solid #000000; border-bottom:2px solid #000000" colspan=2><P style="margin:0px" align=justify><font face="Times New Roman"><B>MINERAL RESERVES </B>( at a Gold price of US$500/oz)</font></P>
</TD><TD style="border-top:1px solid #000000; border-bottom:2px solid #000000" width=113.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:2px solid #000000" width=122.867><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000" width=248.133><P style="margin:0px" align=justify><B><font face="Times New Roman">Classification</font></B></P>
</TD><TD style="border-right:1px solid #000000" width=113><P style="margin:0px" align=justify><B><font face="Times New Roman">Tonnes</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113.4><P style="margin:0px" align=justify><B><font face="Times New Roman">Grade Au g/t</font></B></P>
</TD><TD style="border-right:2px solid #000000; border-bottom:1px solid #000000" width=122.867><P style="margin:0px" align=justify><B><font face="Times New Roman">Gold Content (oz)</font></B></P>
</TD></TR>
<TR><TD style="border-left:2px solid #000000; border-top:2px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=248.133><P style="margin:0px" align=justify><B><font face="Times New Roman">Proven Ore</font></B></P>
</TD><TD style="border-top:2px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=113><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:2px solid #000000; border-bottom:1px solid #000000" width=122.867><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000; border-bottom:2px solid #000000" width=248.133><P style="margin:0px" align=justify><font face="Times New Roman">Total Proven Ore including Pillars</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113><P style="margin:0px" align=justify><font face="Times New Roman">1,301,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113.4><P style="margin:0px" align=justify><font face="Times New Roman">3.84</font></P>
</TD><TD style="border-right:2px solid #000000; border-bottom:2px solid #000000" width=122.867><P style="margin:0px" align=justify><font face="Times New Roman">160,800</font></P>
</TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=248.133><P style="margin:0px" align=justify><B><font face="Times New Roman">Probable Ore</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:2px solid #000000; border-bottom:1px solid #000000" width=122.867><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000; border-bottom:2px solid #000000" width=248.133><P style="margin:0px" align=justify><font face="Times New Roman">Operating and Development Areas</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113><P style="margin:0px" align=justify><font face="Times New Roman">2,332,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113.4><P style="margin:0px" align=justify><font face="Times New Roman">3.74</font></P>
</TD><TD style="border-right:2px solid #000000; border-bottom:2px solid #000000" width=122.867><P style="margin:0px" align=justify><font face="Times New Roman">280,400</font></P>
</TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000; border-bottom:2px solid #000000" width=248.133><P style="margin:0px" align=justify><B><font face="Times New Roman">Total Proven + Probable Ore</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113><P style="margin:0px" align=justify><B><font face="Times New Roman">3,633,000</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113.4><P style="margin:0px" align=justify><B><font face="Times New Roman">3.78</font></B></P>
</TD><TD style="border-right:2px solid #000000; border-bottom:2px solid #000000" width=122.867><P style="margin:0px" align=justify><B><font face="Times New Roman">441,200</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-bottom:2px solid #000000" colspan=2><P style="margin:0px" align=justify><font face="Times New Roman"><B>MINERAL RESOURCES</B> (at a Gold price of US$500/oz)</font></P>
</TD><TD style="border-bottom:2px solid #000000" width=113.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=122.867><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000" width=248.133><P style="margin:0px" align=justify><B><font face="Times New Roman">Classification</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113><P style="margin:0px" align=justify><B><font face="Times New Roman">Tonnes</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113.4><P style="margin:0px" align=justify><B><font face="Times New Roman">Grade Au g/t</font></B></P>
</TD><TD style="border-right:2px solid #000000; border-bottom:1px solid #000000" width=122.867><P style="margin:0px" align=justify><B><font face="Times New Roman">Gold Content (oz)</font></B></P>
</TD></TR>
<TR><TD style="border-left:2px solid #000000; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=248.133><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=113.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:2px solid #000000; border-bottom:1px solid #000000" width=122.867><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000; border-bottom:2px solid #000000" width=248.133><P style="margin:0px" align=justify><B><font face="Times New Roman">&nbsp;Indicated</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113><P style="margin:0px" align=justify><font face="Times New Roman">520,300</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113.4><P style="margin:0px" align=justify><font face="Times New Roman">3.79</font></P>
</TD><TD style="border-right:2px solid #000000; border-bottom:2px solid #000000" width=122.867><P style="margin:0px" align=justify><font face="Times New Roman">63,400</font></P>
</TD></TR>
<TR><TD style="border-left:2px solid #000000; border-right:1px solid #000000; border-bottom:2px solid #000000" width=248.133><P style="margin:0px" align=justify><B><font face="Times New Roman">Inferred</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113><P style="margin:0px" align=justify><font face="Times New Roman">2,519,800</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:2px solid #000000" width=113.4><P style="margin:0px" align=justify><font face="Times New Roman">5.27</font></P>
</TD><TD style="border-right:2px solid #000000; border-bottom:2px solid #000000" width=122.867><P style="margin:0px" align=justify><font face="Times New Roman">**</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top colspan=2><P style="margin:0px" align=justify><font face="Times New Roman">Tonnages and ounces are rounded to the nearest 100</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=113.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=122.867><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top colspan=4><P style="margin:0px" align=justify><B><font face="Times New Roman">Note **</font></B> <font face="Times New Roman"> &nbsp;In keeping with the requirements of NI 43-101, Inferred Resources are reported without estimates &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of metal quantities.</font></P>
</TD></TR>
</TABLE>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:96px; text-indent:-48px" align=justify><font face="Times New Roman">(i)</font></P>
<P style="margin:0px; padding-left:96px" align=justify><font face="Times New Roman">1 tonne = 1,000 kilograms = 2,204.6 pounds</font></P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:96px; text-indent:-48px" align=justify><font face="Times New Roman">(ii)</font></P>
<P style="margin:0px; padding-left:96px" align=justify><font face="Times New Roman">Some numbers may not add due to rounding</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">6</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Mr. David Grant, C. Geol, FGS, Pr. Sci. Nat., an independent consultant is the &#147;Independent Qualified Person&#148; for Blanket&#146;s reserves and resources as required by National Instrument 43-101 of the Canadian Securities Administrators.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-family:Times; font-size:11pt" align=justify><B><font face="Times New Roman">Metallurgical Process</font> </B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Run of mine ore is crushed to &#150; 12mm in the 3 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, before being passed through two 30 inch Knelson Concentrators where approximately 49% of total gold production is recovered as gravity gold. &nbsp;The Knelson Concentrator tails are pumped through cyclones whose underflow reports to a 3.66 meter by 4.9 meter, 750 kW regrind ball mill. &nbsp;The product from the regrind mill is pumped into a carbon-in-leach (&#147;CIL&#148;) plant consisting of eight, 600 cubic meter leach tanks each equipped with 45 kW mixers where leaching at 50% solids and simultaneous adsorption of dissolved gold onto activated carbon takes place.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Elution of the gold from the loaded carbon and subsequent electro-winning is done on site. Gold is deposited on wire wool cathodes, the loaded cathodes are acid-digested and the resultant gold solids are smelted after which the bullion is delivered, as required by Zimbabwean law to the Government-operated Fidelity Printers and Refiners. &nbsp;The Reserve Bank of Zimbabwe (&#147;RBZ&#148;) is then responsible for payment of the gold delivered which has been nominated for payment either as 100% in the local currency or as to 35% in the local currency and 65% in foreign (US Dollar) currency amounts.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The CIL plant has a design capacity of 3,800 tonnes of milled ore per day, from its previous use for reclaimed tailings processing. The present crushing and milling circuit is being expanded from 600 tonnes per day to 1,000 tonnes per day ore throughput capacity to handle the planned increase in mine production from the No 4 shaft expansion project. The plant tailings are reduced in cyanide content and deposited on two licensed tailing impoundment areas.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Production Operations</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The underground workings produce 600 tonnes of ore daily using a long-hole open stoping method. &nbsp;Ore is trammed to one of a number of shafts and hoisted to surface. &nbsp;The current capital program at the No. 4 shaft will, once it becomes operational, streamline the ore hoisting and increase the overall hoisting capacity at the mine to over 1,000 tonnes per day. &nbsp;Blanket employs approximately 800 people.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height: 13pt; font-size: 11pt; margin-top: 0px; margin-bottom: 12.2px" align=justify><B><font face="Times New Roman">3. &nbsp;&nbsp;&nbsp;&nbsp;DISCONTINUED OPERATIONS</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Barbrook Mines Limited</font> </B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">On February 21, 2008 the Corporation accepted an offer from Eastern Goldfields to purchase the entire issued share capital in Barbrook Mines Limited, its debts to the Corporation, and its payables of approximately $1,440,000 for approximately $9,100,000.</font> </P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Eersteling Gold Mining Company Limited</font></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">On March 3, 2008 the Corporation signed an Interim Agreement with a private Canadian company to purchase the entire issued share capital in Eersteling Gold Mining Company Limited (&#147;EGM&#148;) for $3,810,000 excluding the Rooipoort platinum exploration assets currently held by EGM which are in the process of being transferred to Maid O&#146; The Mist, a 100% held South African subsidiary of the Corporation.</font> </P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">4. &nbsp;&nbsp;&nbsp;&nbsp;MARKETING</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">All gold bullion produced in Zimbabwe is delivered to Fidelity Printers and Refiners in Harare and sold under various methods of election, more fully described in Section 6.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">7</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">5. &nbsp;&nbsp;&nbsp;&nbsp;KEY PERFORMANCE FACTORS</font> </B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:19.733px; font-size:11pt" align=justify><font face="Times New Roman">The key performance factor of a gold mine is the ability to produce gold at a cost per ounce that is low enough to pay all obligations and generate an acceptable return to shareholders. &nbsp;The price of gold is established in an international market. &nbsp;&nbsp;The price of gold plays a large part in determining the profitability of gold mines and similarly the Zimbabwean dollar price of gold plays a large part in determining the profitability of Zimbabwean gold mines. &nbsp;During 2007, the USD gold price per ounce ranged from a low of $608 to a high of $834 i.e. a 37% increase. &nbsp;The benefit of this increase was not fully realized in Zimbabwe as gold is not sold at international prices but in terms of Government Monetary policy (more fully described under 6 below) which results in a discounted gold price being received irrespective of whether it is paid for solely in Zimb
abwe Dollars or a combination of US Dollars (65%) and Zimbabwe Dollars (35%). &nbsp;</font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Blanket Mine has been consolidated into the results of the Corporation from July, 1, 2006. During 2007 the Zimbabwe economy continued to falter with inflation moving from 1,200% at the beginning of the year to 25,000% pa by year end and to 100,000% by the end of February 2008. &nbsp;The Zimbabwe dollar was officially devalued against the US dollar during the third quarter of 2007 from Z$250:USD1 to Z$30,000: USD1 and remained at that fixed rate to year end. &nbsp;The Corporation believes it is appropriate to consolidate Blanket Mine into its annual financial statements as it exercises control over the operations, is able to sell &nbsp;65% of gold produced in US dollars, retain these US dollars in a foreign currency, and has government approval to make loan repayments from its available foreign currency funds.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During the year the gold support price was reviewed more regularly than in previous years but because of high inflation and declining value of the Zimbabwe Dollar, gold continued to be sold to the Government pursuant to the current Zimbabwean legislation at a substantial discount to the international price as detailed above.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Negotiations are currently in progress with a suitable partner regarding a &#147;farm-in&#148; arrangement in respect of the Corporation&#146;s PGE assets. &nbsp;Platinum, palladium, nickel and copper &#150; the principle contained metals in the PGE properties as well as gold, previously discussed, have shown substantial price increases in 2007 and will render the properties more attractive to JV partners.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:11.133px; font-size:11pt" align=justify><B><font face="Times New Roman">6. &nbsp;&nbsp;&nbsp;&nbsp;SELECTED ANNUAL INFORMATION -</font> </B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The following information is given for the last three fiscal year-ends of the Corporation:</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=289.733></TD><TD width=104.6></TD><TD width=104.6></TD><TD width=104.6></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=289.733><P style="margin-top:0px; margin-bottom:11.133px" align=justify><B><font face="Times New Roman">C$000&#146;s except for earnings per share amounts.</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">December 31, 2007</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:normal; margin:0px; font-size:11pt" align=justify><font face="Times New Roman"><B>December 31, 2006 </B><FONT style="font-size:8pt"><B>(1)</B></FONT></font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:normal; margin:0px; font-size:11pt" align=justify><font face="Times New Roman"><B>December 31, 2005 &nbsp;</B><FONT style="font-size:8pt"><B>(1)</B></FONT></font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Net sales or total revenues</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">10,039</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">13,586</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">6</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Net (loss) or income before discontinued items or extraordinary items:</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">- per share undiluted</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">- per share diluted</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(3,906)</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.008)</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.008)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">2,315</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">$0.005</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">$0.005</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(3,748)</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.012)</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.012)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Discontinued &nbsp;Operations</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(709)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(7,990)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(5,932)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Net (loss)</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(4,615)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(5,675)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(9,680)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">&nbsp;- per share undiluted</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">- per share diluted</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.009)</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.009)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.013)</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.013)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.031)</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">($0.031)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Comprehensive (loss)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(4,703)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(5,675)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(9,680)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Total assets</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">29,492</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">31,456</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">22,338</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Total long-term financial liabilities</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1,054</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1,221</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">377</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=289.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Cash dividends declared per share</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Nil</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Nil</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=104.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Nil</font></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Times New Roman">&nbsp;(1) Figures have been reclassified to reflect Barbrook and Eersteling Mines under Discontinued Operations.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The above data was prepared in accordance with Canadian Generally Accepted Accounting Principles.</font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The results for 2007 and prior years have been presented on the basis that Barbrook and Eersteling Mines</font> </P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">8</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">are discontinued operations and are classified as assets for sale. Neither sale transaction was concluded by December 31, 2007 but subsequent Sale Agreements for the purchase of the entire share capital of Barbrook Gold Mines Limited and Eersteling Gold Mining Company were signed with two independent buyers. &nbsp;The price for Barbrook is approximately $9,100,000 and for Eersteling is $3,810,000.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The above results for 2007 include Blanket Mine&#146;s results for the 12 months ending December 2007. During 2007 gold production at Blanket was disrupted by the shaft expansion project from February until the end of July. &nbsp;The delays were caused by a combination of frequent power cuts and the irregular and partial payment of US Dollars for gold delivered. &nbsp;&nbsp;During this period production was focused on processing sands as underground operations were curtailed by the shaft closure for equipping. &nbsp;Due to the economic climate in Zimbabwe, Blanket did not receive the full US Dollar proceeds for gold sales and thus the completion of the shaft expansion project was not possible. &nbsp;&nbsp;Entirely as a result of these factors Blanket has not been able to achieve and sustain gold production even at the levels achieved prior to the shaft expansion.</font></P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">For the year ended December 31, 2007, the Corporation recorded a net loss after taxes, before discontinued operations, of $3,906,000 ($2,315,000 income in 2006 and a $3,748,000 loss in 2005), of which Blanket Mine contributed a loss of $510,000. &nbsp;&nbsp;Included in the 2007 loss is a foreign exchange loss of $1,012,000 ($143,000 gain in 2006 and a $50,000 loss in 2005). &nbsp;Blanket Mine reported an unrealized loss on foreign exchange of $1,203,000 during 2007. &nbsp;During 2007 the gross income from operations (before discontinued operations) was $294,000 ($5,014,000 income in 2006 and a $751,000 loss in 2005).</font> </P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During 2007 the carrying value of $750,000 of the Kikerk Lake venture was written off leading to a total asset write-down of $750,000 ($nil in 2006 and $152,000 in 2005 of other mineral properties). &nbsp;&nbsp;The income tax expense of $5,000 relates to withholding taxes paid by Blanket Mine. The operating income of $294,000 includes an amortization charge of $18,000 ($40,000 in 2006 and $27,000 in 2005).</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Blanket Mine recorded revenue for the 12 months of $10,001,000 from the 13,985 ounces of gold sold. &nbsp;During 2007 the RBZ (RBZ) stipulated various possible payment methods for gold sales. The methods varied from &#147;65% of revenue in USD and 35% of revenue in Zimbabwean dollars (&#147;Z$&#148;) to 100% revenue received in Z$ if gold is sold at the gold support price. &nbsp;During the same period, the official exchange rate in Zimbabwe changed from Z$250 per US$1 to Z$30,000 per US$1.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The changes in the gold support price and the effective exchange rate received are shown in the table below</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=217.4></TD><TD width=66.133></TD><TD width=66.133></TD><TD width=75.6></TD><TD width=66.133></TD><TD width=66.2></TD><TD width=75.6></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=217.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Jan</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Feb</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Mar</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Apr</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">May</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">June</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Ave gold price USD/oz</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">631</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">665</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">655</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">679</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">667</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">655</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Z$ Gold support price per gm</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">16,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">16,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">16,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">16,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">350,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">1,000,000</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Effective Z$:USD exchange rate</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">789</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">748</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">760</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">733</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">16,322</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">47,489</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Old Mutual Implied Rate&#150; Z$&#146;s per US$1</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">3,508</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">5,735</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">16,646</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">17,618</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">26,794</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">126,828</font></P>
</TD><A NAME="OLE_LINK3"></A><A NAME="OLE_LINK6"></A><A NAME="_Hlk193188868"></A></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Effective discount to gold price based on buying power of the Z$</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">78%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">87%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">95%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">96%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">39%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">63%</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top colspan=7><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Jul</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Aug</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Sept</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Oct</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Nov</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Dec</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Ave gold price USD/oz</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">665</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">665</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">713</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">755</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">806</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">803</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Z$ Gold support price per gm</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">3,000,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">3,500,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">4,000,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">5,000,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">7,500,000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">10,000,000</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Effective Z$:USD exchange rate</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">140,324</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">163,712</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">174,503</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">205,995</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">289,440</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">387,362</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Old Mutual Implied Rate&#150; Z$&#146;s per US$1</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">139,747</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">141,164</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">298,371</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">884,062</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">2,545,416</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; font-size:9pt" align=justify><font face="Times New Roman">4,422,203</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=217.4><P style="line-height:11pt; margin:0px; font-family:Times; font-size:9pt" align=justify><font face="Times New Roman">Effective discount to gold price based on buying power of the Z$</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">0%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">0%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">42%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">77%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.2><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">89%</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:11pt; margin:0px; text-indent:28.8px; font-size:9pt" align=justify><font face="Times New Roman">91%</font></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">In January 2008 the gold support price was increased to Z$100 million per gram and in March 2008 was further increased to Z$700 million per gram.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">9</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During the year, the quarterly results (&#147;Q&#148;) of Blanket Mine have been translated into C$ using the rates of exchange (&#147;ROE&#148;) per the table below.</font> </P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">&nbsp;</font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=198.467></TD><TD width=85></TD><TD width=75.6></TD><TD width=75.6></TD><TD width=75.6></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=198.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Z$&#146;s per C$1</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Q4 ROE</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Q3 ROE</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Q2 ROE</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Q1 ROE</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=198.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Sales revenue</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">275,926</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">156,590</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">14,220</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">713</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=198.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Other income statement items</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">260,870</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">150,507</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">21,070</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">758</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=198.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Monetary assets and liabilities</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">378,644</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">168,645</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">47,451</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">758</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=198.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">All other assets and liabilities</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">&nbsp;&nbsp;101.19</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">101.19</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">101.19</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">101.19</font></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The use of the above rates is a change in estimate, and the rates are determined as follows:</font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=207.867></TD><TD width=321.333></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=207.867><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Sales Revenue</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=321.333><P style="line-height:13pt; margin:0px; text-indent:1.133px; font-size:11pt" align=justify><font face="Times New Roman">The actual rate of exchange received on gold sales depending on the sale method chosen</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=207.867><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Other income statement items</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=321.333><P style="line-height:13pt; margin:0px; text-indent:1.133px; font-size:11pt" align=justify><font face="Times New Roman">The average effective rate of exchange determined by the gold support price during the quarter</font> </P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=207.867><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Monetary assets and liabilities</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=321.333><P style="line-height:13pt; margin:0px; text-indent:1.133px; font-size:11pt" align=justify><font face="Times New Roman">The quarter end effective rate of exchange determined by the gold support price during the quarter</font> </P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=207.867><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">All other assets and liabilities</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=321.333><P style="line-height:13pt; margin:0px; text-indent:1.133px; font-size:11pt" align=justify><font face="Times New Roman">Historic rate determined at July 1, 2006</font></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During 2007, the Corporation invested $3,250,000 in capital assets and mineral properties ($3,579,000 in 2006 and $5,284,000 in 2005). &nbsp;&nbsp;Of the amount invested in 2007, Blanket Mine spent $616,000 Nama spent $2,470,000 and Rooipoort spent $141,000. During the year $4,380,000 was raised from private placements, and the exercise of warrants and options, ($7,559,000 in 2006 and $6,588,000 in 2005) all net of issue costs.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The basic net income/ (loss) per share, <A NAME="OLE_LINK1"></A><A NAME="OLE_LINK2"></A>for continuing operations, of ($0.008) in 2007, ($0.005 in 2006 and ($0.012) in 2005) has been calculated using a weighted average number of shares of 477,930,290 (423,838,628 for 2006 and 313,565,142 for 2005).</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The funds raised were used to finance exploration activities at Nama and Rooipoort, to fund the holding costs at Barbrook and Eersteling Mine and to provide working capital for Greenstone Management Services. &nbsp;Capital projects at Blanket Mine were funded from internally generated funds.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation had related party transactions with several of the Corporation&#146;s Directors relating to their compensation and members of the President&#146;s family in fiscal years 2007, 2006 and 2005. &nbsp;They are detailed in Note 10 to the Corporation&#146;s December 31, 2007 audited financial statements. &nbsp;&nbsp;It is expected that related party transactions of a similar nature will continue during the current fiscal year of the Corporation.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><B><font face="Times New Roman">7.</font></B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; text-indent:48px; font-size:11pt" align=justify><B><font face="Times New Roman">OPERATIONAL REVIEW AND RESULTS OF OPERATIONS</font></B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify><font face="Times New Roman">The plans for the non-revenue generating exploration projects continue to be determined by the availability of funds and are more fully described below.<A NAME="OLE_LINK4"></A><A NAME="OLE_LINK5"></A></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><B><font face="Times New Roman">7.1</font> </B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:7.333px; text-indent:37.8px; font-size:11pt" align=justify><B><font face="Times New Roman">Gold Production</font> </B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify><B><font face="Times New Roman">Blanket Mine &#150; Zimbabwe</font></B></P>
<P style="line-height:13pt; margin-top:4.867px; margin-bottom:4.867px; font-size:11pt" align=justify><B><font face="Times New Roman">Safety, Health and Environment</font></B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">The mine recorded four lost time injuries, including one fatality, and four restricted work activity cases during the period. &nbsp;This is compared to the same period in 2006 which recorded three lost time and 7 restricted work activity cases. &nbsp;With the exception of the single fatality, the reduction in incidents in restricted work activity cases was attributable to the intensive safety training undertaken under the National Occupational Safety Association (&#147;NOSA&#148;). &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">10</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">An occupational health centre has been established and all employees were screened for occupational ailments. &nbsp;There were no occupational health illnesses detected during the year. &nbsp;HIV/AIDS continues to be an area of concern and management has put in place awareness programs to educate workers. The prevalence of medical retirees is increasing due to the HIV/AIDS pandemic.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Mine continues to monitor the ground water in the ground-water pumping wells downstream of the tailings impoundment. &nbsp;Results continue to be well within the Governmental Environmental Management Agent (&#147;EMA&#148;) minimum levels. &nbsp;Re-grassing of the slopes on Dam B was undertaken and is ongoing. &nbsp;As a result of management&#146;s continuing efforts to improve pollution control measures at Blanket Mine, the EMA has now upgraded the slimes dam from the red to the yellow category and management intends to strive for achievement of the highest (&#147;green&#148;) safety category.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Capital Projects</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Number 4 Shaft Expansion Project</font></I></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Projects at Blanket focused mainly on the expansion program which involved the upgrading of the No. 4 shaft and the crushing/milling section of the plant. &nbsp;Shaft equipping of the No. 4 shaft continued throughout the year and was completed at the end of October. &nbsp;Work remaining to complete the shaft upgrade includes the equipping of loading and ore bin arrangements at the shaft bottom as well as the installation of a crusher and conveyor system to reduce the size of the ore prior to hoisting.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">This expansion project is designed to facilitate the increase in underground production from the current 600 tonnes per day (&#147;tpd&#148;) to 1,000 tpd. &nbsp;This should enable the total gold recovered to increase from 25,000 oz to 40,000 oz per annum.</font> </P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Operations</font></I></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Contrary to the project plan, Blanket suffered a prolonged unplanned No4 shaft closure from February to the end of July which was beyond Management&#146;s control and was due mainly to a lack of power supply and severely restricted foreign currency receipts from the RBZ. &nbsp;During July, production was halted and the mine put on care and maintenance to save costs as the high grade sands being processed during this period were depleted and the contractor cost of transporting the sands to the plant escalated to an uneconomic level. &nbsp;In order to gain rapid access to the new mid-shaft loading bins underground, the decision was taken to speed up equipping of the No. 4 shaft by operating around the clock when power availability allowed. &nbsp;This decision paid some dividends, as Blanket was able to partially commission the No. 4 shaft to haul from 14 level at the end of July, thereby allowing the resumption o
f some underground operations building up to the planned production level of up to 600 tonnes per day. However recurring power outages continued to cause major disruptions to the final quarter operations, but these were eventually resolved by the mine undertaking to pay the Zimbabwe Electricity Supply Authority (&#147;ZESA&#148;) in foreign currency for its power supply. &nbsp;Absenteeism, power supply problems, and the consistent withholding of foreign currency by the RBZ so severely limited Blanket&#146;s ability to restore production to the 600 tpd level that it was unachievable. &nbsp;The RBZ controls all foreign currency needed by Blanket which includes US Dollars from gold sales proceeds and payments to ZESA and certain suppliers, and also South African Rand required for certain supplier payments. &nbsp;Gold production has averaged 1,000 ounces per month since underground mining operations were resumed in July 2007 compared to the pre-shaft expansion target of 2,100 ounces per month.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Frequent power disruptions during the last two quarters of the year allowed the shafts and metallurgical plant to operate for only 86% of the available time, processing 100,082 tonnes instead of a forecast 178,000 tonnes. &nbsp;&nbsp;Both the nearly completed No. 4 shaft expansion and the plant are currently running well although foreign currency shortages are beginning to affect the plant availability, in particular the crushing and screening plant and the carbon in leach (C.I.L) sections due to the inability to purchase critical wear parts due to the foreign currency delays. &nbsp;Discussions are ongoing with RBZ to try to improve the receipt of US Dollars for gold delivered.</font></P>
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<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">11</font></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
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<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=209.333></TD><TD width=94.533></TD><TD width=71.933></TD><TD width=71.933></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top colspan=2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Production results for year to December 2007</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">2007</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">2008 Jan.- Feb.</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Ore mined</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">tonnes</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">100,082</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">17,165</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Development advance (ROM)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">meters</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">669</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">85</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Development advance (Capital)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">meters</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">504</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">26</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Ore milled</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Tonnes</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">100,082</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">17,285</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Ore Gold Grade milled</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">grams/tonne</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">3.58</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">3.51</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Ore &#150; Gold Recovered</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">ounces</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">9,885</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1,719</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Sands Processed</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">tonnes</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">125,137</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">-</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Sands Grade</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">grams/tonne</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1.29</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">-</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Sands Gold Recovered</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">ounces</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">3,414</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">-</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Gold produced</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">ounces</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">13,299</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1,719</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=209.333><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Gold Sold</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=94.533><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">ounces</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">13,985</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1,876</font></P>
</TD></TR>
</TABLE>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Outlook</font></I></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The aims and objectives of Blanket Mine for 2008, subject to the return of reliable payment procedures for gold sales proceeds by the RBZ, are:</font> </P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">To complete the No. 4 shaft project in order to realize the planned increase in ore production to 1,000 tonnes per day and gold production to 3,330 ounces of gold per month.</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">To intensify underground development initiatives in order to open up sufficient reserves to sustain the planned increase in ore production.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">To explore ways of controlling input costs in a hyperinflationary environment (such as off-shore purchasing).</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">To explore ways of retaining key staff in a hyperinflationary economy.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">To formulate a development strategy for the exploration properties in the Gwanda Greenstone Belt.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">To focus employee and management attention and effort on issues of safety, health and environment.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">To focus on off-mine exploration to supply additional ore to the plant</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">7.2 &nbsp;&nbsp;&nbsp;&nbsp;Exploration and Project Development</font></B></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">COBALT AND BASE METALS</font> </B></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Nama Cobalt Project &#150; Zambia</font></B></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">&nbsp;</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Property</font></I></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Caledonia Nama Limited (&#147;Nama&#148;), a wholly owned subsidiary of the Corporation, holds a Retention License in northern Zambia on which near-surface cobalt/copper mineralization has been discovered. This area lies immediately northwest of the operating Konkola Copper mine and adjoins the extensive land holdings of Teal Mining and Exploration Limited. &nbsp;This Retention License covers an area of 80,625 hectares and is valid for two years.</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Work Completed</font></I></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The 2001/2002 soil sampling program carried out jointly by Nama and BHP Billiton was completed over the remainder of the original license areas not covered by Nama in its 1995 and 1996 soil sampling and drilling program. The 1995/1996 programs identified a number of high priority anomalous targets (anomalies A, B, C, D and E) within the required geological setting. &nbsp;&nbsp;Reverse Circulation (&#147;RC&#148;) drilling was carried out on anomalies A, B, C, and D to a depth of at least 150 meters. &nbsp;The 2001/2002 soil</font> </P>
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<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">12</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">sampling program results identified an additional 11 anomalous areas for further investigation including anomalies F to P. &nbsp;These targets have not yet been followed up in the search for copper/cobalt oxide and sulphide bodies.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">In the second quarter of 2004, a mini bulk sample of 30 tonnes was excavated at Nama A (Discovery) site and underwent successful screening tests and heavy media/gravity separation tests in South Africa. Following encouraging results, a further one tonne sample were sent for additional test work to fine tune the extraction process for the cobalt oxide.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During 2006 metallurgical test work provided a metallurgical flow-sheet. &nbsp;Two further bulk samples were taken from Anomaly A to enhance and refine the metallurgical processes and cost parameters for producing a marketable and economically viable cobalt product.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">In 2006/2007 a Technical Report, compliant with NI 43-101 was prepared for Anomaly A at Nama by Mr. David Grant, C.Geol., FGS, Pr.Sci.Nat., an independent consultant who is the &#147;Independent Qualified Person&#148; for Nama&#146;s resources as required by NI 43-101 of the Canadian Securities Administrators.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">In his report, which has been filed on SEDAR and is available on the Corporation&#146;s website, Mr. Grant estimates the Indicated Resources at Anomaly A as 43,656,000 tonnes grading 0.055% Co, 0.099% Cu and 0.011%Ni. &nbsp;Mr. Grant subsequently re-evaluated the data for Anomaly C and prepared an update to the previous Technical Report which included the following additional Indicated Resources for Anomaly C; 78,218,000 tonnes grading 0.043% Co, 0.012% Cu and 0.019% Ni. &nbsp;The combined resource is therefore 121,874,000 tonnes grading 0.047% Co, 0.043% Cu and 0.016% Ni. &nbsp;This second NI 43-101 report has been filed on Sedar and is available on the Corporation website.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Mr. Grant also states that Anomalies F through Q inclusive are worthy of further investigation.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Nama continued exploration on the Nama Retention License area during the 2007 field season. &nbsp;During the year $2,470 was spent on exploration consisting mainly of drilling diamond and reverse circulation holes. &nbsp;The results of the exploration activities will be released as soon as available.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Diamond drill core holes were drilled for both geological and bulk density measurement purposes. &nbsp;Bulk density measurements are required in order to determine ore volumes and tonnages for mining purposes with an acceptable level of accuracy. &nbsp;The bulk density drill holes were sited so as to provide information of a geological nature in critical areas and thereby provide the added benefit of improving the definition and understanding of the ore bodies. &nbsp;&nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">A total of 4,099 meters of Diamond drilling was completed during the 2007 exploration field season, and the breakdown per &nbsp;anomaly area is as follows:</font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=71.467></TD><TD width=154></TD><TD width=124.667></TD><TD width=274.2></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><U><font face="Times New Roman">Anomaly</font></U></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><U><font face="Times New Roman">Diamond Drill Holes</font></U></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><U><font face="Times New Roman">Meters Drilled</font></U></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=274.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><U><font face="Times New Roman">Comment</font></U></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">A</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">7</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; text-indent:31.933px; font-size:11pt" align=justify><font face="Times New Roman">1,769</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=274.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Geological and assay data</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">A</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">4</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=center><font face="Times New Roman">320</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=274.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Bulk Density &amp; Geological data</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">C</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">3</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=center><font face="Times New Roman">770</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=274.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Geological and assay data</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">C</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">8</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=center><font face="Times New Roman">640</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=274.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Bulk Density &amp; Geological data</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">D</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><U><font face="Times New Roman">6</font></U></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=center><U><font face="Times New Roman">600</font></U></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=274.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Bulk Density &amp; Geological data</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Total</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">28</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; text-indent:31.933px; font-size:11pt" align=justify><B><font face="Times New Roman">4,099</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=274.2><P><font face="Times New Roman">&nbsp;</font></P></TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">A total of 5,560 meters of Reverse Circulation drilling was completed during the 2007 exploration season and the breakdown per ore body area is as follows:</font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=71.467></TD><TD width=154></TD><TD width=124.667></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><U><font face="Times New Roman">Anomaly</font></U></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><U><font face="Times New Roman">RC Drill Holes</font></U></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><U><font face="Times New Roman">Meters Drilled</font></U></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">A</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">2</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; text-indent:41.4px; font-size:11pt" align=justify><font face="Times New Roman">&nbsp;160</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">C</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">23</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; text-indent:31.933px; font-size:11pt" align=justify><font face="Times New Roman">1,309</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">D</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><U><font face="Times New Roman">51</font></U></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; text-indent:31.933px; font-size:11pt" align=justify><U><font face="Times New Roman">4,091</font></U></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.467><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Total</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=154><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">76</font></B></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=124.667><P style="line-height:13pt; margin:0px; text-indent:31.933px; font-size:11pt" align=justify><B><font face="Times New Roman">5,560</font></B></P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">13</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
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<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=71.467></TD><TD width=154></TD><TD width=124.667></TD></TR>
</TABLE>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The earlier than usual onset of the rains in early November made it impossible to drill some outstanding areas of Anomaly D and Anomaly Q which is a prominent but untested geochemical target. &nbsp;In order to obtain at least some geological information on Anomaly Q in early 2008, a shallow pit and trench sampling program has been implemented. &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The diamond drill core was logged and split on site prior to dispatch to an accredited analytical laboratory in Kalulushi, Zambia for analysis of cobalt, copper, nickel and zinc, amongst others. &nbsp;Quality Control and Quality Assurance control procedures were put in place to verify the accuracy of the drill core splitting and handling and the laboratory results.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">All assay data has been received and is currently being verified and consolidated into the project database. &nbsp;The resource modelling and re-evaluation of the various anomalies is in progress and a revised independent Technical Report compliant with NI 43-101 standards will be issued once this work is completed.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The metallurgical testing to establish the likely product specification of the cobalt hydroxide product has been completed. &nbsp;Based on this metallurgical test work the cobalt hydroxide specification has been discussed with, and is acceptable, to the refiners who have signed purchase agreements for the cobalt hydroxide product.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Five year supply agreements have been finalized with four large Chinese refiners to supply a total of 51,560 tonnes of cobalt metal equivalent over a five year period commencing in 2009. &nbsp;Nerin China (Nanchang Engineering and Research Institute of Nonferrous Metals) has been commissioned to produce a Feasibility Study in accordance with the Regulations and Preparation Basis of a Project Feasibility Study Report for the Nonferrous Metals Industry, and related Chinese specifications and standards.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During the year the Nama Environmental Impact Assessment (EIA) covering the new access road and power line routes to the proposed Nama Plant Site was completed, and has been submitted to the Environmental Council of Zambia for their final approval. &nbsp;This EIA study is currently being expanded to cover the anticipated future mining operations at Nama. &nbsp;</font></P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; padding-left:3.533px; text-indent:-3.533px; font-size:11pt" align=justify><B><font face="Times New Roman">Rooipoort PGE/Ni/Cu Project (including Grasvally) - South Africa</font></B></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Property</font></I></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">In 2002, Eersteling Gold Mining Company Limited (&#147;EGM&#148;) acquired the Rooipoort property, containing platinum group elements (PGE), nickel (Ni) and copper (Cu), from Rustenburg Platinum, owned by Anglo Platinum Limited. The property is located approximately 30 km southwest of the Eersteling Gold Mine property in an area that is presently undergoing a surge in platinum group metal exploration along a well-mineralized feature known as the &#147;Platreef&#148;. &nbsp;An additional 342 hectares on the farm Grasvally, immediately adjacent to, and south of, the Rooipoort property was optioned in 2004, and over which the Company was granted a New Order Prospecting Right in May 2005 (3 year period). A further 43 hectare portion was granted in April 2006 (5 year period).</font> </P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Application for conversion of the Rooipoort property into a New Order Right in terms of the Mineral and Petroleum Development Act (&#147;MPRDA&#148;) was granted in November 2006.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">In March 2006, the Company concluded an agreement, with Falconbridge Ventures of Africa (Pty) Ltd (&#147;Falconbridge&#148;) to acquire a 100% interest in Falconbridge&#146;s prospecting rights covering a total area of 4,315.81 hectares contiguous with the Rooipoort property which effectively doubles the area of the Rooipoort Project property underlain by Bushveld Complex rocks with PGE potential. &nbsp;The Falconbridge properties were granted New Order Prospecting Rights in April 2006 (3,099 hectares, for a period of 5 years) and September 2006 (1,217 hectares, for a period of 5 years). The total area of EGM&#146;s New Order Prospecting Rights in the Rooipoort PGE/Ni/Cu properties is now 8473.39 hectares.</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">EGM&#146;s rights to the Rooipoort Project, together with the Falconbridge agreement are in the process of being transferred to Maid O&#146; The Mist (Pty) Ltd, a 100% South African registered subsidiary of the Corporation.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">14</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
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<P style="line-height:14pt; margin:0px; font-size:12pt" align=justify><font face="Times New Roman">&nbsp;&nbsp;</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Exploration</font></I></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">To date, the Company has diamond-drilled a total of 18,450 meters in 54 holes on the Rooipoort PGE/Ni/Cu Exploration Project. This drilling covers the full 6 km strike length that makes up the project area.</font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Falconbridge drilled a total of 7,393 meters in 22 holes on the portions of Grasvally and the farms Jaagbaan and Moorddrift that comprise most of the property purchased from Falconbridge.</font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">At the end of 2004, very preliminary, flotation amenability test work was performed at the SGS Lakefield laboratories in Johannesburg, South Africa on mineralized composite samples from 5 lithological units prepared from the early diamond drill-hole cores to verify the flotation amenability of the ore. The tests included milling and basic flotation to produce a flotation concentrate. The tests indicated that from each of the five mineralized zones, a re-cleaner flotation concentrate of low mass recovery can be produced that contains medium to high recovery of platinum, palladium, gold, copper and nickel. This initial test work indicates that a relatively simple metallurgical process route could possibly produce a flotation concentrate from high-tonnage, low-grade feed material.</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:7.333px; padding-left:3.4px; font-size:11pt" align=justify><font face="Times New Roman">In September 2005, an independent resource estimate was calculated and incorporated into a NI 43-101 - compliant report by RSG Global of Australia. The results of this estimate are:</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:4.867px; font-size:11pt" align=justify><B><font face="Times New Roman">Inferred Resource: At 0.5g/t 2PGE+Au and 200m below surface (900m base)</font></B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=56.733></TD><TD width=103.933></TD><TD width=85.067></TD><TD width=75.667></TD><TD width=47.2></TD><TD width=47.2></TD><TD width=40.067></TD><TD width=40.067></TD><TD width=42.733></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=56.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Zone</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=103.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Average True Width (m)</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Tonnes</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">2PGE+Au (g/t)</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=47.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Pt (g/t)</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=47.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Pd (g/t)</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=40.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Au (g/t)</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=40.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Ni %</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=42.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Cu %</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=56.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">M2</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=103.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1.8</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=85.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">12,791,200</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1.34</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=47.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.42</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=47.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.83</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=40.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.10</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=40.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.20</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=42.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.12</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=56.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">L3</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=103.933><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1.3</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=85.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">5,337,154</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.667><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1.15</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=47.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.59</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=47.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.51</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=40.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.05</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=40.067><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.15</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=42.733><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">0.10</font></P>
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<P style="margin:0px" align=justify><font face="Times New Roman">The resource estimate is the work of Dr. Julian Verbeek supported by Mr. Ken Lomberg, both of RSG Global.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During 2007, field work consisting of geochemical sampling was conducted over the land acquired from Falconbridge. A total of 37.37 line kilometers was sampled during this phase of the work and 1500 samples submitted for assay for Ni, Cu and PGMs. &nbsp;&nbsp;Based on the results of this sampling, the drilling program for the coming 2008 drilling season will be laid out. &nbsp;</font></P>
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<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Maps and drill logs for the Rooipoort PGE/Ni/Cu Exploration Project shown on the Corporation&#146;s website provide an overview of the exploration activity that has been carried out on the Rooipoort property. The Project Status Report and the full RSG NI 43-101 Technical Report are available on the Corporation&#146;s website. &nbsp;&nbsp;As a result of the work done to date, additional target areas have been identified on the west and north-west of the property, and these are identified in the Project Status Report on the website.</font> </P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Discussions with a suitable Joint Venture partner regarding a &#147;farming-in&#148; arrangement are currently underway.</font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><B><font face="Times New Roman">GOLD</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Zimbabwe Exploration - Gold</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation&#146;s exploration activities in Zimbabwe are conducted by the Blanket Mine&#146;s exploration department. &nbsp;Blanket&#146;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 a total area of 2,500 hectares. &nbsp;&nbsp;47 claims of these claims are registered as precious metal (gold) blocks covering 415 hectares and &nbsp;31 claims were pegged and are registered as base metal (Cu, Ni, As) blocks covering a total area of 2,085hectares</font> </P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Blanket&#146;s efforts were focused in certain key areas in the Gwanda Greenstone Belt (that are within trucking distance of the Blanket plant) such as GG and Mbudzane where it is believed there is the greatest chance of success. A drilling program initiated in late 2005 to probe for down-dip and strike extension mineralization associated with the GG prospect was continued into 2007 with 281 meters of drilling completed. &nbsp;The assay results establish the presence of two zones of potentially economic gold mineralization. The main</font> </P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">exploration activities involved diamond core drilling and the development of a prospect shaft down to the first level aimed at exposing the ore body and providing a bulk sample for metallurgical testing.</font> </P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Bubi Greenstone Belt ground holding portfolio comprises a total of 27 base metal claims covering a combined total area of 2,820 hectares. &nbsp;&nbsp;Reconnaissance exploration work by soil, sampling and geological mapping has been completed in all the claims areas. &nbsp;In 2008 the focus will mainly be directed to conduct additional follow-up work to define drill targets on potentially prospective metal-in-soil anomalies so far identified in the area. &nbsp;The work in the Sandy Claims constitutes part of this detailed follow-up exploration work. &nbsp;</font></P>
<P style="line-height:13pt; margin-top:7.333px; margin-bottom:0px; font-size:11pt" align=justify><font face="Times New Roman">During the first quarter of 2008, and assuming the availability of funds, Blanket&#146;s exploration focus is centered on the Gwanda area with the main emphasis being delineation of a potentially economic ore resource at the GG prospect and Mbudzane. &nbsp;At GG, this will be achieved through continued core drilling from the surface to establish the strike extent of established economic mineralization as well as by deepening the prospect shaft and extending underground development. At Mbudzane, a second phase core-drilling program has been planned to follow up on several highly prospective deep seated IP-anomalies generated in 2006.</font></P>
<P style="line-height:13pt; margin-top:7.333px; margin-bottom:0px; font-size:11pt" align=justify><font face="Times New Roman">In addition, Blanket is conducting basic reconnaissance exploration work on the Bunny&#146;s Luck claims, the target being to determine the potential strike length of a 1m &nbsp;to 1.5m wide shear zone hosted quartz vein so far mapped over a strike length of 300m. &nbsp;Blanket needs to formulate a development strategy for its outside properties in the Gwanda area, in particular, and elsewhere in general, in order to prevent forfeiture under the current indigenization proposals.</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><B><font face="Times New Roman">DIAMONDS</font> </B></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Kikerk Lake &#150; Canada</font></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Kikerk Lake property consists of 5 mineral leases covering 12,912.5 acres (5,225.5 hectares). In 2001 and 2002, the Corporation announced the discovery of two diamondiferous kimberlites, &#147;Potentilla&#148; and &#147;Stellaria&#148;, on the Kikerk Lake property in Nunavut Canada, by its joint venture partner and operator of the property, Ashton Mining of Canada Inc. (&#147;Ashton&#148;), a wholly owned subsidiary of Stornoway Diamond Corporation (&#147;Stornoway&#148;). &nbsp;The two kimberlite pipes are approximately 700 meters apart. &nbsp;In 2005, Ashton collected 108 heavy mineral samples to follow up on previous anomalous results. These samples were sent to Ashton&#146;s laboratory and results were received in the first quarter of 2007.</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Ashton reported that approximately 24 line-kilometers of ground magnetic survey were conducted over a structural trend line, but there were no new magnetic features noted that would be indicative of kimberlite emplacement. &nbsp;</font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Four diamond drill holes, totaling 382 meters were drilled to test the Stellaria kimberlite and a possible source of kimberlite indicator minerals east of Stellaria. &nbsp;Results confirm that the Stellaria body has a steep dip to the north-west and limited width.</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation&#146;s 17.5% share of this program is funded by Ashton. &nbsp;Ashton holds a 52.5% interest, having incurred in excess of $750,000 in exploration expenditures on the property. &nbsp;&nbsp;This interest can be increased to 59.5% if Ashton funds the Corporation&#146;s share of the costs through to a completed feasibility study. &nbsp;The remaining 30% interest is held by Stornoway. &nbsp;Recently Stornoway has amalgamated with Ashton.</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Due to a lack of recent activity on this joint venture the carrying value of $750,000 has been written off.</font></P>
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<P style="line-height:11.55pt; margin:0px; padding-left:37.8px; text-indent:-37.8px; font-size:11pt" align=justify><B><font face="Times New Roman">Mulonga Plain &#150; Zambia</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Work Completed</font></I></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Motapa Diamonds has given the Corporation notice that it intends withdrawing from the joint venture and intends to transfer all rights in and title to the properties to the Corporation for a nominal amount.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation has applied for a retention license over the properties managed under the joint venture.</font></P>
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<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Mulonga Plain License area is located in Western Zambia, between the Zambezi River and the Angolan border. &nbsp;The Company has identified discrete areas within the license area. An airborne gravity survey was completed on the easternmost of these in late 2004.</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Ten, out of an original eleven, airborne gravity and magnetic targets were drill tested during 2005 and one hole was abandoned due to poor drilling conditions. &nbsp;Basalt basement was intersected in each of the holes at depths ranging from 87 meters to 173 meters with no kimberlite intercepts reported from any of the holes. Motapa has defined four prospective regions within the extensive Mulonga Plain anomaly through prior heavy mineral sampling, airborne magnetics and reconnaissance drilling. &nbsp;The 2005 drill program was designed to test the easternmost of these prospective regions and followed on from completion and interpretation of an airborne gravity survey in late 2004. &nbsp;A Falcon airborne survey was flown and the results interpreted in 2006.</font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Commenting on the 2005 results, Motapa&#146;s CEO Dr. Larry Ott noted: &#147;The extensive Mulonga Plain diamond and kimberlite indicator mineral anomaly remains highly prospective for discovery. &nbsp;This program has provided an initial drill test of one of four well defined indicator mineral dispersions. &nbsp;The remaining three areas, in the central and western portions of the Mulonga Plain remain essentially untested and results of this program should add considerably to our understanding of kimberlite indicator mineral dispersion within the Mulonga Plain and better constrain likely source kimberlite areas.&#148; No further work was carried out in 2006 and 2007 as Motapa prioritized other areas of their property portfolio over Mulonga.</font></P>
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<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Kashiji Plain - Zambia</font></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:19.733px; font-size:11pt" align=justify><font face="Times New Roman">This license area is located in northwest Zambia, adjacent to the Angolan border. &nbsp;Prior work by Motapa has recovered 22 micro diamonds in association with numerous kimberlitic ilmenites. &nbsp;Work in 2005 focused on interpretation of results from the field work of 2004 in two discrete areas of anomalous kimberlite indicator mineral and diamond recoveries. No further field work was carried out on the Kashiji or Lukulu licenses in 2006 and 2007. This license is due to expire in June 2008, however as stated above the Corporation has also applied for retention licenses covering the Kashiji and Lukulu areas.</font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Goedgevonden &nbsp;- South Africa</font></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation holds prospecting rights over the Goedgevonden diamond bearing kimberlite pipe and surrounding area. This property is located approximately 20km north of the Stilfontein gold mine in the Klerksdorp district of the North West Province in South Africa and 200km south west of Johannesburg.</font> </P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">In April 2005 an application for conversion of these rights was submitted in terms of the Mineral and Petroleum Resources Development Act (&#147;MPRDA&#148;) and the rights were granted in December 2006. &nbsp;An additional application for New Order Prospecting rights was submitted over an adjoining farm, Eleazar in June 2005. &nbsp;It is expected that this application will be granted shortly as soon as documentary proof of BEE participation has been presented.</font></P>
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<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Previous prospecting activities carried out in the mid 1970&#146;s on Goedgevonden indicate that the pipe is oval in shape and covers a surface area of approximately 0.27 hectares. &nbsp;This work also confirms that the pipe was drill intersected at a depth of 425 meters, and that further down-dip extensions remain undefined. Previous drilling reported an average diamond content of 35 to 45 carats per hundred tonnes of material (&#147;cpht&#148;), with one hole yielding 65 cpht. &nbsp;The Corporation has not completed the work necessary to estimate a resource in terms of NI 43-101 for the Goedgevonden property.</font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">A preliminary drilling program conducted in 2002 consisted of 7&#148;, 8&#148; and 12&#148; diameter reverse circulation drill holes, followed by the collection of the drill samples and diamond recovery. &nbsp;Four holes were drilled in the centre of the pipe, three to a depth of 150 meters, and the other to 120 meters. &nbsp;The three remaining holes were drilled to delineate the pipe in more detail. &nbsp;All of the seven holes drilled entered the kimberlite at a depth of about 6 meters, and the four centrally-located holes were stopped whilst still in the kimberlite. A total of about 56 tonnes of drilling sample was collected and processed through a Van Eck and Lurie</font> </P>
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<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">dense-media separation (&#147;DMS&#148;) plant and wet Sortex machine. From the diamond recoveries it was confirmed that the Goedgevonden pipe was diamondiferous, and sufficient gem-quality diamonds were recovered to warrant a larger bulk sample. Geological interpretive work as well as detailed ground gravity and magnetometer surveys were completed during 2003 but there was no further exploration activity on this property as corporate resources were concentrated on the Corporation&#146;s other projects which were considered to be of higher priority in adding shareholder value.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Granting of the New Order Prospecting Rights (not yet signed) gives the Company security of tenure. Discussions are in progress with other parties with a view to realizing value by joint venture or disposal of the properties in the Goedgevonden Diamond Project.</font></P>
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<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><B><I><font face="Times New Roman">Outlook</font> </I></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The outlook for the aforementioned exploration properties, except for Nama,is difficult to quantify. &nbsp;Exploration by its nature is speculative with a high degree of risk accompanied by the potential for high returns. &nbsp;The Corporation manages this risk by using well-qualified exploration professionals, senior mining company joint venture partners and by exploring in areas which are considered as having a better than average potential for discovery. &nbsp;The recent increases in the prices of precious and base metals should improve exploration expenditures of the major mining companies and could improve the likelihood of the Corporation negotiating joint venture agreements for its remaining wholly-owned exploration properties.</font> </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation intends to continue to focus its exploration activities of prospective properties by developing the properties through strategic alliances where possible with senior mining companies and metal producers.</font> </P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">In terms of the South Africa Minerals and Petroleum Resources Development Act (No 28 of 2002) (&#147;MPRDA&#148;) and implemented May 1, 2004, all &#147;old order&#148; mineral rights in South Africa are required to be converted to &#147;new order&#148; rights, by a process of re-applying for these rights. Holders of all inactive prospecting and mining rights (immediately preceding May 1, 2004) were required to apply for conversion by April 30, 2005. Active prospecting right conversion applications closed on April 30, 2006 and active mining right conversions close on April 30, 2009.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">Apart from various technical requirements for conversion, the new legislation requires that companies give attention to the requirements of the <I>MPRDA as</I> defined in Section 2(d) as well the Mining Charter as &#147;s<I>ubstantially and meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industries and to benefit from the exploitation of the nation&#146;s mineral and petroleum resources. &nbsp;</I>The Mining Charter was formulated in negotiations between the government, the mining industry as largely represented by the Chamber of Mines of South Africa, and organized labour.</font> </P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Mining Charter seeks to address the implementation of section 2(d) in practical and measurable terms. Lack of clarity as to the status of prospecting under the Mining Charter has led to considerable debate and confusion in terms of the ability of companies involved in early stage prospecting work to meet or even indicate their commitment to meeting the terms of the Mining Charter, even before any sort of mineral resource has been established. &nbsp;This in part has been the cause of considerable delays in processing of the thousands of applications submitted as part of this process. &nbsp;However, there has recently been an apparent relaxing of the attitude of the South African authorities in respect of New Order Prospecting Rights and many companies, including the Corporation have received these new rights in recent months.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Zimbabwe economy continues to be depressed and inflation is rampant. &nbsp;The survival of the mining industry is a high priority of the Government as its ability to generate foreign currency is of paramount importance. &nbsp;Management&#146;s focus is to complete the No 4 shaft expansion and to bring production up to the 1000 tpd level. Cash flow management is critical to ensure the mining operations are protected, as much as possible, &nbsp;from the effects of local inflation by the utilization of foreign currency proceeds to fund operations. &nbsp;Management is also continuing with exploration in the areas near the Blanket mine to enable Blanket to expand its operation should economic improvements in Zimbabwe occur.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">18</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The President of the Republic of Zimbabwe brought the Indigenisation and Economic Empowerment Act into law through decree in March 2008. The law seeks to ensure that a majority stake (at least 51%) in all companies is held by Indigenous Zimbabweans. Additionally the <A NAME="OLE_LINK7"></A><A NAME="OLE_LINK8"></A>Mines and Minerals Amendment Bill was presented before the closure of the last session of Parliament but not passed into law, and has thus lapsed. The Mines and Minerals Amendment Bill if enacted into law also seeks to ensure among other things that a majority stake is held in all mining companies by either indigenous Zimbabweans or the Government of Zimbabwe. Whilst neither the two pieces of legislation allow for compulsory acquisition, the Mines and Minerals Amendment Bill did provide for severe penalties in the form of extremely prohibitive taxes and potential withdrawal of mineral rights in the eve
nt of non voluntary compliance within certain time frames.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Zambian government has announced the following proposed changes to their tax laws that will have a bearing on the Nama cobalt project if passed into law. The key&nbsp;changes are:</font></P>
<P style="margin-top:6.133px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol" align=justify><font face="Symbol">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:6.133px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Increase in mineral royalty from 0.6% to 3%</font></P>
<P style="margin-top:6.133px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol" align=justify><font face="Symbol">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:6.133px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Increase in profit tax rate from 25% to 30%</font></P>
<P style="margin-top:6.133px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol" align=justify><font face="Symbol">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:6.133px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Introduction of variable profits tax of 15% for net profits above 8%</font></P>
<P style="margin-top:6.133px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol" align=justify><font face="Symbol">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:6.133px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Introduction of a windfall profit tax for copper mines</font></P>
<P style="margin-top:6.133px; margin-bottom:-16px; padding-left:48px; text-indent:-24px; font-family:Symbol" align=justify><font face="Symbol">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:6.133px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Capital allowances reduced from 100% to 25%</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">These measures have been highly controversial with mining companies, many of which invested in the country under specific tax incentives and&nbsp;formalised their business&nbsp;models accordingly. Some mining companies are threatening legal recourse as they argue their businesses will become unviable. Proposed capital expenditure projects are being reconsidered. Various representations have been made by the mining companies through the Chamber of Mines to the government since the budget announcement at the end of January, however the government has taken a firm position, and we understand that the changes have&nbsp;been approved by parliament.</font></P>
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<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">8. &nbsp;&nbsp;&nbsp;&nbsp;ENVIRONMENTAL POLICY</font></B></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation is committed to maintain the highest environmental standards such that its operations and/or its products do not present an unacceptable risk to its employees, its customers, the public or the environment. The Corporation and its subsidiaries operate under the Corporation&#146;s Environmental Policy that encompasses the following:</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13.55pt; margin-top:0px; margin-bottom:-18.067px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:11.55pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation directs its employees and its subsidiary companies to conduct their exploration and operations activities in a professional, environmentally responsible manner, in compliance with all applicable legislation and policies in the jurisdictions in which they undertake business.</font> </P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13.55pt; margin-top:0px; margin-bottom:-18.067px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:11.55pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation liaises closely with the applicable government regulatory bodies and the public to optimize communication and an understanding of the Corporation&#146;s activities in relation to environmental protection.</font> </P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13.55pt; margin-top:0px; margin-bottom:-18.067px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:11.55pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation is committed to the diligent application of technically proven, economically feasible, environmental protection measures throughout its exploration, development, mining, processing and decommissioning activities.</font> </P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13.55pt; margin-top:0px; margin-bottom:-18.067px; padding-left:48px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:11.55pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation on a regular ongoing basis monitors its environmental protection management programs to ensure their compliance with the applicable regulatory requirements.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">It is the responsibility of all the employees of the Corporation and its subsidiaries to carry out their employment activities in accordance with this code of practice. Operational line management has the direct responsibility for regular environmental protection management.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">19</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:59px; text-indent:-35px; font-size:11pt" align=justify><B><font face="Times New Roman">9.</font></B></P>
<P style="line-height:13pt; margin:0px; padding-left:59px; text-indent:-21.2px; font-size:11pt" align=justify><font face="Times New Roman"><B>SUMMARY OF QUARTERLY RESULTS - </B>(C$ 000&#146;s<B> </B>- except per share amounts.)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The following information is provided for each of the 8 most recently completed quarters of the Corporation - ending on the dates specified - in thousands of Canadian dollars. The figures are extracted from underlying financial statements that have been prepared according to Canadian GAAP.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=87.733></TD><TD width=69.667></TD><TD width=70.6></TD><TD width=70.6></TD><TD width=70.6></TD><TD width=71.933></TD><TD width=69.2></TD><TD width=73.333></TD><TD width=65.267></TD></TR>
<TR><TD style="border:1px solid #000000" width=87.733><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=69.667><P style="margin:0px" align=justify><B><font face="Times New Roman">Dec</font></B></P>
<P style="margin:0px" align=justify><B><font face="Times New Roman">31/07</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=70.6><P style="margin:0px" align=justify><B><font face="Times New Roman">Sept 30/07</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=70.6><P style="margin:0px" align=justify><B><font face="Times New Roman">June 30/07</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=70.6><P style="margin:0px" align=justify><B><font face="Times New Roman">Mar</font></B></P>
<P style="margin:0px" align=justify><B><font face="Times New Roman">30/07</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=71.933><P style="margin:0px" align=justify><B><font face="Times New Roman">Dec</font></B></P>
<P style="margin:0px" align=justify><B><font face="Times New Roman">31/06</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=69.2><P style="margin:0px" align=justify><B><font face="Times New Roman">Sept</font></B></P>
<P style="margin:0px" align=justify><B><font face="Times New Roman">30/06</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=73.333><P style="margin:0px" align=justify><B><font face="Times New Roman">June 30/06</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=65.267><P style="margin:0px" align=justify><B><font face="Times New Roman">Mar 30/06</font></B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=87.733><P style="margin:0px" align=justify><font face="Times New Roman">&nbsp;Sales before &nbsp;discontinued operations</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.667><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">3,231</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">1,950</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">1,539</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">3,319</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">9,044</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.2><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">4,539</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=73.333><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">1</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.267><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">1</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=87.733><P style="margin:0px" align=justify><font face="Times New Roman">Income/(loss) before discontinued operations</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">-- per share</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">undiluted</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">- per share</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">Diluted</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.667><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">494</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.001</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.001</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(855)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.002)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.002)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">364</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.001</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.001</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(3,909)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.009)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.009)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="margin:0px" align=justify><font face="Times New Roman">&nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">3,841</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.008</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.008</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.2><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px; text-indent:13.133px" align=justify><font face="Times New Roman">(455)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.001)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.001)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=73.333><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(683)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.002)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.002)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.267><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(388)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.001)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.001)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=87.733><P style="margin:0px" align=justify><font face="Times New Roman">Discontinued operations (loss)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.667><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(249)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(80)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(126)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(254)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(1,283)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.2><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(2,619)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=73.333><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(2,210)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.267><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(1,878)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=87.733><P style="margin:0px" align=justify><font face="Times New Roman">Net Income/ (loss) after discontinued operations</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">- per share</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">undiluted</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">- per share</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">Diluted</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.667><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">245</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.001</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.001</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(935)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.002)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.002)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">238</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.0005</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.0005</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(4,163)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.008)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.008)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">2,558</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.006</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">0.006</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.2><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(3,074)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.007)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.007)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=73.333><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(2,893)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.007)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.007)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.267><P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(2,266)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.006)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman">(0.006)</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=87.733><P style="margin:0px" align=justify><font face="Times New Roman">No of shares basic &#145;000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.667><P style="margin:0px" align=justify><font face="Times New Roman">487,869</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman">487,869</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman">487,869</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman">457,981</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="margin:0px" align=justify><font face="Times New Roman">457,981</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.2><P style="margin:0px" align=justify><font face="Times New Roman">455,209</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=73.333><P style="margin:0px" align=justify><font face="Times New Roman">398,142</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.267><P style="margin:0px" align=justify><font face="Times New Roman">380,714</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=87.733><P style="margin:0px" align=justify><font face="Times New Roman">No of shares diluted &#145;000</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.667><P style="margin:0px" align=justify><font face="Times New Roman">487,975</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman">488,61</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman">489,454</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.6><P style="margin:0px" align=justify><font face="Times New Roman">457,981</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=71.933><P style="margin:0px" align=justify><font face="Times New Roman">458,087</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=69.2><P style="margin:0px" align=justify><font face="Times New Roman">455,951</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=73.333><P style="margin:0px" align=justify><font face="Times New Roman">403,055</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=65.267><P style="margin:0px" align=justify><font face="Times New Roman">381,663</font></P>
</TD></TR>
</TABLE>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The discontinued operation relates to Barbrook and Eersteling Mines. Barbrook Mine was operational during the first three quarters of 2006. All foreign exchange gains or losses are reported in the results before discontinued operations. &nbsp;The gold sales at Blanket Mine were 4,352 ounces in the first quarter, 2,858 ounces in the second quarter, 2,263 ounces in the third quarter and 4,512 ounces in the fourth quarter. Production at Blanket Mine was affected from February 2007 to July 2007 when underground operations were halted. &nbsp;Included in the loss before discontinued operations are the unrealized foreign exchange gains or (losses) of $456,000 in the fourth quarter, ($1,016,000) in the third quarter, ($707,000) in the second quarter and $255,000 in the first quarter. &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><I><font face="Times New Roman">Note:</font></I></P>
<P style="line-height:13pt; margin:0px; text-indent:48px; font-size:11pt" align=justify><I><font face="Times New Roman">&nbsp;The effect of the dilution on the earnings per share has been calculated only for each quarter of 2006 as income was earned before discontinued operations for the year. No calculation for 2007 or 2005 was made as the result for the years was a loss and the diluted earnings per share would be anti-dilutive.</font> </I></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><B><font face="Times New Roman">10.</font></B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; text-indent:48px; font-size:11pt" align=justify><B><font face="Times New Roman">INVESTING</font> </B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><font face="Times New Roman">During 2007 the Corporation invested $3,250,000 in capital assets and mineral properties ($3,579,000 in 2006 and $5,284,000 in 2005). &nbsp;Of the amount invested in 2007 $2,470,000 was spent at Nama, $616,000 at Blanket Mine, and $141,000 at Rooipoort.</font> </P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">20</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><B><font face="Times New Roman">11.</font></B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; text-indent:48px; font-size:11pt" align=justify><B><font face="Times New Roman">FINANCING</font> </B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">During the year $4,380,000 was raised from private placements, and the exercise of warrants and options ($7,559,000 in 2006 and $6,588,000 in 2005) all net of issue costs. In all 22,888,259 shares were issued when an equal number of warrants were exercised (2006- 87,265,885 common shares) &nbsp;&nbsp;The funds were used to finance exploration activity on the Corporation&#146;s most prospective projects and on other working capital requirements.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><B><font face="Times New Roman">12.</font></B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; text-indent:48px; font-size:11pt" align=justify><B><font face="Times New Roman">LIQUIDITY AND CAPITAL RESOURCES</font> </B></P>
<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">As of December 31, 2007, the Corporation had a working capital surplus of $65,000 (surplus of $2,874,000 at December 31, 2006 and a deficit of $325,000 at December 31, 2005). Current assets of $4,408,000 ($8,773,000 &#150; 2006) reduced mainly due to lower inventory levels at Blanket Mine while the US dollar amount owed by RBZ increased due to late payment for gold sales. During the first quarter of 2008 the US dollar amount owed by the RBZ has increased from $1,780,000 at the 2007 year end to $2,500,000 in mid March despite having received $325,000 in payments. Details of financing activities are presented in note 5 (b) of the notes to the consolidated financial statements. During 2008, it is expected that the cash requirements of the Corporation will be met from the proceeds of the sale of Barbrook Mine and Eersteling Gold Mine and gold sales from Blanket Mine.</font> </P>
<P style="line-height:11.55pt; margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify><font face="Times New Roman">Anticipated cash inflows in 2008 will be used mainly by the Corporation on its exploration, development and production activities such as:</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:14.667px; padding-left:76.4px; font-size:11pt" align=justify><font face="Times New Roman">at Blanket Mine (internally generated) for the completion of the No 4 shaft expansion &nbsp;- at an estimated cost of $750,000 to regain the 600 tpd ore delivery to the plant and an amount of $1,500,000 to reach the expanded rate of 1,000 tpd ore delivery.</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:14.667px; padding-left:76.4px; font-size:11pt" align=justify><font face="Times New Roman">the defined activities at the Corporation&#146;s Nama Cobalt/Copper Project at an estimated cost of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$ 4,000,000</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:14.667px; padding-left:76.4px; font-size:11pt" align=justify><font face="Times New Roman">at Rooipoort and the other exploration of the South African PGE &amp; Ni properties at an estimated cost of $1,250,000 .</font> </P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-24px; font-family:Symbol; font-size:11pt" align=justify><font face="Times New Roman">&#183;</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:14.667px; padding-left:76.4px; font-size:11pt" align=justify><font face="Times New Roman">corporate working capital</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The funds raised will be sufficient to move forward with the direct development of the above assets if the projects are proven to be economically and technically justified. &nbsp;Notwithstanding the estimated expenditure amounts for each of the programs described above, the Corporation cannot predict the actual amounts that will be spent on those programs. &nbsp;It can be stated that the projects with top priority are the development of Nama, the installation of the 20 tpd metallurgical optimization testing plant at Nama, and the No. 4 shaft expansion project at Blanket Mine. &nbsp;Decisions will be made to go ahead on the programs from time to time by Management as they, at that time, determine appropriate, based on results received in previous programs and funding available.</font></P>
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<P style="line-height:11.55pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation does not have any significant long-term contractual obligations or commercial commitments other than the payment of its current liabilities and its four cobalt sales agreements. &nbsp;It had two joint venture agreements with Ashton Mining of Canada Inc. and Motapa Diamonds Inc., in each case these partners were responsible for all property expenditures until a feasibility study has been completed. &nbsp;The Corporation has minor obligations in respect of licence fees for its exploration and mining properties some of which are paid in full by the Corporation&#146;s joint venture partners. &nbsp;&nbsp;Now that Motapa wishes to withdraw from its JV on Mulonga Plain, the Corporation will be responsible for maintaining the Licences. &nbsp;&nbsp;As of December 31, 2007 the Corporation had potential/contingent liabilities to do rehabilitation work on the Blanket, Barbrook and Eersteling Mines - if a
nd when those Mines are permanently closed - at an estimated cost of $1,043,000. With the proposed sales of the Barbrook and Eersteling Mines, these obligations will pass on to the new owners.</font></P>
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<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">21</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">13. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OFF-BALANCE SHEET ARRANGEMENTS</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">There are no off balance sheet arrangements.</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">14. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOURTH QUARTER</font> </B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:19.733px; padding-right:0.933px; font-size:11pt" align=justify><font face="Times New Roman">The operating results for the fourth quarter reflect the mining activity at Blanket Mine which sold 4,512 ounces of gold. &nbsp;The Corporation generated revenue of $3,231,000 and an operating income of $1,020,000 after expenses of $525,000 a net income after tax of $493,000 was realized. Included in the expenses was unrealized income from foreign currency of $456,000. Discontinued operations loss of $249,000 is made up of holding costs at Barbrook and Eersteling comprising of minimum charges for electricity, limited managerial employment costs, and ongoing security costs to safeguard the property and interest accrual on outstanding creditors of $145,000. As Barbrook and Eersteling mines were on care and maintenance no amortization charge was provided for on plant and equipment but $25,000 was provided for on vehicles and computer equipment.</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The RBZ held the official exchange rate at Z$30,000:USD1 for the whole quarter and did not alter the exchange rate during the monetary policy announcement during the first quarter of 2008.</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">15. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CRITICAL ACCOUNTING POLICIES</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">There are two major areas where accounting estimates are made, asset impairment and asset retirement obligation. As significant impairment provisions have already been made against the assets and there is a reasonable level of certainty around the estimate it is considered unlikely that any change in estimate would result in a material impact on the results of the Corporation. Based on indicative purchase offers made for Barbrook and Eersteling Mines no further asset impairment has been made against these assets. &nbsp;The asset retirement obligation is also considered to be estimated with a reasonable degree of certainty, although the original estimation was calculated some years ago. The estimation is accreted annually at 5% and thus any change in circumstances is considered unlikely to have a material impact on the results of the Corporation or its operations.</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The following are the changes to accounting policies adopted during 2007:</font></P>
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<P style="line-height: 13pt; font-size: 11pt; margin-top: 0px; margin-bottom: -17.333px" align=justify><font face="Times New Roman">i)</font></P>
<P style="text-indent: 56.733px; font-size: 11pt; line-height: 13pt; margin: 0px" align=justify><font face="Times New Roman">Financial Instruments</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Recognition and Measurement Section 3855, Disclosure and Presentation Section 3861.These standard set out criteria for the recognition, measurement, disclosure and presentation of financial instruments for fiscal years beginning on or after October 1, 2006. This standard requires all financial instruments within its scope, including derivatives, to be included on a Company&#146;s balance sheet and measured either at fair value or, in certain circumstances when fair value may not be considered most relevant, at cost or amortized cost. Changes in fair value are to be recognized in the statements of operations and comprehensive income.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">All financial assets and liabilities are recognized when the entity becomes a party to the contract creating the item. As such, any of the Company&#146;s outstanding financial assets and liabilities at the effective date of adoption are recognized and measured in accordance with the new requirements as if these requirements had always been in effect. Any changes to the fair values of assets and liabilities prior to October 1, 2006 are recognized by adjusting opening deficit or opening accumulated other comprehensive income.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">All financial instruments are classified into one of the following five categories: held for trading, held-to-maturity, loans and receivables, available-for-sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification.</font></P>
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<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">22</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The various assets and liabilities were classified as follows on adoption:</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-size:11pt" align=justify><font face="Times New Roman">1.</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Cash and cash equivalents are classified as &#147;assets held for trading&#148;. They are stated at fair value and any gains/losses arising on revaluation at the end of each period are included in the statement of operations. We have no derivative financial instruments that would have been classified on a similar basis.</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-size:11pt" align=justify><font face="Times New Roman">2.</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Investments are classified as &#147;assets available for sale&#148;. They were previously presented at cost but will now be presented at fair value and the gains/losses arising from their revaluation at the end of each quarter will be included in other comprehensive income. When a decline in fair value is other than temporary, the accumulated loss that had been recognized directly in other comprehensive income is removed from accumulated other comprehensive income and recognized in net income even though the financial asset has not been derecognized.</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-size:11pt" align=justify><font face="Times New Roman">3.</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Trade receivables are classified under &#147;loans and receivables&#148;. They are recorded at their original cost which is deemed their fair value at that time. Subsequent measurement will be at amortized cost using the effective interest rate method.</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-size:11pt" align=justify><font face="Times New Roman">4.</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Bank overdraft is classified as a &#147;financial liability held for trading&#148; as there is a contractual obligation to deliver cash. It is measured at fair value which is book value plus accrued interest. It is stated at fair value and any gains/losses arising on revaluation at the end of each period are included in the statement of operations.</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-24px; font-size:11pt" align=justify><font face="Times New Roman">5.</font></P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify><font face="Times New Roman">Accounts payable and accrued liabilities and long term debt are classified under &#147;other financial liabilities&#148;. They are recorded at their fair value at that time. Subsequent measurement will be at amortized cost using the effective interest rate method.</font></P>
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<P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Unless otherwise noted, it is the opinion of management that the Company is not exposed to significant interest rate or credit risks arising from its financial instruments. &nbsp;A significant portion of the Company&#146;s assets and liabilities are denominated in South African rand and Zimbabwe dollars. &nbsp;Management do not consider that the fluctuation of the value of the South African Rand to the Canadian Dollar could have a significant impact on the results of operations. Blanket Mine operation is subject to a hyperinflationary environment in Zimbabwe, foreign creditors are denominated in Rands and local costs increase with inflation. As the official exchange rate is fixed and the effective buying power of the Zimbabwe Dollar decreases accordingly there could be a significant impact on the results of the operations. The shareholder loan account in Zimbabwe is denominated in US Dollars and will generate foreign exchange lo
sses for Blanket Mine in Zimbabwe Dollar terms but the effect on the consolidated financial statements in Canadian Dollars is unlikely to be significant. &nbsp;The fair values of these financial instruments approximate their carrying values, unless otherwise noted. &nbsp;The Company does not use any derivative instruments to reduce its foreign currency risks.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Below is a summary of the cash or near cash items denominated in a currency other than the Canadian dollar that would be affected by changes in exchanges rates relative to the Canadian dollar. All values are in thousands.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=140></TD><TD width=77.533></TD><TD width=122.8></TD><TD width=75.6></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=140><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=77.533><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">US Dollars</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=122.8><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Zimbabwe Dollars</font></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">SA &nbsp;Rand</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Cash</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">470</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=122.8><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">(179,738,803)</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">331</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Accounts Receivable</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">1,780</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=122.8><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">79,027,980</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">986</font></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Accounts Payable</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P><font face="Times New Roman">&nbsp;</font></P></TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=122.8><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">195,488,055</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">10,830</font></P>
</TD></TR>
</TABLE>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><font face="Times New Roman">ii)</font> </P>
<P style="line-height:13pt; margin:0px; text-indent:56.733px; font-size:11pt" align=justify><font face="Times New Roman">Comprehensive Income (CICA Handbook Section 1530)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Comprehensive income is the change in shareholders&#146; equity during a period from transaction and other events from non-owner sources. This standard requires certain gains and losses that would otherwise be recorded as part of the net income/(loss) to be presented in other &#147;comprehensive income&#148; until it is considered appropriate to recognize into net income/(loss). This standard requires the presentation of comprehensive income and its components in a separate financial statement that is displayed with the same prominence as the other consolidated financial statements. Accordingly, the Company now reports a Statement of Operations and Comprehensive Income and a Statement of Shareholder&#146;s Equity which</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">23</font></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">includes the account &#147;accumulated other comprehensive income&#148; in the shareholder&#146;s equity section of the consolidated balance sheet.</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The adoption of Sections 3855 and 1530 determines how the Company records its investment in Motapa Diamonds Inc. and Old Mutual Plc which are now classified as financial instruments &#147;available for sale&#148; and thus recorded at fair value. The adjustment to opening balance to recognize this was $31 and any further unrealized gains or losses during the year are reported in the current period.</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><font face="Times New Roman">iii)</font> </P>
<P style="line-height:13pt; margin:0px; text-indent:56.733px; font-size:11pt" align=justify><font face="Times New Roman">Equity (Section 3251)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Along with the adoption of the above standards, the Company adopted CICA Handbook Section 3251, Equity, effective from the beginning of the current fiscal year. This Standard establishes the presentation of equity and changes in equity during the reported period. The Company now presents a Statement of Changes in Shareholders&#146; Equity as part of the annual consolidated financial statements.</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><font face="Times New Roman">iv)</font></P>
<P style="line-height:13pt; margin:0px; text-indent:48px; font-size:11pt" align=justify><font face="Times New Roman">&nbsp;&nbsp;Foreign Currency Translation (Section 1651)</font></P>
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">&nbsp;The Company maintains its accounts in Canadian dollars. The accounts of its foreign subsidiaries are maintained in the local currency where the subsidiary is incorporated. The Corporations foreign subsidiaries are considered to be integrated operations. Accordingly, the foreign operations are translated to Canadian dollars using the temporal method. As such, monetary assets and liabilities are translated using the exchange rates in effect at the consolidated balance sheet date and non-monetary assets and liabilities at historical exchange rates. Revenue and expense items have been translated using the average exchange rate prevailing during the year. The gains and losses resulting from changes in exchange rates are recognized in earnings.</font></P>
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<P style="line-height:14pt; margin-top:0px; margin-bottom:-18.667px; font-size:11pt" align=justify><font face="Times New Roman">v)</font> </P>
<P style="margin:0px; text-indent:49.467px; font-size:11pt" align=justify><font face="Times New Roman">&nbsp;Accounting Changes (Section 1506)</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">This new section establishes criteria for changes in accounting policies along with the accounting treatment and disclosures required upon adoption of the new accounting policies, estimates and corrections of errors. The standard is applied prospectively for the Company&#146;s 2007 financial year. The adoption of this standard did not have a material impact on our consolidated financial statements.</font></P>
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<P style="margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The following accounting policy changes will be adopted in the following financial year:</font></P>
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<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-48px; font-size:11pt" align=justify><font face="Times New Roman">(i)</font></P>
<P style="line-height:13pt; margin:0px; padding-left:76.4px; text-indent:-19.667px; font-size:11pt" align=justify><font face="Times New Roman">Financial instruments and capital disclosure, Section 3862 and Section 1535</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-48px; font-size:11pt" align=justify><font face="Times New Roman">(ii)</font></P>
<P style="line-height:13pt; margin:0px; padding-left:76.4px; text-indent:-19.667px; font-size:11pt" align=justify><font face="Times New Roman">Financial instruments presentation, Section 3863</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-48px; font-size:11pt" align=justify><font face="Times New Roman">(iii)</font></P>
<P style="line-height:13pt; margin:0px; padding-left:76.4px; text-indent:-19.667px; font-size:11pt" align=justify><font face="Times New Roman">Inventories, Section 3031</font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:76.4px; text-indent:-48px; font-size:11pt" align=justify><font face="Times New Roman">(iv)</font></P>
<P style="line-height:13pt; margin:0px; padding-left:76.4px; text-indent:-19.667px; font-size:11pt" align=justify><font face="Times New Roman">General standards of financial statement presentation, Section 1400</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">These standards are effective for the Company for interim and annual consolidated financial statements beginning on January 1, 2008 and the Company is currently evaluating the impact of the adoption of these new Sections on its consolidated financial statements.</font></P>
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<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin-top:0px; margin-bottom:12.2px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">24</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; padding-right:0.733px; font-size:11pt" align=justify><B><font face="Times New Roman">16. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECURITIES OUTSTANDING</font></B></P>
<P style="line-height:13pt; margin:0px; padding-right:208.333px; font-size:11pt" align=justify><font face="Times New Roman">As at March 31, 2008 the following securities were outstanding: &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13.55pt; margin-top:0px; margin-bottom:-18.067px; font-size:11pt" align=justify><font face="Times New Roman">(1)</font></P>
<P style="line-height:11.55pt; margin:0px; text-indent:48px; font-size:11pt" align=justify><font face="Times New Roman">500,169,280 common shares<FONT style="font-family:Arial; font-size:12pt">;</FONT></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; font-size:11pt" align=justify><font face="Times New Roman">(2)</font></P>
<P style="line-height:13pt; margin:0px; text-indent:48px; font-size:11pt" align=justify><font face="Times New Roman">Options and warrants as follows:</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=96></TD><TD width=228></TD><TD width=132></TD><TD width=177.2></TD></TR>
<TR><TD style="border:1px solid #000000" valign=top width=96><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Number</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=228><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">&nbsp;Description</font></B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=132><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">&nbsp;Exercise Price</font> </B></P>
</TD><TD style="border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=177.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B><font face="Times New Roman">Validity</font> </B></P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=96><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">33,038,000 &nbsp;</font></P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=228><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Common share purchase options</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=132><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Average $0.186</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=177.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Various until May 11, 2016</font> </P>
</TD></TR>
<TR><TD style="border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=96><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">12,300,000</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=228><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Common share purchase warrants</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=132><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">$0.15</font> </P>
</TD><TD style="border-right:1px solid #000000; border-bottom:1px solid #000000" width=177.2><P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Until January 11, 2009</font> </P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">As the Corporation&#146;s Option Plan allows the granting of options on a number of shares equal to 10% of the issued shares, the Corporation could grant options on 50,016,928 shares. &nbsp;As only 18,588,000 options are outstanding a further 31,428,928 options are available to be granted.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">17. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONTROLS</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The CEO and CFO have evaluated the effectiveness of the Corporation&#146;s disclosure controls and procedures and assessed the design of the Corporation&#146;s internal control over financial reporting as of December 31, 2007, pursuant to the certification requirements of Multilateral Instrument 52-109. They confirm that the internal control over financial reporting will prevent any material misstatement of the annual financial statements.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">The Corporation has a Disclosure Committee consisting of four Directors and one Officer, 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. &nbsp;The Corporation&#146;s Directors and Management, and the Disclosure Committee, are making all reasonable efforts to ensure that the Corporation&#146;s disclosures are made in full compliance with the applicable rules and requirements. &nbsp;All reasonable efforts are also being made to ensure that the Corporation&#146;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&#146;s Certifying Officers by others within those entities.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:12.2px; font-size:11pt" align=justify><B><font face="Times New Roman">18. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FORWARD LOOKING STATEMENTS</font></B></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><font face="Times New Roman">This Management Discussion and Analysis contains certain forward-looking statements relating but not limited to the Corporation&#146;s expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as &#147;anticipate&#148;, &#147;believe&#148;, &#147;expect&#148;, &#147;goal&#148;, &#147;plan&#148;, &#147;intend&#148;, &#147;estimate&#148;, &#147;could&#148;, &#147;should&#148;, &#147;may&#148; and &#147;will&#148; or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information may include reserve and resource estimates, estimates of future production, unit costs, costs of capital projects and timing of commencement of operations, and is based on current expectations that involve a num
ber of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from expected results.</font> </P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Potential shareholders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">25</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
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<P style="line-height:5pt; margin-top:0px; margin-bottom:3.867px; page-break-before:always" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. The Corporation undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:56.733px; text-indent:-56.733px; font-size:11pt" align=justify><B><font face="Times New Roman">19.</font></B></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:15.533px; padding-left:56.733px; font-size:11pt" align=justify><B><font face="Times New Roman">QUALIFIED PERSON</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">James Johnstone, P.Eng., is a qualified person as defined by NI 43-101. Mr Johnstone is responsible for the technical information provided on this MD&amp;A except where otherwise stated. He was assisted by employees of the Corporation who are qualified persons for the individual projects and, where appropriate, outside consultants and/or qualified persons for joint-ventured projects. &nbsp;</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height: 13pt; text-indent: -56.733px; font-size: 11pt; margin-top: 0px; margin-bottom: -17.333px; padding-left: 56.733px" align=justify><B><font face="Times New Roman">20.</font></B></P>
<P style="line-height: 13pt; font-size: 11pt; margin-top: 0px; margin-bottom: 15.533px; padding-left: 56.733px" align=justify><B><font face="Times New Roman">BOARD AND SENIOR MANAGEMENT CHANGES</font></B></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">Dr. Trevor Pearton was appointed VP Exploration on February 15, 2008.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="line-height:13pt; margin:0px; padding-right:4.133px; font-size:11pt" align=justify><font face="Times New Roman">Mr Leigh A. Wilson was appointed as a non-executive Director of the Corporation and a member of the Audit committee.</font></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><font face="Times New Roman">At the present time there is a worldwide shortage of senior mining industry professionals and the Corporation is one of many companies looking for suitable staff. &nbsp;With the anticipated sale of the South African gold mines and the planned expansion of the Zambian exploration, mining and metallurgical pilot plant programs the Corporation is re-evaluating its requirements for replacement senior staff.</font> </P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR>
<BR></font></P>
<P style="margin:0px; font-family:Times" align=center><font face="Times New Roman">26</font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
<P style="margin:0px" align=justify><font face="Times New Roman"><BR></font></P>
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<DESCRIPTION>CERTIFICATION
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
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<TITLE>CC Filed by Filing Services Canada Inc. 403-717-3898</TITLE>
<META NAME="date" CONTENT="03/31/2008">
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<P style="line-height:13pt; margin:0px; font-size:11pt" align=center><B>Form 52-109F1 <I>Certification of Annual Filings</I></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>I, <B><I>Stefan Hayden</I></B>, President and Chief Executive Officer of Caledonia Mining Corporation, certify that:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>1.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52-109 <I>Certification of Disclosure in Issuers&#146; Annual and Interim Filings</I>) of <B>Caledonia Mining Corporation</B> (the issuer) for the period ending <B><I>December 31, 2007; </I></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>2.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>3.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the annual filings;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>4.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>The issuer&#146;s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:96px; text-indent:-48px; font-size:11pt" align=justify>(a)</P>
<P style="line-height:13pt; margin:0px; padding-left:96px; font-size:11pt" align=justify>designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual filings are being prepared; &nbsp;and</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:96px; text-indent:-48px; font-size:11pt" align=justify>(b)</P>
<P style="line-height:13pt; margin:0px; padding-left:96px; font-size:11pt" align=justify>evaluated the effectiveness of the issuer&#146;s disclosure controls and procedures as of the end of the period covered by the annual filings and have caused the issuer to disclose in the annual MD&amp;A our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the annual filings based on such evaluation.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Date: &nbsp;&nbsp;March 31, 2008</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>(Signed: S E Hayden)</P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>___________________________________</P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Stefan Hayden</P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Chief Executive Officer</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
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<DESCRIPTION>CERTIFICATION
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
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<HEAD>
<TITLE>CC Filed by Filing Services Canada Inc. 403-717-3898</TITLE>
<META NAME="date" CONTENT="03/31/2008">
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<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="line-height:13pt; margin:0px; font-size:11pt" align=center><B>Form 52-109F1 <I>Certification of Annual Filings</I></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>I, <B>Steven Curtis</B>, Chief Financial Officer of Caledonia Mining Corporation, certify that:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>1.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52-109 <I>Certification of Disclosure in Issuers&#146; Annual and Interim Filings</I>) of <B>Caledonia Mining Corporation</B> (the issuer) for the period ending <B><I>December 31, 2007; </I></B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>2.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>3.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the annual filings;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:48px; text-indent:-48px; font-size:11pt" align=justify>4.</P>
<P style="line-height:13pt; margin:0px; padding-left:48px; font-size:11pt" align=justify>The issuer&#146;s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:96px; text-indent:-48px; font-size:11pt" align=justify>(a)</P>
<P style="line-height:13pt; margin:0px; padding-left:96px; font-size:11pt" align=justify>designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual filings are being prepared; &nbsp;and</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-17.333px; padding-left:96px; text-indent:-48px; font-size:11pt" align=justify>(b)</P>
<P style="line-height:13pt; margin:0px; padding-left:96px; font-size:11pt" align=justify>evaluated the effectiveness of the issuer&#146;s disclosure controls and procedures as of the end of the period covered by the annual filings and have caused the issuer to disclose in the annual MD&amp;A our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the annual filings based on such evaluation. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Date: &nbsp;&nbsp;March 31, 2008</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>(Signed) S R Curtis</P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>______________________________________</P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Steven Curtis</P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Chief Financial Officer</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="line-height:9pt; margin:0px; font-size:7pt">Z:\2006\Q4\Annual report\Form 52-109F2-Annual-CFO-Dec 31-06_020407.doc</P>
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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
