<SEC-DOCUMENT>0001137171-11-000188.txt : 20110404
<SEC-HEADER>0001137171-11-000188.hdr.sgml : 20110404
<ACCEPTANCE-DATETIME>20110404124018
ACCESSION NUMBER:		0001137171-11-000188
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20101231
FILED AS OF DATE:		20110404
DATE AS OF CHANGE:		20110404

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:		11734591

	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>caledonia6k04042011.htm
<DESCRIPTION>CALEDONIA MINING FORM 6-K
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>MD Filed by Filing Services Canada Inc.&nbsp; (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>&nbsp;</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center>&nbsp;</P>
<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 April 2011</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)<br>
</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&nbsp;<u>&nbsp;&nbsp;&nbsp;
X&nbsp;&nbsp;&nbsp;&nbsp;</u>&nbsp;&nbsp; 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):
____ </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):
____ </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 ____ No&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
X&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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-
_______ </P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center>&nbsp;</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center>&nbsp;</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center>&nbsp;</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center>&nbsp;</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt" align=center>&nbsp;</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:4.15pt; margin-bottom:4.15pt">&nbsp;</P>
<P style="margin-top:4.15pt; margin-bottom:4.15pt">&nbsp;</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:&nbsp;<u>&nbsp;&nbsp;&nbsp;
/s/ Carl Jonsson&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></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;April 4, 2011<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>&nbsp;</P>
<P style="margin:0pt; page-break-before:always" align=center>&nbsp;</P>
<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:0pt">&nbsp;</P>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.1</P>
<p style="margin: 0pt; padding-left: 216pt"><a href="aif.htm">Annual Information
Form</a></p>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.2</P>
<p style="margin: 0pt; padding-left: 216pt"><a href="financials.htm">Annual
Financial Statements for the year ended December 31, 2010</a></p>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.3</P>
<p style="margin: 0pt; padding-left: 216pt"><a href="mda.htm">Management
Discussion and Analysis for the year ended December 31, 2010</a></p>
<P style="margin-top: 0pt; margin-bottom: -12pt">99.4</P>
<p style="margin: 0pt; padding-left: 216pt"><a href="newsrelease.htm">News
Release dated March 31, 2011</a></p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<blockquote>
  <p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
</blockquote>
<p style="margin: 0pt; padding-left: 216pt">&nbsp;</p>
<hr>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>aif.htm
<DESCRIPTION>ANNUAL INFORMATION FORM
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>MD Filed by Filing Services Canada Inc.&nbsp; (403) 717-3898</TITLE>
<META NAME="author" CONTENT="Lynne Hume-Powell">
<META NAME="date" CONTENT="03/31/2011">
</HEAD>
<BODY style="margin-top:0;font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; font-size:12pt" align=justify><B>&nbsp;</B></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:16pt" align=center><B>ANNUAL INFORMATION FORM</B></P>
<P style="line-height:13pt; margin:0px" align=center><BR></P>
<P style="line-height:13pt; margin:0px; font-size:16pt" align=center><B>RENEWAL</B></P>
<P style="line-height:13pt; margin:0px" align=center><BR></P>
<P style="line-height:13pt; margin:0px; font-size:12pt" align=center>Form 51-102F2 prescribed by National Instrument 51-102</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:144px; font-size:12pt"><B>CALEDONIA MINING CORPORATION (the &#147;Company&#148; or Caledonia&#148;)</B></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:144px" align=justify>Corporate Name</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:144px; font-size:12pt" align=justify><B>March 31, 2011</B></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:144px" align=justify>Date of Annual Information Form</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:144px; font-size:12pt" align=justify><B>December 31, 2010</B></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; padding-left:144px; font-size:12pt" align=justify>Date of Latest Financial Year End</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=center>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<div align="left">
  <table border="0" cellspacing="0" width="1107">
    <tr valign="bottom">
      <td align="left" nowrap width="44"></td>
      <td align="center" nowrap width="395"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">TABLE
        OF CONTENTS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="left" nowrap width="608">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        1.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">CORPORATE
        STRUCTURE</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1.1</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Name,
        address and incorporation</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1.2</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Intercorporate
        Relationships</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1.3</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Transfer
        Agent</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        2.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">GENERAL
        DEVELOPMENT OF THE BUSINESS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">5</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.1</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Three
        Year History</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">5</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.2</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Significant
        Acquisitions</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">5</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        3.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">DESCRIPTION
        OF THE BUSINESS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">5</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.1</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">General</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">5</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(c)</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">General
        Comments</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">6</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        4.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">MINERAL
        PROPERTIES AND PROJECTS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="608"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">7</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.1</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Blanket
        Mine, Zimbabwe</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">7</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.2</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Nama
        Property, Zambia</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">11</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.3</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Rooipoort
        and Mapochsgronde, South Africa</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.4</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Eersteling
        Mine, South Africa</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        5.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">RISK
        FACTORS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        6.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">DIVIDENDS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        7.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">CAPITAL
        STRUCTURE</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">7.1</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Capital</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        8.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">MARKET
        FOR SECURITIES</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8.1</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Trading
        Price and Volume</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        9.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ESCROWED
        SECURITIES</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        10.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">DIRECTORS
        AND OFFICERS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">10.1</font></b></td>
      <td align="left" nowrap colspan="2" width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Name,
        Occupation and Security Holdings of Directors and Officers</font></b></td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">10.2</font></b></td>
      <td align="left" nowrap colspan="2" width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Cease
        Trade Orders, Bankruptcies, Penalties or Sanctions</font></b></td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">23</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">10.3</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Conflicts
        of Interest</font></b></td>
      <td align="right" nowrap colspan="2" width="658"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">23</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        11.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Promoters</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">23</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        12.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Legal
        Proceedings and Regulatory Actions</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        13.</font></b></td>
      <td align="left" nowrap colspan="2" width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">INTEREST
        OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS</font></b></td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        14.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">MATERIAL
        CONTRACTS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        15.</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">INTERESTS
        OF EXPERTS</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">15.1</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Experts
        Named</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">15.2</font></b></td>
      <td align="left" nowrap width="395"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Interests
        of Experts</font></b></td>
      <td align="left" nowrap width="44">&nbsp;</td>
      <td align="right" nowrap width="610"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b></td>
    </tr>
  </table>
</div>
<p style="MARGIN:0px">&nbsp;</p>
<p style="MARGIN:0px">&nbsp;</p>
<p style="MARGIN:0px">&nbsp;</p>
<p style="MARGIN:0px">&nbsp;</p>
<p style="text-align: center;"><font size="2" face="TimesNewRomanPSMT,Times New Roman,Times,serif">2</font></p>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<p style="text-align: center">&nbsp;</p>
<p style="text-align: center">&nbsp;</p>
<div align="left">
  <table border="0" cellspacing="0" width="1107" height="216">
    <tr>
      <td width="44" height="25"></td>
      <td width="217" height="25"></td>
      <td width="834" height="25"></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44" height="21">&nbsp;</td>
      <td align="left" nowrap style="text-indent: 37.000000px" width="217" height="21"></td>
      <td align="left" nowrap width="836" height="21">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" width="1103" height="21">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        16.</font></b></td>
      <td align="left" nowrap width="217" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ADDITIONAL
        INFORMATION</font></b></td>
      <td align="right" nowrap width="836" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16.1</font></b></td>
      <td align="left" nowrap width="217" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Press
        Releases</font></b></td>
      <td align="right" nowrap width="836" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16.2</font></b></td>
      <td align="left" nowrap width="217" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Forward
        Looking Statements</font></b></td>
      <td align="right" nowrap width="836" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16.3</font></b></td>
      <td align="left" nowrap width="217" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Further
        Information</font></b></td>
      <td align="right" nowrap width="836" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap width="44" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
        17</font></b></td>
      <td align="left" nowrap width="217" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">AUDIT
        COMMITTEE INFORMATION</font></b></td>
      <td align="right" nowrap width="836" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17.1</font></b></td>
      <td align="left" nowrap width="217" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Audit
        Committee Charter</font></b></td>
      <td align="right" nowrap width="836" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17.2</font></b></td>
      <td align="left" nowrap width="217" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Audit
        Committee Composition</font></b></td>
      <td align="right" nowrap width="836" height="16"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">26</font></b></td>
    </tr>
    <tr valign="bottom">
      <td align="left" nowrap style="text-indent: 8.000000px" width="44" height="15"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17.3</font></b></td>
      <td align="left" nowrap width="217" height="15"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">External
        Auditors Fees</font></b></td>
      <td align="right" nowrap width="836" height="15"><b><font size="1" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">26</font></b></td>
    </tr>
  </table>
</div>
<p style="MARGIN:0px">&nbsp;</p>
<P style="margin:0px"><BR></P>
<p style="MARGIN:0px">&nbsp;</p>
<p style="text-align: center;"><font size="2" face="TimesNewRomanPSMT,Times New Roman,Times,serif">3</font></p>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:13pt; margin-top:6.667px; margin-bottom:0px"><BR></P>
<A NAME="_Toc480008558"></A><A NAME="_Toc252801122"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:12pt; float:left"><B>ITEM 1.</B></P>
<P style="line-height:13pt; margin:0px; padding-left:96px; text-indent:-2px; font-size:12pt"><B>CORPORATE STRUCTURE</B></P>
<P style="margin:0px; clear:left"><BR></P>
<A NAME="_Toc252801123"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:12pt; float:left"><B>1.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:12pt"><B>Name, address and incorporation</B></P>
<P style="margin:0px; clear:left"><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:12pt; float:left">(1)</P>
<P style="line-height:13pt; margin:0px; text-indent:-2px; font-size:11pt" align=justify>The Company exists pursuant to the <I>Canada Business Corporations Act</I>.</P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left">(2)</P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify>The Company has the following addresses: </P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=352 /><TD width=248 /></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify><B>Office</B></P>
</TD><TD style="margin-top:0px" valign=top width=248><P style="margin:0px; font-size:11pt" align=justify><B>Address</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>- Canadian Representational Office</P>
</TD><TD style="margin-top:0px" valign=top width=248><P style="margin:0px; font-size:11pt" align=justify>Suite 1201 &#150; 67 Yonge Street, Toronto, Ontario, Canada M5E 1J8</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>- Registered and Canadian Representational Office &nbsp;</P>
</TD><TD style="margin-top:0px" valign=top width=248><P style="margin:0px; font-size:11pt" align=justify>1710 &#150; 1177 W. Hastings Street, Vancouver, B.C., Canada, V6E 2L3</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>- African Administrative Office</P>
</TD><TD style="margin-top:0px" valign=top width=248><P style="margin:0px; font-size:11pt" align=justify>P.O. Box 834 Saxonwold, 24 &#150; 9<SUP>th</SUP> Street, Lower Houghton, &nbsp;2132, Johannesburg, South Africa</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801124"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>1.2</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Intercorporate Relationships</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company has the following wholly owned subsidiaries:</P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=352 /><TD width=250.4 /></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify><B>Subsidiary Names</B></P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify><B>Incorporated</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Blanket Mine (1983) (Private) Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Zimbabwe</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Caledonia Holdings Zimbabwe (Private) Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Zimbabwe</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Caledonia Mining Services Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Zimbabwe</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Caledonia Nama Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Zambia</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Eersteling Gold Mining Corporation Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>South Africa</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Greenstone Management Services (Proprietary)</P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>South Africa</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Blanket (Barbados) Holdings Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Barbados</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Caledonia Holdings (Africa) Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Barbados</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Caledonia Kadola Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Zambia</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Caledonia Mining (Zambia) Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Zambia</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Caledonia Western Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>Zambia</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Fintona Investments (Proprietary) Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>South Africa</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:11pt" align=justify>Maid O&#146;Mist (Proprietary) Limited</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>South Africa</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=352><P style="margin:0px; font-size:12pt" align=justify>Mapochs Exploration (<FONT style="font-size:11pt">Proprietary</FONT>) Ltd</P>
</TD><TD style="margin-top:0px" valign=top width=250.4><P style="margin:0px; font-size:11pt" align=justify>South Africa</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801125"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>1.3</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Transfer Agent</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; padding-left:48px; font-size:11pt" align=justify>Equity Transfer &amp; Trust Company, 400 &#150; 200 University Avenue,</P>
<P style="margin:0px; padding-left:48px; font-size:11pt" align=justify>Toronto, Ontario, Canada M5H 4H1</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>4</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<A NAME="_Toc252801126"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 2.</B></P>
<P style="line-height:13pt; margin:0px; padding-left:96px; text-indent:-2px; font-size:11pt" align=justify><B>GENERAL DEVELOPMENT OF THE BUSINESS</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801127"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>2.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Three Year History </B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company has been involved in mineral exploration and mining in Southern Africa. &nbsp;Until September of 2006 it operated the Barbrook Gold Mine in South Africa - which it then sold in 2008. &nbsp;It owns and maintains on a &#147;care and maintenance&#148; basis the Eersteling Gold Mine in South Africa.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Effective April 1, 2006 the Company purchased 100% of the issued shares of the Zimbabwe Company Blanket Mine (1983) (Private) Limited which is the owner and operator or the Blanket Gold Mine in Zimbabwe. &nbsp;The Company has been operating the Blanket Mine since its acquisition. Due to non-payment for gold delivered to the Reserve Bank of Zimbabwe Blanket Mine ceased gold production in October 2008 and only recommenced gold production in April 2009. &nbsp;The only product currently produced by the Company is gold from the Blanket Mine. During the third quarter of 2010 Blanket completed the No. 4 shaft expansion project which will increase the productive capacity of Blanket Mine to 40,000 ounces of gold per annum. During the last 2 weeks in December 2010 Blanket achieved a production rate that would produce 40,000 ounces of gold on an annualized basis.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company&#146;s mineral exploration activities &#150; which have included gold, base metal and platinum group metals &#150; have been in northern South Africa, Zimbabwe and Zambia. &nbsp;Its principal exploration efforts have been for copper, cobalt and nickel on the &#147;Nama&#148; property in Zambia and platinum group and base metals in South Africa. &nbsp;The Nama Property in Zambia has nickel, cobalt and copper mineralization but historically the primary interest has been its cobalt mineralization. In 2010 this emphasis has changed to the search for traditional copper and cobalt mineralization of the Zambian Copperbelt. The Rooipoort and Mapochsgronde (&#147;Mapochs&#148;) exploration projects in northern South Africa have platinum group metals and copper/nickel mineralization.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801128"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>2.2</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Significant Acquisitions </B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company has not effected any significant acquisition in the last three years or in the period since the 2010 year end.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc417969973"></A><A NAME="_Toc480008559"></A><A NAME="_Toc252801129"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 3.</B></P>
<P style="line-height:13pt; margin:0px; padding-left:96px; text-indent:-2px; font-size:11pt" align=justify><B>DESCRIPTION OF THE BUSINESS</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801130"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>3.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>General</B></P>
<P style="margin:0px; clear:left"><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:12pt; float:left">(a)</P>
<P style="margin:0px; text-indent:-2px; font-size:12pt"><B>Summary</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company&#146;s business during the past three completed fiscal years - in the period commencing January 1, 2008 - has been focused primarily on the operation of the Blanket Mine in Zimbabwe under the difficult conditions that have prevailed in that country - and, latterly, efforts to finance the No. 4 Shaft expansion project at Blanket Mine that was substantially completed in the 3<SUP>rd</SUP> &nbsp;quarter of 2010. &nbsp;Reference is made to Clause 4.1 for details with respect to the Blanket Mine. &nbsp;The Company&#146;s only production is that of gold from the Blanket Mine - which is sold pursuant to the arrangements described in Clause 4.1. &nbsp;The Company has had no revenue in the past two completed fiscal years, other than from the sale of gold produced at the Blanket Mine except for minor interest amounts.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left">(b)</P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Mineral Exploration</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>5</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company has, during the past three completed fiscal years conducted exploration activities in South Africa, Zimbabwe and Zambia. &nbsp;The Company&#146;s main exploration efforts have, other than minor exploration in the area of the Blanket Mine in Zimbabwe, been focused on exploration of the Company&#146;s &#147;Nama&#148; property in Zambia - discussed in more detail in Clause 4.2 and very limited activity at its Rooipoort platinum group metals (PGE) property in South Africa. During the negotiations towards a joint venture agreement with Mitsubishi Corporation, no exploration was conducted at Rooipoort during 2008 and 2009. These JV negotiations with Mitsubishi on the PGE Joint Ventures (&#147;JV&#146;s&#148;) at Rooipoort and Mapochs properties failed to be completed as Mitsubishi concluded that the conditions precedent relating to security of tenure of the prospecting rights held by Caledonia and its subsidiaries due to the Broad Based Black Economic Empowerment (&#147;empowerment&#148;) requirements imposed by the South Africa Department of Minerals (&#145;DM&#148;) did not meet their requirements. &nbsp;The DM&#146;s requirement that empowerment be introduced at the exploration stage was and is not currently required under South Africa law and, accordingly, was not envisaged at that stage in the Agreement. </P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801131"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left">(c)</P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>General Comments</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Caledonia&#146;s activities are centered in Southern Africa. &nbsp;Generally, in the gold mining industry and exploration in Africa, the work is not seasonable except where heavy seasonal rainfall can affect surface mining or exploration. &nbsp;Caledonia is not dependent, to any material extent, on patents, licenses, contracts, specialized equipment or new manufacturing processes at this time. &nbsp;However, there may be occasions that Caledonia may wish to adopt such patents, licenses, specialized equipment, etc. if these are economically beneficial to its operations. The operations at the Blanket Mine were suspended from October 2008 to March 2009 due to lack of foreign currency to purchase essential spares and consumables. Shortages of electrical power at Blanket has also hampered operation of the mining and milling sections of the mine in the 3 year period. During October 2010 Blanket signed an electricity supply agreement with the Zimbabwe Electricity Supply Authority (ZESA) in terms of which Blanket agreed to pay a higher tariff per unit for electricity in return for uninterrupted power supply. Since the agreement was signed the incidence of power interruptions has decreased significantly. Despite the new electricity supply agreement Blanket will install 4 diesel generators that will provide sufficient power to operate the mine and plant during power interruptions. Two of these generators have been installed to date.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>All mining and exploration activities are conducted under the various Economic, Mining and Environmental Regulations of the country where such operations are being carried out. &nbsp;It is always Caledonia&#146;s standard that these regulations are complied with or exceeded by the Company to satisfy the company&#146;s best practices and to avoid any risk of its activities being suspended.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Blanket Mine employs approximately 800 employees and has developed and continues to develop the necessary skills for new employees that are required to operate the mine by its on-mine training programs. In the event that specialized skills are required and that are not immediately available in Zimbabwe then these are generally sourced from South Africa. </P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Over the past three years, the gold market has been operating in an upward cycle and seasonality is generally not an obvious factor of the business. Caledonia is not dependent on any key contracts, except the selling of gold, which could materially affect the business.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Due to the economic situation in Zimbabwe, working capital finance is restricted and not freely available. However, Blanket Mine secured sufficient financing facilities to be able to complete with the No. 4 Shaft Expansion Project during the 3<SUP>rd</SUP> quarter of 2010. </P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:12pt" align=center>6</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>During 2010 the Reserve Bank of Zimbabwe again failed to redeem the Gold Bonds and also failed to give any indication of when they were extended to. As a result of this failure Blanket has written off the Bonds to nil value for accounting purposes.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt">Zimbabwe brought the Indigenization and Economic Empowerment Act into law in March 2008. &nbsp;The law seeks to ensure that a majority stake (at least 51%) in all companies is held by Indigenous Zimbabweans. &nbsp;In February 2010, the Zimbabwean Minister responsible for the Act (the &#147;Minister&#148;) issued Regulations which gave effect to the Act. </P>
<P style="margin:0px; font-size:11pt">On March 25, 2011 the Zimbabwe Government issued a General Notice via a Government Gazette which announced the following indigenization regulations applicable to the mining sector:</P>
<P style="margin:0px; font-size:11pt">- all non-indigenous mining companies would have to transfer a 51% ownership stake,</P>
<P style="margin:0px; font-size:11pt">- only designated entities, as defined, could be considered as indigenous partners, </P>
<P style="margin:0px; font-size:11pt">- the valuation of the business must be agreed by the Minister and the Company,</P>
<P style="margin:0px; font-size:11pt">- the value of sovereign ownership of mineral resources of exploited and unexploited minerals is to be taken into account in determining the valuation,</P>
<P style="margin:0px; font-size:11pt">- all non-indigenous mining companies have to file an implementation plan by May 9, 2011 and,</P>
<P style="margin:0px; font-size:11pt">- the plan must be implemented within six months and after the approval of the implementation plan.</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt">The consequences and enforceability of the General Notice are currently being reviewed by the industry and further communication will be issued in due course.</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt">Any divestiture of ownership in Blanket Mine will require prior shareholder approval.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The Zimbabwe Minister of Finance, pursuant to the Finance Act which was passed in December 2009 announced in his budget speech, that the rate of royalties on precious metals would again increase from 3.5% to 4.5% with effect from 1 January, 2011. &nbsp;In addition, the Act provides that the rate of Income Tax applied to mining companies would be increased from 15% to 25%, effective January 1, 2010, although this was not mentioned in the Minister&#146;s budget speech.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<A NAME="_Toc252801132"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 4.</B></P>
<P style="line-height:13pt; margin:0px; padding-left:96px; text-indent:-2px; font-size:11pt"><B>MINERAL PROPERTIES AND PROJECTS</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801133"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>4.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>Blanket Mine, Zimbabwe</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Below is the summary extracted from the NI 43-101 compliant report prepared on Blanket Mine. The full report dated July 2006 can be viewed on www.sedar.com</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Applied Geology Services cc (AG) was commissioned by Caledonia to prepare an Independent Report on the Blanket Mine, Zimbabwe. &nbsp;On the 20<SUP>th</SUP> June 2006 Caledonia announced that it had acquired the Blanket Gold Mine, near Gwanda in Zimbabwe, from Kinross Gold Corporation. The transaction, because it represented a significant addition to the assets of Caledonia, required the preparation and posting of an Independent Technical Report.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Blanket Mine, which was discovered at the turn of the 20<SUP>th</SUP> century, consists of underground mining and processing of several closely-spaced gold-bearing mineral deposits defining a mineralised trend. &nbsp;Major infrastructure consists of underground workings, a process plant, a tailings dam and a village for the Mine&#146;s employees. &nbsp;Since the startup of the mining operations, the mine area has a recorded production of approximately 1,004,000 oz. of Au, mined at an average grade of 4.79 g/t Au. Reserves and resources calculated as of June 30, 2006 are summarized in the table below:</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=center><BR></P>
<P style="margin:0px" align=center><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>7</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px" align=center><BR></P>
<P style="margin:0px; font-size:11pt" align=left><B>Summary of Mineral Resources and Mineral Reserves, Blanket Mine,30<SUP>th</SUP> June 2006</B></P>
<P style="margin:0px; font-size:11pt" align=left>&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=245 /><TD width=98.4 /><TD width=92 /><TD width=70.667 /><TD width=69.533 /></TR>
<TR><TD style="margin-top:0px" valign=bottom width=575.6 colspan=5><P style="margin:0px; font-size:11pt" align=center>MINERAL RESERVES (@Au price US$500/oz.)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-top:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" width=245 rowspan=2><P style="margin:0px; font-size:11pt" align=center><B>Classification</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" width=98.4 rowspan=2><P style="margin:0px; font-size:11pt" align=center><B>Tonnes</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center><B>Grade</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=center><B>Content</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=center><B>Content</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center><B>Au g/t</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=center><B>(kg)</B></P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=center><B>(oz.)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt"><B>PROVEN ORE</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt">Operating Areas</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;917,200 </P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>3.96</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=right>3,628</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1.333px solid #000000; border-bottom:1px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=right>116,640</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt">Pillars (discounted by 50%)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;247,600 </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=92><P style="margin:0px; font-size:11pt" align=center>4.59</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=right>1,137</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=right>36,560</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt">Blanket Tailings</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;145,600 </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>1.63</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=right>237</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=right>7,620</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt">Total Proven Ore including Pillars</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt" align=right>&nbsp;1,310,400 </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>3.82</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=right>5,002</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=right>160,820</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt"><B>PROBABLE ORE</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt" align=right>&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=right>&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=right>&nbsp;</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt">Operating and Development Areas</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt" align=right>2,326,000</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>4.10</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=right>9,540</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=right>306,700</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-top:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" width=245><P style="margin:0px; font-size:11pt" align=center><B>Total Proven +Probable Ore</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" width=98.4><P style="margin:0px; font-size:11pt" align=right><B>3,636,400</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" width=92><P style="margin:0px; font-size:11pt" align=center><B>4.00</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" width=70.667><P style="margin:0px; font-size:11pt" align=right><B>14,542</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-right:1.333px solid #000000; border-bottom:1.333px solid #000000" width=69.533><P style="margin:0px; font-size:11pt" align=right><B>467,500</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=575.6 colspan=5><P style="margin:0px; font-size:11pt"><B>Note: </B>&nbsp;For Proven ore, tonnages are rounded to nearest 100 and ounces to nearest 10; for Probable ore, tonnages are rounded to the nearest 1000, ounces to the nearest 100 and kilograms to the nearest 10.</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=bottom width=575.6 colspan=5><P style="margin:0px; font-size:11pt" align=center>MINERAL RESOURCES (@Au price US$500/oz.)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=245 rowspan=2><P style="margin:0px; font-size:11pt" align=center><B>Classification</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=98.4 rowspan=2><P style="margin:0px; font-size:11pt" align=center><B>Tonnes</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center><B>Grade</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=center><B>Content</B></P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=center><B>Content</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center><B>Au g/t</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=center><B>(kg)</B></P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=center><B>(oz.)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt"><B>&nbsp;</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt"><B>&nbsp;Indicated</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;380,000 </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>4.12</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=right>1,600</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=right>51,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt"><B>&nbsp;</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt">&nbsp;</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.333px solid #000000; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=245><P style="margin:0px; font-size:11pt"><B>Inferred</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=98.4><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;2,400,000 </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px; font-size:11pt" align=center>5.91</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1.333px solid #000000" valign=top width=70.667><P style="margin:0px; font-size:11pt" align=center>**</P>
</TD><TD style="margin-top:0px; border-right:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=69.533><P style="margin:0px; font-size:11pt" align=center>**</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=575.6 colspan=5 rowspan=2>
</TD></TR>
</TABLE>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp; </P>
<P style="margin:0px; font-size:11pt">Notes:</P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:24px; width:48px; font-size:11pt; float:left">1.</P>
<P style="font-size: 11pt; clear: left; margin: 0px; padding-left: 22.2px" align="justify">Indicated Resource tonnages have been rounded to the nearest 10 000, ounces to the nearest 1000 and kilograms to the nearest 100, Inferred resource tonnages have been rounded to the nearest 100 000:<BR>
2. &nbsp;&nbsp; ** &nbsp;- In keeping with the requirements of NI 43-101, Inferred Resources are reported without estimates of metal quantities.</P>
<P style="margin:0px; padding-left:22.2px; font-size:11pt; clear:left" align=justify>3. &nbsp;&nbsp;
The Qualified Person responsible for the above calculations was David Grant,
P.Geol. &nbsp;- the author of the Independent Report.</P>
<P style="margin:0px; padding-left:22.2px; font-size:11pt" align=justify>4. &nbsp;&nbsp;
Since the calculation of the above figures in 2006, the Company has mined approximately 426,000 tons with an average gold grade of 3.7 grammes per tonne from within the reserves and resource figures set out above. &nbsp;Local management of the Company has concluded that ongoing work and exploration on the property has resulted in the establishment of replacement reserves and resources. &nbsp;However, the Company has not had an independent calculation done of the current reserve and resource figures.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt">A revised NI 43-101compliant report will be released before June 30, 2011.</P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp; </P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp; </P>
<P style="margin:0px; font-size:11pt" align=justify>The Blanket Mine exploits a fairly typical Archaean greenstone-hosted deposit situated on the northwest limb of the Gwanda Greenstone belt. Active mining at Blanket covers a 3 km span and includes the Jethro deposits in the south, through Blanket itself to the Feudal, AR South, AR Main, Sheet, Eroica and Lima deposits in the north. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Two main types of mineralisation are recognised: &nbsp;</P>
<P style="margin-top:0px; margin-bottom:-2px; width:24px; font-size:11pt; float:left"><B><font style='font-family:Arial Unicode MS,Times New Roman'>&#1470;</font></B></P>
<P style="margin:0px; padding-left:24px; text-indent:-2px; font-size:11pt" align=justify>a disseminated sulphide replacement type, which comprises the bulk of the ore shoots</P>
<P style="margin-top:0px; margin-bottom:-2px; width:24px; font-size:11pt; clear:left; float:left"><B><font style='font-family:Arial Unicode MS,Times New Roman'>&#1470;</font></B></P>
<P style="margin:0px; padding-left:24px; text-indent:-2px; font-size:11pt" align=justify>quartz veins that tend to have long strikes but are not uniformly mineralised.</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Three types of mining methods are used at the Blanket Mine:</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>Underhand stoping in the narrow ore bodies</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>Shrinkage stoping where blocky sidewalls are evident</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>Long hole stoping in the wider ore bodies, using 15 m sub-levels.</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The various rock types at the Blanket Mine are generally very competent in strength and structural support such as rock bolts are only installed on rare occasions where weak rock conditions are encountered.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>In conjunction with the new No. 4 shaft project an underground crushing station has been installed at the shaft bottom to crush all mined ore to a minus 80 mm sizing for hoisting to surface.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The metallurgical process consists of two-stage crushing, rod milling, Knelson Concentrators, and a CIL (carbon-in-leach) circuit. The gold-loaded carbon is eluted, the gold is electro-won and cathodes from the electro-winning cell are acid digested and calcined before smelting on site into bullion bars. Separately, the gold concentrate from the Knelson concentrators is re-dressed, acid digested, calcined and then smelted into bullion bars. Tailings from the CIL stream is pumped to a tailings dam, with the water effluent decanted and recycled to the metallurgical plant.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Zimbabwean Government enacted regulations covering water and effluent disposal. &nbsp;Under these regulations the mine is required to obtain permits for all effluent disposal. &nbsp;The two required permits have been issued to the Blanket Mine covering the sewage effluent and mill tailings disposals. &nbsp;The Mine has also implemented a pollution-monitoring control system around the tailings dams with the installation of a
number of boreholes and piezometers, which are routinely monitored on an independent basis by International-based consultants
Steffan, Robertson and Kirsten, (SRK) personnel from the Harare office. </P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>9</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>In terms of the Mining General Regulations, certain closure obligations are required to be fulfilled and these are currently covered in a &#147;Closure Plan&#148; dated December 2009 prepared by local management.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Blanket Mine smelt their gold at least twice a month and deliver it to Rand Refineries in South Africa in the form of Dore bars. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Production scheduling from the Blanket Mine&#146;s &nbsp;Life-of- Mine (LoM) Plan was used as the basis for input to the financial model prepared by Applied Geology Services for the Company in 2006 and is presented in Table II below. &nbsp;The following assumptions were used for the financial model:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>All prices are as at 30<SUP>th</SUP> June 2006; </P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>A gold price of US$500/oz. was used for all gold revenue;</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>Unit costs are based on the June 2006 Income Statement that includes the revenue and operating costs for June and for the year-to-date from January 2006;</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>The financial model was calculated in US$;</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>Capital expenditure of US$1.9 million was included as per the Life-of-Mine (LOM) plan. &nbsp;After that the capital expenditure allows for ongoing capital based on an estimated &nbsp;10% of the operating cost per year. &nbsp;The capital expenditure was considered as a deduction for tax purposes</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>A closure cost of US$1.2 million is provided for by the salvage value of the mine and plant once it closes </P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>The rate used for income tax is 30% based on the corporate rate of 15% plus import duties</P>
<P style="margin-top:0px; margin-bottom:-2px; width:28.8px; font-family:Symbol; font-size:11pt; clear:left; float:left">&#183;</P>
<P style="margin:0px; padding-left:28.8px; text-indent:-2px; font-size:11pt" align=justify>The financial model has not taken any extra income, depreciation, royalties, levies or interest payable into account.</P>
<P style="margin:0px; clear:left"><BR></P>
<A NAME="_Toc28433728"></A><P style="margin:0px; font-size:11pt"><B>TABLE II - Blanket Mine Financial Model Generated By AG</B></P>
<div align="left">
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=268.133 /><TD width=243.067 /></TR>
<TR><TD style="margin-top:0px; border:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt"><B>LOM PLAN &nbsp;Production from 2006 to 2017</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Total Underground Production</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">3,776,000 t @ 4.05 g/t Au</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">ROM tonnes per day</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">920</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Mill Recovery</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">90.0%</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Total Recovered - kg Au</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;13,756</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Total Recovered - oz. Au</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;442,300</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Revenue at US$500/oz. </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;221,135,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Working Costs &nbsp;US$ </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;124,115,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Working Costs &nbsp;US$/tonne (June,2006)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.61</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Services and Admin &nbsp;US$ </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,300,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Total Operating Costs &nbsp;US$ </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;140,415,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Operating Profit/Loss &nbsp;US$ </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;80,720,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Capital Expenditures &nbsp;US$ </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,904,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Earnings Subject to Tax &nbsp;US$ </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;67,816,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Taxes @ 30% &nbsp;US$ </P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17,849,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">Earnings After Tax &nbsp;US$</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;49,987,000</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=268.133><P style="margin:0px; font-size:11pt">NPV @ 15% &nbsp;US$</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=243.067><P style="margin:0px; font-size:11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21,711,000</P>
</TD></TR>
</TABLE>
</div>
<P style="margin:0px"><BR></P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px; font-size:12pt" align=center>10</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Current operational update &nbsp;</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The improved gold selling conditions introduced by the RBZ in early 2009 have operated satisfactorily since 2009. Blanket continues to export its gold production to Rand Refineries in South Africa and receives 100% of the sale proceeds in US dollars within 5 days of sale. Cash flow at Blanket continued to be tight due to ongoing capital investment for the completion of the No. 4 shaft expansion and the requirement for funds to increase the mining and milling rate to 1000 tonnes per day and for the purchase and installation of diesel generators to supplement the mine&#146;s erratic power supply. &nbsp;The continuing failure to redeem the Gold Bond by the RBZ is unfortunate, but alternative financing and revision to the capital expenditure programme allowed for the completion of the No. 4 Shaft expansion project by 3rd of 2010. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify><B>Geological Setting</B></P>
<P style="margin:0px; font-size:11pt" align=justify>Like most of the gold mines in Zimbabwe, Blanket is situated in a typical greenstone terrain, the 70 km long by 15 km wide, Gwanda Greenstone belt. &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. &nbsp;The Blanket property is the largest of the three remaining large gold producers, from a gold resource area that has given rise to no less than 268 gold mines. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Property Geology</B></P>
<P style="margin:0px; font-size:11pt" align=justify>Blanket is part of the group that makes up the North Western Mining camp also called the Sabiwa group of mines extending from Sabiwa and Jethro in the south, through Blanket itself to the Feudal, AR South, AR Main, Sheet, Eroica and Lima ore bodies. &nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify>The geological sequence strikes north-south, dips vertically and consists, from east to west, of a basal felsic unit which is not known to carry mineralization. &nbsp;It is generally on this lithology type that the various mine tailings disposal sites have been located. &nbsp;Above this basal felsic unit is the ultramafic unit that includes the banded iron formations hosting the eastern &#145;dormant&#146; cluster of mines and the ore bodies of the adjacent Vubachikwe mine complex. &nbsp;&nbsp;The active Blanket ore bodies are found on the next<FONT style="font-size:12pt"> </FONT>unit, <I>the mafics</I> and 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 the Smiler prospect. &nbsp;Ore bodies at Blanket are epigenetic and are associated with a later, regionally developed deformation zone characterized by areas of high strain, wrapping around relatively under formed remnants of the original basaltic lava flows. &nbsp;It is within the higher strain regime (highly sheared rocks) that the wider of the ore bodies are located.</P>
<P style="margin-top:0px; margin-bottom:7.333px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:7.333px; font-size:11pt" align=justify><B>Production Operations</B></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Mining</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Subsequent to the completion of the No. 4 Shaft Expansion Project, the underground mining areas can now produce up to 1,100 tonnes of ore daily using predominately long-hole open stoping methods. Certain ore
handling limitations still existed underground on 18 and 22 Levels at the year end. These limitations are currently being addressed by raise boring an ore pass connecting 18 Level to the No. 2 ore bin grizzly tip located on 22 Level. This 120 metre long and 1.5 metre diameter ore pass will dramatically improve the efficiency of delivering ore to the new underground crushing and hoist loading station by eliminating the current necessity to double handle ore and waste generated on 18 Level down to 22 Level via the No 6 winze before it is crushed and hoisted from the underground loading station to surface. &nbsp;These raise boring operations will have a temporary adverse impact on gold production in the first quarter of 2011which is expected to be lower than the increased capacity equivalent of 10,000 ounces per quarter. &nbsp;However the 1<SUP>st</SUP> quarter 2011 production is still expected to be higher than the production level achieved in 4<SUP>th</SUP> quarter of 2010 and the planned annual gold production of 40,000 ounces is expected to be met from increased gold production later in 2011. </P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>11</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify><B>Metallurgical Process </B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The present crushing and milling circuit has been expanded from 600 tonnes per day to about 1,800 tonnes per day capacity by improvements to the crushing and milling circuits. This is more than sufficient to handle the planned increases in mine production from the No. 4 Shaft Expansion Project, and, in future, from any ore mined from the satellite exploration properties currently being developed.</P>
<P style="margin:0px; font-size:11pt" align=justify>All run of mine (&#147;ROM&#148;) ore is crushed &nbsp;underground to minus 80mm, hoisted to surface and crushed to minus 12mm in the surface 2-stage crushing circuit. &nbsp;This material is then fed into two 1.8m by 3.6m rod mills where it is milled down to approximately 70% passing 75 microns, after which the milled slurry is pumped through two 30 inch Knelson Gravity Gold Concentrators where approximately 49% of total mill gold production is recovered as &#145;gravity&#146; gold. &nbsp;The Knelson Concentrator tails are pumped through cyclones whose underflow reports to the open-circuit regrind ball mill. &nbsp;The product from the Knelson tails cyclone overflow and the regrind mill discharge are pumped into a carbon-in-leach (&#147;CIL&#148;) plant consisting of eight, 600 cubic meter leach tanks where alkaline-cyanide leaching and simultaneous absorption of dissolved gold onto granular activated carbon takes place. &nbsp;Elution of the gold from the loaded carbon and subsequent electro-winning is done on site. &nbsp;During electro winning the gold is deposited on wire wool cathodes, the loaded cathodes are acid-digested and the resultant gold solids from acid digestion and the re-dressed gold concentrate from Knelson Concentrators are smelted into dore bars. The granular activated carbon is kiln regenerated before it is re-circulated back to the CIL section. The Dore bars are delivered, as required by Zimbabwean law, to the Government-operated Fidelity for sampling and onward delivery to the Rand Refineries in South Africa. &nbsp;Rand Refineries undertakes the final refining and sells the resultant gold with 100% of the proceeds being credited to Blanket&#146;s bank account in US dollars within 5 days of sale. Rand refinery also recovers a small amount of silver that is co-produced with the gold &#150; this silver is also sold by Rand Refinery and credited to Blanket.</P>
<P style="margin:0px; font-size:11pt" align=justify>The CIL plant has an overall design capacity of 3,800 tonnes of milled ore per day. &nbsp;The CIL plant tailings are reduced in cyanide content and deposited sequentially on two licensed tailing impoundment areas sited close to the plant. Tailings water is pumped back to the metallurgical plant for re-use. &nbsp;Daily management and operation of the tailing deposition area is contracted out to the Zimbabwean subsidiary of specialized South African company &#147;Fraser Alexander Tailings&#148;</P>
<P style="margin:0px"><BR></P>
<P style="font-size: 11pt; margin: 0px" align=justify><B>Zimbabwe Exploration &#150; Gold</B></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Caledonia&#146;s exploration activities in Zimbabwe are conducted by Blanket&#146;s exploration<B> </B>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. These claims cover an area of about 2,500 hectares. &nbsp;Forty seven (47) of these claims are registered as precious metal (gold) blocks covering 415
hectares and &nbsp;31 claims are registered as base metal (Cu, Ni, As) blocks covering a total area of 2,085 hectares. </P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:12pt" align=center>12</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Blanket&#146;s main exploration efforts have been and continue to be focused in certain key areas in the Gwanda Greenstone Belt that are within economic trucking distance of the Blanket plant such as GG prospect and the Mascot Project Area, which are &nbsp;believed to have the greatest potential of early success. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Drilling programs were carried out at GG over the past 5 years. &nbsp;Thirteen diamond cored holes were drilled amounting to 2,336 meters of drilling. &nbsp;Two zones of potentially economic gold mineralization have been established down to a depth of approximately 200 meters. &nbsp;A prospect shaft has been sunk down to the first level as a first step to exposing the mineralization. Further core drilling from the surface will be done in 2011 to establish the strike extent of previously established mineralization. &nbsp;In addition, the existing prospect shaft will be deepened and underground development on the first and second levels will be advanced to expose the extent of the mineralization and to facilitate a more detailed evaluation, sampling and mine planning. &nbsp;Depending on the outcome of 2011 exploration work, the earliest estimation that production could commence at GG could be in mid-2012. Production material will be trucked to the Blanket plant for processing. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Mascot Project Area comprises three existing shafts (Mascot, Penzance and Eagle Vulture) each of which extend down to depths of up to 450 meters and other surface infrastructure, much of which is in need of extensive rehabilitation. &nbsp;Each of these shafts operated until the mid-1960&#146;s after which production ceased due to the increasing political difficulties at that time and the limitations of the technology that was then available. &nbsp;Blanket management believe that the application of modern exploration and processing techniques may allow some or all of these shafts to operate profitably on a sustainable basis. The rehabilitation and installation of infrastructure at Mascot and Eagle Vulture mines continues and is at an advanced stage and underground activities are planned to resume in the 2<SUP>nd</SUP> quarter of 2011. &nbsp;Depending on the rate and extent of rehabilitation and a favourable outcome of exploration work, the earliest that production could commence at the Mascot Project Area would be in early 2012.Production material will be trucked to the Blanket plant for processing.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Blanket is formulating an exploration and project development strategy to prioritize work on its other properties in the Gwanda area</P>
<P style="line-height:11.55pt; margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<A NAME="_Toc252801134"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>4.2</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Nama Property, Zambia</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Below is the summary extracted from the May 1, 2008 NI 43-101 compliant report prepared on Caledonia Nama Limited (&#147;Nama&#148;). The full report can be viewed on www.sedar.com</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Nama lies on the north-western flank of the Zambian Copperbelt and has potential for high tonnage, lower-grade cobalt-copper-nickel mineralisation referred to as the Nama Project.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The area is underlain by strata of the Katanga Supergroup but paucity of outcrop and structural complexity has prevented accurate correlation of the stratigraphy intersected in the boreholes except that distinct mixtite units can be correlated with the lower Kundelungu Group. The mineralisation occurs in a deep weathered profile and is probably caused by the oxidation of primary disseminated cobalt-copper-nickel sulphides combined with supergene redistribution and precipitation, especially in the near surface environment. This has produced both flat lying and inclined resource bodies of mineralisation.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>13</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Caledonia started exploration in the area in 1994 and in the ensuing years acquired five Prospecting Licences and undertook an exploration program commencing with soil sampling supported by airborne geophysical surveys and concluded with a drilling campaign carried out in 1995 and 1996 &#150; predominantly on the A, B, C and the D anomalous cobalt areas. The drilling amounted to 323 reverse circulation holes totalling 38,119 metres followed by five diamond drill holes totalling 1445m. This drilling is in addition to the historical work of 25 diamond drill holes drilled by Roan Selection Trust, Zamanglo and JCI in the Nama area and on the flank of the Konkola dome and 23 auger holes drilled by Roan Selection Trust.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>In 2007, Caledonia embarked on a drilling program in the Nama Retention Licence area and most of this drilling was undertaken over the D Anomaly. This report presents an estimation of indicated and inferred resources based on the results of 38 boreholes drilled into the D anomaly in the northeast to east-central parts of the Retention Licence. This resource amounts to a combined indicated and inferred resource amounting to 63.91million tonnes (Mt) with an average grade of 0.08%Co, 0.035%Cu and 0.028%Ni. This includes an indicated resource of 9.2Mt with a grade of 0.165%Co, 0.067%Cu and 0.05%Ni and an inferred resource of 14.3Mt with a grade of 0.138%Co, 0.054%Cu and 0.051%Ni contained within the shallow dipping hematite-magnetite body.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Current Update</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify>Nama has been granted four contiguous 25 year Large Scale Mining Licenses 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 the Teal Mining/CVRD joint venture. &nbsp;&nbsp;These Mining Licenses consist of four separate licenses which cover a combined area of 786.1 square kilometers. </P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify>The Zambian Development Agency has also granted Nama a 10 year investment license which provides for 10 years of income tax concessions which range from 100% exemption for the first 5 years, 50% exemption for years 6, 7 and 8 and 25% exemptions for years 9 and 10, together with Duty and VAT exemptions and deferrals on imported equipment and materials.</P>
<P style="margin:0px; font-size:11pt"><B>Types of Mineralization at Nama</B></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Cobalt &#150;rich Minerals</B>:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Two main styles of cobalt (&#147;Co&#148;) mineralization occur in the Nama area, the &#145;D-type&#146; iron oxide bodies which are mostly enriched in Co, and the copper (&#147;Cu&#148;) dominated Ore Shale hosted Cu-Co mineralization, more common elsewhere in the Copperbelt, which is being exploited by neighbouring mines to the east and south of Nama. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Ore Shale hosted Cu-Co deposits</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Mineralization of this type occurs within the Ore Shale of the Copperbelt rocks and is currently being exploited immediately to the east of the Nama license on the Konkola mining property. The <I>Ore Shale</I> is known from previous shallow drilling to extend into the Nama license for a distance of about 4 km from its eastern boundary. &nbsp;The neighbouring Konkola and Konnoco Mines have both defined substantial copper resources on their properties. &nbsp;Recent exploration activities at Nama have resulted in the definition of two resource targets (being &#147;Konkola East&#148; and &#147;Kafwira&#148;) characterized as belonging to the Ore Shale-hosted
Cu-Co style of mineralization. &nbsp;These targets will be investigated further during the 2011 exploration field season, including some medium depth diamond drilling to confirm the existence of Copperbelt stratigraphy within the two target areas. &nbsp;Drilling of the first of four holes on the Konkola East target area commenced in early March 2011 and the results of this program are expected to be received in mid-2011. &nbsp;Thereafter, depending on the early results from Konkola east, drilling will continue on two further drill-holes at Konkola East or on one or two drill-holes at the Kafwira target area. </P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>14</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Although the existing &#147;A-type&#148; &nbsp;resource body, with its higher &#145;oxide&#146; cobalt mineralization has often been regarded as belonging to the Ore Shale style of mineralization, it &nbsp;should be noted that its unusual stratigraphic position coupled with the its associated iron and manganese enrichments make this a &#145;hybrid style&#146; of mineralization. &nbsp;Metallurgical work on this hybrid material is continuing in order to improve the economics of the current process while ongoing exploration will be undertaken to improve the resource base on which the process is based.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:12pt"><B>Exploration program for 2011</B></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Drill Targets</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The following drill targets have been defined within the Nama Licence areas. &nbsp;Caledonia has budgeted to drill the first of these two targets during the 2011 field program depending on availability of funding, ground conditions and drilling speeds. &nbsp;The objective of this work is to advance the targets to the stage where there is sufficient confidence that a larger drilling program to determine a potential resource can be justified. </P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Diamond core drilling on the Konkola East area, one of the two target areas discussed below, commenced in early March 2011. &nbsp;Also in 2011, field surveys in the form of detailed magnetometer surveys will be carried out over all past and current target areas as a means of understanding the depth potential of the various bodies investigated. &nbsp;&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Konkola East Target Area</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Konkola East target covers the westward continuation of the Ore Shale from where it crosses the boundary with the Konnoco (Teal/CVRD joint venture) property. &nbsp;The prospect has a strike of 3 km while the Ore Shale is known to extend for about 5 km along strike to the license boundary. &nbsp;Eight shallow boreholes were drilled into this area in 1970 by Zamanglo and an historical resource (non-compliant with NI 43-101) of 5.4 million tonnes, grading at 0.74% Cu was estimated (Co was not assayed). &nbsp;Exploration drilling by Konnoco on the adjoining property to the east of Nama&#146;s Konkola property has proved particularly successful and has established that the Ore Shale dips down to a depth of about 800 m below surface and then extends to their southern boundary in an undulating manner &#150; a distance of approximately 5 km. &nbsp;The resource potential of this 25 square kilometer target area is significant and may have the potential to be a large Cu and Co resource.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Kafwira Target Area</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>A significant contribution to the exploration during the 2010 year has been the complete revision of Caledonia&#146;s geological map of the Nama Licence area. &nbsp;This map has contributed to the prioritizing of the various anomalies and will continue to form the basis for the assessment of the full potential of the Nama area. &nbsp;An indirect result of this work has been the development of an understanding of the major structural trends in the Nama area, in particular the identification of those areas where the &#147;Copperbelt&#148; type lithologies are closest to surface but not actually exposed. &nbsp;These areas represent ideal targets for deeper
drilling programs (500-1000 meters) and have the advantage that the Ore Shale, if intersected, would have a shallow dip. &nbsp;A target area of approximately 20 square kilometres has been defined in the Kafwira area and drilling of up to four holes is expected to commence once the Konkola East target has been drilled and defined. </P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>15</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>&#145;D-Type&#146; iron oxide Co bodies</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>&#145;D-type&#146; ores at Nama consist essentially of massive hematite and magnetite concentrations encapsulated by less well mineralized talcose schist alteration zones. &nbsp;These concentrations occur associated with dyke-like gabbroic intrusions which appear to disrupt the iron-rich bodies. &nbsp;On account of the complex metallurgy and hence larger capital and operating cost requirements involved in treating the typical &#145;D-type&#146; iron oxide bodies, further work on this ore type is required before economic extraction of this type of Co resource can be considered. &nbsp;In particular, work is required on developing a more cost effective means of recovering the Co from this ore type. &nbsp;To this end the company is considering various leach technologies which may reduce the metallurgical costs significantly.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Work Completed</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Details of the previous years&#146; exploration work completed at Nama can be found in the MD&amp;A reports included in prior years&#146; Annual Reports and the 3 quarterly MD&amp;A reports of 2010.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Caledonia&#146;s focus on increasing production at the Blanket Mine meant that capital intensive programs at the Nama Project such as diamond drilling had to be postponed to the 2011 exploration season. &nbsp;As a result, the more recent work program at Nama focused on deep sampling and evaluation of targets deemed most suitable for future drilling. &nbsp;Pits were dug in strategic positions, up to 10 meters deep, to expose the bedrock beneath the thick soil cover. &nbsp;This program has contributed substantially to the development of an improved geological map of the Nama project area, which in turn has made it possible to define exploration targets areas on the basis of geological structure alone in areas where no base metal enrichments are present at surface. Sampling and logging of these exposures has increased the control over the various targets such that the follow-up 2011 drilling program currently underway could be more accurately positioned. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>Other Nama Areas of Interest:</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify><B>&#145;E&#146; Anomaly &#150; Yembela Clearing </B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Research into previous geochemical surveys carried out in the 1960&#146;s indicated that further anomalies had been located by localized sampling programs both east and west of the Yembela Clearing. &nbsp;These anomalous sites were located and follow-up sampling has verified the existence of the anomalies &#150; Yembela East and Yembela West. &nbsp;Cobalt values were encountered in soils which form a thick cover over the two new anomalous areas. &nbsp;Coincidental geophysical anomalies suggest that the mineralization occurs in the form of steeply dipping fold or shear structures. &nbsp;The association of a prominent fault and tillite floor rocks to the south is a very similar structure to that at the &#145;A-type&#146; resource body and supports the interpretation that this occurrence is likely to be analogous to the &#145;A-type&#146; mineralization which is known to be amenable to lower cost extraction techniques. </P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify><B>Konkola West</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>During the 2008 field season, exploration established the existence and extent of an Ore Shale horizon along </P>
<P style="margin:0px; font-size:11pt" align=justify>the western margin of the Konkola Dome (south of the &#145;A&#146; Resource Body). &nbsp;A shale unit, approximately 100 meters wide containing anomalous values of Co and Cu has been located in an area of very deep soil cover. &nbsp;Surface material (&#147;float&#148;) from this area was found to contain measurable amounts of Co and Cu. &nbsp;This area is referred to as the &#147;Konkola West&#148; area. Two future drill targets have been outlined in this area based on that season&#146;s work, in particular, the use of termite hill sampling. &nbsp;Based on the current interpretation, it appears that the target horizon has a north-south strike extent of about 3 km before crossing into the Democratic Republic of Congo (&#147;DRC&#148;). &nbsp;</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>16</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>A second anomaly with a much stronger geochemical response occurs further to the west of the &#147;Ore Shale&#148; target described above. &nbsp;The area is referred to as the &#147;Fault Target&#148; and appears to be the result of a fault or shear zone mineralization and may therefore be similar in character to the &#145;A-type&#146; cobalt anomaly.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<A NAME="_Toc252801135"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>4.3</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Rooipoort and Mapochsgronde, South Africa</B></P>
<P style="margin:0px; clear:left"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Below is the summary extracted from the December 2005 NI 43-101 compliant report prepared by RSG Global (Pty) Ltd (&#147;RSG&#148;) on the Rooipoort property. The full report can be viewed on <FONT style="color:#0000FF"><U>www.sedar.com</U></FONT></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>Eersteling Gold Mining Company Ltd. (&#147;EGMC&#148;) &nbsp;is a 100% owned subsidiary of Caledonia Mining Corporation and holds 100% of the Rooipoort Pt/Pd/Au/Ni/Cu project which is situated in the Limpopo Province, South Africa, some 250km north of Johannesburg and 5km south of the town of Mokopane (formerly Potgietersrus). &nbsp;The Rooipoort Project incorporates two adjacent farms viz. Rooipoort 46KS (the whole farm) and Grasvally 293KR (Portions&nbsp;9, 11, 13, 14 and 16) comprising a contiguous area of 3687.1948 hectares. &nbsp;EGMC is the holder of the Prospecting Permit and Prospecting Right, issued by the South African Department of Minerals and Energy, to the Rooipoort Project area.</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>Acquisition of the properties comprising the Rooipoort Project area and the subsequent exploration programme were initiated as the area is underlain by approximately 7km of strike length of the Northern Lobe overlying the floor rocks. &nbsp;The project area has limited exposure and had been poorly explored in the past, with published extrapolations of the Platreef southwards from Mokopane indicating possible Platreef sub-outcrop along the 7km strike close to the floor rocks.</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>The Rooipoort Project lies in the southern part of the Northern Lobe of the Bushveld Complex, the largest layered intrusion in the world and the world&#146;s most important resource of platinum group metals. &nbsp;Thirty kilometres along strike to the north of the Rooipoort Project is the Potgietersrus Platinum&#146;s Ltd. opencast Pt/Pd/Au/Ni/Cu mine of Anglo Platinum Corporation Ltd. located on the Platreef. &nbsp;The Platreef forms the lowermost unit of the Northern Lobe of the Bushveld Complex in that area which lies on a floor of Transvaal Supergroup rocks and Basement granites. &nbsp;The Platreef is unique to the Northern Lobe. The type area of the Platreef extends in outcrop from Mokopane for some 35km to the north. It consists of an assemblage of feldspathic pyroxenites and pyroxenites hosting platinum group metals (PGMs), nickel and copper bearing sulphide mineralization.</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>Exploration by EGMC was undertaken in a phased manner commencing in mid-2003 with the acquisition of airborne geophysical (aeromagnetic) data followed by a soil geochemical survey and two phases of core drilling, culminating in September 2005 with 3D modelling and resource estimation (RSG&nbsp;Global). &nbsp;The interpretation of the aeromagnetics coupled with soil geochemical data and geological extrapolation provided the basis for positioning of drill holes for the first phase of the core drilling programme. &nbsp;The interpretation of this drilling programme of 23&nbsp;drill holes totalling 7,470m of core and 4,886&nbsp;assays is that the Platreef is not present however several mineralized zones within a 600m to 800m stratigraphic sequence were identified.</P>
<P style="margin-top:0px; margin-bottom:14.667px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>17</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The second phase of core drilling added 31&nbsp;drill holes totalling 10,979.17m of core and 7,782 assays and allowed for definition of seven previously unidentified PGM and base metal (Ni &amp; Cu) bearing sulphide mineralized zones, as well as the recognition of a stratigraphic sequence of this area. &nbsp;A local stratigraphic terminology has been developed which does not correlate directly with the established stratigraphic terminology applied to the Bushveld Complex. &nbsp;Potential correlation with the standard stratigraphy is presented in the context of previous work on the area of Grasvally and adjacent properties to the south of the project area. &nbsp;The mineralized zones were essentially numbered upwards from the base of the enclosing unit with broader cut mineralization given the suffix &#145;S&#146;.</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>On the project area, a broad, shallow, north plunging synclinal structure is developed, separated by a northerly trending fault zone (the Grasvally Fault) from a westerly dipping unit. &nbsp;Only mineralized material to the east of the Grasvally fault is considered in this interpretation, although it is clear that additional mineralized material exists to the west of this fault. &nbsp;This represents upside potential to the resource calculated in this exercise.</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>The deposit is disrupted by several smaller-scale faults and intruded in the north by an easterly trending bifurcating dyke. The EGMC geological interpretations separate the resource into 3 main zones, the C &amp; G block to the south of the dyke, the B block between the bifurcated limbs of the dyke and the A block to the north of the dyke. &nbsp;Only mineralization in the Lower Units have been modelled in the A block. &nbsp;RSG&nbsp;has treated all 3 blocks together, as they would have originally been continuous.</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>A mineral resource estimation was carried out by RSG&nbsp;Global on two of the seven defined mineralized zones viz. the M2 and L3, primarily due to the level of confidence in the lateral geological continuity of the selected zones. &nbsp;RSG&nbsp;considered the mineral resource to be an Inferred Mineral Resource, primarily because of the sparse drill information. &nbsp;Data quality and geological understanding are considered appropriate for this level of classification. The RSG report, date December, 2005 can be viewed on www.sedar.com</P>
<P style="margin:0px; font-size:11pt" align=justify>Metal contents and block tonnages were accumulated and formed the basis for reporting the resource as tabulated below. &nbsp;Resource tabulations are based on a 0.5g/t Pt+Pd+Au (&#147;2PGE+Au&#148;) cut-off above 900m elevation, which correlates approximately to 200m depth, considered appropriate for an open pit.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<DIV align=left><TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=37.8 /><TD width=47.267 /><TD width=85.067 /><TD width=66.133 /><TD width=49.867 /><TD width=43.467 /><TD width=48.2 /><TD width=48.2 /><TD width=66.133 /><TD width=30.933 /><TD width=31 /><TD width=30.933 /><TD width=31 /><TD width=31 /></TR>
<TR><TD style="margin-top:0px; border:1px solid #000000" valign=top width=647 colspan=14><P style="margin-top:5px; margin-bottom:0px; font-size:9pt" align=center><B>Table 1_1</B></P>
<P style="margin-top:5px; margin-bottom:0px; font-size:9pt" align=center><B>Inferred Resource</B></P>
<P style="margin-top:5px; margin-bottom:5px; font-size:9pt" align=center><B>At 0.5g/t 2PGE+AuPGE+Au cut-off and 900m base (200m). &nbsp;Inferred Resource<BR>
Apparent inconsistencies between grades, tonnage and contained metal may arise from rounding</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=647 colspan=14><P style="margin:0px; padding:0px; font-size:9pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=37.8><P style="margin:0px; padding:0px; font-size:9pt">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=47.267><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Ave Thick<BR>
(m)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=85.067><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Tonnes</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Pt<BR>
(oz.)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=49.867><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Pd<BR>
(oz.)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=43.467><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Au<BR>
(oz.)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=48.2><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Ni<BR>
(tonnes)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=48.2><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Cu<BR>
(tonnes)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>2PGE+<BR>
AuPGE+Au<BR>
(g/t)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=30.933><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Pt<BR>
(g/t)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=31><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Pd<BR>
(g/t)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=30.933><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Au<BR>
(g/t)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=31><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Ni<BR>
(%)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=31><P style="margin-top:2px; margin-bottom:2px; font-size:9pt" align=center><B>Cu<BR>
(%)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000" valign=top width=37.8><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt">M2</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=47.267><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>1.8</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=85.067><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>12,791,000</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=66.133><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>172,900</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=49.867><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>340,300</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=43.467><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>39,200</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=48.2><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>25,300</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=48.2><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>14,900</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=66.133><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>1.34</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=30.933><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.42</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=31><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.83</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=30.933><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.10</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=31><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.20</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=31><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.12</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=37.8><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt">L3</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=47.267><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>1.3</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=85.067><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>5,337,000</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>101,300</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=49.867><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>88,300</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=43.467><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>8,400</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=48.2><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>8,000</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=48.2><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=right>5,200</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=66.133><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>1.15</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=30.933><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.59</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=31><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.51</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=30.933><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.05</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=31><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.15</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=31><P style="margin-top:1.2px; margin-bottom:1.2px; font-size:9pt" align=center>0.10</P>
</TD></TR>
</TABLE></DIV>
<P style="margin-top:0px; margin-bottom:14.667px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>The Qualified Person responsible for the above calculations was Julian Verbeek, BSc Geology of RSG Global (Pty) Ltd.<BR>
<BR></P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:12pt" align=center>18</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px">&nbsp;</P>
<P style="margin-top:0px; margin-bottom:14.667px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify><B>Current Status</B><BR></P>
<P style="margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify>The Rooipoort rights, previously held by Eersteling Gold Mine, have been transferred into Maid O&#146; Mist (Pty) Limited, is a wholly owned subsidiary of the Caledonia. &nbsp;Maid O&#146;Mist is the vehicle that will be used to manage the Rooipoort platinum exploration program. </P>
<P style="margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify>In the 2010 financial year $577,000 of previously incurred exploration drilling costs were written off as it was determined that the drilling would not result in the definition of a resource. </P>
<P style="margin:0px; font-size:11pt" align=justify>An application in terms of the provisions of the applicable Act is in progress to treat the 5 adjoining prospecting rights at Rooipoort as a single right and to extend the period of this consolidated right for a further three years.</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:12pt" align=justify>The prospecting rights granted to Caledonia to prospect for Platinum Group Elements (PGE)s on the major portions of the Mapochsgronde tribal trust land are currently in the process of registration. &nbsp;A further application has been made for an adjoining property to the north of the current rights applied for. &nbsp;Caledonia is still waiting the issuing of the prospecting right following its registration.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Caledonia is actively seeking Joint-Venture partnerships for its Rooipoort and Mapochsgronde properties. </P>
<P style="margin-top:0px; margin-bottom:14.667px" align=justify><BR></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:-2px; width:28.4px; font-family:Arial; font-size:11pt; float:left"><B>&nbsp;</B><FONT style="font-family:Times New Roman"><B>4.4</B></FONT></P>
<P style="line-height:11.55pt; margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Eersteling Gold Mining Company Limited</B></P>
<P style="margin:0px; clear:left"><BR></P>
<P style="margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify>The mine is no longer disclosed as &#147;held for sale&#148; but the Board&#146;s decision to sell remains intact. The change in disclosure is as a result of no offer being made for the mine since 2008. &nbsp;No additional impairment has been made against the carrying value as the previously offered price by a third party potential buyer was significantly higher than the carrying value and Caledonia has rejected a purchase offer also in excess of the carrying value. &nbsp;Interested parties continue to investigate the merits of purchasing the mine and Caledonia continues to seek a suitable purchaser.</P>
<A NAME="_Toc252801137"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 5.</B></P>
<P style="line-height:13pt; margin:0px; padding-left:96px; text-indent:-2px; font-size:11pt"><B>RISK FACTORS</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The securities of the Company must be considered speculative, generally because of the nature of the Company&#146;s business and its stage of development. &nbsp;In addition to the other information in this Form the following risks should be considered:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(a)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Mineral Exploration and Development</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The Company&#146;s properties are in the exploration stage and are without any known bodies of commercial ore with the exception of the Blanket Mine in Zimbabwe. &nbsp;Further development of the properties will only proceed upon obtaining satisfactory exploration results. &nbsp;Mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines. &nbsp;There is no assurance that even if a body of commercial ore is discovered underlying a property, a mine will be brought into commercial production. &nbsp;The feasibility of developing a mineral deposit, once discovered, is dependent on a number of factors, including the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices, metallurgical metal recoveries determined, operating cost estimations and government regulations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The long-term profitability and sustainability of the Company&#146;s operations will be in part directly related to the cost and success of its exploration programmes and the operating cash flows generated by the Blanket Mine, which may be affected by a number of factors which are beyond the control of the Company. It is the
Company&#146;s intention to seek Joint Venture partnerships for all of its exploration projects except those of the Blanket Mine in Zimbabwe. </P>
<P style="margin:0px" align=justify><BR>
</P>
<P style="margin:0px" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>19</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(b)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Operating Hazards and Risks</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Mineral production and exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. &nbsp;The operations which the Company conducts, or proposes to undertake, are and will be subject to all the hazards and risks normally incidental to exploration, development and production of resources, any of which could result in work stoppages and damage to persons or property or the environment &nbsp;and possible legal liability for any and all damage. &nbsp;Fires, power outages, labour disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labour are some of the risks involved in the operation of mines and the conduct of exploration programmes. &nbsp;Although the Company has secured liability insurance in an amount which it considers adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or the Company might elect not to insure itself against such liabilities due to high premium costs or other reasons, in which event the Company could incur significant costs or uninsured losses that could have a material adverse effect upon its financial condition. &nbsp;</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Blanket Mine has been adversely affected by power shortages in Zimbabwe, these shortages are expected to continue for the foreseeable future and self-generation via diesel generator sets has been approved and will be operational by the 1<SUP>st</SUP> quarter 2011. The new agreement for power supply with ZESA has improved electricity supply dramatically albeit at an increased power cost to Blanket.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(c)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Economics of Developing Mineral Properties</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract metal(s) from ore and to develop the mining, processing facilities and infrastructure at any site chosen for mining. &nbsp;Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities or grades, metallurgical process recoveries of the metals of interest or the estimated operating costs of the mining venture are sufficient to justify development of the deposit, or that the funds required for development can be obtained on a timely and economically acceptable basis.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond the Company&#146;s control and which cannot be predicted, such as metal price and market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. &nbsp;Depending on the price of minerals produced, the Company may determine that it is not commercially feasible to commence or continue commercial production.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(d)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Environmental Factors and Government Regulation</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>All phases of the Company&#146;s operations will be subject to environmental and other regulations, pursuant to the laws and regulations of the countries in which they are located. &nbsp;Environmental legislation is evolving in a manner which requires stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors, senior management and employees. &nbsp;There is no assurance that future changes in environmental regulations, if any, will not adversely affect the Company&#146;s exploration programs or its operations. &nbsp;There is no assurance that regulatory and environmental approvals
will be obtained on a timely basis or at all. &nbsp;The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations or to preclude entirely the economic development of a property. &nbsp;Environmental hazards, which have been caused by previous or existing owners of the property, and which are unknown to the Company at present may exist on the property. However the Company&#146;s due diligence evaluation of such properties conducted prior to its involvement checks carefully for such environmental hazards so the chances of any major unknown hazards is considered low. </P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp; </P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>20</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Reference is made to Clause 3.1(c) in relation to recent new rules and taxes announced by the Zimbabwe Government.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The exploration programmers which are being carried on by the Company on its properties do not entail significant environmental risk and no separate amount is budgeted to comply with environmental requirements. Any remedial work related to exploration programs is completed during the work programs as part of such work. It is not possible to, at this time, calculate what, if any, costs might be incurred in subsequent years to comply with environmental regulations. &nbsp;In basic mineral exploration and production, complying with environmental regulations is carried out as part of the regular work and no special or separate efforts are required or undertaken. In its financial statements, the Company includes amounts estimated for known rehabilitation work required at its projects/operations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(e)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Additional Financing</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The Company does currently have sufficient financial resources to undertake further planned exploration programmes on its properties and, in particular, to undertake all of the work which it has announced it wishes to do. &nbsp;The Company has limited financial resources and there is no assurance that additional funding will be available to allow the Company to fulfill future plans as and when they are formulated. &nbsp;Failure to obtain additional financing could result in delay or indefinite postponement of further exploration.</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-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(f)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Metal Prices</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The Company&#146;s revenues are, and are expected to be, derived from the mining and sale of minerals from its properties or interests related thereto. &nbsp;The price of those commodities has fluctuated widely, particularly in recent years, and is affected by numerous factors beyond the Company&#146;s control including international economic and political conditions, expectations of inflation, international currency exchange rates, interest rates, global or regional consumption patterns, speculative activities, levels of supply and demand, increased production due to new mine developments and improved mining and production methods, availability and costs of metal substitutes, metal stock levels maintained by producers and others and inventory carrying costs. &nbsp;The effect of these factors on the price of base and precious metals, and therefore the economic viability of the Company&#146;s operations cannot be accurately predicted. Blanket&#146;s gold operations in Zimbabwe have benefitted significantly in the last 3 years from higher US$ gold prices. These higher gold revenues have offset some significant operating cost increases and the strengthening of the South African Rand and Canadian dollar currencies</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(g)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Competition and Agreements with Other Parties</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The resource industry is intensively competitive in all of its phases, and the Company competes with many companies possessing far greater financial resources and technical facilities than itself. &nbsp;Competition could adversely affect the Company&#146;s ability to acquire suitable properties for exploration in the future.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>21</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company tries to Joint Venture its exploration properties with major mining and exploration companies who have the funding potential for such exploration. Previously, the Company has had joint venture partners for its Nama base metal property and its Mulonga diamond exploration property. The Company continues to seek other joint venture partners on all of its properties except the Blanket Mine.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(h)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Governmental Regulation</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Exploration and development of the Property will be affected to varying degrees by: &nbsp;(i) government regulations relating to such matters as environmental protection, health, safety and labour; &nbsp;(ii) mining laws; &nbsp;(iii) restrictions on production; &nbsp;price controls; &nbsp;tax increases; &nbsp;(iv) maintenance of claims; &nbsp;(v) tenure; &nbsp;and (vi) expropriation of property. &nbsp;There is no assurance that future changes in such regulation, if any, will not adversely affect the Company&#146;s operations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Government approvals and permits are required in connection with the exploration activities proposed for the Property. &nbsp;To the extent such approvals are required and not obtained, the Company&#146;s planned exploration activities may be delayed, curtailed, or cancelled entirely.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Failure to comply with applicable laws, regulations and requirements may result in enforcement action against the Company, including orders calling for the curtailment or termination of operations on the Property, or calling for corrective or remedial measures requiring considerable capital investment. &nbsp;Parties engaged in mineral exploration and mining activities may be subject to civil and criminal liability as a result of failure to comply with applicable laws and regulations.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Amendments to current laws, regulations and permitting requirements affecting mineral exploration and mining activities could have a material adverse impact on the Company&#146;s operations and prospects.</P>
<P style="margin:0px; font-size:11pt" align=justify>It is not possible at this date, to calculate what, if any, separate costs might be incurred by the Company in subsequent years to comply with government regulations. &nbsp;Compliance with governmental regulations is included in the Company&#146;s regular performance of its work and the Company has no separate budget for, nor undertakes any separate or special efforts to, achieve regulation compliance.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(i)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Claims Titles and Aboriginal Rights</B></P>
<P style="line-height:13pt; margin-top:14.667px; margin-bottom:0px; font-size:11pt; clear:left" align=justify>As the Company&#146;s properties and efforts are all in South Africa, Zimbabwe and Zambia, they are subject to the indigenization (Black Empowerment) laws of those countries. &nbsp;The Company could therefore (and will likely) be forced to sell shares of its local operating subsidiaries, or interests in the properties, to local indigenous citizens of, or the governments of, the countries in which the properties are located. Reference is made to the disclosure in Clause 3.1(c) of recent new steps by the Zimbabwe Government to impose and enforce indigenization rules on the Blanket Mine.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Other parties may dispute the Company&#146;s title to its properties and the properties may be subject to prior unregistered agreements or transfers and title may be affected by undetected encumbrances or defects or government actions.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(j)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Management</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The Company currently has sufficient experienced employees to carry out all of its announced current plans. &nbsp;&nbsp;Development of the Company will be dependent upon it having the funds necessary to, and being successful in, employing and retaining skilled executives or contractors/consultants. &nbsp;Hiring and retaining skilled executives, consultants, contractors and employees in Southern Africa is a significant problem at the present time.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:12pt" align=center>22</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>(k)</B></P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Conflicts of Interest</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>There are no existing material conflicts of interest between the Company and any of its directors or officers. &nbsp;However, certain directors and officers of the Company are directors, officers and/or shareholders of other companies, including companies engaged in mineral exploration. &nbsp;To the extent that such other companies may be interested or participate in or be affected by opportunities or transactions involving the Company, these directors and officers of the Company may have conflicting interests in negotiating and settling terms of such transactions. &nbsp;Conflicts of interest affecting the directors and officers and senior management of the Company will be governed by the applicable laws. &nbsp;In the event that such a conflict of interest arises at a meeting of the Board of Directors of the Company, a director who has such a conflict must disclose the nature and extent of his interest and abstain from voting for or against matters concerning the venture. During 2010 there have been no notified or identified conflicts of interest between the Company and its directors or senior management.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left">(l) </P>
<P style="line-height:13pt; margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>Foreign Currency risk</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:16.8px; font-size:11pt" align=justify>As Caledonia operates in an international environment, some of Caledonia&#146;s financial instruments and transactions are denominated in currencies other than the Canadian Dollar, mainly the South African Rand and the US$. The results of Caledonia&#146;s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of Caledonia are reported in Canadian dollars in Caledonia&#146;s consolidated financial statements. </P>
<P style="margin-top:0px; margin-bottom:16.8px; font-size:11pt" align=justify>The fluctuation of the Canadian dollar in relation to other currencies will consequently have an impact upon the profitability of Caledonia and may also affect the value of Caledonia&#146;s assets and the amount of shareholders&#146; equity. &nbsp;&nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify>As noted below, the Corporation has certain financial assets and liabilities denominated in foreign currencies. Caledonia does not use any derivative instruments to reduce its foreign currency risks.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<A NAME="_Toc252801138"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 6.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align=justify><B>DIVIDENDS</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company has declared and paid no dividends during its existence. &nbsp;There are no restrictions on the Company which would prevent it from paying dividends if and after it becomes profitable. &nbsp;The Company does not have a dividend policy.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<A NAME="_Toc252801139"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 7.</B></P>
<P style="line-height:13pt; margin:0px; text-indent:-2px; font-size:11pt" align=justify><B>CAPITAL STRUCTURE</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc195601717"></A><A NAME="_Toc252801140"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>7.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Capital</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The authorized capital of the Company consists of an unlimited number of Preference Shares &#150; none of which are issued &#150; and an unlimited number of Voting Common Shares &#150; of which 500,169,280 are issued at then date of this document. &nbsp;All of the Common Shares have equal voting and other rights and restrictions and rank pari passu with each other. &nbsp;To the knowledge of the Company&#146;s directors or executive officers, no person or company beneficially owns, directly or indirectly, or controls or directs, voting securities carrying 10 percent or more of the voting rights attached to any class of voting securities of the Company.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The company did not issue any shares during its last completed fiscal year, nor during the period since the end of the fiscal year.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801142"></A><P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>23</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">24</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 8.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align=justify><B>MARKET FOR SECURITIES </B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801143"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>8.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Trading Price and Volume</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Common Shares of the Company are quoted for trading on the NASDAQ OTC (Over-the-Counter) Bulletin Board in the U.S. and listed on the AIM Market in London. &nbsp;The Principal marketplace for the Company is the listing of the shares on the Toronto Stock Exchange. &nbsp;During the year January 1, 2010 &#150; December 31, 2010 77,420,000 shares of the Company traded on the TSX Exchange at prices that range between a high of $0.17 and a low of $0.055 per share, on AIM 1,068,000 shares were traded with prices that ranged between a high of 9.5 pence and a low of 3.5 pence and on Nasdaq 59,282,000 shares were trade with prices that ranged between a high of $0.16 and a low of $0.052.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801144"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 9.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align=justify><B>ESCROWED SECURITIES</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>None of the Issued Shares of the Company are held in escrow.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc480008566"></A><A NAME="_Toc252801145"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 10.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align=justify><B>DIRECTORS AND OFFICERS</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801146"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>10.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Name, Occupation and Security Holdings of Directors and Officers</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=179.6 /><TD width=0.4 /><TD width=252 /><TD width=78 /><TD width=156 /></TR>
<TR><TD style="margin-top:0px; border:1.2px solid #000000" valign=top width=180 colspan=2><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt"><B>Name, Office Held and</B></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt"><B>Municipality of Residence</B></P>
</TD><TD style="margin-top:0px; border-top:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=252><P style="margin:0px"><BR></P>
<A NAME="_Toc195601725"></A><P style="margin:0px; font-size:12pt"><B>Principal Occupation</B></P>
</TD><TD style="margin-top:0px; border-top:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=78><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center><B>Director Since</B></P>
</TD><TD style="margin-top:0px; border-top:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=156><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt" align=center><B>Number of Shares</B></P>
<P style="margin:0px; font-size:11pt" align=center><B>Beneficially Owned,</B></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center><B>Controlled or Directed</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=179.6><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt">Stefan E. Hayden, <SUP>(3)(4)(5)</SUP> President, Chief Executive Officer &nbsp;&amp; Director</P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">Johannesburg, South Africa</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=252.4 colspan=2><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">President and Chief Executive Officer of the Company and Director of all the Company&#146;s subsidiary companies. </P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=78><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>1996</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=156><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>Nil</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=179.6><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt">James Johnstone <SUP>(1)</SUP></P>
<P style="margin:0px; font-size:11pt">Director </P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">Gibsons, British Columbia, Canada</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=252.4 colspan=2><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">Retired. &nbsp;Formerly Chief Operating Officer of the Company and Director of several of its subsidiary companies. </P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=78><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>1997</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=156><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>&nbsp;Nil</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=179.6><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">F. Christopher Harvey, <SUP>(1)</SUP> Director, Oakville, Ontario, Canada</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=252.4 colspan=2><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">Retired. &nbsp;Until 31 December 2005 employed as Technical Director and Secretary of the Company and Director of several of its subsidiary companies.</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=78><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>1993</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=156><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>&nbsp;204,300</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=179.6><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin:0px; font-size:11pt">Carl R. Jonsson,<SUP>(2) (3) (4) (5)</SUP></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">Chairman, Director &amp; Secretary, <SUP>&nbsp;</SUP>Vancouver, British Columbia, Canada</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=252.4 colspan=2><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt">Lawyer. &nbsp;Principal of Tupper, Jonsson &amp; Yeadon, Vancouver, Canada.</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=78><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>1992</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=156><P style="line-height:6pt; margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:3.533px; font-size:11pt" align=center>&nbsp;59,469</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=179.6><P style="margin:0px; font-size:11pt">Robert W Babensee <SUP>(1)(2)</SUP></P>
<P style="margin:0px; font-size:11pt">Director, Toronto, Ontario, Canada</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=252.4 colspan=2><P style="margin:0px; font-size:11pt">Retired Chartered Accountant. &nbsp;Formerly an assurance specialist in the Canadian accounting firm of BDO Dunwoody LLP (retired December 31, 2004). &nbsp;Formerly the CFO of Golden China Resources, a company whose shares were registered on the TSX Venture Exchange. </P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=78><P style="margin:0px; font-size:11pt" align=center>2008</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=156><P style="margin:0px; font-size:11pt" align=center>Nil</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1.2px solid #000000; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=179.6><P style="margin:0px; font-size:11pt">Steven Curtis <SUP>(5)</SUP></P>
<P style="margin:0px; font-size:11pt">VP Finance, Chief Financial Officer &amp; Director</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=252.4 colspan=2><P style="margin:0px; font-size:11pt">Financial Director Avery Dennison SA (Pty) Ltd. until March 2006. &nbsp;Since then, VP Finance, Chief Financial Officer and Director of the Company.</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=78><P style="margin:0px; font-size:11pt" align=center>2008</P>
</TD><TD style="margin-top:0px; border-right:1.2px solid #000000; border-bottom:1.2px solid #000000" valign=top width=156><P style="margin:0px; font-size:11pt" align=center>Nil</P>
</TD></TR>
</TABLE>
<P style="margin:0px; font-size:11pt" align=justify><I>Notes:</I></P>
<P style="margin:0px; font-size:11pt" align=justify><I><SUP>(1)</SUP> Member of Audit Committee, <SUP>(2)</SUP> Member of Compensation Committee, <SUP>(3)</SUP> Member of Corporate Governance Committee, &nbsp;&nbsp;</I></P>
<P style="margin:0px; font-size:11pt" align=justify><I>&nbsp;<SUP>(4)</SUP> Member of Nominating Committee, <SUP>(5) </SUP>Member of Disclosure Committee. &nbsp;</I></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:12pt" align=center>24</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify>The information as to shares beneficially owned or controlled or directed, not being within the knowledge of the Company, has been furnished by the respective nominees individually.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801147"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>10.2</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt" align=justify><B>Cease Trade Orders, Bankruptcies, Penalties or Sanctions</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>None of the Company&#146;s directors or senior officers have been the subject of any cease trade orders, bankruptcies, penalties or sanctions, nor have any companies of which they have been directors, senior officers or controlling shareholders been the subject of any cease trade orders, bankruptcies, penalties or sanctions, within the past 10 years &#150; with the exception of Carl R. Jonsson who was a director and/or officer of three companies the shares of which were/are listed on the TSX Venture Exchange and its predecessor that were the subject of Cease Trade Orders issued by Provincial Securities Regulators having jurisdiction over them. &nbsp;In the case of each company Mr. Jonsson held the positions incidental to his acting as the Solicitor for the companies:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:33.6px; font-size:11pt; float:left">-</P>
<P style="margin:0px; padding-left:33.6px; text-indent:-2px; font-size:11pt" align=justify>Director and Secretary, August 1987 - August 2003, of Global CT &amp; T Telecommunications Ltd. &nbsp;Cease Trade Order was issued against it for failure to file and distribute financial statements - which has not been rescinded.</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:33.6px; font-size:11pt; float:left">-</P>
<P style="margin:0px; padding-left:33.6px; text-indent:-2px; font-size:11pt" align=justify>Director and Secretary of Global Net Entertainment Corp. &nbsp;&nbsp;Cease Trade Order was issued against it for failure to file and distribute financial statements - which was rescinded when the financial statements were filed.</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:33.6px; font-size:11pt; float:left">-</P>
<P style="margin:0px; padding-left:33.6px; text-indent:-2px; font-size:11pt" align=justify>Director until February 4, 2005 of TelcoPlus Enterprises Ltd. &nbsp;Cease Trade Order was issued against it for failure to file and distribute financial statements - which was rescinded when the financial statements were filed.</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801149"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 11.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align=justify><B>PROMOTERS</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company has not within the past three completed Financial Years or during the current year, had a person who is acting as a Promoter of the Company.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801150"></A><P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>25</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 12.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align=justify><B>LEGAL PROCEEDINGS AND REGULATORY ACTIONS</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company is not involved in any legal proceedings which would involve claims for amounts that would exceed 10% of the value of the current assets of the Company. &nbsp;Nor is the Company involved in or threatened with any regulatory actions.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801151"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 13.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align="justify"><B>INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>None of the Directors or Officers of the Company has any current &#150; or within the last three completed Financial Years &#150; any direct interest in any material transactions of the Company or its subsidiaries &#150; other than Share Purchase Option Agreements that have been granted to them or with respect to the remuneration they received for their services to the Company. </P>
<P style="margin:0px" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px"><BR></P>
<P style="line-height:12pt; margin:0px; font-size:12pt">Caledonia had the following related party transactions: &nbsp;&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=392.4 /><TD width=73.467 /><TD width=73.467 /><TD width=73.467 /><TD width=73.467 /></TR>
<TR><TD style="margin-top:0px" valign=top width=392.4><P style="margin:0px; padding:0px; font-size:12pt">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=bottom width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right><U>2009</U></P>
</TD><TD style="margin-top:0px" valign=bottom width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right><U>2008</U></P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="margin:0px; padding:0px; font-size:12pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=392.4><P style="margin:0px; padding:0px; font-size:12pt">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="margin:0px; padding:0px; font-size:12pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=392.4><P style="margin:0px; font-size:11pt">Fees and allowances paid to a Corporation which provides the services of Caledonia's president</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right><B>552</B></P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right>558</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right>635</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="margin:0px; padding:0px; font-size:12pt">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=392.4><P style="line-height:12pt; margin:0px; font-size:11pt">Rent for office premises paid to a company owned by members of the President&#146;s family</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right><B>49</B></P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right>50</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px; font-size:12pt" align=right>43</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="margin:0px; padding:0px; font-size:12pt">&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Caledonia has a management agreement with Epicure Overseas S.A. (&#147;Epicure&#148;), for management services provided by the President. &nbsp;Caledonia is required to pay a base annual remuneration and an expense allowance adjusted for inflation and bonuses as set out in the agreement. &nbsp;In the event of a change of control of Caledonia, Epicure can terminate the agreement and receive a lump sum payment equal to 200% of the remuneration for the year in which the change occurs.</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801152"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 14.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align="justify"><B>MATERIAL CONTRACTS </B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The Company and its Subsidiaries have not entered into any material contracts since January 1, 2010 - the beginning of its last completed fiscal year.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801153"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 15.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align="justify"><B>INTERESTS OF EXPERTS </B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801154"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:12pt; float:left"><B>15.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>Experts named </B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Mr. Julian Verbeek, B.Sc. Geology, an independent consultant, was the independent Qualified Person for the Rooipoort reserves and resources as required by National Instrument 43-101 of the Canadian Securities Administrators.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>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.</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-size:12pt" align=center>26</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<A NAME="_Toc252801155"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>15.2</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>Interests of Experts</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>The named experts have no personal interests in any of the Company&#146;s properties</P>
<P style="margin:0px" align=justify><BR></P>
<A NAME="_Toc252801156"></A><P style="line-height:13pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>ITEM 16.</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align="justify"><B>ADDITIONAL INFORMATION</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801157"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:12pt; float:left"><B>16.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>Further Information</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Further specific information may be found in the Company&#146;s December 31, 2010 Audited, Consolidated, Year-End Financial Statements and in its Annual MD &amp; A. &nbsp;All of these documents may be viewed on SEDAR at <FONT style="color:#0000FF"><U>www.sedar.com</U></FONT> and on the Company&#146;s website at &nbsp;<FONT style="color:#0000FF"><U>www.caledoniamining.com</U></FONT> &nbsp;Additional information about the Company is also contained in the Information Circular issued by the Company for its most recent annual meeting of shareholders, including directors and officers remuneration and indebtedness, principal holders of the Company&#146;s securities, securities authorized for issuance under equity compensation plans.</P>
<P style="line-height:12pt; margin:0px"><BR></P>
<A NAME="_Toc252801158"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>16.2</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>Forward Looking Statements</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:14.067px; font-size:11pt" align=justify>This Annual Information Form contains certain forward-looking statements relating but not limited to the Company&#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 number 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. </P>
<P style="margin:0px; font-size:11pt" align=justify>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 assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia 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.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<A NAME="_Toc252801159"></A><P style="line-height:12pt; margin:0px"><BR></P>
<A NAME="_Toc252801160"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>Item 17</B></P>
<P style="line-height: 13pt; text-indent: -2px; font-size: 11pt; margin: 0px" align="justify"><B>AUDIT COMMITTEE INFORMATION</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<A NAME="_Toc252801161"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>17.1</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>Audit Committee Charter</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:12pt" align=center>27</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; font-size:12pt; page-break-before:always">&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>Attached as Schedule &#147;A&#148; is a copy of the Company&#146;s Audit Committee Charter - adopted November 9, 2006.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<A NAME="_Toc252801162"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-size:11pt; float:left"><B>17.2</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>Audit Committee Composition</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The Company&#146;s Audit Committee is comprised of directors Robert Babensee, James Johnstone and Christopher Harvey. &nbsp;Some information with respect to them is given in Clause 10.1. &nbsp;They are all considered independent and are all considered to be financially literate. &nbsp;Messrs. Johnstone and Harvey are considered financially literate as a result of their decades of business experience. &nbsp;Mr. Babensee was a qualified and former practicing chartered accountant in Canada for in excess of 35 years and had experience in preparing, auditing, analyzing and evaluating financial statements. &nbsp;All members of the Audit Committee are considered, based on their professional education or experience have a good understanding of the accounting principles used by the Company to prepare its financial statements, the ability to assess the general application of such accounting principles in connection the accounting for the estimates, accruals and reserves of the Company and a good understanding of internal controls and procedures for financial reporting.</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<A NAME="_Toc252801163"></A><P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:96px; font-size:11pt; float:left"><B>17.3</B></P>
<P style="line-height:12pt; margin:0px; padding-left:48px; text-indent:-2px; font-size:11pt"><B>External Auditors Fees</B></P>
<P style="line-height:13pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:13pt; margin:0px; font-size:11pt" align=justify>The fees charged by the Company&#146;s external auditors, BDO Canada LLP, Chartered Accountants for the last two completed fiscal years of the Company are as follows:</P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=131.467 /><TD width=131.533 /><TD width=131.533 /><TD width=131.533 /><TD width=131.533 /></TR>
<TR><TD style="margin-top:0px; border:1px solid #000000" valign=top width=131.467><P style="line-height:13pt; margin:0px; font-size:9pt" align=center><I>Financial Year Ending</I></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center><I>Audit Fees</I></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center><I>Audit Related Fees</I></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center><I>Tax Fees</I></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center><I>All Other Fees</I></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.467><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>December 31, 2009</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>$201,531</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>$18,485</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>Nil</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>Nil</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.467><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>December 31, 2010</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>$192,600</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>$19,900</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>Nil</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=131.533><P style="line-height:13pt; margin:0px; font-size:9pt" align=center>Nil</P>
</TD></TR>
</TABLE>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify><BR></P>
<P style="line-height:13pt; margin:0px" align=justify>&nbsp;</P>
<P style="line-height:13pt; margin:0px" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:12pt" align=center>28</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
</BODY>
<!-- EDGAR Validation Code: C99AEC80 -->
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>financials.htm
<DESCRIPTION>ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>MD Filed by Filing Services Canada Inc.&nbsp; (403) 717-3898</title>
<META NAME="author" CONTENT="##">
<META NAME="date" CONTENT="03/31/2011">
</HEAD>
<BODY style="margin-top:0;font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="margin:0px" align=justify><BR><BR>
<BR></P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0 width="1399"><TR height=0 style="font-size:0"><TD width=1397 /></TR>
<TR><TD style="background-color: #000000; border: 1px solid #000000; margin-top: 0px" valign=top width=1397><P style="margin-top:6.2px; margin-bottom:6.2px; font-family:Shruti,Times New Roman; font-size:14pt; color:#FFFFFF" align=justify>MANAGEMENT&#146;S RESPONSIBILITY FOR FINANCIAL INFORMATION</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="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="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 (&#147;the Corporation or Caledonia&#148;) have been prepared in conformity with generally accepted accounting principles applied in Canada and, where appropriate, these statements include some amounts that are based on best estimates and judgment. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Financial information used elsewhere in the Annual Report is consistent with that in the financial statements. The MD&amp;A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from the present assessment of this information because future events and circumstances may not occur as expected.</P>
<P style="margin:0px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; font-size:11pt" align=justify>The Corporation maintains adequate systems of internal accounting and administrative controls, consistent with reasonable cost. Such systems are designed to provide adequate assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the annual consolidated financial statements and expressing an opinion on them.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>Management has determined that as a result of the relatively small size of the Corporation&#146;s head office finance department personnel, the Internal Controls over Financial Reporting (&#147;ICFR&#148;) assessment concluded that there were limited resources to adequately segregate duties and to permit or necessitate the comprehensive documentation of all policies and procedures that form the basis of an effective design of ICFR.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; font-size:11pt" align=justify>In order to mitigate the risk of material misstatement in the Corporation&#146;s consolidated financial statements, the Corporation implemented additional cash flow review and monitoring controls at head office on a monthly basis. Also as part of their monitoring and oversight role the Audit Committee performs additional analysis and other post-closing procedures. No material exceptions were noted based on the additional year end procedures and no evidence of fraudulent activity was found.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="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="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 Canada LLP, in accordance with generally accepted auditing standards in Canada and the standards of the Public Company 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>
<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-top:0px; margin-bottom:-2px; text-indent:28.8px; width:288px; font-size:11pt; float:left">&#147;Signed&#148;</P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify>&#147;Signed&#148;</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:283.533px; font-size:11pt; float:left">S. E. Hayden</P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify>&nbsp;S. R. Curtis</P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:288px; font-size:11pt; clear:left; float:left">President and Chief Executive Officer</P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify>Vice-President, Finance and Chief Financial Officer<BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px; text-indent:-2px; font-size:11pt" align=justify>&nbsp;</P>
<P style="font-size: 14pt; border-top-style: solid; border-top-width: 2; border-bottom: 2 solid #000000; margin-top: 9.333px; margin-bottom: 0px" align=right><B><br>
Independent</B><FONT style="font-size:11pt"> </FONT><B>Auditor&#146;s Report<br>
</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><B>To the shareholders of Caledonia Mining Corporation</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:8px" align=justify>We have audited the accompanying consolidated financial statements of Caledonia Mining Corporation, which comprise the consolidated balance sheets as at December 31, 2010 and 2009, and the consolidated statements of changes in shareholders&#146; equity, operations and comprehensive income and loss and cash flow for each of the years in the three year period ended December 31, 2010, and a summary of significant accounting policies and other explanatory information.</P>
<P style="margin-top:0px; margin-bottom:8px" align=justify><B>Management's Responsibility for the Consolidated Financial Statements</B></P>
<P style="margin-top:0px; margin-bottom:8px" align=justify>Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian Generally Accepted Accounting Principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.</P>
<P style="margin-top:0px; margin-bottom:8px" align=justify><B>Auditor's Responsibility</B></P>
<P style="margin-top:0px; margin-bottom:8px" align=justify>Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.</P>
<P style="margin-top:0px; margin-bottom:8px" align=justify>An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.</P>
<P style="margin-top:0px; margin-bottom:8px" align=justify>We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.</P>
<P style="margin-top:0px; margin-bottom:8px" align=justify><B>Opinion</B></P>
<P style="margin-top:0px; margin-bottom:6.667px" align=justify>In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Caledonia Mining Corporation as at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2010, in accordance with Canadian Generally Accepted Accounting Principles.</P>
<P style="margin-top:0px; margin-bottom:8px" align=justify><B>Emphasis of Matter</B></P>
<P style="margin-top:0px; margin-bottom:8px" align=justify>Without qualifying our opinion, we draw attention to the Basis of Presentation and Going Concern paragraph in the Summary of Significant Accounting Policies in the financial statements which indicates that the Corporation's ability to recover amounts shown for capital assets and mineral properties is dependent upon the existence of economically recoverable reserves, the ability of the Corporation to obtain financing and future profitable production. These conditions, along with other matters as set forth in the Basis of Presentation and Going Concern paragraph, indicate the existence of a material uncertainty that may cast significant doubt about the Corporation's ability to continue as a going concern.</P>
<P style="margin-top:6.667px; margin-bottom:0px" align=justify><BR></P>
<P style="margin-top:6.667px; margin-bottom:0px" align=justify>&nbsp;(Signed) BDO Canada LLP</P>
<P style="margin-top:6.667px; margin-bottom:0px" align=justify>Chartered Accountants, Licensed Public Accountants</P>
<P style="margin:0px" align=justify>Toronto, Ontario</P>
<P style="margin:0px" align=justify>Date: March 30, 2011</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,Times New Roman" align=center>2</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=641.733 /></TR>
<TR><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=641.733><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=641.733><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Consolidated Balance Sheets</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=641.733><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; 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>&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0>
  <tr>
    <TD width=432 /><TD width=198 colspan="2" />
      <p align="center"><B>December 31</B>
  </tr>
  <TR height=0 style="font-size:0"><TD width=432 /><TD width=96 align="right" /><B>2010</B><TD width=102 align="right" />2009</TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Assets</B></P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Current</B></P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=102><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=96><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=102><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,145</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,623</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable </P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,309</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,547</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Inventories (Note 11)</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,626</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,589</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>114</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>158</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:1px solid #000000; border-bottom:1px solid #000000" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>6,194</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-bottom:1px solid #000000" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>5,917</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=96><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=102><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Accounts receivable</B> (Note 10)</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>810</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Investments</B> (Note 1)</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>59</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Capital assets</B> (Note 2)</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5,435</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,336</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Mineral properties</B> (Note 3)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>15,854</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>13,968</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>21,294</B></P>
</TD><TD style="margin-top:0px" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>16,173</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>27,488</B></P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=102><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>22,090</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=432 /><TD width=93.267 /><TD width=104.733 /></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Liabilities and Shareholders&#146; Equity</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104.733><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Current</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104.733><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Bank facility (Note 13)</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>747</B></P>
</TD><TD style="margin-top:0px" valign=top width=104.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>588</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable </P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3,882</B></P>
</TD><TD style="margin-top:0px" valign=top width=104.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,171</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:1px solid #000000" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>4,629</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000" valign=top width=104.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,759</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=93.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104.733><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Future tax liability </B>(Note 6)</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,286</B></P>
</TD><TD style="margin-top:0px" valign=top width=104.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>859</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Asset retirement obligation </B>(Note 4)</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,731</B></P>
</TD><TD style="margin-top:0px" valign=top width=104.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,730</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>8,646</B></P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=104.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>5,348</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=432 /><TD width=97.2 /><TD width=100.8 /></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Shareholders&#146; Equity </B>(Note 5)</P>
</TD><TD style="margin-top:0px" valign=top width=97.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=100.8><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Share capital </P>
</TD><TD style="margin-top:0px" valign=top width=97.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>196,125</B></P>
</TD><TD style="margin-top:0px" valign=top width=100.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>196,125</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Contributed surplus </P>
</TD><TD style="margin-top:0px" valign=top width=97.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,305</B></P>
</TD><TD style="margin-top:0px" valign=top width=100.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,951</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income/(loss)</P>
</TD><TD style="margin-top:0px" valign=top width=97.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,061)</B></P>
</TD><TD style="margin-top:0px" valign=top width=100.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(550)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;Deficit</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=97.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(178,527)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=100.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(180,784)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=97.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>18,842</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=100.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>16,742</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=432><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=97.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>27,488</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=100.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>22,090</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>On behalf of the Board:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:48px; width:240px; font-family:Times,Times New Roman; float:left">&#147;S E Hayden&#148; </P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>&nbsp;Director</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:48px; font-family:Times,Times New Roman; float:left">&nbsp;</P>
<P style="line-height: 12pt; width: 240px; font-family: Times, 'Times New Roman'; float: left; text-indent: 48px; margin-top: 0px; margin-bottom: -2px">&#147;Robert W Babensee&#148;</P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>&nbsp;Director</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman; 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="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>3</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=678.2 /></TR>
<TR><TD style="margin-top:0px; border-top:2px solid #000000" valign=top width=678.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=678.2><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Consolidated Statements of Changes in Shareholders&#146; Equity</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=678.2><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>(in thousands of Canadian dollars )</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify>&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=678.2 /></TR>
<TR><TD style="margin-top:0px" valign=top width=678.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>For the years ended December 31, 2010, 2009 and 2008 &nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:240px; font-family:Times,Times New Roman; float:left"><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;</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=217.4 /><TD width=56.667 /><TD width=66.2 /><TD width=85 /><TD width=104 /><TD width=75.6 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Accumulated </P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>&nbsp;Other</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Share </P>
</TD><TD style="margin-top:0px" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Contributed</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>&nbsp;Comprehensive </P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Note</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Capital</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Surplus</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>&nbsp;Income/(loss)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Deficit</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Total</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-top:2px solid #000000" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance at December 31, 2007</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>195,006</P>
</TD><TD style="margin-top:0px" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,040</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(57)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(171,894)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>24,095</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Shares issued</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>5(a)(i)</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,119</P>
</TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,119</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Equity-based compensation expense</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>5(b)</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>862</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>862</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Investments revaluation to fair value</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(10)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(10)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Reclassification adjustment for other than temporary decline in value</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>70</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>70</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Net loss for the year</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,940)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,940)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance at December 31, 2008</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>196,125</P>
</TD><TD style="margin-top:0px" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,902</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(176,834)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>21,196</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Equity-based compensation expense</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><U>5(b)</U></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>49</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>49</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Investments revaluation to fair value</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>47</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>47</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Translation loss at Blanket Mine</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><U>5(e)</U></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(600)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(600)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Net loss for the year</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,950)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,950)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance at December 31, 2009</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>196,125</P>
</TD><TD style="margin-top:0px" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,951</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(550)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(180,784)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>16,742</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Equity-based compensation expense</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><U>5(b)</U></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>354</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>354</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Reclassification to net income on sale of investment</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(45)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(45)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Translation loss at Blanket Mine</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(466)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(466)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Net income for the year</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,257</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,257</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=217.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Balance at December 31, 2010</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=56.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>196,125</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,305</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,061)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(178,527)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>18,842</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>4</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=648.933 /></TR>
<TR><TD style="margin-top:0px" valign=top width=648.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=648.933><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;Consolidated Statements of Operations and Comprehensive Income and Loss</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=648.933><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>(in thousands of Canadian dollars except per share amounts)</B></P>
</TD></TR>
</TABLE>
<P style="line-height:0.65pt; margin:0px; clear:left" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0>
  <tr>
    <TD width=368.6 /><TD width=254 colspan="3" />
      <p align="center"><B>For the years ended December 31</B>
  </tr>
  <TR height=0 style="font-size:0"><TD width=368.6 /><TD width=75.6 align="right" /><b>2010</b><TD width=83.8 align="right" />2009<TD width=96 align="right" />2008</TR>
<TR><TD style="margin-top:0px" valign=bottom width=368.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman"><B>Revenue and operating costs</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=368.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Revenue from sales</P>
</TD><TD style="margin-top:0px" valign=bottom width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>22,401</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>11,559</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>7,696</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=368.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Royalty expense</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(825)</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(240)</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=368.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">&nbsp;Operating costs (exclusive of amortization &nbsp;below) (Note 12)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(13,298)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(8,403)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,657)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=368.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>8,278</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,916</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,039</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=340.2 /><TD width=104 /><TD width=83.8 /><TD width=96 /></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Costs and expenses</B></P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=83.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=96><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=340.2><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman">General and administrative</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,404</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,147</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,896</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=340.2><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman">Interest (received)/paid &nbsp;</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(3)</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(264)</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(385)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=340.2><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman">Amortization</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>566</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>436</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>397</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=340.2><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman">Write-down of mineral properties (Note 3)</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>577</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,434</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,168</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=340.2><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman">Foreign exchange loss/(gain)</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>50</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(248)</P>
</TD><TD style="margin-top:0px" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,876</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=340.2><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman">Other expense &nbsp;(Note 8)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>997</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,502</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>591</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>4,591</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>6,007</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=96><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>7,543</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=340.067 /><TD width=103.933 /><TD width=83.8 /><TD width=95.933 /></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman"><B>Income/(Loss) before income tax</B></P>
</TD><TD style="margin-top:0px" valign=top width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3,687</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,091)</P>
</TD><TD style="margin-top:0px" valign=top width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,504)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=340.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman"><B>Income tax </B>(Note 6)</P>
</TD><TD style="margin-top:0px" valign=top width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,430)</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(859)</P>
</TD><TD style="margin-top:0px" valign=top width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Net Income/(loss) continuing operations</B></P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000" valign=bottom width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,257</B></P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000" valign=bottom width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,950)</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000" width=95.933><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,504)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Net (loss) for discontinued operation</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Net Income(loss) after discontinued operation</B></P>
</TD><TD style="margin-top:0px" width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,257</B></P>
</TD><TD style="margin-top:0px" width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,950)</P>
</TD><TD style="margin-top:0px" width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,940)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Revaluation of investments to fair value (</B>Note 1<B>)</B></P>
</TD><TD style="margin-top:0px" width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>47</P>
</TD><TD style="margin-top:0px" width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(10)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Reclassification to gain on sale of investment</B></P>
</TD><TD style="margin-top:0px" width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(45)</B></P>
</TD><TD style="margin-top:0px" width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Reclassification adjustment for other than temporary decline in value</B></P>
</TD><TD style="margin-top:0px" width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>70</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Foreign exchange translation loss at Blanket Mine</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(466)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(600)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; font-family:Times,Times New Roman"><B>Comprehensive Income/(loss)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=103.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,746</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=83.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,503)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=95.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,880)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=103.933><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=83.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=95.933><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=justify><B>Net Income/(Loss) per share</B></P>
</TD><TD style="margin-top:0px" valign=top width=103.933><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=83.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=95.933><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>Basic and diluted from continuing operations</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" width=103.933><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right><B>0.0045</B></P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" width=83.8><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right>(0.008)</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" width=95.933><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right>(0.009)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>Basic and diluted from discontinued operations</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=103.933><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=83.8><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=95.933><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right>(0.001)</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=340.067><P style="margin-top:0px; margin-bottom:6.667px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>Basic and diluted for the year (Note 7)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=103.933><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right><B>0.0045</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=83.8><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right>(0.008)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" width=95.933><P style="margin-top:0px; margin-bottom:6.667px; font-family:Times,Times New Roman" align=right>(0.010)</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman; 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="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>5</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always" align=justify><BR></P>
<P style="margin:0px" align=justify><BR><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0 width="630"><TR height=0 style="font-size:0"><TD width=628 /></TR>
<TR><TD style="margin-top: 0px" valign=top width=628><P style="line-height:14pt; margin:0px; padding-top:4px; font-family:Times,Times New Roman; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=628><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Consolidated Statements of Cash Flows</B></P>
</TD></TR>
<TR><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=630><P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>(in thousands of Canadian dollars)</B></P>
</TD></TR>
</TABLE>
<P style="line-height:0.65pt; margin:0px; clear:left" align=justify><BR></P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0 width="630">
  <tr>
    <TD width=348 /><TD width=278 colspan="3" />
      <p align="center"><B>For the years ended December 31</B>
  </tr>
  <tr>
    <TD width=348 /><TD width=82 align="right" /><b>2010</b><TD width=95 align="right" />2009<TD width=97 align="right" />2008
  </tr>
  <TR height=0 style="font-size:0"><TD width=348 /><TD width=82 /><TD width=95 /><TD width=97 /></TR>
<TR><TD style="margin-top: 0px" valign=top width=348><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Cash provided by (used in)</B></P>
</TD><TD style="margin-top: 0px" valign=top width=82><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=95><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=97><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=348><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=82><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=95><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=97><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
</TABLE>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667 /><TD width=83.333 /><TD width=94.6 /><TD width=96.4 /></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify><B>Operating activities</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>&nbsp;Income/(Loss) from &nbsp;operations</P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,257</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,950)</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,504)</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667 /><TD width=83.333 /><TD width=94.6 /><TD width=96.4 /></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;Adjustments to reconcile net cash from operations (Note 9) </P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3,489</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,830</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,237</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667 /><TD width=83.333 /><TD width=94.6 /><TD width=96.4 /></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;Changes in non-cash operating account balances (Note 9)</P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>822</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,917)</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,049)</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667 /><TD width=83.333 /><TD width=94.6 /><TD width=96.4 /></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>6,568</B></P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,037)</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,316)</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667 /><TD width=83.333 /><TD width=94.6 /><TD width=96.4 /></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify><B>Investing activities</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=96.4><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;Expenditures on capital assets and mineral properties</P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(7,290)</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,547)</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,023)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; padding-left:10.933px; font-family:Times,Times New Roman" align=justify>Proceeds from the sale of an investment</P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>51</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; padding-left:10.933px; font-family:Times,Times New Roman" align=justify>Proceeds on the sale of Barbrook Mine</P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>9,359</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(7,239)</B></P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,547)</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>6,336</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667 /><TD width=83.333 /><TD width=94.6 /><TD width=96.4 /></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify><B>Financing activities</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=96.4><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;Bank facility increase</P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>187</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>588</P>
</TD><TD style="margin-top:0px" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(13)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;Issue of share capital net of issue costs </P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,119</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; text-indent:9.467px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>187</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>588</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=96.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,106</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=349.667 /><TD width=83.333 /><TD width=94.6 /><TD width=94.6 /></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Cash flows from discontinued operation</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Operating activities</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Effect of foreign currency translation on cash</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>6</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(35)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(112)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Increase (decrease) in cash for the year</B></P>
</TD><TD style="margin-top:0px" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(478)</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,031)</P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,578</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Cash and cash equivalents, beginning of year</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,623</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,654</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>76</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Cash and cash equivalents, end of year</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=83.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,145</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,623</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,654</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=83.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman; font-size:8pt" align=justify>See Note 9 for supplementary cash flow information</P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman; 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="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>6</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:14pt; margin:0px; padding-top:4px; font-family:Times,Times New Roman; font-size:14pt; border-top:2px solid #000000" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Nature of Business</B></P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:11.55pt; margin-top:0px; margin-bottom:12.8px; padding-left:28.4px" align=justify>Caledonia is a mining company with exploration and development activities focused on Africa. &nbsp;The Corporation&#146;s primary assets are a gold production operation in Zimbabwe (Blanket), a base metals exploration project in Zambia (Nama), platinum group and base metals (PGE) exploration projects in South Africa (Rooipoort/Mapochs) and a non-producing gold mine in South Africa (Eersteling) which has been identified for disposal. &nbsp;</P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Basis of Presentation and Going Concern</B></P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>The ability of the Corporation to recover the amounts shown for its capital assets and mineral properties is dependent upon the existence of economically recoverable reserves and the ability of the Corporation 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>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height: 10pt; font-family: Times, 'Times New Roman'; margin: 0px; padding-left: 28.4px" align=justify>The Corporation operates in a number of Southern African countries, its interests in the various properties 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 Corporation's activities in these areas or may result in the impairment or loss of part or all of the Corporation's interest in the properties<B>.</B></P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>These consolidated financial statements have been prepared on the basis of a going concern, which contemplates that the Corporation will be able to realize assets and discharge liabilities in the normal course of business. &nbsp;The Corporation&#146;s ability to continue as a going concern is dependent upon operating profitable operations, realising proceeds from the disposal of mineral properties and obtaining sufficient financing to meet its liabilities and its obligations with respect to operating expenditures and expenditures required on its mineral properties.</P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Measurement Uncertainties</B></P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" 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 the fair value of mineral resources, future cash flows associated with capital assets, mineral properties, the net realizable value of the bonds receivable, the obligation under asset retirement obligations, the measurement of stock based compensation and the measurement of future tax assets and liabilities. &nbsp;The Corporation&#146;s realization of its accounts receivable and its Blanket Mine assets are highly reliant on the monetary policies being implemented by the Zimbabwe government. The amount ultimately recovered could be materially different than the estimated values.</P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>7</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Principles of Consolidation</B></P>
<P style="line-height:10pt; margin:0px" align=justify><BR></P>
<P style="line-height:10pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>The consolidated financial statements include the accounts of the Corporation together with all its subsidiaries. &nbsp;All significant inter-Corporation balances and transactions have been eliminated on consolidation.</P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>The Corporation&#146;s consolidated subsidiaries (all 100% owned) are:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=288.867 /><TD width=324.467 /></TR>
<TR><TD style="margin-top:0px; border:1px solid #000000" valign=top width=288.867><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Blanket Mine (1983) (Private) Limited (&#147;Blanket&#148;)</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Caledonia Nama Limited (&#147;Nama&#148;)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=288.867><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Blanket (Barbados) Holdings Limited (&#147;Barbados&#148;)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Caledonia Western Limited (&#147;Western&#148;)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=288.867><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Caledonia Holdings (Africa) Limited (&#147;CHA&#148;)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Eersteling Gold Mining Corporation Limited &nbsp;(&quot;Eersteling&quot;)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=288.867><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Caledonia Holdings Zimbabwe (Private) Limited (&#147;CHZ&#148;)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Fintona Investments (Proprietary) Limited (&#147;Fintona&#148;)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=288.867><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Caledonia Mining Services Limited (&#147;CMS&#148;)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Greenstone Management Services (Proprietary) Limited (&#147;Greenstone&#148;)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=288.867><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Caledonia Kadola Limited (&#147;Kadola&#148;)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Maid O&#146; The Mist (Pty) Ltd (&#147;Maid&#148;)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=288.867><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Caledonia Mining (Zambia) Limited (&#147;CMZ&#148;)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=324.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Mapochs Exploration (Pty) Ltd</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Cash and Cash Equivalents</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>Cash and cash equivalents represent cash on hand in operating bank accounts, and money market funds with initial maturities less than three months.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Inventory</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:30px; font-family:Times,Times New Roman" 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,Times New Roman" align=justify><B>Investments</B></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:30px; font-family:Times,Times New Roman" align=justify>The marketable security is recorded at fair value. Changes in fair value are recognized in the statements of operations and comprehensive income (loss) except for losses that are considered other than temporary which are recognised in operations.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Revenue Recognition</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>Revenue from the sale of precious metals is recognized when the metal leaves the mine for delivery to the respective refineries, risk and benefits of ownership are transferred and the receipt of proceeds are substantially assured. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Capital Assets</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B><I>Producing Assets</I></B></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>Producing assets are recorded at cost less grants, accumulated amortization and write-downs. &nbsp;Amortization on property, plant and equipment is provided on the straight-line basis at rates considered appropriate to reduce book values to estimated residual values over the useful lives of the assets. &nbsp;The estimated life of the producing assets ranges up to 10 years. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times,Times New Roman" align=justify>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;Eersteling Gold Mine remains for sale but in 2010 is presented as held and used as no buyer has yet been found. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>8</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B><I>Non-Producing Assets</I></B></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" 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. The estimated life of the non-producing assets being amortized ranges up to 5 years.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify><B><I>Assets held for sale and discontinued operations</I></B></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>Eersteling Gold Mining Corporation has been on care and maintenance since 1997 and in 2007 the decision to sell Eersteling was taken by the Board. Despite the fact that Eersteling is still for sale it is not disclosed as an &#147;asset held for sale&#148; as we have not had an offer submitted since 2008. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>Eersteling Mine&#146;s results are no longer disclosed under discontinued operations and the comparative figures for 2009 and 2008 have been adjusted accordingly. The information disclosed under discontinued operations relates to Barbrook Mine that was sold in 2008.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=226.8 /><TD width=75.6 /><TD width=74.733 /></TR>
<TR><TD style="margin-top:0px" valign=top width=226.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD><TD style="margin-top:0px" valign=top width=74.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2008</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=226.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=74.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=226.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Operating costs previously disclosed</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>8,223</P>
</TD><TD style="margin-top:0px" valign=top width=74.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,438</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=226.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Add: Eersteling operating costs</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>180</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=74.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>219</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=226.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Operating costs currently disclosed</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>8,403</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=74.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,657</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Mineral Properties</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B><I>Producing Properties</I></B></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>When and if properties are placed in production, the applicable capitalized costs are amortized. &nbsp;Where the total reserves are not determinable because ore bearing structures are open at depth or are open laterally, which is currently the case at Blanket Mine, the straight-line method of amortisation is applied over the estimated life of the mine which is currently up to end of year 2023. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B><I>Non-Producing Properties</I></B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times,Times New Roman" align=justify>Costs relating to the acquisition, exploration and development of non-producing resource properties which are held by the Corporation or from time to time &nbsp;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="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>A decision to abandon, reduce or &nbsp;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 Corporation will continue exploration on the project. &nbsp;However, based on the results at the conclusion of each phase of 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="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" 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>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify><B>Asset Impairment</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" 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="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>9</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Asset retirement obligation </B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>The fair value of the liability of an asset retirement obligation is recorded when it is legally incurred and the corresponding increase to the mineral property is depreciated over the life of the mineral property. The liability is adjusted over time to reflect an accretion element considered in the initial measurement at fair value and revisions to the timing or amount of original estimates and for drawdowns as asset retirement expenditures are incurred.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Strategic Alliances</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>In the past the Corporation 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 Corporation are reflected in these consolidated financial statements. Currently there are no active strategic alliances that would result in a joint venture.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Foreign Currency Translation</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>Balances of the Corporation denominated in foreign currencies and the accounts of its foreign subsidiaries, except for Blanket Mine are translated into Canadian dollars as follows:</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:66.2px; width:113.4px; font-family:Times,Times New Roman; float:left">(i)</P>
<P style="line-height:12pt; margin:0px; padding-left:113.4px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>monetary assets and liabilities at period end rates;</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:66.2px; width:113.4px; font-family:Times,Times New Roman; clear:left; float:left">(ii)</P>
<P style="line-height:12pt; margin:0px; padding-left:113.4px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>all other assets and liabilities at historical rates, and</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:66.2px; width:114.2px; font-family:Times,Times New Roman; clear:left; float:left">(iii)</P>
<P style="line-height:12pt; margin:0px; padding-left:114.2px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>revenue and expense transactions at the average rate of exchange prevailing during the period.</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>Exchange gains or losses arising on these translations are reflected in income in the year incurred. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px" align=justify>Blanket is a self-sustaining operation and operates in Zimbabwe in what was a hyper inflationary economy. &nbsp;Due to the dollarization of the economy in February, 2009 the hyper inflationary environment no longer exists. &nbsp;Accordingly the results of these operations have been translated into Canadian Dollars using the current rate method. &nbsp;On January 1, 2009 Blanket&#146;s functional currency also changed to US Dollars following the Monetary Policy announcement introducing the use of foreign currency in Zimbabwe for all forms of trade and business. &nbsp;The assets and liabilities of a self-sustaining foreign operation are translated at the rate in effect at the balance sheet date for purposes of incorporation in the financial statements of Caledonia and, therefore, an exchange gain or loss will arise when the exchange rate changes. &nbsp;It is inappropriate to incorporate this exchange gain or loss in net income of Caledonia in the period in which it arises; rather, it is reported in the financial statements as a separate component of shareholders' equity and is disclosed as a separate component of accumulated other comprehensive income during the period. &nbsp;In summary the current rate method is as follows:</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:48.4px; width:96px; float:left">(i)</P>
<P style="line-height:12pt; margin:0px; padding-left:96.4px; text-indent:-2px" align=justify>all assets and liabilities are translated at rates at the balance sheet date; and</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:48.4px; width:94.533px; clear:left; float:left">(ii)</P>
<P style="line-height:12pt; margin:0px; padding-left:96.4px; text-indent:-2px" align=justify>revenue and expense transactions at the average rate of exchange prevailing during the period.</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px" align=justify>Included in the statement of operations and comprehensive income/loss is an exchange loss of $50 (2009 - gain $248 and 2008- loss $1,876 ). &nbsp;Due to the translation of Blanket Mine a loss of $466 (2009 - $600) has been disclosed under other comprehensive income/ (loss).</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>Income Taxes</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times,Times New Roman" align=justify>The Corporation 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 </P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>10</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times,Times New Roman" align=justify>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</P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times,Times New Roman" align=justify>when the asset 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.<FONT style="font-size:14pt"><B> </B></FONT></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" 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,Times New Roman" align=justify>The Corporation operates a share option plan as described in note 5(b). &nbsp;The Corporation accounts for equity-based compensation granted under such plans using the fair value method of accounting. Under such method, the</P>
<P style="margin:0px; padding-left:28.4px; text-indent:0.4px; font-family:Times,Times New Roman" align=justify>cost of equity-based compensation is estimated at fair value and is recognized in the statement of operations and comprehensive loss 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 Corporation on exercise of share options together with amounts previously credited to contributed surplus for these options is credited to share capital.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify><B>Financial Instruments</B></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" 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,Times New Roman" 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:-2px; text-indent:24px; width:48px; font-family:Times,Times New Roman; float:left">1.</P>
<P style="margin:0px; padding-left:48px; text-indent:-2px; font-family:Times,Times New Roman" 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. The Corporation has no derivative financial instruments that would have been classified on a similar basis.</P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:24px; width:48px; font-family:Times,Times New Roman; clear:left; float:left">2.</P>
<P style="margin:0px; padding-left:48px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Investments are classified as &#147;assets available for sale&#148;. Investments are presented at fair value and the gains/losses arising from their revaluation at the end of each period 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:-2px; text-indent:24px; width:48px; font-family:Times,Times New Roman; clear:left; float:left">3.</P>
<P style="margin:0px; padding-left:48px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Accounts receivables are classified as &#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. The Reserve Bank of Zimbabwe (&#147;RBZ&#148;) Gold Bonds (&#147;the Bonds&#148;) &nbsp;have been written off in 2010 as the RBZ again failed to redeem the Bonds in July 2010 and also failed to extend the redemption period of the Bonds in the last two Monetary Policy Statements made by the RBZ. Blanket Mine however retains legal title to the Bonds.</P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:24px; width:48px; font-family:Times,Times New Roman; clear:left; float:left">4.</P>
<P style="margin:0px; padding-left:48px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Bank overdraft is classified as &#147;other financial liability&#148; as there is a contractual obligation to deliver cash. It is measured at fair value which is the carrying 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.</P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:24px; width:48px; font-family:Times,Times New Roman; clear:left; float:left">5.</P>
<P style="margin:0px; padding-left:48px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Accounts payable is classified as &#147;other financial liability&#148;. They are recorded at their fair value upon initial recognition. Subsequent measurement will be at amortized cost using the effective interest rate method. </P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify><B>Changes in accounting policies:</B></P>
<P style="margin-top:5.533px; margin-bottom:5.533px; text-indent:28.8px; font-family:Times,Times New Roman">Financial instruments &#151; recognition and measurement, Section 3855</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:28.4px; text-indent:0.4px; font-family:Times,Times New Roman" align=justify>This Section has been amended to clarify the application of the effective interest method after a debt instrument has been impaired. This amendment is effective for fiscal years beginning on or after July 1, 2009. There was no effect on the financial statements due to adopting this amendment.</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,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px" align=justify><B>Recently issued accounting pronouncements issued and not yet effective</B><FONT style="font-family:Times,Times New Roman"> </FONT></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>The CICA issued three new accounting standards in January 2009: Section 1582, Business Combinations, Section 1601, <I>Consolidated Financial Statements </I>and Section 1602, <I>Non-Controlling interests. </I>Section 1582 replaces section 1581 and establishes standards for the accounting of a business combination. It provides the Canadian equivalent to IFRS 3 - <I>Business Combinations. </I>The section 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 January 1, 2011.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:15.267px; padding-left:28.4px" align=justify>Sections 1601 and 1602 together replace section 1600, <I>Consolidated Financial Statements. </I>Section 1601, establishes standards for the preparation of consolidated financial statements. Section 1601 applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. Section 1602 establishes standards for accounting of a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS lAS 27 - C<I>onsolidated and Separate Financial Statements </I>and applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011 and all three sections must be applied concurrently. The Corporation does not anticipate that the adoption of these standards will impact its financial results.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp;Section 3855 Financial Instruments &#150; Recognition and Measurement has been amended to clarify when an embedded prepayment option is separated from its host debt instrument for accounting purposes. This amendment applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Earlier adoption is permitted.<B> </B></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>International Financial Reporting Standards (&#147;IFRS&#148;) </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:12.8px; padding-left:28.4px" align=justify>The Canadian Accounting Standards Board confirmed in February 2008 plans to converge Canadian GAAP with International Financial Reporting Standards (&#147;IFRS&#148;) over a transition period expected to be effective for interim and annual periods commencing January 1, 2011. The transition date of January 1, 2010 will require the restatement for comparative purposes amounts reported by Caledonia for the year ended December 31, 2010. </P>
<P style="margin:0px"><BR><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>12</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:52.8px; float:left"><B>1.</B></P>
<P style="line-height:12pt; margin:0px; padding-left:52.8px; text-indent:-2px" align=justify><B>&nbsp;&nbsp;&nbsp;Investments</B></P>
<P style="line-height:12pt; margin:0px; padding-left:56.733px; clear:left" align=justify>The fair value of the investment in Lucara is $Nil (2009 - $54) and the fair value of the shares held in Old Mutual Plc. is $5 (2009 - $5 ). Caledonia sold the Lucara shares in 2010 for $51.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:56.733px; font-family:Times,Times New Roman; float:left"><B>2. &nbsp;&nbsp;&nbsp;</B></P>
<P style="line-height:12pt; margin:0px; padding-left:56.733px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Capital Assets</B></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=132.267 /><TD width=66.2 /><TD width=113.4 /><TD width=94.467 /><TD width=85.067 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px" valign=top width=567 colspan=6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=567 colspan=6><P style="line-height:12pt; margin:0px" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>COST</B><SUP>(1)</SUP></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>As at December 31, 2009</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>Exchange rate difference</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>Additions</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>As at December 31, 2010</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>$</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Land and buildings</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>9</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>1</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>111</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>121</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Plant and equipment</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- producing <SUP>(2)</SUP></P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>816</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(40)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>4,048</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>4,824</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- non-producing <SUP>(3)</SUP> </P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>1,080</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>1,080</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Office equipment</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>986</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(7)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>45</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>1,024</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Mobile equipment</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>433</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(52)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>100</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>481</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>3,324</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(98)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>4,304</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>7,530</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px; text-indent:192px; font-family:Times,Times New Roman; font-size:8pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:12pt; margin:0px; text-indent:192px; font-family:Times,Times New Roman; font-size:8pt" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; text-indent:192px; font-family:Times,Times New Roman; font-size:8pt" align=justify>&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=132.267 /><TD width=66.2 /><TD width=113.4 /><TD width=94.467 /><TD width=85.067 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px" valign=bottom width=567 colspan=6><P style="line-height:12pt; margin:0px" align=center><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;ACCUMULATED AMORTIZATION</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>As at December 31, 2009</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>Exchange rate difference</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>Additions</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>As at December 31, 2010</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>$</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Land and buildings</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>-</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Plant and equipment</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- producing <SUP>(2)</SUP></P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>38</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(2)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>136</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>172</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;- non-producing <SUP>(3)</SUP> </P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>610</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>1</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>611</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Office equipment</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>921</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(1)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>9</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>929</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="line-height:12pt; margin:0px" align=justify>Mobile equipment</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>419</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(66)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>30</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>383</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>1,988</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right>(68)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right>175</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>2,095</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=113.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify>&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=198.467 /><TD width=113.4 /><TD width=94.467 /><TD width=85.067 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px" valign=top width=198.467><P style="line-height:12pt; margin:0px" align=justify>Net Book Value</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px" align=right>1,336</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>5,435</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:56.733px; width:75.6px; font-family:Times,Times New Roman; font-size:8pt; float:left"><SUP>(1)</SUP></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Opening 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:12pt; margin-top:0px; margin-bottom:-2px; text-indent:56.733px; width:75.6px; font-family:Times,Times New Roman; font-size:8pt; clear:left; float:left"><SUP>(2)</SUP></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>The producing plant and equipment relates to the Blanket operation which recommenced gold production in April 2009.</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:56.733px; width:75.6px; font-family:Times,Times New Roman; font-size:8pt; clear:left; float:left"><SUP>(3)</SUP><FONT style="font-size:10pt"> </FONT></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Non-producing plant and equipment represents Zambian and Eersteling operations. </P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>13</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify>&nbsp;</P>
<P style="line-height:0.9pt; margin:0px" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:48px; font-family:Times,Times New Roman; float:left">&nbsp;</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:48px; font-family:Times,Times New Roman; float:left"><B>3.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Mineral Properties</B></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=129.933 /><TD width=2.333 /><TD width=132.333 /><TD width=16.733 /><TD width=68.333 /><TD width=66.133 /><TD width=75.6 /><TD width=85.067 /></TR>
<TR><TD style="margin-top:0px" valign=top width=132.267 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=444.2 colspan=6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=576.467 colspan=8><P style="line-height:12pt; margin:0px" align=center><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;COST</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=129.933><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="line-height:12pt; margin:0px" align=right>As at&nbsp;<br>
 December 31, 2009</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>Exchange rate difference</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right>Additions</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right>Impairment</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><B>As at December 31, 2010</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=129.933><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><B>$</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=129.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Producing:</P>
</TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=129.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;Blanket, Zimbabwe - gold property </P>
</TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="line-height:12pt; margin:0px" align=right>4,940</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>(280)</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right>2,319</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><B>6,979</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=129.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Non-producing &nbsp;exploration:</P>
</TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=129.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Rooipoort </P>
</TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="line-height:12pt; margin:0px" align=right>4,443</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right>37</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><SUP>(1)</SUP>(577)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><B>3,903</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=129.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Eersteling</P>
</TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="line-height:12pt; margin:0px" align=right>210</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><B>210</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=129.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Nama, Zambia</P>
</TD><TD style="margin-top:0px" valign=top width=134.667 colspan=2><P style="line-height:12pt; margin:0px" align=right>4,956</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right>630</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><B>5,586</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=129.933><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=134.667 colspan=2><P style="line-height:12pt; margin:0px" align=right>14,549</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>(280)</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right>2,986</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right>(577)</P>
</TD><TD style="margin-top:0px; border-top:2px solid #000000; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><B>16,678</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px; text-indent:192px; font-family:Times,Times New Roman; font-size:8pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=9.467 /><TD width=120.467 /><TD width=2.333 /><TD width=94.533 /><TD width=37.8 /><TD width=54.067 /><TD width=31 /><TD width=43.6 /><TD width=22.533 /><TD width=52.733 /><TD width=22.867 /><TD width=73.467 /></TR>
<TR><TD valign=top width=9.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=122.8 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=432.6 colspan=9><P style="line-height:12pt; margin:0px" align=center><B>ACCUMULATED AMORTIZATION</B></P>
</TD></TR>
<TR><TD valign=top width=9.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=120.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=134.667 colspan=3><P style="line-height:12pt; margin:0px" align=right>As at&nbsp;<br>
 December 31, 2009</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>Exchange rate difference</P>
</TD><TD style="margin-top:0px" valign=top width=66.133 colspan=2><P style="line-height:12pt; margin:0px" align=right>Additions</P>
</TD><TD style="margin-top:0px" valign=top width=75.6 colspan=2><P style="line-height:12pt; margin:0px" align=right>Disposals</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px" align=right><B>As at December 31, 2010</B></P>
</TD></TR>
<TR><TD valign=top width=9.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=120.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=96.867 colspan=2><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=bottom width=91.867 colspan=2><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=bottom width=74.6 colspan=2><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=bottom width=75.267 colspan=2><P style="line-height:12pt; margin:0px" align=right>$</P>
</TD><TD style="margin-top:0px" valign=bottom width=96.333 colspan=2><P style="line-height:12pt; margin:0px" align=right><B>$</B></P>
</TD></TR>
<TR><TD valign=bottom width=9.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=122.8 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Producing:</P>
</TD><TD style="margin-top:0px" valign=top width=132.333 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=73.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD valign=top width=9.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=122.8 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;Blanket, Zimbabwe - gold property </P>
</TD><TD style="margin-top:0px" valign=top width=132.333 colspan=2><P style="line-height:12pt; margin:0px" align=right>581</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>(147)</P>
</TD><TD style="margin-top:0px" valign=top width=66.133 colspan=2><P style="line-height:12pt; margin:0px" align=right>390</P>
</TD><TD style="margin-top:0px" valign=top width=75.6 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px" align=right><B>824</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.267 colspan=3><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Non-producing &nbsp;exploration:</P>
</TD><TD style="margin-top:0px" valign=top width=132.333 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=73.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=132.267 colspan=3><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Rooipoort</P>
</TD><TD style="margin-top:0px" valign=top width=132.333 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px" align=right><B>-</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=132.267 colspan=3><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Eersteling</P>
</TD><TD style="margin-top:0px" valign=top width=132.333 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=73.467><P style="line-height:12pt; margin:0px" align=right><B>-</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=132.267 colspan=3><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Nama, Zambia</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=132.333 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.133 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=73.467><P style="line-height:12pt; margin:0px" align=right><B>-</B></P>
</TD></TR>
<TR><TD valign=top width=9.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=122.8 colspan=2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=132.333 colspan=2><P style="line-height:12pt; margin:0px" align=right>581</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067 colspan=2><P style="line-height:12pt; margin:0px" align=right>(147)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.133 colspan=2><P style="line-height:12pt; margin:0px" align=right>390</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6 colspan=2><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=73.467><P style="line-height:12pt; margin:0px" align=right><B>824</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px; text-indent:144px; font-family:Times,Times New Roman; font-size:8pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0 width="582"><TR height=0 style="font-size:0"><TD width=134 /><TD width=132 /><TD width=88 /><TD width=68 /><TD width=76 /><TD width=72 /></TR>
<TR><TD style="margin-top: 0px" valign=top width=134><P style="line-height:12pt; margin:0px" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Book Value</P>
</TD><TD style="border-top: 2px solid #000000; border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=134><P style="line-height:12pt; margin:0px" align=right>13,968</P>
</TD><TD style="border-top: 2px solid #000000; border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=90><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="border-top: 2px solid #000000; border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=70><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="border-top: 2px solid #000000; border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=78><P style="line-height:12pt; margin:0px" align=right>-</P>
</TD><TD style="border-top: 2px solid #000000; border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=74><P style="line-height:12pt; margin:0px" align=right><B>15,854</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:37.8px; width:61.8px; font-family:Times,Times New Roman; font-size:8pt; float:left"><SUP>(1)</SUP></P>
<P style="margin:0px; padding-left:61.8px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>The Rooipoort property has been impaired in 2010 to recognise the fact that drilling expenditure in the far northern region will not be recovered in the foreseeable future as no resource can be defined in this area. </P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; padding-left:37.8px; font-family:Times,Times New Roman">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.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</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,Times New Roman" align=center>14</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:66.2px; font-family:Times,Times New Roman; float:left"><B>4.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Asset Retirement Obligation</B></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=296.6 /><TD width=94.467 /><TD width=118.333 /></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Blanket Mine </P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,406</B></P>
</TD><TD style="margin-top:0px" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>839</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Accretion expense</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>55</B></P>
</TD><TD style="margin-top:0px" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>28</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Increase in asset retirement obligation</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>592</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Foreign exchange loss (gain)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(65)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(53)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Closing balance &#150; continuing operations </P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,396</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,406</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=118.333><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Eersteling Gold Mine</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=118.333><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Opening balance </P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>324</B></P>
</TD><TD style="margin-top:0px" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>314</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Accretion expense</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>11</B></P>
</TD><TD style="margin-top:0px" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>11</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Foreign exchange loss (gain)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Closing balance &#150; held for sale</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>335</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>324</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=296.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,731</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=118.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,730</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>The asset retirement obligations relate to Blanket Mine $1,396 (2009 - $1,406), and Eersteling Gold Mine $335 (2009 - $324) and are estimates of costs of rehabilitation at the end of the mine life. The obligation at Eersteling is accreted at a rate of 5% per annum whilst at Blanket the accretion is within a range of 1.7% - 5%. &nbsp;The undiscounted obligation for the Blanket Mine is $1,781 (2009 -$1,781)</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:66.2px; font-family:Times,Times New Roman; float:left"><B>5.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Shareholders&#146; Equity</B></P>
<P style="line-height:12pt; margin:0px; text-indent:66.2px; font-family:Times,Times New Roman; clear:left" align=justify>(a) Share Capital</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:37.8px; width:66.2px; font-family:Times,Times New Roman; float:left">&nbsp;</P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Authorized</P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman; clear:left" align=justify>An unlimited number of common shares</P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" align=justify>An unlimited number of preference shares.</P>
<P style="line-height:12pt; margin:0px; padding-left:65.8px; font-family:Times,Times New Roman" align=justify>Issued</P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0 height="100"><TR height=0 style="font-size:0"><TD width=8.733 height="17" /><TD width=302.4 height="17" /><TD width=132.267 height="17" /><TD width=113.4 height="17" /></TR>
<TR><TD style="margin-top: 0px" valign=top width=311.133 colspan=2 height="11"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=132.267 height="11"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align="right"><U>Number of Shares</U></P>
</TD><TD style="margin-top: 0px" valign=top width=113.4 height="11"><P style="line-height:12pt; margin:0px; padding-right:1.467px; text-indent:48.733px; font-family:Times,Times New Roman" align=right><U>Amount</U></P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=8.733 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=302.4 height="18"><P style="line-height:12pt; margin:0px; text-indent:0.733px; font-family:Times,Times New Roman" align=justify>Common shares</P>
</TD><TD style="margin-top: 0px" valign=top width=132.267 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=113.4 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=8.733 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=302.4 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance - December 31 , 2007</P>
</TD><TD style="border-top: 2px solid #000000; margin-top: 0px" valign=top width=132.267 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>487,869,280</P>
</TD><TD style="border-top: 2px solid #000000; margin-top: 0px" valign=top width=113.4 height="18"><P style="line-height:12pt; margin:0px; padding-left:20.4px; font-family:Times,Times New Roman" align=right>195,006</P>
</TD></TR>
<TR><TD style="border-top-color: #000000; border-top-width: 2px; margin-top: 0px" valign=top width=8.733 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=302.4 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Issued pursuant to a private placement (i)</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=132.267 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>12,300,000</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=113.4 height="18"><P style="line-height:12pt; margin:0px; padding-left:20.4px; font-family:Times,Times New Roman" align=right>1,119</P>
</TD></TR>
<TR><TD style="border-bottom-color: #000000; border-bottom-width: 2px; margin-top: 0px" valign=top width=8.733 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=302.4 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance - December 31 , 2008, 2009 and 2010</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=132.267 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>500,169,280</B></P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=113.4 height="18"><P style="line-height:12pt; margin:0px; padding-left:20.4px; font-family:Times,Times New Roman" align=right><B>196,125</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:37.8px; width:85.8px; font-family:Times,Times New Roman; float:left">(i)</P>
<P style="margin:0px; padding-left:85.8px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>In February 2008 the Corporation, in a private placement, raised $1,119 after expenses from the sale of 12,300,000 units. &nbsp;Each unit consists of one common share and one common share purchase warrant at $0.15 exercisable before February 21, 2009. &nbsp;These warrants expired unexercised on February 21, 2009.</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>15</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:37.8px; width:66.2px; font-family:Times,Times New Roman; float:left">(b) </P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Stock Option Plans and Equity Based Compensation</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" align=justify>The Corporation 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 the aggregate number of shares that may be issued will not exceed 10% of the number of the shares issued of the Corporation and, as at December 31, 2010, the Corporation has the following options outstanding:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<div align="left">
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=136.533 /><TD width=113.4 /><TD width=145 /></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Number of Options</U></P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Exercise Price-$</U></P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Expiry Date</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>9,450,000</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>April 24, 2012</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,300,000</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>May 31, 2012</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>15,820,000</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Mar 18, 2013</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,000,000</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>July 1, 2013</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>500,000</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>Mar 23, 2014</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>210,000</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>April 29, 2014</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,000,000</P>
</TD><TD style="margin-top:0px" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>February 15, 2015</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>300,000</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>May 11, 2016</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=136.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>32,580,000</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=113.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>0.07</P>
</TD><TD style="margin-top:0px" valign=top width=145><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
</TABLE>
</div>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" align=justify>The continuity of the options granted, exercised, forfeited and expired under the Plans during 2010, 2009 and 2008 are as follows:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=387.467 /><TD width=94.467 /><TD width=104 /></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><U>Number of Options</U></P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><U>Weighted Avg. Exercise Price</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Options outstanding at December 31, 2007</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>18,588,000</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>0.198</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Forfeited or expired</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,778,000)</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>(0.28)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Granted</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>17,320,000</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>0.155</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=387.467><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Options outstanding at December 31, 2008</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>34,130,000</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>0.173</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Granted</P>
</TD><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>500,000</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>0.155</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Forfeited or expired</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,050,000)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>0.187</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify><B>Options outstanding and exercisable at December 31, 2010 </B>and 2009</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>32,580,000</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>0.07</B><B><SUP>(1)</SUP></B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:66.2px; width:85.067px; font-family:Times,Times New Roman; float:left">&nbsp;</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:66.2px; width:85.067px; font-family:Times,Times New Roman; float:left">(1)</P>
<P style="line-height:12pt; margin:0px; padding-left:90.2px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>As a result of the re-pricing, the weighted average exercise price is $0.07</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:36px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>The weighted average remaining contractual life of the outstanding options is 2.2 years (2009 &#150; 3.2 years)</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" 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, 2010 there are 17,436,928 stock options available to grant.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" align=justify>In August 2010 the re-pricing of the exercise price of the above options, down to $0.07, as approved at the 2010 AGM in May, became effective. During the year $354 (2009 - $49 and 2008 - $862) total equity based compensation expense was charged to expense and credited to contributed surplus.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" 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, 2010, 2009 and 2008.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<div align="left">
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=177 /><TD width=61.067 /><TD width=56.667 /><TD width=56.667 /></TR>
<TR><TD style="margin-top:0px" valign=top width=177><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=61.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>2010</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>2009</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>2008</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=177><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Risk-free interest rate</P>
</TD><TD style="margin-top:0px" valign=top width=61.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>1-2%</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>2%</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>3%</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=177><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Expected dividend yield</P>
</TD><TD style="margin-top:0px" valign=top width=61.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>Nil</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>Nil</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>Nil</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=177><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Expected stock price volatility</P>
</TD><TD style="margin-top:0px" valign=top width=61.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>45-55%</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>58-60%</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>55-62%</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=177><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Expected option life in years</P>
</TD><TD style="margin-top:0px" valign=top width=61.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>1.7 &#150; 5.8</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>5</P>
</TD><TD style="margin-top:0px" valign=top width=56.667><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>5</P>
</TD></TR>
</TABLE>
</div>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" 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 Corporation&#146;s stock options.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:37.8px; width:75.6px; font-family:Times,Times New Roman; float:left">(c)</P>
<P style="line-height:12pt; margin:0px; padding-left:37.8px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Warrants &nbsp;</P>
<P style="line-height:8pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>There are no common share purchase warrants pursuant to private placements which are outstanding as of December 31, 2010: </P>
<P style="line-height:12pt; margin:0px; text-indent:75.6px; font-family:Times,Times New Roman" align=justify>The continuity of warrants issued and outstanding is as follows:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<div align="left">
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=272.067 /><TD width=150.533 /></TR>
<TR><TD style="margin-top:0px" valign=top width=272.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=150.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Number of Warrants</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=272.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Outstanding December 31, 2007</P>
</TD><TD style="margin-top:0px" valign=top width=150.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>15,437,626</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=272.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Expired</P>
</TD><TD style="margin-top:0px" valign=top width=150.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(15,437,626)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=272.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Issued pursuant to private placement</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=150.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>12,300,000</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=272.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Outstanding December 31, 2008</P>
</TD><TD style="margin-top:0px" valign=top width=150.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>12,300,000</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=272.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Expired</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=150.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(12,300,000)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=272.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Outstanding December 31, 2010 </B>and 2009</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=150.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD></TR>
</TABLE>
</div>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Warrants expired unexercised on February 21, 2009.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:75.6px; font-family:Times,Times New Roman; float:left">(d)</P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Contributed Surplus</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=302.4 /><TD width=75.6 /><TD width=56.733 /></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2010</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance at beginning of year</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,951</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,902</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Equity based compensation</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>354</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>49</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance at end of year</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,305</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,951</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:1.35pt; margin:0px" align=justify><BR></P>
<P style="line-height:1.35pt; margin:0px" align=justify><BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:75.6px; font-family:Times,Times New Roman; float:left">&nbsp;(e)</P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Accumulated Other Comprehensive Income (loss) and Deficit</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=302.4 /><TD width=85.067 /><TD width=65.467 /></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2010</B></P>
</TD><TD style="margin-top:0px" valign=top width=65.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=65.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Investments revalued to fair value</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5</B></P>
</TD><TD style="margin-top:0px" valign=top width=65.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>50</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Cumulative translation account</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,066)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=65.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(600)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Accumulated other comprehensive income(loss)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,061)</B></P>
</TD><TD style="margin-top:0px" valign=top width=65.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(550)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Deficit</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(178,527)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=65.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(180,784)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Balance at end of year</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(179,588)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=65.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(181,334)</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>6. </B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Income Taxes</B></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman; clear:left" align=justify>The following table reconciles the expected income tax expense at the Canadian statutory income tax rate to the amounts recognized in the consolidated statements of operations for continuing operations:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=302.4 /><TD width=75.6 /><TD width=66.2 /><TD width=66.2 /></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2010</B></P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2008</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Income tax rate</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>31.0%</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>33.0%</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>33.5%</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Income taxes (recovery) at statutory rate</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,143</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,020)</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,436)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Tax rate difference</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(140)</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>405</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>259</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Foreign currency difference</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(644)</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>271</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>83</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Permanent differences</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>495</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>279</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>87</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Losses expired</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5,377</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,192</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(576)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Change in tax rate</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,322</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>186</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Change in valuation allowance</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(4,801)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,590)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,397</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Income tax </P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,430</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>859</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Current year tax</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Future tax</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,427</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>859</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,430</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>859</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" align=justify>The following table reflects future income tax assets and liabilities and are classified as current and non-current according to the classification of the related asset or liability for financial reporting.</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=132.333 /><TD width=170.067 /><TD width=75.6 /><TD width=66.2 /><TD width=66.133 /></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2010</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2008</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Future Tax Asset</B></P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Current</B></P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Zimbabwe</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Loss carried forward</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>11</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>23</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Foreign exchange</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>9</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total current future tax asset</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>20</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>23</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Less: Future tax liability</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(20)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(23)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify>&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=132.333 /><TD width=170.067 /><TD width=75.6 /><TD width=66.2 /><TD width=66.133 /></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Non-current</B></P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Zimbabwe</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Loss carried forward</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Rehabilitation costs</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>173</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>152</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>91</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Other</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>40</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>33</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>507</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>South Africa</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Loss carried forward</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,289</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>947</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>798</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Canada</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Loss carried forward</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3,708</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>8,761</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>10,613</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Other</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>382</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>70</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>304</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Non-current future tax assets</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5,592</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>9,963</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>12,313</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Less: valuation allowance</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(4,976)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(9,777)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(11,367)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total Non- current future tax asset</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>616</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>186</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>946</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Less: Future tax liability</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(616)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(186)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(946)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Future tax liability</B></P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Zimbabwe</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Capital assets and mineral properties</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(2,520)</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,068)</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(597)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Other</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(217)</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(349)</P>
<P style="line-height:12pt; margin:0px" align=right><BR></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>South Africa</P>
</TD><TD style="margin-top:0px" valign=top width=170.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Foreign Exchange</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(186)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total future tax liability</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(2,923)</B></P>
</TD><TD style="margin-top:0px" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,068)</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(946)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=132.333><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=170.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Less: Future tax assets</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>637</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>209</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>946</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=302.4 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify><B>Net future tax liability</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,286</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>859</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66px; text-indent:0.2px; font-family:Times,Times New Roman" align=justify>The Corporation has available tax losses for income tax purposes of approximately $19,477 (2009 - $35,630 and 2008 - $36,985) in Canada and South Africa which may be carried forward to reduce taxable income derived in future years.</P>
<P style="line-height:12pt; margin:0px; padding-left:66px; text-indent:0.2px; font-family:Times,Times New Roman" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" align=justify>The expiry of these losses is as follows:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=94.467 /><TD width=104 /></TR>
<TR><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=94.467><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>Year</B></P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>Amount</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2030</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,660</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2029</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,630</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2028</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,260</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2027</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,054</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2026</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,780</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2015</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,863</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2014</P>
</TD><TD style="margin-top:0px" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,583</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>No expiry</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,648</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=94.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=104><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>19,478</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" align=justify>The Corporation also has approximately $81,356 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 Corporation also has the following expenses which are available to be applied against future income for income tax purposes:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0 align=center><TR height=0 style="font-size:0"><TD width=292.933 /><TD width=94.533 /></TR>
<TR><TD style="margin-top:0px" valign=top width=292.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Canadian exploration and development expenses</P>
</TD><TD style="margin-top:0px" valign=top width=94.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>7,560</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=292.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Foreign exploration and development expenses</P>
</TD><TD style="margin-top:0px" valign=top width=94.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,811</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=292.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Capital assets and other</P>
</TD><TD style="margin-top:0px" valign=top width=94.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>304</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=292.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Tax reserves</P>
</TD><TD style="margin-top:0px" valign=top width=94.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>247</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:66.2px; font-family:Times,Times New Roman" 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 &#147;more likely than not&#148;.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>7.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Net Income/(Loss) Per Share</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" 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 500,169,280 (2009 -500,169,280; 2008 -498,450,650;). &nbsp;Fully diluted income/(loss) per share has not been calculated for 2009 and 2008 as it would be anti-dilutive. &nbsp;&nbsp;The fully diluted number of shares amounts to 503,471,910 (2009 - 500,169,280 and 2008 - 499,217,712). The fully diluted number of shares consists of common shares outstanding of 500,169,280 plus potential exercise of options.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.8px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>8.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Other Expense (Income) </B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times,Times New Roman" align=justify>Other expense (income) is comprised of the following:</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=18.867 /><TD width=330.8 /><TD width=75.6 /><TD width=75.6 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px" valign=top width=18.867><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=330.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2008</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=18.867><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=330.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667 colspan=2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Write off of Gold Bond and accrued interest (Note 10)</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,040</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,502</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>526</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=349.667 colspan=2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Reclassification adjustment for other than temporary decline in value of short term investments held for sale.</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>70</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667 colspan=2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Gain on sale of investment</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(43)</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=349.667 colspan=2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Other</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(5)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=18.867><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=330.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>997</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,502</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>591</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>9.</B></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Statement of Cash Flows</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times,Times New Roman" align=justify>Items not involving cash are as follows:</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=293 /><TD width=66.133 /><TD width=93.267 /><TD width=93.267 /></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2008</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Profit on sale of investment</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(43)</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Amortization</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>566</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>436</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>397</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Asset retirement obligation increase </P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>66</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>36</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>39</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Equity based compensation expense</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>354</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>49</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>862</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Blanket long term liability</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(11)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Write down of mineral properties</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>577</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,434</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,168</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Reclassification adjustment for other than temporary decline in value</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>70</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Write off of Gold Bond and accrued interest <SUP>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,040</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,502</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Current year future tax charge</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,427</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>859</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Interest accrued RBZ bond</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(269)</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(280)</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Unrealised foreign exchange differences </P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(229)</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(207)</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(297)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Other</P>
</TD><TD style="margin-top:0px" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1</P>
</TD><TD style="margin-top:0px" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>9</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=293><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=66.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3,489</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,830</P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:2px solid #000000" valign=top width=93.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,237</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:1.35pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:75.6px; font-family:Times,Times New Roman" align=justify>The net changes in non-cash operating account balances for operations are as follows:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=263 /><TD width=94.6 /><TD width=94.8 /><TD width=94.8 /></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2008</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Accounts receivable</P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(824)</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,546)</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(451)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Inventories</P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(159)</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,814)</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,026</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Prepaid expenses</P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>44</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>132</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(10)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Accounts payable</P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,761</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,311</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,614)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>822</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,917)</P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,049)</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:75.6px; font-family:Times,Times New Roman" align=justify>Supplemental cash flow Information:</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=263 /><TD width=94.6 /><TD width=94.8 /><TD width=94.8 /></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2008</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Interest paid </P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>267</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>95</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>103</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Interest received</P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1)</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(79)</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(488)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=263><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Withholding tax paid Zimbabwe</P>
</TD><TD style="margin-top:0px" valign=top width=94.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3</B></P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=94.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>21</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-37.8px; font-family:Times,Times New Roman" align=justify><B>10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts Receivable</B></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>&nbsp;In the monetary policy statement announced by the Reserve Bank of Zimbabwe (&#147;RBZ&#148;) in February 2009, the debt owing by RBZ to Blanket Mine was converted into a Special Tradable Gold-Backed Foreign Exchange Bond, with a term of 12 months and an 8% interest rate. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Bond plus interest is guaranteed by RBZ on maturity. Blanket has been unable to sell the Bond at an acceptable discount rate and the RBZ did not redeem the Bond on the initial maturity date nor any subsequently advised maturity dates. As a result of the uncertain redemption date and the lack of information coming from the RBZ, the Bond has been written down to a nil fair value whilst Blanket continues to retain legal ownership of the RBZ debt.</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=413.6 /><TD width=47.2 /><TD width=56.733 /></TR>
<TR><TD style="margin-top:0px" valign=top width=413.6><P style="line-height:12pt; margin:0px" align=justify><BR></P>
</TD><TD style="margin-top:0px" valign=top width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2010</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=413.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=413.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Estimated recoverable amount</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-bottom:1px solid #000000" valign=top width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-bottom:1px solid #000000" valign=top width=56.733><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>810</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>11. </B></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Inventory</B></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman; clear:left" align=justify>Inventory is comprised of gold in circuit at Blanket and consumable stores utilised by Blanket Mine.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=217.8 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=16.067 /><TD width=23.133 /><TD width=44.6 /><TD width=51.267 /></TR>
<TR><TD style="margin-top:0px" valign=top width=217.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Inventory items as at December 31</P>
</TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=23.133><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=44.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2010</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=51.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=23.133><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=44.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=51.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Consumable stores</P>
</TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=23.133><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=44.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,044</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=51.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,092</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Gold in circuit</P>
</TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=23.133><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=44.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>582</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=51.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>497</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=217.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total</P>
</TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=16.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=23.133><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=44.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,626</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=51.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,589</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation has a provision for slow moving inventory of $708 (2009 - $724) related to its consumable stores at Blanket Mine.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>12.</B></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>The components of operating costs were as follows</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0 width="655"><TR height=0 style="font-size:0"><TD width=405 /><TD width=51 /><TD width=47 /><TD width=47 /></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=53><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2010</B></P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=49><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2009</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=49><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2008</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" width=51><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Wages</P>
</TD><TD style="margin-top: 0px" width=51><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>4,909</B></P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,366</P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,100</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Consumable materials (including amounts written down)</P>
</TD><TD style="margin-top: 0px" width=51><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5,868</B></P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,222</P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,510</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Asset retirement obligation</P>
</TD><TD style="margin-top: 0px" width=51><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>66</B></P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>36</P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>29</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Exploration</P>
</TD><TD style="margin-top: 0px" width=51><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>34</B></P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>68</P>
</TD><TD style="margin-top: 0px" width=47><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Administration and safety</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" width=53><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,421</B></P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" width=49><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,711</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" width=49><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>18</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=405><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" width=53><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>13,298</B></P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" width=49><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>8,403</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" width=49><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,657</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>13.</B></P>
<P style="line-height:12pt; margin:0px; padding-left:1.467px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Bank facility</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=406.4 /><TD width=47.2 /><TD width=47.267 /></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=bottom width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Bank facility</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=bottom width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>747</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=bottom width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>588</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The bank facility is US$2,500 &nbsp;(2009 - US$1,500) and any portion utilised bears interest at 7% (6% - 2009) above the 30 day LIBOR rate. The facility is unsecured and valid for a 180 day period which is renewable. The facility is repayable on demand. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:75.6px; font-family:Times,Times New Roman; float:left"><B>14.</B></P>
<P style="line-height:12pt; margin:0px; padding-left:1.467px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Related Party Transactions</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:37.8px; text-indent:37.8px; font-family:Times,Times New Roman" align=justify>The Corporation had the following related party transactions measured at the exchange amount: &nbsp;&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=406.4 /><TD width=47.2 /><TD width=47.267 /><TD width=47.267 /></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2008</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; font-family:Times,Times New Roman" align=justify>Fees and expense allowances paid to a Corporation which provides the services of the Corporation's president</P>
</TD><TD style="margin-top:0px" width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>552</B></P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>558</P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>635</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Rent for office premises paid to a company owned by members of the President&#146;s family</P>
</TD><TD style="margin-top:0px" width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>49</B></P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>50</P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>43</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; font-family:Times,Times New Roman" align=justify>Interest paid to directors on outstanding fees and expenses</P>
</TD><TD style="margin-top:0px" width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Other fees paid to Directors</P>
</TD><TD style="margin-top:0px" width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>62</P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>65</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Legal fees paid to a law firm where a Director is a partner</P>
</TD><TD style="margin-top:0px" width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>58</B></P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>53</P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>117</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=406.4><P style="margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Fees, allowances and interest paid to the past Chairman of the Board &nbsp;</P>
</TD><TD style="margin-top:0px" width=47.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>38</B></P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>150</P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>334</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation has entered into a management agreement with Epicure Overseas S.A. (&#147;Epicure&#148;), a Panamanian corporation, for management services provided by the president. &nbsp;The Corporation is required to pay a base annual remuneration and an expense allowance adjusted for inflation and bonuses as set out in the agreement. In the event of a change of control of the Corporation, Epicure can terminate the agreement and receive a lump sum payment equal to 200% of the remuneration for the year in which the change occurs.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>These related party transactions were in the normal course of operations and are recorded at the exchange amount. &nbsp;The Corporation has the following related party balances:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=415.8 /><TD width=47.267 /><TD width=47.267 /></TR>
<TR><TD style="margin-top:0px" valign=top width=415.8><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=415.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Included in accounts payable</P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=415.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">- owing to &nbsp;directors for unpaid salaries and directors&#146; fees</P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>155</B></P>
</TD><TD style="margin-top:0px" valign=top width=47.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>172</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>23</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:28.4px; width:49.467px; font-family:Times,Times New Roman; float:left"><B>15.</B></P>
<P style="margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Segmented Financial Information</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation has been engaged directly or through subsidiaries in the production of and the exploration for precious metals in various geographical locations.</P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation&#146;s operating segments have been identified based on geographic areas as follows:</P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>For the year ended December 31, 2010</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=243.067 /><TD width=75.267 /><TD width=88 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"><TD width=77.8 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"><TD width=60.467 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"><TD width=79.067 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>Corporate</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>Zimbabwe</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>South Africa</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>Zambia</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>Total</U></B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Revenue from sales</P>
</TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>22,401</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>22,401</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Royalty</P>
</TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(825)</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(825)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Operating costs</P>
</TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(12,108)</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,190)</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(13,298)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">General and administrative</P>
</TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,924)</B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(274)</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(206)</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(2,404)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Interest income</P>
</TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Amortization</P>
</TD><TD style="margin-top:0px" valign=top width=75.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(561)</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(5)</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(566)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Foreign exchange gains/(loss)</P>
</TD><TD style="margin-top:0px" valign=bottom width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(92)</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(32)</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>84</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(10)</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(50)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Write down of mineral property</P>
</TD><TD style="margin-top:0px" valign=bottom width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(577)</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px" valign=bottom width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(577)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Other income (expense) </P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>43</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,040)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(997)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Income (loss) </P>
</TD><TD style="margin-top:0px" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,973)</B></P>
</TD><TD style="margin-top:0px" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>7,563</B></P>
</TD><TD style="margin-top:0px" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,893)</B></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(10)</B></P>
</TD><TD style="margin-top:0px" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>3,687</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Income tax expense</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,430)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,430)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Net income (loss) for the year</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,973)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>6,133</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(1,893)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(10)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,257</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Identifiable assets</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=75.267><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,126</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=88><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>15,422</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=77.8><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5,367</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5,573</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=79.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>27,488</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=243.067><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Expenditures on capital assets &amp; mineral properties </P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.267><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=88><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>6,622</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=77.8><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>37</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=60.467><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>630</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=79.067><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>7,290</B></P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>For the year ended December 31, 2009</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=241.267 /><TD width=75.133 /><TD width=81.533 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"><TD width=80.467 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"><TD width=60.467 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"><TD width=84.933 />
      <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Corporate</U></P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Zimbabwe</U></P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>South Africa</U></P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Zambia</U></P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Total</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Revenue from sales</P>
</TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>11,556</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>11,559</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Royalty</P>
</TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(240)</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(240)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Operating costs</P>
</TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(7,374)</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,029)</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(8,403)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">General and administrative</P>
</TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,750)</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(221)</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(176)</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,147)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Interest income</P>
</TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>77</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>184</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>264</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Amortization</P>
</TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(412)</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(24)</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Foreign exchange gains/(loss)</P>
</TD><TD style="margin-top:0px" valign=bottom width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(14)</P>
</TD><TD style="margin-top:0px" valign=bottom width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(103)</P>
</TD><TD style="margin-top:0px" valign=bottom width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>390</P>
</TD><TD style="margin-top:0px" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(25)</P>
</TD><TD style="margin-top:0px" valign=bottom width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>248</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Write down of mineral property</P>
</TD><TD style="margin-top:0px" valign=bottom width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=bottom width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=bottom width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,434)</P>
</TD><TD style="margin-top:0px" valign=bottom width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,434)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Other income (expense) </P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,502)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,502)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Income (loss) </P>
</TD><TD style="margin-top:0px" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,684)</P>
</TD><TD style="margin-top:0px" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>888</P>
</TD><TD style="margin-top:0px" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(836)</P>
</TD><TD style="margin-top:0px" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,459)</P>
</TD><TD style="margin-top:0px" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,091)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Income tax expense</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(859)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(859)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Net income (loss) for the year</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,684)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>29</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(836)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,459)</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,950)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=bottom width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Identifiable assets </P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,217</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>10,231</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>5,697</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,945</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=bottom width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>22,090</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=241.267><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Expenditures on capital assets &amp; mineral properties </P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=75.133><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=81.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>860</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=80.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>71</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=60.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>616</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=84.933><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,547</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px"><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:12pt; margin:0px"><BR></P>
<P style="line-height:12pt; margin:0px"><BR></P>
<P style="line-height:12pt; margin:0px"><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman">For the year ended December 31, 2008</P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0 height="316"><TR height=0 style="font-size:0"><TD width=241.267 height="17" /><TD width=75.133 height="17" /><TD width=81.533 height="17" /><TD width=80.467 height="17" /><TD width=60.467 height="17" /><TD width=84.933 height="17" /></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD valign=top width=75.133 align="right" height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Corporate</U></P>
</TD><TD valign=top width=81.533 align="right" height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Zimbabwe</U></P>
</TD><TD valign=top width=80.467 align="right" height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>South Africa</U></P>
</TD><TD valign=top width=60.467 align="right" height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Zambia</U></P>
</TD><TD valign=top width=84.933 align="right" height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>Total</U></P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Revenue from sales</P>
</TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>12</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>7,684</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>7,696</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Operating costs</P>
</TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,855)</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(802)</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,657)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">General and administrative</P>
</TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,670)</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(73)</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(153)</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,896)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Interest income</P>
</TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>299</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>78</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>8</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>385</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Amortization</P>
</TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(381)</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(16)</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(397)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">&nbsp;Foreign exchange gains/(loss)</P>
</TD><TD style="margin-top: 0px" width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>237</P>
</TD><TD style="margin-top: 0px" width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,899)</P>
</TD><TD style="margin-top: 0px" width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(102)</P>
</TD><TD style="margin-top: 0px" width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(112)</P>
</TD><TD style="margin-top: 0px" width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,876)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Write down of mineral property</P>
</TD><TD style="margin-top: 0px" valign=bottom width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=bottom width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=bottom width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(124)</P>
</TD><TD style="margin-top: 0px" valign=bottom width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,044)</P>
</TD><TD style="margin-top: 0px" valign=bottom width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,168)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Other income (expense) </P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=bottom width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(70)</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=bottom width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(526)</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=bottom width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>5</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=bottom width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=bottom width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(591)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Income (loss) continuing operations</P>
</TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,192)</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,028</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,184)</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,156)</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,504)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Discontinued operations loss</P>
</TD><TD style="margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436)</P>
</TD><TD style="margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Income tax expense</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Net income (loss) for the year</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=75.133 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,192)</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=81.533 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,028</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=80.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,620)</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=60.467 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,156)</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=84.933 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,940)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" height="1"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Identifiable assets &nbsp;</P>
    <P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Operations</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" width=75.133 height="1"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,658</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" width=81.533 height="1"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>8,798</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" width=80.467 height="1"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>5,384</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" width=60.467 height="1"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>5,817</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" width=84.933 height="1"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>23,657</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=241.267 height="49"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman">Expenditures on capital assets &amp; mineral properties </P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=75.133 height="49"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=81.533 height="49"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>90</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=80.467 height="49"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>253</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=60.467 height="49"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,680</P>
</TD><TD style="border-bottom: 1px solid #000000; margin-top: 0px" valign=top width=84.933 height="49"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,023</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:37.8px; font-family:Times,Times New Roman; float:left"><B>16.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Contingent Liabilities</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>In the Share Sale Agreement dated May 12, 2006 pursuant to which the Corporation purchased 100% of the shares of Blanket, the Corporation 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, 2010 no scheme had been established, nor were any shares of Blanket deposited in a Trust for the purposes of such a scheme. &nbsp;The Corporation 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 enacted, will likely have a material impact on the 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="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation and its subsidiaries are subject to various claims that arise in the normal course of business. Management believes that the aggregate contingent liability of the Corporation arising from these claims is immaterial and therefore no provision has been made.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:37.8px; font-family:Times,Times New Roman; float:left"><B>17.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Capital Commitments</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Prior to December 31, 2010 Blanket Mine had placed orders for the purchase of various items of a capital nature including two 2.5 MVA generator sets and the ancillary equipment. The generator sets along with ancillary equipment has a future liability value of approximately $2,197.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" 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>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:48px; font-family:Times,Times New Roman; float:left"><B>18.</B></P>
<P style="line-height:12pt; margin:0px; text-indent:-2px; font-family:Times,Times New Roman" align=justify><B>Comparative figures</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Comparative figures for 2009 and 2008 have been restated due to the fact that Eersteling Gold Mine is no longer disclosed as an asset for sale as no acceptable offer has been received since 2008. The mine remains on the market for sale as the Board has not revised their decision to sell the asset. Discontinued operations now only relates to Barbrook Mine that was sold in 2008.</P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Certain prior period figures have been reclassified to conform to the current presentation. </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; width:48px; font-family:Times,Times New Roman; float:left"><B>19.</B></P>
<P style="margin:0px; text-indent:-2px; font-family:Times,Times New Roman"><B>Financial Risk Exposure and Risk Management </B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on preservation of capital, and protecting current and future Corporation assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets. &nbsp;&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Board of Directors has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Corporation&#146;s Audit Committee oversees management&#146;s compliance with the Corporation&#146;s financial risk management policy. &nbsp;</P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The fair value of the Corporation&#146;s financial instruments approximates their carrying value unless otherwise noted. The types of risk exposure and the way in which such exposures are managed are as follows: </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:6.133px; padding-left:56.733px; text-indent:18.867px; font-family:Times,Times New Roman" align=justify><B>(a) Currency Risk </B></P>
<P style="margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>As the Corporation operates in an international environment, some of the Corporation&#146;s financial instruments and transactions are denominated in currencies other than the Canadian Dollar. The results of the Corporation&#146;s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Corporation are reported in Canadian dollars in the Corporation&#146;s consolidated financial statements. </P>
<P style="margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The fluctuation of the Canadian dollar in relation to other currencies will consequently have an impact upon the profitability of the Corporation and may also affect the value of the Corporation&#146;s assets and the amount of shareholders&#146; equity. &nbsp;&nbsp;</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>As noted below, the Corporation has certain financial assets and liabilities denominated in foreign currencies. The Corporation does not use any derivative instruments to reduce its foreign currency risks.</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Below is a summary of the cash or cash equivalents items denominated in a currency other than the Canadian dollar that would be affected by changes in exchange rates relative to the Canadian dollar. The values are the Canadian dollar equivalent of the respective asset or liability that is denominated in a currency other than the Canadian dollar.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=140 /><TD width=77.533 /><TD width=75.6 /><TD width=75.6 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px; border:1px solid #000000" valign=top width=140><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=153.133 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>2010</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=151.2 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>2009</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>C$&#145;000s</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>US Dollars</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>SA &nbsp;Rand</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>US Dollars</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>SA &nbsp;Rand</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Cash</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,054</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>13</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,230</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>40</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Bank overdraft</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>747</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>588</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Accounts receivable</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,705</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>578</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,122</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>233</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Accounts payable</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,637</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>902</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,658</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>689</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The table below illustrates by how much a 5% change in the rate of exchange between the Canadian dollar and the currencies above will affect net income.</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>26</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px"><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=140 /><TD width=77.533 /><TD width=75.6 /><TD width=75.6 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px; border:1px solid #000000" valign=top width=140><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=153.133 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center><B>2010</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=151.2 colspan=2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=center>2009</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>C$&#145;000s</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>US Dollars</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>SA &nbsp;Rand</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>US Dollars</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>SA &nbsp;Rand</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Cash</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>53</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>59</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Bank overdraft</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>37</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>29</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Accounts receivable</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>85</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>29</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>106</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>11</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=140><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman">Accounts payable</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=77.533><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>82</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>45</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>83</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>33</P>
</TD></TR>
</TABLE>
<P style="line-height:14pt; margin-top:0px; margin-bottom:15.267px; text-indent:75.6px; font-size:14pt" align=justify><B>&nbsp;</B></P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:15.267px; text-indent:75.6px; font-size:14pt" align=justify>&nbsp;</P>
<P style="line-height:14pt; margin-top:0px; margin-bottom:15.267px; text-indent:75.6px; font-size:14pt" align=justify><FONT style="font-family:Times,Times New Roman; font-size:10pt"><B>(b) Interest Rate Risk </B></FONT></P>
<P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. </P>
<P style="line-height:12pt; margin-top:6.667px; margin-bottom:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Unless otherwise noted, it is the opinion of management that the Corporation is not exposed to significant interest rate risk as it is debt free apart from short term borrowings utilized in Zimbabwe. &nbsp;The Corporation&#146;s cash and cash equivalents earn interest at market rates. The Corporation manages its interest rate risk by endeavoring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. The Corporation&#146;s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions. </P>
<P style="margin:0px"><BR></P>
<P style="margin-top:0px; margin-bottom:6.667px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Cash held in foreign banks is subject to the interest rates ruling in those particular countries and this can have an effect on the results of the Corporation due to higher interest rates being paid in African countries compared to Canada. Cash held in interest bearing accounts amounted to $1,145 ($1,624- 2009) and short term borrowings in Zimbabwe were $747 ($588 &#150; 2009). At December 31, 2010, with all other variables unchanged, a 1% change in interest rates would result in an increase of interest expense of $8 ($6 expense &#150; 2009). </P>
<P style="margin-top:0px; margin-bottom:8px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The interest payable by RBZ on the Bonds is subject to the same recovery risk as the principle amount and has therefore been written off to Nil.</P>
<P style="line-height:12pt; margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Fluctuations in market interest rates have not had a significant impact on the Corporation&#146;s results of operations.</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:29.2px; text-indent:46.4px; font-size:12pt" align=justify>&nbsp;<FONT style="font-family:Times,Times New Roman; font-size:10pt"><B>(c) Credit Risk </B></FONT></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Credit risk is the risk of a financial loss to the Corporation if a gold sales customer fails to meet its contractual obligation. Credit risk arises principally from the Corporation&#146;s Gold Bonds payable by the RBZ. The amount owing by the RBZ is only increasing by the amount of accrued interest due as gold is no longer sold to the RBZ. Future credit exposure to RBZ is limited to the recovery of the value of the Gold Bonds. &nbsp;</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman">Current gold sales are made to Rand Refineries in South Africa and the payment terms are stipulated in the service delivery contract and are adhered to in all instances.</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Company&#146;s cash is invested in interest bearing accounts at a major South African bank. Because of these circumstances, the Company does not believe it has a material exposure to credit risk.</P>
<P style="margin:0px"><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:38.333px; text-indent:37.267px; font-family:Times,Times New Roman" align=justify><B>(d) Liquidity Risk </B></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>27</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation manages its liquidity by ensuring that there is sufficient capital to meet its likely cash requirements, after taking into account cash flows from operations and the Corporation&#146;s holdings of cash and cash equivalents. The Corporation believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities. </P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Since the inception of dollarization in Zimbabwe certain insurance cover has been reinstated. The Zimbabwean operations are now covered for Public Liability risk, all risk cover on plant and equipment </P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>and Comprehensive cover on all motor vehicles. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>&nbsp;<B>(e) Commodity Price Risk </B></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:18.333px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The value of the Corporation&#146;s mineral resource properties is related to the price of gold, platinum, copper and cobalt, and the outlook for these minerals. In addition, adverse changes in the price of certain operating consumables can significantly impair the Corporation&#146;s cash flows. </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Gold prices historically have fluctuated widely and are affected by numerous factors outside of the Corporation's control, including, but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand because of speculative hedging activities, and macro-economic variables, and certain other factors related specifically to gold. </P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>As Blanket has a license to export its gold to a refiner of its choice it is paid full value in USD for the gold sold. Blanket sells gold at the spot price prevailing in the market from time to time.</P>
<P style="text-indent: -2px; font-family: Times, 'Times New Roman'; margin: 0px"><B>20</B><FONT style="font-size:12pt">. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT style="font-size: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><B><FONT style="font-family:Times,Times New Roman">Capital </FONT>Management </B></P>
<P style="text-indent: -2px; font-family: Times, 'Times New Roman'; margin: 0px">&nbsp;</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation&#146;s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue the mining operations and exploration potential of the mineral properties.</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:18.333px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation&#146;s capital includes shareholder&#146;s equity, comprising issued common shares, contributed surplus, accumulated deficit and accumulated other comprehensive income.</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:15.267px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation&#146;s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its ongoing operations, to provide returns for shareholders, accommodate any asset retirement obligation and to pursue growth opportunities. &nbsp;</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman">In order to maximize ongoing exploration efforts, the Corporation does not pay dividends.</P>
<P style="margin:0px"><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>As at December 31, 2010, the Corporation is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy. </P>
<P style="margin:0px"><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,Times New Roman" align=center>28</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:0.9pt; margin:0px" align=justify>&nbsp;</P>
<P style="line-height:0.9pt; margin:0px" align=justify>&nbsp;</P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=179.6 /><TD width=184.2 /><TD width=180.133 /></TR>
<TR><TD style="margin-top:0px" valign=top width=543.933 colspan=3><P style="margin:0px; font-family:Times,Times New Roman">Shareholders&#146; Equity</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=179.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=184.2><P style="margin:0px; font-family:Times,Times New Roman" align=right><B>As at December 31, 2010</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=180.133><P style="margin:0px; font-family:Times,Times New Roman" align=right>As at December 31, 2009</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=179.6><P style="margin:0px; text-indent:2.267px; font-family:Times,Times New Roman">Issued common shares</P>
</TD><TD style="margin-top:0px" valign=top width=184.2><P style="margin:0px; font-family:Times,Times New Roman" align=right><B>196,125</B></P>
</TD><TD style="margin-top:0px" valign=top width=180.133><P style="margin:0px; font-family:Times,Times New Roman" align=right>196,125</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=179.6><P style="margin:0px; text-indent:2.267px; font-family:Times,Times New Roman">Contributed surplus</P>
</TD><TD style="margin-top:0px" valign=top width=184.2><P style="margin:0px; font-family:Times,Times New Roman" align=right><B>2,305</B></P>
</TD><TD style="margin-top:0px" valign=top width=180.133><P style="margin:0px; font-family:Times,Times New Roman" align=right>1,951</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=179.6><P style="margin:0px; font-family:Times,Times New Roman">Accumulated &nbsp;Other comprehensive income/(loss)</P>
</TD><TD style="margin-top:0px" valign=top width=184.2><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=right><B>(1,061)</B></P>
</TD><TD style="margin-top:0px" valign=top width=180.133><P style="margin:0px" align=right><BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=right>(550)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=179.6><P style="margin:0px; text-indent:2.267px; font-family:Times,Times New Roman">Deficit</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=184.2><P style="margin:0px; font-family:Times,Times New Roman" align=right><B>(178,527)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=180.133><P style="margin:0px; font-family:Times,Times New Roman" align=right>(180,784)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=179.6><P style="margin:0px; text-indent:2.267px; font-family:Times,Times New Roman">Total</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=184.2><P style="margin:0px; font-family:Times,Times New Roman" align=right><B>18,842</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=180.133><P style="margin:0px; font-family:Times,Times New Roman" align=right>16,742</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The increase in accumulated other comprehensive loss is attributable to the adoption of the current rate method of translation of the Zimbabwean operations from US dollars into Canadian dollars as explained in Foreign Currency Translations policy. During 2010 $466 (2009 - $600) was charged to other comprehensive income as a result of the translation of Blanket. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="width: 48px; font-family: Times, 'Times New Roman'; float: left; margin-top: 0px; margin-bottom: -2px"><B>21. </B></P>
<P style="text-indent: -2px; font-family: Times, 'Times New Roman'; margin: 0px"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Defined Contribution Plan</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Under the terms of the Mining Industry Pension Fund (&#147;Fund&#148;) in Zimbabwe eligible employees contribute a fixed percentage of their eligible earnings to the Fund. Blanket makes a matching contribution plus an inflation levy as a fixed percentage of eligible earnings of these employees. The total contribution required by Blanket for the year ended December 31, 2010 was $227 ($121 &#150; 2009).</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="width: 48px; float: left; font-family: Times, 'Times New Roman'; margin-top: 0px; margin-bottom: -2px"><B>22.</B></P>
<P style="text-indent: -2px; font-family: Times, 'Times New Roman'; margin: 0px"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subsequent Events</B></P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Zimbabwe Indigenisation announcement</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>On March 25, 2011 the Zimbabwe Government issued a General Notice via a Government Gazette which announced the following indigenization regulations applicable to the mining sector:</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>- all non-indigenous mining companies would have to transfer a 51% ownership stake,</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>- only designated entities, as defined, could be considered as indigenous partners, </P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>- the valuation of the business must be agreed by the Minister and the Company,</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>- the value of sovereign ownership of mineral resources of exploited and unexploited minerals is to be taken into account in determining the valuation,</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>- all non-indigenous mining companies have to file an implementation plan by May 9, 2011 and,</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>- the plan must be implemented within six months of March 25, 2011 and after the approval of the implementation plan.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The consequences and enforceability of the General Notice are currently being reviewed by the industry and further communication will be issued in due course.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Any divestiture of ownership in Blanket Mine will require prior shareholder approval.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Zimbabwe Monetary Policy announcement.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>In the Monetary Policy Statement released in January 2011, the RBZ again failed to announce a revised redemption date for the Special Tradable Gold-backed Foreign Exchange Bonds. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Bonds were created in February 2009 with an initial redemption date of July 2009 which was subsequently extended a number of times to July 31, 2010. No redemption took place and no further date was announced.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Banking facilities in Zimbabwe</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>In January 2011 the $2,5 million facility granted to Blanket was extended on the same terms and conditions for a further 180 day period expiring on July 30, 2011.</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>29</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:11.5pt; margin:0px; padding-left:75.6px; padding-right:-1.333px; font-family:Times,Times New Roman">Share Option grant</P>
<P style="line-height:11.5pt; margin:0px"><BR></P>
<P style="line-height:11.5pt; margin:0px; padding-left:75.6px; padding-right:-1.333px; font-family:Times,Times New Roman" align=justify>In January 2011, the Board granted 16,460,000 share options as an incentive to directors, officers and employees of the Company at an exercise price of $0.13 per Caledonia common share expiring on January 31, 2016.</P>
<P style="line-height:11.5pt; margin:0px" align=justify><BR></P>
<P style="line-height:11.5pt; margin:0px; padding-left:75.6px; padding-right:-1.333px; font-family:Times,Times New Roman" align=justify>On January 09, 2011 6,500,000 unexercised share options expired.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="width: 48px; font-family: Times, 'Times New Roman'; float: left; margin-top: 0px; margin-bottom: -2px"><B>23. &nbsp;</B></P>
<P style="text-indent: -2px; font-family: Times, 'Times New Roman'; margin: 0px"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Generally Accepted Accounting Principles in Canada and the United States</B></P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The Corporation&#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="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="margin-top:0px; margin-bottom:-2px; text-indent:75.6px; width:104px; font-family:Times,Times New Roman; float:left">(a)</P>
<P style="margin:0px; padding-left:75.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Mineral Properties</P>
<P style="margin:0px; clear:left" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" 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="line-height:12pt; 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,Times New Roman" align=justify>(b) &nbsp;&nbsp;&nbsp;Employee and Directors Stock Options</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Effective January 1, 2003, the Corporation has, for US reporting purposes, prospectively applied the fair-value recognition provisions of Accounting Standards Codification Topic 718. Under Canadian GAAP, effective January 1, 2002 on a prospective basis, the Corporation adopted the CICA policy of accounting for stock based compensation. Prior to adoption no compensation expense on stock options granted to directors, officers and employees, was 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 granted to directors, officers and employees.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Under Canadian GAAP, effective January 1, 2003 on a prospective basis, the Corporation 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>
<P style="margin:0px" align=justify><BR></P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify><B><U>Recently Issued United States Accounting Standards</U></B></P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Effective July 1, 2009, the Financial Accounting Standards Board (&#147;FASB&#148;) Accounting Standards Codification (&#147;ASC&#148;) became the single official source of authoritative, non-governmental U.S. GAAP. The historical U.S. GAAP hierarchy was eliminated and the ASC became the only level of authoritative U.S. GAAP, other than guidance issued by the SEC. The Corporation&#146;s accounting policies were not affected by the conversion to ASC.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Business Combinations</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>In April 2009, the FASB issued a pronouncement on what is now codified as ASC Topic 805, <I>Business Combinations</I>. This pronouncement issued authoritative guidance on accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies, which amends the provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination under previously issued guidance. The authoritative guidance requires that such contingencies be recognized at fair value on the acquisition date if fair value can be reasonably estimated during the allocation period. The new guidance is effective as of the beginning of an entity&#146;s fiscal year that begins after December 15, 2008, and was adopted by the Corporation on January 1, 2009. The adoption of this new guidance had no material impact on the Corporation&#146;s financial position, results of operations or cash flows.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Financial instruments</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>In April 2009, the FASB issued a pronouncement on what is now codified as ASC Topic 825, <I>Financial Instruments</I>. This pronouncement issued new accounting guidance addressing the interim disclosures
about the fair value of financial instruments, which amended the previous disclosures regarding the fair value of financial instruments, and interim financial reporting. This new guidance requires disclosures about the fair value of financial instruments in interim financial statements, in addition to the annual financial statements as already required. This new accounting guidance became effective for interim periods ending after June 15, 2009. The adoption of this new guidance had no material impact on the Corporation&#146;s financial position, results of operations or cash flows. </P>
<P style="margin:5.533px" align=justify><BR></P>
<P style="margin:5.533px" align=justify><BR></P>
<P style="margin:5.533px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>31</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Subsequent Events</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>In May 2009, the FASB issued a pronouncement on what is now codified as ASC Topic 855, <I>Subsequent Events</I>. This pronouncement issued authoritative guidance in accounting for subsequent events which establishes general standards of accounting for and disclosures of events that occur after balance sheet date but before financial statements are issued or are available to be issued. </P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Specifically, ASC Topic 855 provides: </P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:120px; width:144px; font-family:Symbol; float:left">?</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; </P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:120px; width:144px; font-family:Symbol; clear:left; float:left">?</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and </P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:120px; width:144px; font-family:Symbol; clear:left; float:left">?</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:144px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman; clear:left" align=justify>This accounting guidance was effective for interim or fiscal periods ending after June 15, 2009 and was adopted by the Corporation during the quarter ended June 30, 2009. This guidance did not have a material impact on the Corporation&#146;s financial position, results of operations, or cash flows. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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:12pt; margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>In June 2009, the FASB issued ASC Topic 105-10, &quot;<I>The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles</I>&quot; which established the FASB Accounting Standards Codification (the &#147;Codification&#148;) as the single source of authoritative GAAP to be applied by nongovernmental entities. The Codification is a new structure which took existing accounting pronouncements and organized them by accounting topic. Relevant authoritative literature issued by the Securities and Exchange Commission (&#147;SEC&#148;) and select SEC staff interpretations and administrative literature was also included in the Codification. All other accounting guidance not included in the Codification is non-authoritative. The Codification was effective for interim and annual periods ending after September 15, 2009. The adoption of the Codification did not have an impact on the Corporation&#146;s consolidated financial position, results of operations or cash flows.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Measuring Liabilities at Fair Value<FONT style="margin-bottom:1.333px; padding-top:1.333px; border:1.333px solid #FFFFFF">.</FONT></P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify><FONT style="margin-bottom:1.333px; padding-top:1.333px; border:1.333px solid #FFFFFF">&nbsp;On</FONT> August 28, 2009, the FASB issued Accounting Standards Update (&#147;ASU&#148;) 2009-05, <I>Measuring Liabilities at Fair Value</I><B><I>. </I></B><FONT style="margin-bottom:1.333px; padding-top:1.333px; border:1.333px solid #FFFFFF">The </FONT>ASU provides guidance on how to measure the fair value of liabilities when observable market information is not available. If a quoted price in an active market for an identical liability is available it should be used to value the liability. In circumstances when a quoted
price in an active market for an identical liability is not available, the ASU requires that the fair value of the liability be measured using one or more of the following techniques:</P>
<P style="margin:5.533px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>32</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>&nbsp;</P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:99.6px; width:123.6px; font-family:Symbol; float:left">&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:123.6px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>A valuation technique that uses:</P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:72px; width:96px; font-family:Courier New; clear:left; float:left">o</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:96px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>The quoted price of the identical liability when traded as an asset </P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:72px; width:96px; font-family:Courier New; clear:left; float:left">o</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:96px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Quoted prices for similar liabilities or similar liabilities when traded as assets</P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:120px; font-family:Symbol; clear:left; float:left">&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:120px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Another valuation technique that is consistent with the principles of ASC Topic 820, <I>Fair Value Measurements and Disclosures,</I> such as an income approach or a market approach.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman; clear:left" align=justify>When using the quoted price of an identical liability when traded as an asset, an entity:</P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:144px; width:168px; font-family:Symbol; float:left">&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:168px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Should &nbsp;adjust for factors that are not applicable to the fair value of the asset price of the liability (e.g., the quoted price of the asset includes the effect of third-party credit guarantees)</P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:144px; width:168px; font-family:Symbol; clear:left; float:left">&#183;</P>
<P style="margin-top:0px; margin-bottom:5.533px; padding-left:168px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>Should not adjust the asset price for the effect of a restriction preventing the sale of the asset.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman; clear:left" align=justify>If a quoted price for an identical liability when traded as an asset in an active market is available, the asset price is considered to be a Level 1 fair value measurement for the liability, provided that no adjustment(s) to the quoted price of the asset is required. </P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The ASU is effective for the first reporting period (including interim periods) beginning after issuance. Early adoption is permitted. The adoption of this guidance did not have a material impact on the Corporation&#146;s financial position, results of operations, or cash flows</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Fair Value Measurements and Disclosures</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>On November 1, 2009, the Corporation adopted authoritative guidance for fair value measurements which is now codified as ASC Topic 820, <I>Fair Value Measurements and Disclosures</I>, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This authoritative guidance addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. The adoption of this guidance did not have a material impact on the Corporation&#146;s financial position, results of operations, or cash flows.</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>The FASB has issued ASU No. 2010-06, <I>Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.</I> This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB&#146;s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now require: </P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:120px; width:144px; font-family:Symbol; float:left">?</P>
<P style="margin-top:0px; margin-bottom:6.667px; padding-left:144px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and<FONT style="font-size:12pt"> </FONT></P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:120px; width:144px; font-family:Symbol; clear:left; float:left">?</P>
<P style="margin-top:0px; margin-bottom:6.667px; padding-left:144px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements.</P>
<P style="margin:0px; clear:left" 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,Times New Roman" align=center>33</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </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,Times New Roman" align=justify>In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures:</P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:120px; width:144px; font-family:Symbol; float:left">?</P>
<P style="margin-top:0px; margin-bottom:6.667px; padding-left:144px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and<FONT style="font-size:12pt"> </FONT></P>
<P style=margin-top:5.533px;margin-bottom:-1pt;font-size:1pt /><P style="margin-top:0px; margin-bottom:-2px; text-indent:120px; width:144px; font-family:Symbol; clear:left; float:left">?</P>
<P style="margin-top:0px; margin-bottom:6.667px; padding-left:144px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.</P>
<P style="margin:0px; padding-left:75.6px; font-family:Times,Times New Roman; clear:left" align=justify>ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. The adoption of this amendment will not have an impact on the Corporation&#146;s consolidated financial position, results of operations or cash flows.</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Other recent accounting pronouncements</P>
<P style="margin-top:5.533px; margin-bottom:5.533px; padding-left:75.6px; font-family:Times,Times New Roman" align=justify>Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed to have a material impact on the Corporation's present or future consolidated financial position.</P>
<P style="line-height:12pt; margin:0px; padding-left:56.733px; font-family:Times,Times New Roman" align=justify>The impact of the foregoing on the consolidated financial statements is as follows:</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:37.8px; width:61.8px; font-family:Times,Times New Roman; float:left">(a)</P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; width:563.667px; font-family:Times,Times New Roman; float:left">&nbsp;Statement of operations and comprehensive income</P>
<P style="line-height:12pt; margin:0px; padding-left:61.8px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>&nbsp;</P>
<TABLE style="font-size: 10pt; margin-top: 0px" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=370.2 height="17" /><TD width=72 height="17" /><TD width=72 height="17" /><TD width=72 height="17" /></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2008</U></P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=bottom width=72 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=bottom width=72 height="17"><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Income(Loss) per Canadian GAAP from continuing operations</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,257</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,950)</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(4,504)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="50"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Mineral property expenditure with no proven reserves (expensed) or previously expensed under US GAAP</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="50"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(90)</B></P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="50"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>774</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="50"><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,188)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Net income (loss) from continuing operations</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,167</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,176)</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(6,692)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Discontinued operations loss</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Net income (loss) available for common shareholders</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,167</B></P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,176)</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(7,128)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Net income (loss)</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>2,167</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,176)</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(7,128)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Other comprehensive (loss)/gain</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>47</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>60</P>
</TD></TR>
<TR><TD style="margin-top: 0px" width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Reclassification to gain on sale of investment</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(45)</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD></TR>
  <tr>
    <TD style="margin-top: 0px" width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Translation loss at Blanket Mine</P>
</TD><TD style="border-bottom: 2 solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(466)</B></P>
</TD><TD style="border-bottom: 2 solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(600)</P>
</TD><TD style="border-bottom: 2 solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD>
  </tr>
<TR><TD style="margin-top: 0px" width=370.2 height="18"><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Total comprehensive
    Income (loss)</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18">
    <p style="line-height: 12pt; font-family: Times, 'Times New Roman'; margin: 0px" align="right"><b>1,656</b>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,729)</P>
</TD><TD style="border-bottom: 2px solid #000000; margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(7,068)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Net income (loss) per share</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Basic and diluted from continuing operations</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>0.004</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(0.006)</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(0.013)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Basic and diluted from discontinued operation</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(0.001)</P>
</TD></TR>
<TR><TD style="margin-top: 0px" valign=top width=370.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Basic and diluted income/(loss) per share for the year</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>0.004</B></P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(0.006)</P>
</TD><TD style="margin-top: 0px" valign=top width=72 height="18"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(0.014)</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px; padding-left:61.8px; font-family:Times,Times New Roman" align=justify>Amortization for Canadian GAAP on Blanket&#146;s assets is calculated on the straight line basis over the life of mine of Blanket. No adjustment is made for this US GAAP reconciliation as the unit of production basis of amortization would result in an amortization charge of materially the same amount.</P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>34</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin-top:0px; margin-bottom:-2px; text-indent:37.8px; width:61.8px; font-family:Times,Times New Roman; float:left">(b)</P>
<P style="line-height:12pt; margin:0px; padding-left:61.8px; text-indent:-2px; font-family:Times,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;Balance Sheets</P>
<P style="line-height:12pt; margin:0px; clear:left" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=387.467 /><TD width=75.6 /><TD width=75.6 /></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total assets per Canadian GAAP</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>27,488</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>22,090</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Mineral properties with no proven reserves expensed</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(9,489)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(9,399)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total assets per US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:3px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>17,999</B></P>
</TD><TD style="margin-top:0px; border-bottom:3px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>12,691</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total liabilities per Canadian and US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>8,646</B></P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>5,348</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Shareholders&#146; equity</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Shareholders&#146; equity per Canadian GAAP</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>18,842</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>16,742</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Mineral properties with no proven reserves expensed</P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(9,489)</B></P>
</TD><TD style="margin-top:0px" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(9,399)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Shareholders&#146; equity per US GAAP</P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>9,353</B></P>
</TD><TD style="margin-top:0px; border-top:1.333px solid #000000; border-bottom:1.333px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>7,343</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=75.6><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=387.467><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Total liabilities &amp; shareholder&#146;s equity per US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:3px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>17,999</B></P>
</TD><TD style="margin-top:0px; border-bottom:3px solid #000000" valign=top width=75.6><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>12,691</P>
</TD></TR>
</TABLE>
<P style="line-height:12pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; text-indent:28.8px; font-family:Times,Times New Roman" align=justify>(c) &nbsp;&nbsp;&nbsp;&nbsp;Statement of Cash Flows</P>
<P style="line-height:12pt; margin:0px; padding-left:37.8px; text-indent:251.667px" align=justify>&nbsp;</P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=340.2 /><TD width=85.067 /><TD width=85.067 /><TD width=85.067 /></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067 align="right"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B><U>2010</U></B></P>
</TD><TD style="margin-top:0px" valign=top width=85.067 align="right"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2009</U></P>
</TD><TD style="margin-top:0px" valign=top width=85.067 align="right"><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><U>2008</U></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Cash provided by (used in)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>$</B></P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>$</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=bottom width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Operating activities for &nbsp;operations per Canadian GAAP</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>6,568</B></P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,037)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(3,316)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Mineral properties expenditure by operations</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(667)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(660)</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,188)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Operating activities per US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>5,901</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,697)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(5,504)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Investment activities for operations per Canadian GAAP</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(7,239)</B></P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(1,547)</P>
</TD><TD style="margin-top:0px" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>6,336</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Mineral properties expenditure</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>667</B></P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>660</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>2,188</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Investment activities per US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(6,572)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(887)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>8,524</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Financing Activities per Canadian and US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>187</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>588</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,106</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Effects of foreign currency translations on cash per Canadian and US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>6</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(35)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(112)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Increase (decrease) in cash from continuing operations</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(478)</B></P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,031)</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>4,014</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Cash flows from discontinued operations per Canadian and US GAAP</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>-</B></P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>-</P>
</TD><TD style="margin-top:0px; border-bottom:1.333px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px" align=right><BR></P>
<P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(436)</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; text-indent:1.467px; font-family:Times,Times New Roman" align=justify>Increase (decrease) in cash for the year</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>(478)</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>(2,031)</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3.578</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Cash and cash equivalents, beginning of year</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,623</B></P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,654</P>
</TD><TD style="margin-top:0px; border-bottom:1px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>76</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=justify>Cash and cash equivalents, end of year</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right><B>1,145</B></P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>1,623</P>
</TD><TD style="margin-top:0px; border-bottom:2px solid #000000" valign=top width=85.067><P style="line-height:12pt; margin:0px; font-family:Times,Times New Roman" align=right>3,654</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=340.2><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=85.067><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>35</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=324.467 /><TD width=324.467 /></TR>
<TR><TD style="margin-top:0px" width=648.933 colspan=2><P style="margin:0px; font-family:Times,Times New Roman; font-size:16pt"><B>Directors and Management at March 31, 2011</B><FONT style="color:#FFFFFF"><B> </B></FONT></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><B>BOARD OF DIRECTORS</B></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><B>OFFICERS</B></P>
</TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>C. R. Jonsson &nbsp;(2) (3) (4) (5) &nbsp;- Chairman</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right>C. R. Jonsson &nbsp;- Chairman</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Principal of Tupper Jonsson&amp; Yeadon</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right>Corporate Secretary</P>
</TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Barristers &amp; Solicitors</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Principal of Tupper Jonsson&amp; Yeadon</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Vancouver, British Columbia,</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Barristers &amp; Solicitors</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Canada</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Vancouver, British Columbia,</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Canada</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>S. E. Hayden(3) (4) (5) </P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right>S. E. Hayden</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>President and Chief Executive Officer</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>President and Chief Executive Officer</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Johannesburg, South Africa</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Johannesburg, South Africa</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>J. Johnstone (1)</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right>S. R. Curtis</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Retired Mining Engineer</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Vice-President Finance and Chief Financial officer</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Gibsons, British Columbia, Canada</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Johannesburg, South Africa &nbsp;</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>&nbsp;</P>
</TD><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>F C. Harvey (1)</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right>Dr. &nbsp;T. Pearton</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Retired Executive</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Vice-President Exploration</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Oakville, Ontario, Canada</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Johannesburg, South Africa</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman">R. W. Babensee (1) (2)</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right>J.M. Learmonth</P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman"><I>Chartered Accountant - Retired</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Vice-President Business Development</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman"><I>Toronto, Ontario, Canada</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=right><I>Johannesburg, South Africa</I></P>
</TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman">S. R. Curtis (5)</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Vice-President Finance and Chief Financial officer</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><I>Johannesburg, South Africa</I></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify><B>BOARD COMMITTEES</B></P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>(1) &nbsp;Audit Committee</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>(2) &nbsp;Compensation Committee</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>(3) &nbsp;Corporate Governance Committee</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>(4) &nbsp;Nominating Committee</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" width=324.467><P style="margin:0px; font-family:Times,Times New Roman" align=justify>(5) &nbsp;Disclosure Committee</P>
</TD><TD style="margin-top:0px" width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=324.467><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px" align=justify><BR><BR></P>
<P style="margin:0px"><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>36</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Caledonia Mining Corporation</B></P>
<P style="line-height:14pt; margin:0px; font-family:Times,Times New Roman; font-size:14pt" align=right><B>Summary of Significant Accounting Policies </B></P>
<P style="line-height:12pt; margin:0px; padding-bottom:4px; font-family:Times,Times New Roman; border-bottom:1.333px solid #000000" align=right>(in thousands of Canadian Dollars)<B> &nbsp;&nbsp;December 31, 2010, 2009 and 2008</B></P>
<P style="line-height:0.9pt; margin:0px" align=justify><BR></P>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px"><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=310.267 /><TD width=310.267 /></TR>
<TR><TD style="margin-top:0px; border:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>CORPORATE DIRECTORY</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>SOLICITORS</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>CORPORATE OFFICES</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Tupper, Jonsson &amp; Yeadon</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Canada - Head Office</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">1710-1177 West Hastings St, Vancouver,</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Caledonia Mining Corporation</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">British Columbia V6E 2L3 Canada</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Suite 1201, 67 Yonge Street</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Toronto, Ontario M5E 1J8 Canada</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Borden Ladner Gervais LLP</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Tel:(1)(416) 369-9835 Fax:(1)(416) 369-0449</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Suite 4100, Scotia Plaza</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; color:#0000FF"><font color="#000000">info@caledoniamining.com</font></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">40 King Street West</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Toronto, Ontario M5H 3Y4 Canada</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>South &#193;frica &#150; &#193;frica Office</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:336px; float:left"><B>Greenstone Management Services (Pty) Ltd.</B></P>
<P style="margin:0px; text-indent:-2px"><B>AUDITORS</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>AUDITORS</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:336px; float:left">P.O. Box 834</P>
<P style="margin:0px; text-indent:-2px"><B>BDO Dunwoody LLP</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">BDO Canada LLP</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:336px; float:left">Saxonwold 2132</P>
<P style="margin:0px; text-indent:-2px"><B>Chartered Accountants</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Chartered Accountants</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:336px; float:left">South Africa</P>
<P style="margin:0px; text-indent:-2px">Suite 3300, 200 Bay Street</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Suite 3300, 200 Bay Street</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Tel: (27)(11) 447-2499 Fax: (27)(11) 447-2554</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Royal Bank Plaza, South Tower</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Toronto, Ontario M5J 2J8 Canada</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Zambia</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; font-family:Times,Times New Roman">Caledonia Mining (Zambia) Limited</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; font-family:Times,Times New Roman"><B>REGISTRAR &amp; TRANSFER AGENT</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">P.O. Box 36604</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Equity Transfer Services Inc.</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:336px; float:left">Lusaka, Zambia</P>
<P style="margin:0px; text-indent:-2px">Suite 400 200 University Ave</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Suite 400&nbsp;200 University Ave.</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Tel:(260)(1) 29-1574 Fax(260)(1) 29-2154</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Toronto, Ontario M5H 4H1 Canada</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Tel: (416) 361 0152 Fax: (416) 361 0470</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>BANKERS</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Zimbabwe</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Canadian Imperial Bank of Commerce</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Caledonia Holdings Zimbabwe (Limited)</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">6266 Dixie Road</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">P.O. Box CY1277</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Mississauga, Ontario L5T 1A7 Canada</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Causeway, Harare</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Zimbabwe</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>NOMADS AND BROKERS (AIM)</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Tel: (263) (4) 701&nbsp;152/4 Fax: (263)(4) 702 248</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Collins Stewart Europe Limited</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">88 Wood Street</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:384px; float:left"><B>CAPITALIZATION </B>at March 29, 2011</P>
<P style="margin:0px; text-indent:-2px"><B>RBC Capital Markets</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">London EC2V 7QR</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:336px; float:left">Authorised: Unlimited</P>
<P style="margin:0px; text-indent:-2px">71 Queen Victoria Street</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Fax: +44 20 7523 8134</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Shares, Warrants and Options Issued:</B></P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:336px; float:left">Common Shares: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;500,169,280 </P>
<P style="margin:0px; text-indent:-2px">Tel: +44 20 7653 4000</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>SHARES LISTED</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:96px; float:left">Warrants:</P>
<P style="margin:0px; text-indent:-2px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nil</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">Toronto Stock Exchange Symbol &#147;CAL&#148;</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin-top:0px; margin-bottom:-2px; width:96px; float:left">Options:</P>
<P style="margin:0px; text-indent:-2px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42,540,000</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">NASDAQ OTC BB Symbol &quot;CALVF&quot;</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px">London &#147;AIM&#148; Market Symbol &#147;CMCL&#148;</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=bottom width=310.267><P style="margin:0px"><B>Web Site: </B><U>http://www.caledoniamining.com</U><FONT style="font-family:Times,Times New Roman"></FONT></P>
</TD></TR>
<TR><TD style="margin-top:0px" valign=top width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD><TD style="margin-top:0px" valign=top width=310.267><P style="margin:0px; padding:0px">&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; text-indent:336px; font-family:Shruti,Times New Roman" align=justify>&nbsp;&nbsp;&nbsp;<FONT style="font-family:Bookman Old Style,Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<P style="margin:0px; font-family:Times,Times New Roman" align=center>37</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="line-height:12pt; margin:0px; padding-left:28.4px; font-family:Times,Times New Roman" align=justify>&nbsp; </P>
</BODY>
<!-- EDGAR Validation Code: EFEAD310 -->
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>mda.htm
<DESCRIPTION>MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2010
<TEXT>

<HTML>
<HEAD>
   <TITLE>MD Filed by Filing Services Canada Inc.&nbsp; (403) 717-3898</TITLE>
</HEAD>

<BODY bgcolor="#ffffff">


<!--$$/page=--><BR>

<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=47%></TD>
     <TD width=11%></TD>
     <TD width=10%></TD>
     <TD width=10%></TD>
     <TD width=10%></TD>
     <TD width=8%></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="Calibri-Bold,Arial,Helvetica,sans-serif">Financial &#150; All in C&#36; 000&#146;s unless otherwise indicated</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="Calibri-Bold,Arial,Helvetica,sans-serif">2010</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="Calibri-Bold,Arial,Helvetica,sans-serif">2009</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="Calibri-Bold,Arial,Helvetica,sans-serif">2008</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="Calibri-Bold,Arial,Helvetica,sans-serif">2007</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="Calibri-Bold,Arial,Helvetica,sans-serif">2006</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Revenue from Sales</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22,401</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">11,559</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7,696</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">10,039</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">13,586</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Gross Operating Profit (Loss)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8,278</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,916</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3,039</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(288)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(2,565)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Expense - (General and administration, interest, amortization and</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(4,591)</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(6,007)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(7,543)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,195)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(2,047)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">foreign exchange including provisions and impairments)</FONT></TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Income/ (Loss) &#150; before write-downs and tax</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4,264</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(1,657)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(3,772)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,610)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(5,023)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Net loss from discontinued operations</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">-</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(436)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(582)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(7,579)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Net Income /(Loss) &#150; after income taxes</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2,257</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(3,950)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,940)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,615)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(5,675)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Cash and cash equivalent</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,145</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,623</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3,652</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">76</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,252</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Current Assets</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">6,194</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">5,917</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">5025</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,408</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">8,773</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Assets</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">27,488</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">22,090</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">23,657</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">29,492</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">31,456</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Current Liabilities</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4,629</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,759</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,308</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,343</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">5,899</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Long Term Liabilities</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4,017</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,589</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,153</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,054</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,221</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Working Capital</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,565</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3,158</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3,717</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">65</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,874</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Shareholders&#146; Equity</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">18,842</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">16,742</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">21,196</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">24,095</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">24,336</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Total Capital Expenditures including Mineral Properties</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">7,290</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,547</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3,023</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3,250</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3,579</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Financing Raised</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">187</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">588</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,106</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,380</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7,559</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Market Capitalization (&#36; Thousands) at December 31</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">80,021</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">32,508</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">32,511</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">53,666</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">45,798</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Shares Outstanding (Thousands)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">500,169</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">487,869</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">457,981</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Warrants &amp; Options (Thousands)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">32,580</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">32,580</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">46,430</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">34,026</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">102,354</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Basic and diluted net income (loss) per share for continuing</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#36;0.0045</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.008)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.010)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.009)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.003</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">operations</FONT></TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Basic and diluted net income (loss) per share for discontinued</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">-</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.000)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.000)</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.016)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">operations</FONT></TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Basic and diluted net income (loss) per share for the year</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#36;0.0045</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;(0.008)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;(0.010)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;(0.009)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;(0.013)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">TSE Share Price High</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#36;0.17</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.095</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.200</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.230</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.230</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">TSE Share Price Low</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#36;0.055</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.050</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.030</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.090</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.095</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">TSE Share Volume (Thousands)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">77,420</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">99,885</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">119,534</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">101,156</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">132,323</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">NASDAQ Share Price High (US&#36;)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#36;0.160</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.084</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.205</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.200</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.204</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">NASDAQ Share Price Low (US&#36;)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#36;0.052</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.045</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.030</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.074</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.082</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">NASDAQ Share Volume (Thousands)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">59,282</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">79,107</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">170,944</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">194,192</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">212,028</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">AIM Share Price High (pence)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">9.5</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">6.2</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">10.0</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">8.0</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">13.0</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">AIM Share Price Low (pence)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.5</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2.5</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2.5</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4.1</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4.9</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">AIM Share Volume (Thousands)</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,068</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,031</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,099</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">8,710</FONT></TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">12,162</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Gold Production (Ounces)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17,707</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">11,027</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7,687</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">13,985</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">12,437</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Silver Production (Ounces)</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,144</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,225</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">635</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,332</FONT></TD>
	<TD align=right nowrap>
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,038</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: center;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<B><FONT size=5 face="Arial-BoldMT,Arial,Helvetica,sans-serif">CALEDONIA MINING CORPORATION as at March 30, 2011</FONT></B></P>
<P style="text-align: left;">
<B><FONT size=4 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Management&#146;s Discussion and Analysis</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">This discussion and analysis of the consolidated operating results and financial condition of Caledonia Mining Corporation (&#147;Caledonia&#148; or &#147;the Corporation&#148;) for the fiscal year ended December 31, 2010, and the period ending March 15, 2011 should be read in conjunction with the Consolidated Financial Statements prepared as of December 31, 2010 and Press Releases issued by the Corporation, all of which are available from the System for Electronic Data Analysis and Retrieval at </FONT><U><FONT color="#0000ff" size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">www.sedar.com </FONT></U><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">or from the Corporation&#146;s website at </FONT><U><FONT color="#0000ff" size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">www.caledoniamining.com</FONT></U><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">. 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="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Note that all currency references in this document are to Canadian dollars unless otherwise specified.</FONT></B></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Corporation History</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation was formed in February 1992 and is listed on the Toronto Stock Exchange as &#147;CAL&#148;, on London&#146;s AIM as &#147;CMCL&#148; and its shares are traded on NASDAQ-OTCBB as &#147;CALVF&#148;</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1. FORWARD LOOKING STATEMENTS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">This Management Discussion and Analysis contains certain forward-looking statements relating but not limited to Caledonia&#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 number 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="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">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 assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia 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="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.</FONT></B>&nbsp;&nbsp;&nbsp;
&nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">EXECUTIVE SUMMARY</FONT></B>	</TD>
</TR>
</TABLE>

<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.1 Core Business and Strategy</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Caledonia is an exploration, development and mining corporation focused on Southern Africa. The Corporation&#146;s primary assets are the Blanket gold mine (&#147;Blanket&#148;), in Zimbabwe a base metals exploration project in Zambia (Nama), two platinum group and base metals projects in South Africa (&#147;Rooipoort&#148; and &#147;Mapochs&#148;), and a non-producing gold mine in South Africa (&#147;Eersteling&#148;).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation&#146;s business model is to identify and/or 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 where appropriate by strategic alliances through joint venture agreements. 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.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During 2010 the primary focus of the Blanket Mine in Zimbabwe was to complete the No. 4 Shaft Expansion Project and thereafter to achieve the planned gold production increase to an annualised rate of approximately 40,000 ounces. Both of these objectives were achieved. Judicious expenditure on essential sustaining capital expenditure continued, to progressively remedy the lack of capital investment over the previous few years due to the foreign currency shortages in Zimbabwe.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Work continued throughout the year on the Nama Project in Zambia. As part of the planned ongoing resource development program, a drilling program to identify typical copper-belt type mineralisation, which is the major type of Zambian copper and cobalt deposits, was commenced in March 2011.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Activities at Rooipoort/Mapochs properties were suspended in 2010 by the complete lack of progress on the part of the South African Department of Mineral Resources in registering the licence areas in the names of Caledonia&#146;s local subsidiaries. Without secure title transfers the Company did not want to expend further funds on these properties.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation continues to actively look for joint venture partners on the Rooipoort and Mapochsgronde PGE Projects.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.2 Key Performance Drivers</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Positive drivers for Blanket continue to be a high gold price, the completion of the No. 4 Shaft Expansion Project and the resultant increase in gold production. However there remain numerous challenges to operating in Zimbabwe, namely, the lack of past investment in the Blanket properties, the limited availability of local capital, rising labour and power costs and the vagaries of changing legislation and in particularly the requirements for indigenization. These factors, individually or in combination, may ultimately result in a climate of reduced capital investment, increased operating costs, lower profits, production interruptions and investor nervousness.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Operating and capital cost containment and budgetary controls remain in place at Blanket and are continually monitored to ensure that the production profile and costs meet the strategic goals set by management.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.3 Capability to Deliver</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The completion of the No. 4 Shaft Project Expansion during the 3rd quarter of 2010 was a major achievement and the subsequent production ramp up culminated in Blanket achieving its planned annualised production rate of approximately 40,000 ounces during late December 2010. During 2010 and despite the disruption to on-going underground and plant production caused by the completion of the No. 4 Shaft Expansion Project, Blanket successfully managed to double its quarterly gold production from approximately 3,100 ounces in Quarter 1 to over 6,200 ounces in the 4</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">th </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Renewal of the short term facility of US&#36;2.5 million with a Zimbabwean Bank enabled Blanket to complete the No. 4 Shaft Expansion Project within the planned time table.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: center;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Suitable personnel have been recruited, inducted, and trained by Blanket to ensure that a skilled and trained work force is available to sustain the planned 40,000 ounce production level now that the No. 4 Shaft Expansion Project has been completed. The focus in 2011 is to complete the underground and plant work to ensure that the 40,000 ounces gold production will be achieved and sustainable</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Management successfully applied to the Zimbabwean Ministry of Finance (&#147;ZMF&#148;) for the renewal of the Gold Dealership License (&#147;GDL&#148;) for Blanket before it expired on December 31, 2010 and which has now been extended to December 31, 2011.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Results and Outlook</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket&#146;s tonnages milled and gold produced during 2010 compared to 2009 are shown in the table below:</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=21%></TD>
     <TD width=16%></TD>
     <TD width=25%></TD>
     <TD width=14%></TD>
     <TD width=21%></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2009</FONT></TD>
</TR>
<TR>
	<TD colspan=5>
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=center nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Tonnes</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Gold Produced</FONT></B></TD>
	<TD align=center nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Tonnes</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Gold Produced</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Period</FONT></B></TD>
	<TD align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Milled</FONT></B></TD>
	<TD align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Ounces</FONT></B></TD>
	<TD align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Milled</FONT></TD>
	<TD align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Ounces</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Fourth quarter</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">51,313</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">6,235</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">36,271</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,438</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Third quarter</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">41,594</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4,935</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">34,266</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,108</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Second quarter</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">30,788</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3,408</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">24,177</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,749</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">First quarter</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">29,805</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3,129</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(1)</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=1 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(1)</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Annual Totals</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">153,500</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17,707</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">94,714</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">11,295</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(1) Blanket was forced to stop gold production in October 2008 until late April 2009</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During 2010 tonnages milled and gold produced continued to increase despite frequent power interruptions. Blanket installed the first of four proposed 2500KVA diesel generators in June 2010, which was sufficient to allow underground mining and hoisting activities to continue throughout any interruptions to electricity supplies. The power supply situation improved in the last month of the 4</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">th </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter subsequent to signing a new supply agreement with the Zimbabwe Electricity Supply Authority (&#147;ZESA&#148;). This agreement commits Blanket to a higher average price for electricity but has secured a much more reliable supply of power. However, the electricity supply situation in Zimbabwe remains potentially problematic due to the lack of generating capacity which is unlikely to be addressed for several years. Accordingly, notwithstanding the recent improvement in electricity supply and in recognition of the significant opportunity cost of lost production due to electricity interruptions, Blanket is proposing to continue with the installation of three further 2500KVA diesel generator sets in order to protect Blanket&#146;s entire mining and milling operations against interruptions to electricity supplies.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.4 Operational Risks</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The previously identified operational risks in Zimbabwe were accurately identified. Power interruptions during 2010 increased to an averaged level 19.66% of available 24 hour power and in June, power outages averaged approximately 10 hours per day. This negatively affected gold production and consequently increased the operating costs per ounce due to the high proportion of fixed costs which includes the increasing labour costs. The strength of the gold price has been positive but this effect has been somewhat reduced by the strong South African Rand currency which adversely affected the cost of consumables and capital items imported from South Africa. Increases in royalty and taxation rates for the mining industry were both introduced in early 2010, and indigenization legislation is once more high on the Government&#146;s agenda making Zimbabwe a very difficult investment environment. Unrealistic quarterly US&#36; wage demands by the unions also makes Zimbabwe a potentially high cost environment.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Despite the various inhibiting factors above, Blanket is expected to improve its cash generation in
2011 as a result of increasing its gold production capability to approximately 40,000 ounces per annum.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The mine currently has a daily average mining capacity of about 1,100 tonnes and the metallurgical plant currently has the capacity to process approximately 1,800 tonnes of ore per day. Management has planned for essential underground capital and development expenditures to ensure that higher mining production levels at the planned gold grades can be achieved and sustained to meet or exceed targets. Subject to an acceptable investment climate prevailing in Zimbabwe during 2011, capital will be allocated to upgrade certain metallurgical circuits, together with certain surface and underground improvements in order to further optimize the operations and reduce operating costs.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation previously published mineral reserve and resource figures for the Blanket Mine calculated as at December 2006. In the period since then the reserve and resource figures will have been depleted to the extent of the production which has occurred during the period. The Corporation has not had any new formal reserve or resource figures calculated and reported by a person who is an independent qualified person. Therefore current figures are not quoted in this report. However, a new technical report is currently being prepared by an independent qualified person, in compliance with Canadian National Securities Instrument 43-101, and is expected to be published by
the end of June, 2011.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3. AFTER THE ECONOMIC CRISIS - THE IMPLICATIONS FOR CALEDONIA.</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Having weathered the world economic storm of 2008 and 2009, Caledonia has emerged with a profitable and robust operation at Blanket and with substantial exploration potential at all of its properties. However a number of hurdles, as summarized below, still remain:</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.1 Debt and Equity raising and the cost thereof</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket has been able to raise limited but sufficient working capital loans from a Zimbabwean Bank to supplement its positive operating cash flow and to allow the completion of the No. 4 Shaft Expansion Project. However, the cost of finance in Zimbabwe remains high and the loan terms remain short, requiring Caledonia to invest more capital to support Blanket&#146;s operations than would be the case in a normal environment.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The RBZ again failed to redeem the Gold Bonds in July 2010 and no indication was given of a likely future redemption date. Every effort will continue to be made to secure repayment of the Gold Bonds. Due to RBZ&#146;s continued failure to redeem the Bonds, and the ongoing uncertainty pertaining to the eventual redemption the Bonds, they have, in terms of Canadian Generally Accepted Accounting Principles written down to a nil value as at December 2010, but legal entitlement to payment remains vested in Blanket Mine.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.2 Currencies</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As the majority of the costs incurred by the Corporation are incurred in South African Rands and Canadian dollars, whilst the gold production is sold in US dollars, the current trend towards a higher value for both these currencies against the US dollar is not in the Corporation&#146;s favour. However an increasing US&#36; gold price is a mitigating factor.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.3 Counterparties</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The only long term counterparty contracts in place are the cobalt supply agreements from the Nama property. As required by the agreements, the counterparties were notified in writing during October
2008 of the delay in commencing production at Nama and were agreeable to such delay. None of these parties has requested that the agreements be cancelled.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">5</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.4 Liquidity</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation&#146;s cash resources are estimated to be sufficient to fund its planned exploration, capital expenditure, and the Corporation&#146;s expenses for the foreseeable future, bar any unknown impediments.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.5 Provisions and Impairments</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The &#36;577,000 drilling costs associated with the far northern region of the Rooipoort property have been written down to a nil value as no economic resource was defined in the area as a result of the drilling. Due to the failure of the RBZ to redeem the Bonds in July 2010 and the lack of communication regarding a possible future redemption date the capital value and accrued interest has been written off as at December 31, 2010 for accounting purposes. Blanket will continue to pursue the redemption of the Bonds.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.6 Going concern</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The ability of the Corporation to recover the amounts shown for its capital assets and mineral properties is dependent upon the existence of economically recoverable reserves and the ability of the Corporation 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.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation operates in a number of operating segments and its assets, including its interests in gold properties, 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 Corporation's activities in this country or may result in the impairment or loss of part or all of the Corporation's interest in the properties</FONT><B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">.</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">These consolidated financial statements have been prepared on the basis of a going concern, which contemplates that the Corporation will be able to realize assets and discharge liabilities in the normal course of business. The Corporation&#146;s ability to continue as a going concern is dependent upon operating profitable operations, realising proceeds from the disposal of mineral properties and obtaining sufficient financing to meet its liabilities and its obligations with respect to operating expenditures and expenditures required on its mineral properties.</FONT></P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.</FONT></B>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">OPERATIONS</FONT></B>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.1</FONT></B>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Gold Production</FONT></B>	</TD>
</TR>
</TABLE>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Blanket Mine (1983) Private Limited (&#147;Blanket&#148;) - Gold</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket continues to export its gold production to Rand Refineries in South Africa and receives 100% of the sale proceeds in US dollars within 5 days of sale. Cash flow at Blanket continues to improve as gold production increases and the production unit costs decrease.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Background</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket is wholly owned by the Corporation&#146;s 100% owned Zimbabwe subsidiary. The mine 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. The town of Gwanda, the provincial capital of Matabeleland South, is located 16 km east of the mine and is approximately 197 km north north-west of the South African border post of Beit Bridge. The mine is situated in the Gwanda Greenstone Belt from which gold was
</FONT><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">first produced in the 1800&#146;s. Blanket holds extensive exploration properties throughout this belt. The Blanket property was first staked in 1904 with mining and metallurgical plant operations starting in 1906 and has since produced over a million ounces of gold.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">6</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Geological Setting</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">In common with most of the gold mines in Zimbabwe, Blanket is situated in a typical greenstone terrain, the 70 km long by 15 km wide Gwanda Greenstone belt. This terrain comprises supra crustal metavolcanic rocks similar to those found in the Barberton area of South Africa and the Abitibi area of Canada. The Blanket property is the largest of the three remaining large gold producers on the Gwanda Belt, an area that has given rise to no less than 268 gold mines.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Property Geology</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket is part of the group that makes up the North Western Mining camp also called the Sabiwa group of ore zones extending from Sabiwa and Jethro in the south, through Blanket itself to the Feudal, AR South, AR Main, Sheet, Eroica and Lima ore bodies.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The geological sequence strikes north-south, dips vertically and consists, from east to west, of a basal felsic unit which is not known to carry mineralization. It is generally on this lithology type that the various mine tailings disposal sites are located. Above this unit is the ultramafic unit that includes the banded iron formations hosting the eastern dormant cluster of mines and the ore bodies of the adjacent Vubachikwe mine complex. The active Blanket ore bodies are found in the mafic lavas, while the andesitic unit which lies to the west, caps this whole stratigraphy. A regional dolerite sill cuts the entire sequence from Vubachikwe through Blanket to the Smiler prospect. Ore bodies at Blanket are epigenetic and are associated with a later, regionally developed deformation zone characterized by areas of high strain, wrapping around relatively under formed remnants of the original basaltic lava flows. It is within this higher strain regime (highly sheared rocks) that the wider of the ore bodies are located.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Production Operations Mining</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Subsequent to the completion of the No. 4 Shaft Expansion Project, the underground mining areas can now produce up to 1,100 tonnes of ore daily using predominately long-hole open stoping methods. Certain ore handling limitations still existed at the underground on 18 and 22 Levels at the year end. These limitations are currently being addressed by raise boring an ore pass connecting 18 Level to the No. 2 ore bin grizzly tip on 22 Level. The 120 metre long and 1.5 metre diameter ore pass will dramatically improve the efficiency of delivering ore to the new underground crushing and hoist loading station by eliminating the current necessity to double handle ore and waste generated on 18 Level down to 22 Level via the No 6 winze before it is crushed and hoisted from the underground loading station to surface. The raise boring operations will have an adverse impact on gold production in the first quarter of 2011which is expected to be lower than the increased capacity equivalent of 10,000 ounces per quarter. However the 1</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">st </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter 2011 production is still expected to be higher than the production level achieved in 4</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">th </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter of 2010 and the planned annual gold production of 40,000 ounces will be met from increased gold production later in 2011.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Metallurgical Process</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The present crushing and milling circuit has been expanded from 600 tonnes per day to about 1,800 tonnes per day capacity. This is more than sufficient to handle the planned increases in mine production from the No. 4 Shaft Expansion Project, and, in future, from any ore mined from the satellite exploration properties currently being developed.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: center;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">All run of mine (&#147;ROM&#148;) ore is crushed underground to minus 80mm, hoisted to surface and crushed
to minus 12mm in the surface 2-stage crushing circuit. This material is then fed into two 1.8m by 3.6m rod mills where it is milled down to approximately 70% passing 75 microns, after which the milled slurry is pumped through two 30 inch Knelson Gravity Concentrators where approximately 49% of total mill gold production is recovered as &#145;gravity&#146; gold. The Knelson Concentrator tails are pumped through cyclones whose underflow reports to the open-circuit regrind ball mill. The product from the Knelson tails cyclone overflow and the regrind mill discharge are pumped into a carbon-in-leach (&#147;CIL&#148;) plant consisting of eight, 600 cubic meter leach tanks where alkaline-cyanide leaching and simultaneous absorption of dissolved gold onto granular activated carbon takes place. Elution of the gold from the loaded carbon and subsequent electro-winning is done on site. During electro winning the gold is deposited on wire wool cathodes, the loaded cathodes are acid-digested and the resultant gold solids from acid digestion and the re-dressed gold concentrate from Knelson Concentrators are smelted into bars. The granular activated carbon is kiln regenerated before it is recirculated back to the CIL section. The gold bullion, in the form of Dore bars is delivered, as required by Zimbabwean gold-mining law, to the Government-operated Fidelity for sampling and onward delivery to the Rand Refineries in South Africa. Rand Refineries undertakes the final refining and sells the resultant gold with 100% of the proceeds being credited to Blanket&#146;s Zimbabwean bank account in US dollars within 5 days of sale.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The CIL plant has an overall design capacity of 3,800 tonnes of milled ore per day, from its previous use for reclaimed tailings processing. The plant tailings from CIL are reduced in cyanide content and deposited on two licensed tailing impoundment areas sited close to the plant. The maximum amount of tailings water is pumped back to the metallurgical plant for re-use. Daily management and operation of the tailing deposition area is contracted out to the Zimbabwean subsidiary of specialized South African company &#147;Fraser Alexander Tailings&#148;</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.2 Eersteling Gold Mining Company Limited</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The mine is no longer disclosed as &#147;held for sale&#148; but the Board&#146;s decision to sell remains intact. The change in disclosure is as a result of no offer being made for the mine since 2008. No additional impairment has been made against the carrying value as the previously offered price by a 3</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">rd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">party potential buyer was significantly higher than the carrying value and the Corporation has rejected a purchase offer also in excess of the carrying value. Interested parties continue to investigate the merits of purchasing the mine and the Corporation continues to seek a suitable purchaser.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">5. KEY PERFORMANCE FACTORS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During 2010, the US&#36; gold price per ounce continued to increase and the increased gold production from Blanket has enabled Blanket to remain cash-flow positive throughout 2010. The cash flow, together with a 6-month loan facility from Blanket&#146;s Zimbabwean bankers allowed Blanket to fund all of the 2010 capital expenditure at the mine. Subsequent to the completion of the No. 4 Shaft Expansion Project the mining of the Level 22 Haulage Extension Project, has recommenced. This project will allow for the further up-dip and down-dip exploration of the Blanket mine-site&#146;s known ore bodies and, provided this exploration is successful, will also allow for the rapid commencement of mining on the new mining areas defined and an increase in the mine&#146;s mineral reserves and resources. It is expected that the 2,400 metre long Level 22 Haulage Development Project will be completed by the end of 2012. The frequency of electrical supply interruptions has decreased significantly since the new supply agreement was signed with ZESA in December 2010. Nevertheless the additional diesel generator sets and the associated transformers and switchgear are proposed to be installed during the 1</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">st </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter of 2011to ensure continuous power supply is available to the entire surface and underground operations in the event of any power
interruption.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">8</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">6. SELECTED ANNUAL INFORMATION -</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The following information is given for the last three fiscal year-ends of the Corporation:</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=53%></TD>
     <TD width=18%></TD>
     <TD width=14%></TD>
     <TD width=13%></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">C&#36;000&#146;s except for earnings per share amounts.</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">December</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">December</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">December</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<p align="right">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">31, 2010</FONT></B></p>
    </TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<p align="right">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">31, 2009</FONT></p>
    </TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">31, 2008</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Revenue from sales</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22,401</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">11,559</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7,696</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Income (loss) before income tax :</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3,687</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(3,091)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,504)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Discontinued operations</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">-</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(436)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Net Income (loss) after tax</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2,257</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(3,950)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,940)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Net income/(loss) per share - basic and diluted</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#36;0.0045</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.008)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;0.010)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Comprehensive Income (loss)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,746</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,503)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(4,880)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Total assets</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">27,488</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">22,090</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">23,657</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Total long-term liabilities</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4,017</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,589</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,153</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Cash dividends declared per share</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Nil</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Nil</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Nil</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:1.000000px">
<FONT size=1 face="TimesNewRomanPSMT,Times New Roman,Times,serif">.</FONT></TD>
	<TD align=right nowrap>
&nbsp;</TD>
	<TD align=right nowrap>
&nbsp;</TD>
	<TD align=right nowrap>
&nbsp;</TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Corporation achieved a gross operating profit (exclusive of amortization) of &#36;8,278,000 for the year (&#36;2,916,000 &#150; 2009 and &#36;3,039,000 &#150; 2008) on gold sales of 17,598 ounces (10,517 &#150; 2009 and 8,364 &#150; 2008) at an average gold price of &#36;1,273 (&#36;1,099 &#150; 2009 and &#36;920 &#150; 2008).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Total gold production for the year was 17,707 ounces (11,295 &#150; 2009 and 7,687 &#150; 2008) which was negatively affected by power interruptions during the first 11months of the year.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The profit after tax of &#36;2,257,000 is affected by the unusually large non-operating, non-cash flow items totalling &#36;3,489,000 (&#36;4,830,000 &#150; 2009 and &#36;2,237,000 &#150; 2008) being mainly made up from the impairment of mineral property &#36;577,000 (&#36;1,434,000 &#150; 2009 and &#36;1,168,000 &#150; 2008) , the write down of the RBZ Gold Bonds of &#36;1,040,000 (&#36;2,502,000 &#150; 2009 and &#36;526,000 &#150; 2008), an unrealized foreign exchange loss of &#36;229,000 (&#36;207,000 loss &#150; 2009 and &#36;297,000 loss &#150; 2008) and a future tax liability charge of &#36;1,427,000 (&#36;859,000 &#150; 2009 and &#36;Nil &#150; 2008).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As a result of the dollarization of the Zimbabwean economy in February 2009, Blanket&#146;s functional currency changed to the US dollar and thus the unrealized foreign exchange loss, on translation, of &#36;466,000 (&#36;600,000 &#150; 2009) was debited to other accumulated comprehensive loss and not to the unrealized exchange loss in the Statement of Operations and Comprehensive Income/ (Loss).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Finance charges paid amounted to &#36;267,000 (&#36;95,000 &#150; 2009 and &#36;103,000 &#150; 2008) and were as a result of Blanket requiring borrowed funding.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During 2010, the Corporation invested &#36;7,290,000 in capital assets and mineral properties (&#36;1,547,000 in 2009 and &#36;3,023,000 in 2008). Of the amount invested in 2010, Blanket accounted for &#36;6,623,000 (&#36;860,000 - 2009), Nama accounted for &#36;630,000 (&#36;616,000 - 2009) and Rooipoort accounted for &#36;37,000 (&#36;44,000 - 2009).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The basic and diluted net income per share of &#36;0.0045 (&#36;0.008 loss in 2009 and &#36;0.010 loss in 2008). This has been calculated using a weighted average number of shares of 500,169,280 (500,169,280 in 2009 and 498,450,650 in 2008) and a diluted weighted average number of shares of 503,471,910 (500,169,280 &#150; 2009 and 499,217,712 &#150; 2008).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As at December 31, 2010, the Corporation is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy.</FONT></P>
<P style="text-align: left;">
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">9</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=-->
<p>&nbsp;</p>
<TABLE><TR><TD width=5>&nbsp;</TD><TD nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Shareholders&#146; Equity</FONT></B></TD></TR></TABLE>

<DIV align="left">
<TABLE border=0 cellspacing=0 width="532">
<TR>
     <TD width=225></TD>
     <TD width=158></TD>
     <TD width=137></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap width="225">
&nbsp;</TD>
	<TD align=right nowrap width="158">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">As at December 31,</FONT></B></TD>
	<TD align=right nowrap width="137">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As at December 31,</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="225">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="160">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="139">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2009</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="225">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Issued common shares</FONT></TD>
	<TD align=right nowrap width="158">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">196,125</FONT></B></TD>
	<TD align=right nowrap width="137">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">196,125</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="225">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Contributed surplus</FONT></TD>
	<TD align=right nowrap width="158">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2,305</FONT></B></TD>
	<TD align=right nowrap width="137">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,951</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="225">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Other comprehensive income/(loss)</FONT></TD>
	<TD align=right nowrap width="158">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(1,061)</FONT></B></TD>
	<TD align=right nowrap width="137">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(550)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="225">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Deficit</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="160">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(178,527)</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="139">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(180,784)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="225">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Total</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="160">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">18,842</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="139">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">16,742</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The increase in other comprehensive income is attributable to the adoption of the current rate method of translation of the Zimbabwean operations from US dollars into Canadian dollars as explained in Foreign Currency Translations policy. During 2010, &#36;466,000 (&#36;600,000-2009) was charged to other comprehensive income/ (loss).</FONT></P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">7.</FONT></B>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">OPERATIONAL REVIEW AND RESULTS OF OPERATIONS</FONT></B>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=3 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">7.1</FONT></B>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=3 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Gold Production</FONT></B>	</TD>
</TR>
</TABLE>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Blanket Mine &#150; Zimbabwe</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The operational statistics reported below refer to the period from January 1 to December 31, 2010.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Safety, Health and Environment</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The table below summarizes Blanket&#146;s safety record of accidents, injuries and safety-related incidents</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=53%></TD>
     <TD width=29%></TD>
     <TD width=16%></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">for 2010 and 2009:</FONT></TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2009</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:11.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Lost time injuries</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">0</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:11.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Occupational illness</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:11.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Medical Aid</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">6</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:11.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Restricted work activity case</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">13</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">15</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:11.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">First Aid</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">15</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:38.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Total</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">37</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">31</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:11.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Incidents</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">56</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">36</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="TEXT-INDENT:11.000000px">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Near misses</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">34</FONT></B></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">20</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The mine had a good year from a safety perspective in that zero (3 &#150; 2009) lost time injuries were recorded during the period and 13 (15 &#150; 2009) restricted work activity cases occurred. Considering the amount of electrical supply interruptions experienced and the extensive capital works carried out in 2010 both on surface and underground this is considered to be an excellent achievement by Blanket&#146;s management and employees. Incidents however increased to 56 (36 - 2009), and near misses also increased to 34 (20 &#150; 2009) primarily due to the increased levels of work activity. Intensive safety training continues under the National Occupational Safety Association (&#147;NOSA&#148;) to ensure that new and existing employees are compliant with the NOSA safety requirements and standards.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Occupational Health Center continues to operate at the Mine and all employees are screened for occupational ailments. There was 1 (nil &#150; 2009) occupational health illness detected during the year. HIV/AIDS continues to be an area of concern for management despite awareness programs to educate employees and their relatives being in place. The voluntary testing of employees is still at disappointingly low levels.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Mine continues to monitor the water quality in the ground-water pumping wells downstream of the tailings impoundment areas. The results continue to be well within the Governmental
Environmental Management Agent (&#147;EMA&#148;) minimum levels. Re-grassing of the slopes to improve side stability and to reduce wind and rainfall erosion on Dam B is ongoing.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">10</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">At the higher level of mining and processing activity following completion of the No.4 Shaft Expansion Project, the associated waste material management requirements continue to increase. The typical items covered here include used-oil, scrap metal, used-batteries, domestic refuse, industrial and office waste and clinic waste.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Zimbabwean Chamber of Mines (&#147;COM&#148;) concluded wage negotiations with the unions in December 2010 which resulted in the mine having to pay back-pay to all its employees for the period October 2009 to November 2010. Wage negotiations will commence again in early 2011 but the Chamber of Mines has made it clear that these negotiations will be for the full calendar year 2011.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">In general the labour force is now stable with the number of un-authorized absences and desertions stabilizing at acceptably low levels along with a very low turnover rate.</FONT></P>
<P style="text-align: left;">
<B><FONT size=3 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Capital Projects</FONT></B></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Ore Pass from 18 Level (630m) to 22 Level</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">A 115 meter long by 1.5 metre diameter ore pass is currently being raise-bored which will improve the efficiency of moving mined ore from 18 Level to the underground crushing station. Sustained production at a continuous 1,100 tonnes per day will be achieved once this ore pass and its 18 Level tipping station are completed in April 2011.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22 Level (750m) Haulage Development Project - from Blanket #4 shaft to Lima shaft</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The 22 level Haulage Development Project is currently behind the original schedule in the mine plan due to the decision taken in 2010 to concentrate financial resources on completing the No. 4 Shaft Expansion Project. Work on this Project will now be accelerated to link the Blanket and Lima shafts. Included in the work is a 230 meter ventilation raise that will be bored to improve ventilation in this area and that will allow for double-shift blasting. To expedite its completion the ventilation raise- will commence immediately the 18 level to 22 level ore pass is finished. This ventilation raise is expected to be completed in the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter of 2011 and will be equipped with a suitable single winder engine and a double-deck conveyance for personnel transportation between the 14 Level and 22 Level. The above ventilation raise will commence once the 22 Level development is sufficiently advanced. Crosscuts (short side tunnels) will be mined from the 22 Level haulage each with a length of up to several hundred meters in order to provide the required drilling platforms from which the deeper ore bodies above and below the 22 level can be drilled, evaluated and developed. It is planned that all of the work on the 22 Level Haulage Project and its cross-cuts will be done alongside normal mining production and should be completed by the end of 2012. The budgeted cost of the 22 level Project utilizing internal resources is about US&#36; 900 per meter advanced and equipped for the planned 2,400m totalling about &#36;US 2.2 million to be funded from internal cash flows.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Mine Operations</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Quarterly gold production has increased since mining and milling operations were resumed from 2,746 ounces in Q2 of 2009 to 6,228 ounces in Q4 of 2010. Monthly production and costs have however been subject to significant fluctuations largely due to the incidence of interruptions to electrical power, particularly prior to the installation of the first generator in late June 2010 and the increased labour costs.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P align="left">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">11</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<DIV align="left">
<TABLE border=0 cellspacing=0 width="527">
<TR>
     <TD width=71></TD>
     <TD width=64></TD>
     <TD width=78></TD>
     <TD width=62></TD>
     <TD width=62></TD>
     <TD width=62></TD>
     <TD width=51></TD>
     <TD width=45></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap colspan=3 width="221">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Annual Production Results</FONT></B></TD>
	<TD align=right nowrap width="62">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2008*</FONT></TD>
	<TD align=right nowrap width="62">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2009**</FONT></TD>
	<TD align=right nowrap width="62">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=right nowrap width="51">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Jan</FONT></TD>
	<TD align=right nowrap width="45">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Feb</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2011</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2011</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Ore mined</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Tonnes</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">81,688</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">94,714</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">149,372</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">17,897</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">22.291</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="71">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Development</FONT></TD>
	<TD align=right nowrap width="64">
<p align="left">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">advance</FONT></p>
    </TD>
	<TD align=left nowrap width="78">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Meters</FONT></TD>
	<TD align=right nowrap width="62">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">472</FONT></TD>
	<TD align=right nowrap width="62">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,267</FONT></TD>
	<TD align=right nowrap width="62">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2,455</FONT></B></TD>
	<TD align=right nowrap width="51">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">221</FONT></TD>
	<TD align=right nowrap width="45">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">239</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(ROM)</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="71">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Development</FONT></TD>
	<TD align=right nowrap width="64">
<p align="left">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">advance</FONT></p>
    </TD>
	<TD align=left nowrap width="78">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">meters</FONT></TD>
	<TD align=right nowrap width="62">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
	<TD align=right nowrap width="62">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">165</FONT></TD>
	<TD align=right nowrap width="62">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">365</FONT></B></TD>
	<TD align=right nowrap width="51">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">49</FONT></TD>
	<TD align=right nowrap width="45">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">54</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(Capital)</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Ore milled</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Tonnes</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">81,688</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">103,444</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">153,500</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">17,125</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">20,361</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Head grade</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">grams/tonne</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3.33</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3.75</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.9</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4.1</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3.97</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Recovery</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">percentage</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">87.89</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">90.96</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">92.00</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">92.49</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">91.76</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap colspan=2 style="border-bottom: 1px solid #000000" width="141">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Gold produced</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Ounces</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7,687</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">11,295</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17,707</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,086</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,386</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Gold Sold</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Ounces</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">8,364</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">10,517</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17,598</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,966</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,386</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap colspan=2 width="139">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Average gold price per</FONT></TD>
	<TD align=left nowrap width="78">
&nbsp;</TD>
	<TD align=right nowrap width="62">
&nbsp;</TD>
	<TD align=right nowrap width="62">
&nbsp;</TD>
	<TD align=right nowrap width="62">
&nbsp;</TD>
	<TD align=right nowrap width="51">
&nbsp;</TD>
	<TD align=right nowrap width="45">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">ounce sold</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">USD</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">920</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,099</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,273</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,346</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,402</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="71">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Production</FONT></TD>
	<TD align=right nowrap width="64">
<p align="left">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">cost per</FONT></p>
    </TD>
	<TD align=left nowrap width="78">
&nbsp;</TD>
	<TD align=right nowrap width="62">
&nbsp;</TD>
	<TD align=right nowrap width="62">
&nbsp;</TD>
	<TD align=right nowrap width="62">
&nbsp;</TD>
	<TD align=right nowrap width="51">
&nbsp;</TD>
	<TD align=right nowrap width="45">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="73">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">ounce</FONT></TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="66">
&nbsp;</TD>
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="80">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">USD</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">663</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">744</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="64">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">751</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="53">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">714</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="47">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">658</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">*</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Production was temporarily suspended in October 2008.</FONT>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">**</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">For 9 months April to December 2009</FONT>	</TD>
</TR>
</TABLE>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Underground</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During 2010 the mining operations were affected by the following:</FONT></P>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Electrical power outages have decreased in duration and frequency since the signing of a</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">new power supply agreement with ZESA in December 2010. Blanket is however continuing</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">with the installation of 2 more diesel generating sets and their associated switchgear,</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">associated transformers, and synchronisation panel and controls. This complete 4 unit</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">generator installation once commissioned in the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter will ensure that the entire surface</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and underground operations will be able to continue to fully operate irrespective of ZESA</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">power outages.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Until completion of the No. 4 Shaft Expansion Project, there was a necessity to double and</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">triple handle mined ore and waste from below the 14 Level (510m) mid-shaft loading</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">system via the No 5 and No 6 sub-shafts (winzes), This limited ore production to 500 tonnes</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">per day or less. Ore from below 14 Level is still double-handled but the ore pass which is</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">currently being raised-bored will resolve this problem during the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter, 2011.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Completion of the No. 4 Shaft Expansion Project was essential in order to increase gold</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">production to the 40,000 ounce per annum level. Completion of the underground</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">construction and installation of components of this large Project required that for</FONT></LI>
</UL>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">approximately 12 hours each day during the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and 3</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">rd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarters of 2010 , the No. 4 shaft winder had to be dedicated to lowering all of the materials used for the shaft expansion and the two shifts of personnel and their equipment rather than raising mined ore for processing. This, in conjunction with the substantial power interruptions, further reduced the time available for hoisting ore necessary for gold production and resulted in lower mining and milling production levels.</FONT></P>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Furthermore, during the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and 3</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">rd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarters of 2010 the underground works required to</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">complete the No 4 Shaft Expansion Project caused considerable congestion on the 22 Level</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">haulage. Since completion of the 4 shaft project ,the waste generated from the 22 Level</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Haulage Development Project and from the raise boring above 22 Level has creating further
severe congestion on this key production haulage. Until such time as the raise boring of the new ventilation raise between 14 Level and 22 Level has been completed during the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter of 2011, the efficiency of rail traffic movement on the 22 Level will need to be carefully managed as production ore and waste from the 22 Level Haulage Development and from the raise-borer will need to be transported
(trammed) to the 22 Level tips above the 765m Level Crushing Station. The ore transportation will improve dramatically and the planned 1,100 daily ore tonnage will be readily hoisted to surface. Currently and in future, all ore and waste are transported and hoisted to surface separately. All hoisted waste is conveyed directly from the No. 4 Shaft Headgear bin and deposited into an adjacent near-by disused surface
stope.</FONT></LI>
</UL>
<p>&nbsp;</p>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">12</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Metallurgical Plant</FONT></P>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During 2010 the metallurgical plant operations were very efficient with an averaged gold</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">recovery of 92% being sustained for the year. Metallurgical improvements during 2010</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">included:</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The No. 6 Regrind mill sump was rebuilt and the mill re-commissioned and is currently</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">operating in the main milling circuit.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Both Knelson concentrators were overhauled and recommissioned, and Metallurgical</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">optimisation test work carried out on plant samples has shown that there is little gold recovery</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">potential in the existing Gravity Gold recovery section where about 50% of the produced gold</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">id recovered, but that there may be some potential for additional gold recovery in the various</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">plant sections following the Milling section.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Additional testwork on samples taken from the Gemini Table tails, the Cyclone Over and</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Under flows and the CIL tails to determine their current gold deportment and assess their</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">amenability to gravity concentration and other recovery methods. This will likely result in</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">possible future modifications and additional circuits being added to the gravity section of the</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">plant.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The CIL circuit has now been completely equipped with our most recent design of Agitator</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Gearboxes and impellor mechanisms, and the first leach tank is now being utilised as a pre-</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">conditioning tank.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During the 1</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">st </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter of 2011 the Activated Carbon regeneration kiln was refurbished.</FONT><BR>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">It is planned to change the entire elution circuit to a more efficient automated system once</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">cash flows allow</FONT></LI>
</UL>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Outlook</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The main aims and objectives of Blanket in 2011 are to ensure that the 40,000 ounce production level is achieved and maintained, to successfully install and commission the whole powergenerating station, to accelerate the 22 Level Haulage Development Project, the exploration of the up and down dip extension of the known ore bodies, and to further develop the GG and Mascot projects as rapidly as Mine cash flow and economic conditions in Zimbabwe allow.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">In the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter
of 2011, the completion of the new ore pass between 18 Level and 22 Level and
the installation of the Tipping station on 18 Level will eliminate congestion on 22 Level at Blanket. Also</FONT>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">in the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter a new ventilation raise will be bored between 14 Level and 22 Level to vastly improve ventilation in this key evelopment area.This will allow for double-shift blasting, thereby speeding up the 22 Level Haulage Development Project. The raise boring of the ventilation raise will commence once the 22 level development s is completed to the raise location point. The new ventilation raise is also expected to be completed in the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter of 2011.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">13</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">This ventilation raise will be equipped with a suitable single winder and double-deck conveyance for personnel transportation between 14 Level and 22 Level. The mid shaft loading station on 14 Level will continue to handle ore as necessary and the less congested 14 Level will be equipped with personnel carriages and utilised as a main personnel transportation level providing faster access to the working places on 14 Level, 18 Level, and 22 Level that are located over 1,500 meters distance from No 4 Shaft. This will result in significant production efficiencies from the mining employees.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The crushing circuits and metallurgical plant currently has the capacity to treat approximately 1,800 tonnes of ore per day which provides the flexibility to further increase production as and when mining is able to supply additional ore from either the Blanket mine underground or our development properties. However the capital investment required to maintain and expand the underground mining capacity is obviously completely dependent on the investment climate in Zimbabwe being conducive to such investment.</FONT></P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8</FONT></B>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">EXPLORATION AND PROJECT DEVELOPMENT</FONT></B>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8.1</FONT></B>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Copper and Cobalt Base Metals</FONT></B>	</TD>
</TR>
</TABLE>
<P style="text-align: left;">
<TABLE><TR><TD nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Nama Project &#150; Zambia</FONT></B><BR>
<BR>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Property</FONT></B></TD></TR></TABLE>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Caledonia Nama Limited (&#147;Nama&#148;), a wholly owned subsidiary of the Corporation, has been granted four contiguous 25 year Large Scale Mining Licenses covering a combined area of 786.1 square kilometers 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 the Teal Mining/CVRD joint venture (Konnoco).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Zambian Development Agency has granted Nama a 10 year investment license which provides for 10 years of income tax concessions which range from 100% exemption for the first 5 years, 50% exemption for years 6, 7 and 8 and 25% exemptions for years 9 and 10, together with Duty and VAT exemptions and deferrals on imported equipment and materials.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Types of Mineralization at Nama</FONT></B></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Cobalt &#150;rich Minerals</FONT></B><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">:</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Two main styles of cobalt (&#147;Co&#148;) mineralization occur in the Nama area, the &#145;D-type&#146; iron oxide bodies which are mostly enriched in Co, and the copper(&#147;Cu&#148;) dominated Ore Shale hosted Cu-Co mineralization, more common elsewhere in the Copperbelt, which is being exploited by neighbouring mines to the east and south of Nama.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Ore Shale hosted Cu-Co deposits</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Mineralization of this type occurs within the Ore Shale of the Copperbelt rocks and is imminently/currently being exploited immediately to the east of the Nama license on the Konkola mining property. The </FONT><I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">Ore Shale </FONT></I><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">is known from previous shallow drilling to extend into the Nama license for a distance of about 4 km from its eastern boundary. The neighbouring Konkola and Konnoco Mines have both defined substantial copper resources on their properties. Recent exploration activities at Nama have resulted in the definition of two resource targets (being &#147;Konkola East&#148; and &#147;Kafwira&#148;) characterized as belonging to the Ore Shale-hosted Cu-Co style of mineralization. These targets will be investigated further during the 2011 exploration field season, including some medium depth diamond drilling to confirm the existence of Copperbelt stratigraphy within the two target areas. Drilling of the first of four sequential holes at the Konkola East target
</FONT><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">area commenced in early March 2011 and the results of this program are expected to be received in mid-2011. Thereafter, depending on the early results from Konkola east , drilling will cotinue on two further drill-holes at Konkola East or on one or two drill-holes at the Kafwira target area.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">14</FONT></P>

<HR noshade align="center" width="100%" size=2>



<p>&nbsp;</p>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Although the existing &#147;A-type&#148; resource body, with its higher &#145;oxide&#146; cobalt mineralization has often been regarded as belonging to the Ore Shale style of mineralization, it should be noted that its unusual stratigraphic position coupled with the its associated iron and manganese enrichments make this a &#145;hybrid style&#146; of mineralization. Metallurgical work on this hybrid material is continuing in order to improve the economics of the current process while ongoing exploration will be undertaken to improve the resource base on which the process is based.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Exploration program for 2011</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Diamond core drilling on one of the two target areas discussed below commenced in early March 2011. Also in 2011, field surveys in the form of detailed magnetometer surveys will be carried out over all past and current target areas as a means of understanding the depth potential of the various bodies investigated.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Drill Targets</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The following drill targets have been defined within the Nama Licence areas. Caledonia has budgeted to drill the first these targets during the 2011 field program depending on availability of funding, ground conditions and drilling speeds. The objective of this work is to advance the targets to the stage where there is sufficient confidence that a larger drilling program to determine a potential resource can be justified.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Konkola East Target Area</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Konkola East target covers the westward continuation of the Ore Shale from where it crosses the boundary with the Konnoco (Teal/CVRD joint venture) property. The prospect has a strike of 3 km while the Ore Shale is known to extend for about 5 km along strike to the license boundary. Eight shallow boreholes were drilled into this area in 1970 by Zamanglo and an historical resource (non-compliant with NI 43-101) of 5.4 million tonnes, grading at 0.74% Cu was estimated (Co was not assayed). Exploration drilling by Konnoco on the adjoining property to the east of Nama&#146;s Konkola property has proved particularly successful and has established that the Ore Shale dips down to a depth of about 800 m below surface and then extends to their southern boundary in an undulating manner &#150; a distance of approximately 5 km. The resource potential of this 25 square kilometer target area is significant and has the potential to be a large Cu and Co resource. Drilling the first of four sequential holes at the Konkola East target area commenced in early March 2011 and the results of this over 3,200 metre drilling program are expected to be received in mid-2011.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Kafwira Target Area</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">A significant contribution to the exploration during the 2010 year has been the complete revision of the Corporation&#146;s geological map of the Nama Licence area. This map has contributed to the prioritizing of the various anomalies and will continue to form the basis for the assessment of the full potential of the Nama area. An indirect result of this work has been the development of an understanding of the major structural trends in the Nama area, in particular the identification of those areas where the &#147;Copperbelt&#148; type lithologies are closest to surface but not actually exposed. These areas represent ideal targets for deeper drilling programs (500-1000 meters) and have the advantage that the Ore Shale, if intersected, would have a shallow dip. A target area of approximately 20 square kilometres has been defined in the Kafwira area and drilling of up to four holes is expected to commence once the Konkola East target has been defined.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: center;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">15</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#145;D-Type&#146; iron oxide Co bodies</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#145;D-type&#146; ores at Nama consist essentially of massive hematite and magnetite concentrations encapsulated by less well mineralized talcose schist alteration zones. These concentrations occur associated with dyke-like gabbroic intrusions which appear to disrupt the iron-rich bodies. On account of the complex metallurgy and hence larger capital and operating cost requirements involved in treating the typical &#145;D-type&#146; iron oxide bodies, further work on this ore type is required before economic extraction of this type of Co resource can be considered. In particular, work is required on developing a more cost effective means of recovering the Co from this ore type. To this end the company is considering various leach technologies which may reduce the metallurgical costs significantly.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Work Completed</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Details of the previous years&#146; exploration work completed at Nama can be found in the MD&amp;A reports included in prior years&#146; Annual Reports and the 3 quarterly MD&amp;A reports of 2010.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">A focus on building up production and improving profitability elsewhere in the corporation meant that certain capital intensive programs at the Nama Project such as diamond drilling had to be postponed to the 2011 exploration season. As a result, the more recent work program at Nama focused on deep sampling and evaluation of targets deemed most suitable for future drilling. Pits were dug in strategic positions, up to 10 meters deep, to expose the bedrock beneath the thick soil cover. This program has contributed substantially to the development of an improved geological map of the Nama project area, which in turn has made it possible to define exploration targets areas on the basis of geological structure alone in areas where no base metal enrichments are present at surface. Sampling and logging of these exposures has increased the control over the various targets such that the follow-up 2011 drilling program currently underway could be more accurately positioned.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Other Nama Areas of Interest:</FONT></B></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&#145;E&#146; Anomaly &#150; Yembela Clearing</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Research into previous geochemical surveys carried out in the 1960&#146;s indicated that further anomalies had been located by localized sampling programs both east and west of the Yembela Clearing. These anomalous sites were located and follow-up sampling has verified the existence of the anomalies &#150;Yembela East and Yembela West. Co values of up to 0.16% were encountered in soils which form a thick cover over the two new anomalous areas. Coincidental geophysical anomalies suggest that the mineralization occurs in the form of steeply dipping fold or shear structures. The association of a prominent fault and tillite floor rocks to the south is a very similar structure to that at the &#145;A-type&#146; resource body and supports the interpretation that this occurrence is likely to be analogous to the &#145;Atype&#146; mineralization which is known to be amenable to lower cost extraction techniques.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Konkola West</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During the 2008 field season, exploration established the existence and extent of an Ore Shale horizon along the western margin of the Konkola Dome (south of the &#145;A&#146; Resource Body). A shale unit, approximately 100 meters wide containing anomalous values of Co and Cu has been located in an area of very deep soil cover. Surface material (&#147;float&#148;) from this area was found to contain up to 0.1% Co and 0.2% Cu. This area is referred to as the &#147;Konkola West&#148; area. Two future drill targets have been outlined in this area based on that season&#146;s work, in particular, the use of termite hill sampling. Based on the current interpretation, it appears that the target horizon has a north-south strike extent of about 3 km before crossing into the Democratic Republic of Congo (&#147;DRC&#148;).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">A second anomaly with a much stronger geochemical response occurs further to the west of the &#147;Ore
</FONT><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Shale&#148; target described above. The area is referred to as the &#147;Fault Target&#148; and appears to be the result of a fault or shear zone mineralization and may therefore be similar in character to the &#145;A-type&#146; cobalt anomaly.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">16</FONT></P>

<HR noshade align="center" width="100%" size=2>



<p>&nbsp;</p>
<P style="text-align: left;">
<TABLE><TR><TD nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8.2 Gold</FONT></B><BR>
<BR>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Zimbabwe Exploration &#150; Gold</FONT></B></TD></TR></TABLE>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation&#146;s exploration activities in Zimbabwe are conducted by Blanket&#146;s exploration department. 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 an area of about 2,500 hectares. Forty seven (47) of these claims are registered as precious metal (gold) blocks covering 415 hectares and 31 claims were pegged and are registered as base metal (Cu, Ni, As) blocks covering a total area of 2,085 hectares.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket&#146;s main exploration efforts have been and continue to be focused in certain key areas in the Gwanda Greenstone Belt that are within economic trucking distance of the Blanket plant such as GG prospect and the Mascot Project Area, which are believed to have the greatest potential of success.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Drilling programs were carried out at GG over the past 5 years. Thirteen diamond cored holes were drilled amounting to 2,336 meters of drilling. Two zones of potentially economic gold mineralization have been established down to a depth of approximately 200 m. A prospect shaft has been sunk down to the first level as a first step to exposing the mineralization. At GG, further core drilling from the surface will be done in 2011 to establish the strike extent of previously established mineralization. In addition, the existing prospect shaft will be deepened and underground development on the first and second levels will be advanced to expose the extent of the mineralization and to facilitate evaluation, sampling and mine planning. Depending on the outcome of exploration work, the earliest that production could commence at GG could be in mid-2012 with daily production estimated to be up to a maximum of 200 hundred tonnes of ore per day which could be trucked to the Blanket plant for processing.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Mascot Project Area comprises three existing shafts (Mascot, Penzance and Eagle Vulture) each of which extend down to depths of up to 450 meters and other infrastructure, much of which is in need of extensive rehabilitation. Each of these shafts operated until the mid-1960&#146;s after which production ceased due to the increasing political difficulties at that time and the limitations of the technology that was then available. Blanket management believe that the application of modern exploration and processing techniques may allow some or all of these shafts to operate profitably on a sustainable basis, and not just at the prevailing high gold price. The rehabilitation and installation of infrastructure at Mascot and Eagle Vulture mines continues and is at an advanced stage and underground activities are planned to resume in the 2</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">nd </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter of2011. Depending on the rate and extent of rehabilitation and a favourable outcome of exploration work, the earliest that production could commence at the Mascot Project Area would be in early 2012 with the maximum eventual daily production anticipated at a rate of up to 400 hundred tonnes of ore per day from these three shafts. Such mined ore would then be trucked to the Blanket plant.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket is formulating an exploration and project development strategy to prioritize work on its other properties in the Gwanda area.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">17</FONT></P>

<HR noshade align="center" width="100%" size=2>



<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<B><FONT size=3 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8.3 Platinum Group Elements</FONT></B></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Rooipoort &amp; Mapochs Platinum, Gold, Palladium /Ni/Cu (&#147;PGM&#148;) Project - South Africa</FONT></B><BR>

</P>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Rooipoort rights, previously held by Eersteling Gold Mine, have been transferred into Maid O&#146; the Mist, which is a wholly owned subsidiary of the Corporation. Maid O&#146; the Mist is the vehicle that will be used to manage the Rooipoort platinum exploration program.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">An application in terms of the provisions of the applicable Act is in progress to treat the 5 adjoining prospecting rights at Rooipoort as a single right and to extend the period of this consolidated right for a further three years.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The prospecting rights granted to the Corporation to prospect for Platinum Group Elements (PGE)s on the major portions of the Mapochsgronde tribal trust land are currently in the process of registration. A further application has been made for an adjoining property to the north of the current rights applied for. The Corporation is still waiting the issuing of the prospecting right following its registration.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation is actively seeking Joint-Venture partnerships for its Rooipoort and Mapochsgronde properties.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Outlook</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The outlook for the aforementioned exploration properties is not possible to quantify. Exploration by its nature is speculative with a high degree of risk accompanied by the potential for high returns. The Corporation manages this risk by using well-qualified exploration professionals. Continuing lower prices for platinum group metals and reduced investor appetite for South Africa base metals has resulted in a severe contraction of exploration expenditures for platinum group metals by mining companies and could negatively affect the likelihood of the Corporation negotiating joint venture agreements for its wholly-owned PGE exploration properties.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation intends, where possible, to continue to focus its exploration activities of prospective properties by developing the properties through strategic alliances with other mining companies and metal producers.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Zimbabwe economy continues to be depressed and Zimbabwe&#146;s economic capacity may struggle to expand further. Pressure for unrealistic wage and price increases from labour and Zimbabwean suppliers continues. There is also continuing pressure for higher taxes, both from national and local government and Blanket has accepted increased supply tariffs from the state-owned electricity utility (ZESA) to secure a more reliable power supply. The resuscitation of the mining industry is a stated high priority of the Government as its ability to quickly generate foreign currency is of paramount importance, but blatant political manoeuvring may over take this. Notwithstanding these difficulties, and in the absence of any unforeseen changes to the operating and commercial environment, Blanket has now achieved sufficient critical mass and should be able to realise substantial economies of scale and an improvement in its cash-generative capacity. The expanded capacity of the Blanket metallurgical plant to a daily rate of approximately 1,800 tonnes enables it to immediately treat additional feed material from the Blanket underground and from the GG and Mascot area mines if the planned exploration/development work in the outside areas is successful.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">However, the Government&#146;s aim to foster the rapid regeneration of the Zimbabwean mining sector has been severely undermined by recent regulations and other pronouncements which seek to enforce stringent indigenization requirements which will deter new investment into the Zimbabwean mining industry and contract the mining industry. Caledonia&#146;s proposed response to the indigenization requirements is discussed below.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The President of the Republic of Zimbabwe brought the Indigenization and Economic Empowerment Act (the &#147;Act&#148;) into law through decree in March 2008. The law seeks to ensure that at least 51% of all businesses in Zimbabwe are held by Indigenous Zimbabweans. In February 2010, the Minister for Youth Development, Indigenization and Empowerment (the &#147;Minister&#148;) issued Regulations which gave effect to the Act.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P align="left">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">18</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">On March 25, 2011 the Zimbabwe Government issued a General Notice via a Government Gazette which announced the following indigenization regulations applicable to the mining sector:</FONT></P>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">all non-indigenous mining companies would have to transfer a 51% ownership stake,</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">only designated entities, as defined, could be considered as indigenous partners,</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">the valuation of the business must be agreed by the Minister and the Company,</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">the value of sovereign ownership of mineral resources of exploited and unexploited minerals is to be
taken into account in determining the valuation,</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">all non-indigenous mining companies have to file an implementation plan by May 9, 2011 and,</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">the plan must be implemented within six months of March 25, 2011 and after the approval of the
implementation plan.</FONT></LI>
</UL>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The consequences and enforceability of the General Notice are currently being reviewed by the industry and further communication will be issued in due course.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Any divestiture of ownership in Blanket Mine will require prior shareholder approval.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">9. ENVIRONMENTAL POLICY</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">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>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation directs its employees and its subsidiary companies to conduct their exploration</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and operational activities in a professional, environmentally responsible manner, in compliance</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">with or above the standards of all applicable legislation and policies in the jurisdictions in which</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">they undertake business.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation liaises closely with the applicable government regulatory bodies and the public</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">to optimize communication and an understanding of the Corporation&#146;s activities in relation to</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">environmental protection.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation is committed to the diligent application of technically proven, economically</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">feasible, environmental protection measures throughout its exploration, development, mining,</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">processing and decommissioning activities.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation, on a regular ongoing basis, monitors its environmental protection management</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">programs to ensure their compliance or above the standards of applicable National and</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">International regulatory requirements.</FONT></LI>
</UL>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">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="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">10. SUMMARY OF QUARTERLY RESULTS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The following information is provided for each of the 8 most recently completed quarters of Caledonia - ending on the dates specified - in thousands of Canadian Dollars. The figures are extracted from underlying unaudited financial statements that have been prepared according to Canadian GAAP.</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=26%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=7%></TD></TR>
<TR valign="bottom">
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(&#36;000&#146;s-except per share</FONT></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Dec</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Sept</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">June</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Mar</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Dec</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Sept</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">June</FONT></B></TD>
	<TD align=right nowrap>
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Mar</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">amounts.)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">31/10</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">30/10</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">30/10</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">31/10</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">31/09</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">30/09</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">30/09</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">31/09</FONT></B></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">19</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=26%></TD>
     <TD width=10%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=9%></TD>
     <TD width=8%></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Sales from continuing</FONT></TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">operations</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">7,426</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">6,331</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,154</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,490</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,263</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4,932</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,364</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Net Income/ (loss) after tax</FONT></TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
	<TD align=left nowrap>
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">from operations</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(343)</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,647</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">294</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">659</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(3,738)</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">826</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(199)</FONT></TD>
	<TD align=right nowrap>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(839)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">- per share basic</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(0.0007)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">0.003</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">0.0006</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">0.001</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(0.007)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">0.0017</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(0.0004)</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(0.0017)</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">No of shares basic &#145;000</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<DIV align="left">
<TABLE border=0 cellspacing=0 width="1385">
<TR>
     <TD width=1381></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap width="1381">
<I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">Note: The effect of the dilution on the earnings per share has not been calculated until the 4</FONT></I><I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif"><SUP>th
</SUP>quarter of 2010 as the result for 2009 was a loss and the diluted earnings per share would be anti-dilutive. The fully diluted income per share for the 4</FONT><SUP><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">th </FONT></SUP><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">quarter is (&#36;0.0007)</FONT></I></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During the 4</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">th </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter Caledonia made gross operating profit of &#36;3,417,000 (&#36;1,674,000 &#150; 2009) which resulted in a net income before tax of &#36;1,710,000 (loss &#36;2,878,000 &#150; 2009) which included an unrealized foreign exchange loss of &#36;370,000 (loss &#36;80,000 &#150; 2009). Also included in the gain for the quarter was the impairment of mineral property of &#36;577,000 (&#36;1,434,000 &#150; 2009) and a write off of the RBZ Gold Bonds of &#36;1,040,000 (&#36;2,502,000 &#150; 2009). The operating profit was achieved from the sale of 5,364 ounces (3,670 &#150; 2009) of gold. The monthly operating costs (bulk consumable stores, labour costs, electricity, repairs and maintenance, training, health and safety) per ounce during the quarter were October US&#36;632 (US&#36;567- 2009), November US&#36;922 (US&#36;545-2009), December US&#36;546 (US&#36;686-2009). These monthly operating costs are negatively affected by the high fixed cost component attributable to employment costs of approximately &#36;226 (&#36;307-2009) per ounce and additional costs related to either diesel generation of power or increased ZESA tariff of &#36;167 (&#36;98-2009) per ounce. The current labour numbers, structure and cost base is sufficient to maintain the increased production rate of 1,000 tpd with very little additional cost. The resulting cost per ounce is expected to decrease significantly as production levels increase on a consistent basis to the 40,000 ounces of gold produced annually.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket&#146;s operational costs for the 4</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">th </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter included total employment costs of &#36;1,214,000 (&#36;1,126,000-2009), consumables (excluding diesel to generate electricity) of &#36;1,761,000 (&#36;1,634,000-2009), electricity &#36;897,000 (&#36;361,000-2009) and mine administration costs of &#36;370,000 (&#36;215,000-2009). The dollarization of the economy has resulted in the increase in legislated employee remuneration rates as illustrated above, and management is monitoring this closely to ensure we are paying affordable and market related rates to ensure the scarce skills are attracted and retained.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket is a self-sustaining operation and operates in Zimbabwe in what was a hyper inflationary economy. Due to the dollarization of the economy in February, 2009 the hyper inflationary environment no longer exists. Accordingly the results of these operations are now translated into Canadian Dollars using the current rate method. On January 1, 2009 Blanket&#146;s functional currency also changed to US Dollars following the Monetary Policy announcement introducing the use of foreign currency in Zimbabwe for all forms of trade and business. The assets and liabilities of a self-sustaining foreign operation are translated at the rate in effect at the balance sheet date for purposes of incorporation in the financial statements of Caledonia and, therefore, an exchange gain or loss will arise when the exchange rate changes. This exchange gain or loss has no direct effect on the activities of Caledonia. It is inappropriate to incorporate this exchange gain or loss in net income in the period in which it arises; rather, it is reported in the financial statements as a separate component of shareholders' equity and is disclosed as a separate component of accumulated other comprehensive income during the period. In summary the current rate method is as follows:</FONT></P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(i)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">all assets and liabilities are translated at rates at the balance sheet date;</FONT>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(ii)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">revenue and expense transactions at the average rate of exchange prevailing during the period.</FONT>	</TD>
</TR>
</TABLE>
<P style="text-align: left;">
&nbsp;</P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">11.</FONT></B>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">INVESTING</FONT></B>	</TD>
</TR>
</TABLE>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">During the 4</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">th </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter 2010 Caledonia invested &#36;2,716,000 (&#36;699,000- 2009) in capital assets and mineral properties. Of the amount invested &#36;165,000 (&#36;184,000-2009) was spent at Nama and
&#36;2,868,000 (&#36;501,000) at Blanket.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">20</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">12. FINANCING</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Caledonia financed its operations, except Blanket, using funds on hand. No equity raisings took place in 2010. Caledonia&#146;s operations will be financed from existing cash resources and dividend payments from Blanket. Blanket was granted a facility of US&#36;2.5 million by its bank in Zimbabwe and had an outstanding balance of &#36;747,000 by year end.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">13. LIQUIDITY AND CAPITAL RESOURCES</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">With the increase of production at Blanket, inventory levels of consumables, spares and gold in process have risen marginally to &#36;2,626,000 (&#36;2,589,000-2009). Accounts payable levels of &#36;3,882,000 (&#36;2,171,000-2009) have increased accordingly with production . Despite capital expenditure of &#36;7,284,000 (&#36;1,547,000-2009) in the year, Blanket only had &#36;747,000 (&#36;588,000 &#150;2009) of bank borrowing outstanding at the year end. The Rand Refinery payments continue to be cleared within a contracted 10 day period thereby assisting the cash flow.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Caledonia has potential liabilities to do rehabilitation work on the Blanket and Eersteling Mines - if and when those Mines are permanently closed - at an estimated current cost of &#36;1,731,000 (&#36;1,730,000-2009).</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">14. OFF-BALANCE SHEET ARRANGEMENTS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">There are no off balance sheet arrangements.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">15. RELATED PARTY TRANSACTIONS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation had the following related party transactions measured at the exchange amount:</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0 width="549">
<TR>
     <TD width=367></TD>
     <TD width=55></TD>
     <TD width=54></TD>
     <TD width=57></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">C&#36; 000s</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="57">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="56">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2009</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="59">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2008</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Fees and allowances paid to a Corporation which provides</FONT></TD>
	<TD align=right nowrap width="55">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">552</FONT></B></TD>
	<TD align=right nowrap width="54">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">558</FONT></TD>
	<TD align=right nowrap width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">635</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">the services of the Corporation's president</FONT></TD>
	<TD align=left nowrap width="55">
&nbsp;</TD>
	<TD align=left nowrap width="54">
&nbsp;</TD>
	<TD align=left nowrap width="57">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Rent for office premises paid to a company owned by</FONT></TD>
	<TD align=right nowrap width="55">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">49</FONT></B></TD>
	<TD align=right nowrap width="54">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">50</FONT></TD>
	<TD align=right nowrap width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">43</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">members of the President&#146;s family</FONT></TD>
	<TD align=left nowrap width="55">
&nbsp;</TD>
	<TD align=left nowrap width="54">
&nbsp;</TD>
	<TD align=left nowrap width="57">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Interest paid to directors on outstanding fees and expenses</FONT></TD>
	<TD align=right nowrap width="55">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">-</FONT></B></TD>
	<TD align=right nowrap width="54">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
	<TD align=right nowrap width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4</FONT></TD>
</TR>
<TR>
	<TD colspan=4 width="469">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Other fees paid to Directors</FONT></TD>
	<TD align=right nowrap width="55">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">-</FONT></B></TD>
	<TD align=right nowrap width="54">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">62</FONT></TD>
	<TD align=right nowrap width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">65</FONT></TD>
</TR>
<TR>
	<TD colspan=4 width="469">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Legal fees paid to a law firm where a Director is a partner</FONT></TD>
	<TD align=right nowrap width="55">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">58</FONT></B></TD>
	<TD align=right nowrap width="54">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">53</FONT></TD>
	<TD align=right nowrap width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">117</FONT></TD>
</TR>
<TR>
	<TD colspan=4 width="469">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Fees, allowances and interest paid to the past Chairman of</FONT></TD>
	<TD align=right nowrap width="55">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">38</FONT></B></TD>
	<TD align=right nowrap width="54">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">150</FONT></TD>
	<TD align=right nowrap width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">334</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap width="367">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">the Board</FONT></TD>
	<TD align=left nowrap width="55">
&nbsp;</TD>
	<TD align=left nowrap width="54">
&nbsp;</TD>
	<TD align=left nowrap width="57">
&nbsp;</TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation has a management agreement with Epicure Overseas S.A. (&#147;Epicure&#148;), for management services provided by the President. The Corporation is required to pay a base annual remuneration </FONT><FONT size=2 face="Calibri,Arial,Helvetica,sans-serif">and an expense allowance </FONT><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">adjusted for inflation and bonuses as set out in the agreement. In the event of a change of control of the Corporation, Epicure can terminate the
agreement and receive a lump sum payment equal to 200% of the remuneration for the year in which the change occurs.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">21</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">These related party transactions were in the normal course of operations and are recorded at the exchange amount.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16. CRITICAL ACCOUNTING POLICIES</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The major areas where accounting estimates are made are asset impairment, asset retirement obligations, future tax liabilities, and the recoverable amount of the RBZ Bonds. As significant impairment provisions have already been made against the assets, and there is a reasonable level of certainty around the estimates, it is considered unlikely that any change in estimates would result in a material impact on the results of Caledonia. The asset retirement obligations are also considered to be estimated with a reasonable degree of certainty, although the original estimations were calculated some years ago. The estimation for Blanket was recalculated before December 31, 2009. The estimations are accreted annually at rates between 1.7% and 5% and thus any change in circumstances is considered unlikely to have a material impact on the results of Caledonia or its operations.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The following accounting policy changes have been adopted as of January 1, 2010 and are more fully described in the Consolidated Financial Statements.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16.1 Changes in accounting policies:</FONT></B></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Financial Instruments</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Financial instruments &#151; recognition and measurement, Section 3855</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">This Section has been amended to clarify the application of the effective interest method after a debt instrument has been impaired. This amendment is effective for fiscal years beginning on or after July 1, 2009. There was no effect on the financial statements due to adopting this amendment.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16.2 Recently issued accounting pronouncements issued and not yet effective.</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The CICA issued three new accounting standards in January 2009: Section 1582, Business Combinations, Section 1601, </FONT><I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">Consolidated Financial Statements, </FONT></I><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and Section 1602, </FONT><I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">Non-Controlling interests. </FONT></I><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Section 1582 replaces section 1581 and establishes standards for the accounting of a business combination. It provides the Canadian equivalent to IFRS 3 - </FONT><I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">Business Combinations. </FONT></I><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The section 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 January 1, 2011.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Sections 1601 and 1602 together replace section 1600, </FONT><I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">Consolidated Financial Statements. </FONT></I><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Section 1601, establishes standards for the preparation of consolidated financial statements. Section 1601 applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. Section 1602 establishes standards for accounting of a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS lAS 27 - C</FONT><I><FONT size=2 face="TimesNewRomanPS-ItalicMT,Times New Roman,Times,serif">onsolidated and Separate Financial Statements </FONT></I><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011 and all three sections must be applied concurrently. The Corporation does not anticipate that the adoption of these standards will impact its financial results.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Section 3855 Financial Instruments &#150; Recognition and Measurement has been amended to clarify when an embedded prepayment option is separated from its host debt instrument for accounting
</FONT><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">purposes. This amendment applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Earlier adoption is permitted.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">22</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">International Financial Reporting Standards (&#147;IFRS&#148;)</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Canadian Accounting Standards Board confirmed in February 2008 plans to converge Canadian GAAP with International Financial Reporting Standards (&#147;IFRS&#148;) over a transition period expected to be effective for interim and annual periods commencing January 1, 2011. The transition date of January 1, 2010 will require the restatement for comparative purposes amounts reported by Caledonia for the year ended December 31, 2010.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">16.3 International Financial Reporting Standards</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Canadian Accounting Standards Board confirmed in February 2008 plans to converge Canadian GAAP with International Financial Reporting Standards (&#147;IFRS&#148;) over a transition period expected to be effective for interim and annual periods commencing January 1, 2011. The transition date of January 1, 2010 will require the restatement for comparative purposes amounts reported by Caledonia for the year ended December 31, 2010.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Caledonia is assessing the adoption of IFRS for 2011 by using the services of an independent consultant to produce an Impact Assessment Report (&#147;the Report&#148;) and to prepare a draft template of the new IFRS compliant financial statements. The Report sets out the preliminary assessment of the potential impact of Caledonia&#146;s conversion from Canadian GAAP to IFRS and was based on Caledonia&#146;s publicly reported financial information for the year ended 31 December 2008.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The approach followed was:</FONT></P>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">A review of Caledonia&#146;s accounting policies and accompanying financial statements for the year</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">ended 31 December 2008 and compared them with the requirements of IFRS; and</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Discussions with management to discuss the key differences between IFRS and Canadian GAAP</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and the applicability to Caledonia.</FONT></LI>
</UL>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">This approach provided Caledonia with a clear and concise format for understanding and communicating the effects of implementing IFRS to senior management, the Audit Committee and the Board. Reference to the relevant standards and other authoritative material will be made and specific advice taken before acting if considered necessary.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">It should also be noted that the Report primarily focuses on differences between IFRSs and Canadian GAAP from a recognition and measurement perspective and did not deal with disclosure requirements (except for the IFRS 1 disclosures), which are being considered via the preparation of the Financial Statement template.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">We are considering all standards and interpretations in issue at the date of the Report that will also be effective for Caledonia&#146;s first IFRS financial statements, being the year ending 31 December 2011. A review of the impact that the IFRS requirements would have on Caledonia&#146;s systems was not performed at this stage as all subsidiaries are operating in IFRS compliant jurisdictions.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">IFRS 1 states that, if an entity becomes a first-time adopter later than its subsidiaries, the entity shall, in its consolidated financial statements, measure the assets and liabilities of the subsidiary at the same carrying amounts as in the financial statements of the subsidiaries after adjusting for consolidation. Therefore, for the purposes of the transition to IFRSs, Caledonia would have to use the financial statements of these subsidiaries and cannot make any adjustments. However, Caledonia would have to assess the consolidation entries made to evaluate whether any IFRS 1 exemptions can be applied to these entries.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">23</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The areas that require additional work and quantitative evaluation are:</FONT></P>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Business combinations</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Deemed cost on property, plant and equipment</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Mineral property valuation.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Decommissioning liabilities</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Exploration and evaluation assets</FONT></LI>
</UL>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">With the assistance of consultants Caledonia will be preparing the IFRS compliant financial statement template for January 1, 2010. This template will be used to produce the 1</FONT><SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">st </FONT></SUP><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">quarter 2011 interim financial statement in terms of the conversion to IFRS.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As Zimbabwe has emerged from a hyperinflationary environment into a US dollarized economy in 2009, a revaluation exercise has taken place on property, plant, and equipment (&#147;PP&amp;E&#148;) for the 2009 IFRS compliant annual financial statements in Zimbabwe. The residual values and useful remaining lives have also been reviewed. The outcome of this exercise will be evidenced in Caledonia&#146;s financial statements on transition to IFRS in 2011. Initial indications are that PP&amp;E net book value would be approximately &#36;15 million higher and the resulting amortization expense is expected to be approximately &#36;1.9 million higher on an annual basis (unaudited).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">It is also anticipated that the decommissioning liabilities under IFRS could be approximately &#36;350,000 higher (unaudited).</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17</FONT></B><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">. </FONT><B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">FINANCIAL RISK EXPOSURE AND RISK MANAGEMENT</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on preservation of capital, and protecting current and future Corporation assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Board of Directors has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy. The Corporation&#146;s Audit Committee oversees management&#146;s compliance with the Corporation&#146;s financial risk management policy.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The fair value of the Corporation&#146;s financial instruments approximates their carrying value unless otherwise noted. The types of risk exposure and the way in which such exposures are managed are as follows:</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(a) Currency Risk</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As the Corporation operates in an international environment, some of the Corporation&#146;s financial instruments and transactions are denominated in currencies other than the Canadian Dollar, mainly the South African Rand and the US&#36;. The results of the Corporation&#146;s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Corporation are reported in Canadian dollars in the Corporation&#146;s consolidated financial statements.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The fluctuation of the Canadian dollar in relation to other currencies will consequently have an impact upon the profitability of the Corporation and may also affect the value of the Corporation&#146;s assets and the amount of shareholders&#146; equity.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As noted below, the Corporation has certain financial assets and liabilities denominated in foreign currencies. The Corporation does not use any derivative instruments to reduce its foreign currency risks.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">24</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Below is a summary of the cash or cash equivalents denominated in a currency other than the Canadian dollar that would be affected by changes in exchange rates relative to the Canadian dollar. The values are the Canadian dollar equivalent of the respective asset or liability that is denominated in a currency other than the Canadian dollar.</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=31%></TD>
     <TD width=22%></TD>
     <TD width=16%></TD>
     <TD width=16%></TD>
     <TD width=13%></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;" style="TEXT-INDENT:13.000000px">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">C&#36;&#145;000s</FONT></B></TD>
	<TD align=right nowrap colspan=2 style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=right nowrap colspan=2 style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2009</FONT></B></TD>
</TR>
<TR>
	<TD colspan=5>
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">US Dollars</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">SA Rand</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">US Dollars</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">SA Rand</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Cash</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,054</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">13</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,230</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">40</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Bank overdraft</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">747</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">-</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">588</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Accounts Receivable</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,705</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">578</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2,122</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">233</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Accounts payable</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,637</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">902</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1,658</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">689</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The table below illustrates by how much a 5% change in the rate of exchange between the Canadian dollar and the currencies above will affect net income.</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0>
<TR>
     <TD width=30%></TD>
     <TD width=22%></TD>
     <TD width=15%></TD>
     <TD width=17%></TD>
     <TD width=14%></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;" style="TEXT-INDENT:13.000000px">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">C&#36;&#145;000s</FONT></B></TD>
	<TD align=right nowrap colspan=2 style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=right nowrap colspan=2 style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2009</FONT></B></TD>
</TR>
<TR>
	<TD colspan=5>
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
&nbsp;</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">US Dollars</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">SA Rand</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">US Dollars</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">SA Rand</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Cash</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">53</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">59</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Bank overdraft</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">37</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">-</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">29</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">-</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Accounts receivable</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">85</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">29</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">106</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">11</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Accounts payable</FONT></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">82</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">45</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">83</FONT></B></TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">33</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(b) Interest Rate Risk</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Unless otherwise noted, it is the opinion of management that the Corporation is not exposed to significant interest rate risk as it is debt free apart from short term borrowings utilized in Zimbabwe. The Corporation&#146;s cash and cash equivalents include highly liquid investments that earn interest at market rates. The Corporation manages its interest rate risk by endeavouring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. The Corporation&#146;s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Cash held in foreign banks is subject to the interest rates ruling in those particular countries and this can have an effect on the results of the Corporation due to higher interest rates being paid in African countries compared to Canada. Cash held in interest bearing accounts amounted to &#36;1,145,000 (&#36;1,624,000- 2009) and short term borrowings in Zimbabwe were &#36;747,000 (&#36;588,000 &#150; 2009). At December 31, 2010, with all other variables unchanged, a 1% change in interest rates would result in an increase of interest expense of &#36;8,000 (&#36;6,000 expense &#150; 2009).</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The interest payable on the RBZ Bonds is subject to the same recovery risk as the principle amount. All accrued interest has been written off as at December 31, 2010 as payment in the near term is considered unlikely.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">25</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Fluctuations in market interest rates have not had a significant impact on the Corporation&#146;s results of operations.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(c) Concentration of Credit Risk</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Credit risk is the risk of a financial loss to the Corporation if a gold sales customer fails to meet its contractual obligation. Credit risk arises principally from the Corporation&#146;s RBZ Bonds. The amount owing by the RBZ is no longer increasing as gold is no longer being sold to the RBZ. As the remaining value of the Bonds has been written off in 2010 credit exposure to RBZ is eliminated.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Current gold sales are made to Rand Refineries in South Africa and the payment terms stipulated in the service delivery contract have been adhered to in all instances.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Company&#146;s cash is invested in interest bearing accounts at a major South African bank. Because of these circumstances, the Company does not believe it has a material exposure to credit risk.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(d) Liquidity Risk</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation manages its liquidity by ensuring that there is always sufficient capital to meet its estimated cash requirements, after taking into account cash flows from operations and the Corporation&#146;s holdings of cash and cash equivalents. The Corporation believes that these sources will be sufficient to cover the anticipated cash requirements. Senior management is also actively involved in the review and approval of planned expenditures by regularly monitoring cash flows from operations and anticipated investing and financing activities.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Since the inception of dollarization in Zimbabwe certain insurance cover at Blanket has been reinstated. The Zimbabwean operations are now covered for Public Liability risk, assets all risk and Comprehensive cover on all motor vehicles.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">(e) Commodity Price Risk</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The value of the Corporation&#146;s mineral resource properties is related to the price of gold, platinum and cobalt, and the outlook for these minerals. In addition, adverse changes in the price of certain key or high cost operating consumables can significantly impair the Corporation&#146;s cash flows.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Gold prices historically have fluctuated widely and are affected by numerous factors outside of the Corporation's control, including, but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand because of speculative hedging activities, and macro-economic variables, and certain other factors related specifically to gold. Recent &#36;US gold price movements have been ascending but the effect of devaluation of the US&#36; against the Canadian &#36; and the South African Rand has mitigated against the higher US&#36; gold price.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Caledonia has not hedged any of its past or future gold sales.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">26</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">18. ENVIRONMENTAL RISK</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Matters that have been considered are discussed below:</FONT></P>
<UL>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Environmental risks</FONT></LI>
</UL>

<UL>
 <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The area of focus is the tailings dams at Blanket Mine. In recognition of their importance</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Blanket employs the services of a recognized expert , Fraser Alexander (Pvt) Ltd to manage</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">the maintenance of the dams. There are no pending litigation matters and Blanket complies</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">with all regulatory requirements</FONT><LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Trends and uncertainties</FONT><BR>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">There are no known trends or uncertainties relating to environmental issues that could impact</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">the financial results of the Company</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Environmental liabilities</FONT><BR>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Company complies with current regulatory requirements in the countries it has properties</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">or operations. Future changes to regulations may lead to the Company incurring additional</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">costs to ensure compliance.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Financial and operational effects of environmental protection requirements</FONT><BR>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The costs of employing the services of experts to manage the tailings dams at Blanket is</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">known to be greater that what the inhouse costs would be. Despite this the Company will</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">continue to employ experts to ensure compliance with regulatory issues. The cost of</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">environmental compliance are included under operation costs.</FONT></LI>
<LI>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Asset Retirement Obligations</FONT><BR>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Asset retirement obligations (AROs) result from the acquisition, development, construction</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and ordinary operation of mining property, plant and equipment, and from environmental</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">regulations set by regulatory authorities. AROs include costs related to tailings dams, return</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">water ponds and closure (i.e. ongoing monitoring of ground water quality; tailings dam</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">integrity; closing of shafts, adits and tunnels, recontouring, revegetation), and removal and/or</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">demolition of mine and processing equipment (i.e. crushers, conveyors, mills, flotation and</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">CIL tanks etc.), buildings and related infrastructure.</FONT><BR>
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The corporation estimates the fair value of AROs to range between &#36; 2 million and C&#36; 2.3</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">million. As at December 31, 2010 the corporation recognized a liability of &#36;1.7 million for</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">AROs. The fair value of AROs are estimated using a present value technique and is based on</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">existing laws, contracts or other policies and current technology conditions. The estimate or</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">assumptions required to calculate the fair value of AROs include, among other items,</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">abandonment and reclamation amounts, inflation rates, credit-adjusted risk free rates and</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">timing of retirement of assets. The following significant assumptions were made for the</FONT> <FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">purpose of estimating AROs for Blanket:</FONT></LI>
</UL>
<DIV align="left">
<TABLE border=0 cellspacing=0 height="94" width="415">
<TR>
     <TD width=207 height="20"></TD>
     <TD width=94 height="20"></TD>
     <TD width=102 height="20"></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" height="16" width="209">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Assumption</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="96">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="104">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2009</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" height="16" width="209">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Undiscounted abandonment costs (C&#36;)</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="96">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,781</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="104">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,781</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" height="16" width="209">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Credit adjusted risk free rate</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="96">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1.75 &#150; 2.28</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="104">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1.75 &#150; 2.28</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" height="16" width="209">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Average years to rehabilitation</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="96">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">13</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" height="16" width="104">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">15</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">AROs are considered critical accounting estimates for the corporation. There are significant uncertainties related to AROs and the impact on the financial statements could be material. The eventual timing of and costs for these AROs could differ from current estimates. The main factors that can cause expected cash flows to change are:</FONT></P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">changes to laws and legislation</FONT>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">construction of new facilities</FONT>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">3</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">change in the reserve estimate and the resulting amendment to the life of mine, and</FONT>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">4</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">changes in technology.</FONT>	</TD>
</TR>
</TABLE>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Any future changes to the estimated or actual costs for reclamation and mine closure and for removal and/or demolition of mine and processing equipment, buildings and other
infrastructure, could have a material and adverse effect on the company&#146;s future operating results.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">27</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The corporation has reserved only a portion of the cash and assets required for the purposes of settling AROs. As a result, at the time of closure and rehabilitation of the mine sites, the company will have a significant cash outlay that may affect its ability to satisfy its contractual obligations. The costs associated with the AROs may be significant and the corporation may not have sufficient or available resources to fund the costs but anticipates that it could sell assets to offset the rehabilitation costs. Currently the company has partially secured its obligations under its AROs for properties in South Africa via bank guarantees amounting to approximately &#36;200,000. Legislation in Zimbabwe does not currently require collateral coverage for the future rehabilitation liability.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The following is a brea</FONT><U><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">kdown of the potential ARO by category</FONT></U><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">:</FONT></P>
<DIV align="left">
<TABLE border=0 cellspacing=0 width="317">
<TR>
     <TD width=193></TD>
     <TD width=57></TD>
     <TD width=55></TD></TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="195">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Category</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="59">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2011</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="57">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2010</FONT></B></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="195">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Open Mines</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="59">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1,781</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">1 781</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="195">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Closed Mines</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="59">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">600</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">600</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="195">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Development Projects</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="59">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Nil</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="57">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Nil</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap style="border-bottom: 1px solid #000000" width="195">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Total AROs</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="59">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">2,381</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="57">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2,381</FONT></B></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P align="left">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The above liability of &#36;600,000 does not take into account the value of assets at the mine which could be sold to offset the liability.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">19</FONT></B><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">. </FONT><B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">CAPITAL MANAGEMENT</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation&#146;s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue its mining operations and exploration potential of its mineral properties.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation&#146;s capital includes short-term debt, long-term debt and equity, comprising issued common shares, contributed surplus, accumulated deficit and accumulated other comprehensive income.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation&#146;s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to maintain its ongoing operations, to provide returns for shareholders, accommodate any asset retirement obligation and to pursue growth opportunities.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">In order to maximize ongoing exploration efforts, the Corporation does not pay dividends.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">20. SECURITIES OUTSTANDING</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As at March 31, 2011 the following securities were outstanding:</FONT></P>
<TABLE border=0 cellspacing=0>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(1)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">500,169,280 common shares issued;</FONT>	</TD>
</TR>
<TR>
	<TD nowrap valign=top width="2%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(2)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width="98%">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Options and warrants as follows:</FONT>	</TD>
</TR>
</TABLE>
<DIV align="left">
<TABLE border=0 cellspacing=0 width="611">
<TR>
     <TD width=76></TD>
     <TD width=206></TD>
     <TD width=116></TD>
     <TD width=197></TD></TR>
<TR valign="bottom">
	<TD align=center nowrap style="border-bottom: 1px solid #000000" width="78">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Number</FONT></B></TD>
	<TD align=center nowrap style="border-bottom: 1px solid #000000" width="208">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Description</FONT></B></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="118">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Exercise Price</FONT></B></TD>
	<TD align=center nowrap style="border-bottom: 1px solid #000000" width="199">
<p align="right">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Expiry Date</FONT></B></p>
    </TD>
</TR>
<TR>
	<TD colspan=4 width="538">
&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=center nowrap style="border-bottom: 1px solid #000000" width="78">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">26,080,000</FONT></TD>
	<TD align=center nowrap style="border-bottom: 1px solid #000000" width="208">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Common share purchase options</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="118">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Average &#36;0.07</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="199">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Various until May 11, 2016</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=center nowrap style="border-bottom: 1px solid #000000" width="78">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">16,460,000</FONT></TD>
	<TD align=center nowrap style="border-bottom: 1px solid #000000" width="208">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Common share purchase options</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="118">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">&#36;0.13</FONT></TD>
	<TD align=right nowrap style="border-bottom: 1px solid #000000" width="199">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">January 31, 2016</FONT></TD>
</TR>
</TABLE>
</DIV>
<P style="MARGIN:0px">&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">28</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As Caledonia&#146;s Option Plan allows the granting of options on a number of shares equal to 10% of the issued shares, Caledonia could grant options on a further 17,436,928 shares.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">In January 2011, the Board granted 16,460,000 share options as an incentive to directors, officers and employees of the Company at an exercise price of &#36;0.13 per Caledonia common share expiring on January 31, 2016.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21. CONTROLS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Corporation's President and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. Management of the Corporation, with the participation of the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the Corporation's disclosure controls and procedures as at December 31, 2010 as required by Canadian securities laws pursuant to the certification requirements of Multilateral Instrument 52-109.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation's internal controls over financial reporting (&#147;ICFR&#148;) are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable Canadian GAAP.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Because of its inherent limitations, the Corporation's ICFR may not prevent or detect any or all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation has engaged independent consultants to carry out an assessment of the effectiveness of its internal controls over financial reporting using an internationally acceptable framework. Prior to this engagement, management concluded that the following disclosable material weaknesses existed and still exist as at December 31, 2010.</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Segregation of duties</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Due to limited personnel resources at the Corporation&#146;s Africa office in Johannesburg, adequate segregation of duties within the accounting group was not achieved. This creates a risk that inaccurate entries could be made and not identified or corrected on a timely basis. The result is that the Corporation is highly reliant on the performance of mitigating procedures during its financial close processes in order to ensure the financial statements present fairly in all material respects. The Corporation continues to enhance and monitor this process to ensure that its financial accounting reporting system is able to prevent and detect potentially significant errors.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">As a consequence of the above, an additional accounting member of staff was recruited in November 2009 to the Corporation&#146;s Africa office in Johannesburg to improve the segregation of duties and lighten the work load of existing staff. Both disclosure control and procedure objectives have now been met.</FONT></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Management has concluded, and the Audit Committee has agreed that taking into account the present stage of the Corporation&#146;s development, the Corporation does not have sufficient size and scale to warrant the hiring of any more additional staff to correct further segregation of duties weakness at this time. There have been no changes in the Corporation&#146;s internal controls over financial reporting since the year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">29</FONT></P>

<HR noshade align="center" width="100%" size=2>



<!--$$/page=--><BR>

<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">The Corporation has a Disclosure Committee consisting of three Directors, and has disclosure controls and procedures which it follows in an attempt to ensure that it complies with all required disclosures on an adequate and timely basis. The Corporation&#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 all of the applicable rules, regulations and requirements. 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="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22. QUALIFIED PERSONS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Dr. Trevor Pearton, BSc Eng (Mining Geology), PhD (Geology) FGSSA, VP Exploration is the Corporation&#146;s qualified person as defined by NI 43-101. Dr. Pearton is responsible for the technical information provided on this MD&amp;A except where otherwise stated. He was assisted where appropriate by outside consultants and/or qualified persons for joint-ventured projects. Mr. David Grant, is the Independent Qualified Person for the NI 43-101 report on the D resource area of the Nama Property, prepared by Applied Geology and Mining (Proprietary)Limited whose Managing Director is Mr. Grant .</FONT></P>
<P style="text-align: left;">
<B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">23 BOARD POSITIONS</FONT></B></P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">On December 10, 2010 Mr. Rupert Pardoe resigned as Chairman and Director of Caledonia. Mr. Carl Jonsson assumed the position of Chairman on an interim basis at the request of the Board.</FONT></P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
&nbsp;</P>
<P style="text-align: left;">
<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">30</FONT></P>

<HR noshade align="center" width="100%" size=2>


</BODY>

</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>5
<FILENAME>newsrelease.htm
<DESCRIPTION>NEWS RELEASE DATED MARCH 31, 2011
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>MD Filed by Filing Services Canada Inc.&nbsp; (403) 717-3898</title>
<META NAME="author" CONTENT="Collins Stewart">
<META NAME="date" CONTENT="03/31/2011">
</HEAD>
<BODY style="margin-top:0;font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="margin:0px"><BR></P>
<P style="margin:0px" align="center"><img border="0" src="caledoniaheader.jpg" width="682" height="124"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=center><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:16.133px; font-family:Arial; font-size:12pt" align=center><B>Caledonia Mining 2010 Fourth Quarter and Annual Results</B></P>
<P style="margin:0px; padding-left:-24px; padding-right:16.133px; font-family:Arial; font-size:12pt" align=center><B>and Management Conference Call</B></P>
<P style="margin:0px" align=center><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify><B>Toronto, Ontario &#150; March 31, 2011: &nbsp;</B>Caledonia Mining Corporation (&#147;Caledonia&#148;) (TSX: CAL, NASDAQ-OTCBB: CALVF, AIM: CMCL) is pleased to announce its fourth quarter and full year 2010 operating and financial results. &nbsp;The financial results below are reported in thousands of Canadian dollars.</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:16.133px; font-family:Arial; font-size:11pt" align=justify><B>Financial Highlights </B></P>
<P style="margin:0px" align=justify><BR></P>
<TABLE style="margin-top:0px; font-size:10pt" cellpadding=0 cellspacing=0><TR height=0 style="font-size:0"><TD width=255.2 /><TD width=78.667 /><TD width=78.733 /><TD width=78.667 /><TD width=78.733 /></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-top:1px solid #000000; border-right:1px solid #000000" valign=top width=255.2><P style="margin:0px; font-family:Arial; font-size:11pt"><B>(C$ 000&#146;s)</B></P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right><B>Q4 2010</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right><B>Q4 2009</B></P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right><B>2010</B></P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right><B>2009</B></P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000" valign=top width=255.2><P style="margin:0px; font-family:Arial; font-size:11pt">Revenue from sales</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>7,426</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>4,263</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>22,401</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=78.733><P style="margin:0px; padding-right:2.267px; font-family:Arial; font-size:11pt" align=right>11,559</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000" valign=top width=255.2><P style="margin:0px; font-family:Arial; font-size:11pt">Zimbabwe Royalties</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(309)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(131)</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(825)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=78.733><P style="margin:0px; padding-right:2.267px; font-family:Arial; font-size:11pt" align=right>(240)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000" valign=top width=255.2><P style="margin:0px; font-family:Arial; font-size:11pt">Operating costs</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(3,621)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(2,589)</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(13,298)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.733><P style="margin:0px; padding-right:2.267px; font-family:Arial; font-size:11pt" align=right>(8,403)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000" valign=top width=255.2><P style="margin:0px; padding:0px; font-size:11pt">&nbsp;</P></TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>3,496</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>1,543</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>8,278</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" valign=top width=78.733><P style="margin:0px; padding-right:2.267px; font-family:Arial; font-size:11pt" align=right>2,916</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000" valign=top width=255.2><P style="margin:0px; font-family:Arial; font-size:11pt">Other costs and expenses</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(2,412)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(4,422)</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-right:1px solid #000000" width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(4,591)</P>
</TD><TD style="margin-top:0px; border-right:1px solid #000000" width=78.733><P style="margin:0px; padding-right:2.267px; font-family:Arial; font-size:11pt" align=right>(6,007)</P>
</TD></TR>
<TR><TD style="margin-top:0px; border-left:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=255.2><P style="margin:0px; font-family:Arial; font-size:11pt">Income/(loss) </P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>1,084</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.733><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>(2,880)</P>
</TD><TD style="margin-top:0px; background-color:#DDD9C3; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.667><P style="margin:0px; font-family:Arial; font-size:11pt" align=right>3,687</P>
</TD><TD style="margin-top:0px; border-top:1px solid #000000; border-right:1px solid #000000; border-bottom:1px solid #000000" valign=top width=78.733><P style="margin:0px; padding-right:2.267px; font-family:Arial; font-size:11pt" align=right>(3,091)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>For the year ended December 31, 2010 Caledonia recorded revenues of $22.4 million on the sale of 17,598 ounces of gold by the Blanket Gold Mine, a gross profit of $8.3 million and a net income after tax of $2.257 million. &nbsp;Net income was after the write downs of $0.6 million in respect of a portion of the mineral properties at Rooipoort and $1.0 million in respect of amounts owed to the Blanket Mine by the Reserve Bank of Zimbabwe. &nbsp;Cash and cash equivalents on hand at December 31, 2010 amounted to $1.1 million. &nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>Gold production from the Blanket Mine in Zimbabwe doubled during the year from approximately 3,100 ounces in the quarter ended March 31, 2010 to over 6,228 ounces in the quarter ended 31 December, 2010. &nbsp;The increase was primarily due to the completion of the No. 4 Shaft Expansion Project at the end of September 2010 and the subsequent ramp-up in production. The reduction in the incidence and duration of electricity supply disruptions during the fourth quarter, due to the signing of a new supply agreement between Blanket and the Zimbabwe Electricity Supply Authority (&#147;ZESA&#148;), also facilitated the increase in production. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>Stronger gold prices positively impacted revenues from sales. &nbsp;For the year ended December 31, 2010 Caledonia realized an average gold price of US$1,273 per ounce (2009: US$1,099 per ounce), and for the fourth quarter US$1,384 per ounce of gold (2009: US$1,161). &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>Cash costs per ounce of gold produced were US$751 for the year to December 31, 2010 (2009, US$744) and US$680 in the fourth quarter (2009, US$525). &nbsp;December saw a dramatic decrease in cash costs per ounce of gold produced to US$546 per ounce (2009: US$686), because fixed costs were spread over higher production. &nbsp;In 2010 operating costs were adversely affected by further increases in the cost of labour and electricity. &nbsp;&nbsp;Blanket&#146;s electricity charges increased as a result of the new supply agreement signed with ZESA. &nbsp;Offsetting the increased cost of electricity was a substantial reduction in disruptions to electricity supplies. &nbsp;Electricity from ZESA remains considerably cheaper than the cost of electricity generated by Blanket&#146;s diesel-powered standby generators. </P>
<P style="margin:0px" align=justify><BR><BR>
<BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt; page-break-before:always" align=justify>&nbsp; </P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt; page-break-before:always" align=justify>&nbsp; </P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt; page-break-before:always" align=justify>Blanket&#146;s main exploration efforts during 2010 were and continue to be focused on its properties in the Gwanda Greenstone Belt all of which are within economic trucking distance of the Blanket plant. &nbsp;Surface and underground development work on the GG and the Mascot Project Areas continued throughout 2010. &nbsp;Depending on the outcome of further underground exploration work which will be undertaken in 2011, the earliest that production could commence at GG would be in mid-2012. &nbsp;The Mascot Project Area comprises three existing shafts (Mascot, Penzance and Eagle Vulture) which extend down to depths of up to 450 meters and other infrastructure, much of which is in need of extensive rehabilitation. &nbsp;Depending on the rate and extent of rehabilitation and a favourable outcome of exploration work, the earliest that production could commence at the Mascot Project Area would be in early 2012. The Company will update shareholders on progress on GG and Mascot during the course of the year. </P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>The Government of Zimbabwe continues to pursue the legislated requirement for 51% of all businesses in Zimbabwe to be owned by indigenous Zimbabweans. &nbsp;Caledonia, as a member of the Chamber of Mines Zimbabwe (&#147;COMZ&#148;), continues to work closely with the COMZ regarding the on-going discussions with the Government regarding the level and terms of indigenization for the mining industry. &nbsp;Caledonia, as it has consistently stated over the past four years, supports the introduction of indigenization on a commercially acceptable basis and remains prepared to move forward with a transaction as soon as the detailed policy framework has been finalised. &nbsp;As has been reported, the Government of Zimbabwe gazetted on March 25, 2011 a statement of the minimum requirements for the implementation of the indigenization of mining companies not already controlled by indigenous Zimbabweans. &nbsp;The new gazetted regulations state that mining companies must submit an indigenization plan by Monday, May 9, 2011 and complete the divestiture of at least 51% of their issued shares to certain designated entities by September 25, 2011. Caledonia will continue to discuss with the Government of Zimbabwe the composition, terms and timescale of an acceptable indigenization process in compliance with the legal requirements.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-23.8px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>At the Nama Project in Zambia, the 2010 work program focused on metallurgical issues, the design considerations of specialized plant and equipment while the exploration program focused on completing and updating an evaluation of all the known cobalt/copper anomalies. &nbsp;Field work and desk studies in 2010 were also undertaken on the Ore Shale horizon which hosts the typical Copperbelt type mineralisation. &nbsp;The presence of Ore Shale is known from previous shallow drilling to extend into the Nama licenses for a distance of about four kilometres from its eastern boundary. &nbsp;The neighbouring Konkola and Konnoco Mines have both reportedly defined substantial copper resources on their properties. &nbsp;Exploration activities by Caledonia at Nama during 2010 resulted in the definition of two resource target areas (&#147;Konkola East&#148; and &#147;Kafwira&#148;) characterized as belonging to the Ore Shale-hosted copper-cobalt style of mineralization. &nbsp;These targets will be investigated further during the 2011 exploration field season, including a drilling program of diamond drill-holes to confirm the existence of Copperbelt stratigraphy within the two target areas. &nbsp;Drilling of the first of four holes at the Konkola East target area commenced in early March 2011 and the results of this program are expected to be received in mid-2011. &nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>Commenting on Caledonia&#146;s performance for 2010, Stefan Hayden, President and CEO, said &nbsp;&#147;The completion of the No. 4 Shaft Expansion Project dramatically improved the operating performance at Blanket due to increased production capability, particularly towards the end of the fourth quarter. &nbsp;As Blanket continues to operate at a sustainably higher level of production following the successful ramp-up in production, I expect this to give rise to a significant reduction in average costs per ounce. The cost per ounce achieved in December 2010 of US$546/oz is more representative of the future costs we expect to achieve at the higher production level. &nbsp;Additional underground work is in progress at Blanket, which will be completed early in the second quarter of 2011, and should enable us to hit our 40,000 ounce production target for the year ending December 2011, at a highly competitive operating cost. </P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>&nbsp;&nbsp;&nbsp;</P>
<P style="margin:0px" align=justify><BR>
<BR></P>
<HR style="margin-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
<p style="margin: 0px" align="justify">&nbsp;</p>
<p style="margin: 0px" align="justify">&nbsp;</p>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt; page-break-before:always" align=justify>&#147;I am hopeful that the Government of Zimbabwe will adopt a pragmatic and economically sustainable approach to the issue of indigenization which recognizes the very considerable investments of companies like Blanket in Zimbabwe&#146;s economy, infrastructure, and human capital, and which, in an amenable environment would facilitate additional investment to create new jobs and wealth for all Zimbabweans.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>&#147;I am also hopeful that the further exploration work at Nama will indicate the potential existence of a significant copper deposit.&#148;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>Caledonia management will host a conference call starting at 10.00 (EDT) on April 5, 2011. &nbsp;Please dial-in 10 minutes beforehand and quote the conference ID number: 571306#.</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>Canadian Toll-free Number*: + 1 866 561 8617</P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>USA Toll-free Number*:+ 1 866 928 6049</P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>UK Toll-free Number*:+44 (0)800 368 1950</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>International Access Number: +44 (0)20 3140 0668</P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>Canadian Toll Number: +1&nbsp;416&nbsp;915 9520</P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>USA Toll Number: +1&nbsp;631&nbsp;510 7490</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>*If you are calling from a mobile phone your provider may charge you when connected to the toll-free numbers.</P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify>&nbsp;</P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; font-family:Arial; font-size:11pt" align=justify><B>For more information, please visit </B><FONT style="color:#0000FF"><B><U>www.caledoniamining.com</U></B></FONT><FONT style="font-family:Times New Roman; font-size:12pt"></FONT><B> or contact:</B></P>
<P style="margin:0px" align=justify>&nbsp;</P>
<p style="margin:0px; padding-left:-24px; padding-right:16.133px; font-family:Arial; font-size:11pt" align="justify">&nbsp;</p>
<p style="margin:0px" align="justify"><b><font size="3">Mark Learmonth&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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;&nbsp;&nbsp;&nbsp;
Martin Eales</font></b></p>
<p style="margin:0px" align="justify"><font size="3">Caledonia Mining&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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;&nbsp;&nbsp;&nbsp;&nbsp;
RBC Capital Markets&nbsp;&nbsp;&nbsp;<br>
Tel: +27 11 447 2499&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tel:
+44 7932 740 452&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tel: +44 20 7029 7881</font></p>
<P style="margin:0px" align=justify><BR></P>
<P style="margin:0px; padding-left:-24px; padding-right:6.067px; 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:Times New Roman; font-size:12pt"></FONT></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-bottom:9.6px; padding-top:9.6px" noshade size=1.333>
</BODY>
<!-- EDGAR Validation Code: FC53AA0B -->
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>6
<FILENAME>caledoniaheader.jpg
<TEXT>
begin 644 caledoniaheader.jpg
M_]C_X``02D9)1@`!`0```0`!``#_VP!#`!`+#`X,"A`.#0X2$1`3&"@:&!86
M&#$C)1TH.C,]/#DS.#=`2%Q.0$1713<X4&U15U]B9VAG/DUQ>7!D>%QE9V/_
MVP!#`1$2$A@5&"\:&B]C0CA"8V-C8V-C8V-C8V-C8V-C8V-C8V-C8V-C8V-C
M8V-C8V-C8V-C8V-C8V-C8V-C8V-C8V/_P``1"`!\`JH#`2(``A$!`Q$!_\0`
M'P```04!`0$!`0$```````````$"`P0%!@<("0H+_\0`M1```@$#`P($`P4%
M!`0```%]`0(#``01!1(A,4$&$U%A!R)Q%#*!D:$((T*QP152T?`D,V)R@@D*
M%A<8&1HE)B<H*2HT-38W.#DZ0T1%1D=(24I35%565UA96F-D969G:&EJ<W1U
M=G=X>7J#A(6&AXB)BI*3E)66EYB9FJ*CI*6FIZBIJK*SM+6VM[BYNL+#Q,7&
MQ\C)RM+3U-76U]C9VN'BX^3EYN?HZ>KQ\O/T]?;W^/GZ_\0`'P$``P$!`0$!
M`0$!`0````````$"`P0%!@<("0H+_\0`M1$``@$"!`0#!`<%!`0``0)W``$"
M`Q$$!2$Q!A)!40=A<1,B,H$(%$*1H;'!"2,S4O`58G+1"A8D-.$E\1<8&1HF
M)R@I*C4V-S@Y.D-$149'2$E*4U155E=865IC9&5F9VAI:G-T=79W>'EZ@H.$
MA8:'B(F*DI.4E9:7F)F:HJ.DI::GJ*FJLK.TM;:WN+FZPL/$Q<;'R,G*TM/4
MU=;7V-G:XN/DY>;GZ.GJ\O/T]?;W^/GZ_]H`#`,!``(1`Q$`/P#8UGQA_96J
M367V'S?*V_/YVW.5!Z;3ZU1_X6!_U#/_`"8_^QK%\9?\C/>?\`_]`6L2NN-*
M+BG8YI5))L[7_A8'_4,_\F/_`+&C_A8'_4,_\F/_`+&N*HJO90[$^TEW.U_X
M6!_U#/\`R8_^QH_X6!_U#/\`R8_^QKBJ*/90[![27<[7_A8'_4,_\F/_`+&C
M_A8'_4,_\F/_`+&N*HH]E#L'M)=SM?\`A8'_`%#/_)C_`.QH_P"%@?\`4,_\
MF/\`[&N*HH]E#L'M)=SM?^%@?]0S_P`F/_L:/^%@?]0S_P`F/_L:XJBCV4.P
M>TEW.U_X6!_U#/\`R8_^QH_X6!_U#/\`R8_^QKBJ*/90[![27<[7_A8'_4,_
M\F/_`+&C_A8'_4,_\F/_`+&N*HH]E#L'M)=SM?\`A8'_`%#/_)C_`.QH_P"%
M@?\`4,_\F/\`[&N*HH]E#L'M)=SM?^%@?]0S_P`F/_L:/^%@?]0S_P`F/_L:
MXJBCV4.P>TEW.U_X6!_U#/\`R8_^QH_X6!_U#/\`R8_^QKBJ*/90[![27<[7
M_A8'_4,_\F/_`+&C_A8'_4,_\F/_`+&N*HH]E#L'M)=SM?\`A8'_`%#/_)C_
M`.QH_P"%@?\`4,_\F/\`[&N*HH]E#L'M)=SM?^%@?]0S_P`F/_L:/^%@?]0S
M_P`F/_L:XJBCV4.P>TEW.U_X6!_U#/\`R8_^QH_X6!_U#/\`R8_^QKBJ*/90
M[![27<[7_A8'_4,_\F/_`+&C_A8'_4,_\F/_`+&N*HH]E#L'M)=SM?\`A8'_
M`%#/_)C_`.QH_P"%@?\`4,_\F/\`[&N*HH]E#L'M)=SM?^%@?]0S_P`F/_L:
M/^%@?]0S_P`F/_L:XJBCV4.P>TEW.U_X6!_U#/\`R8_^QH_X6!_U#/\`R8_^
MQKBJ*/90[![27<[7_A8'_4,_\F/_`+&C_A8'_4,_\F/_`+&N*HH]E#L'M)=S
MM?\`A8'_`%#/_)C_`.QH_P"%@?\`4,_\F/\`[&N*HH]E#L'M)=SM?^%@?]0S
M_P`F/_L:/^%@?]0S_P`F/_L:XJBCV4.P>TEW.U_X6!_U#/\`R8_^QH_X6!_U
M#/\`R8_^QKBJ*/90[![27<[7_A8'_4,_\F/_`+&C_A8'_4,_\F/_`+&N*HH]
ME#L'M)=SM?\`A8'_`%#/_)C_`.QH_P"%@?\`4,_\F/\`[&N*HH]E#L'M)=SM
M?^%@?]0S_P`F/_L:/^%@?]0S_P`F/_L:XJBCV4.P>TEW.U_X6!_U#/\`R8_^
MQH_X6!_U#/\`R8_^QKBJ*/90[![27<[7_A8'_4,_\F/_`+&C_A8'_4,_\F/_
M`+&N*HH]E#L'M)=SM?\`A8'_`%#/_)C_`.QH_P"%@?\`4,_\F/\`[&N*HH]E
M#L'M)=SM?^%@?]0S_P`F/_L:/^%@?]0S_P`F/_L:XJBCV4.P>TEW.U_X6!_U
M#/\`R8_^QH_X6!_U#/\`R8_^QKBJ*/90[![27<[7_A8'_4,_\F/_`+&C_A8'
M_4,_\F/_`+&N*HH]E#L'M)=SM?\`A8'_`%#/_)C_`.QH_P"%@?\`4,_\F/\`
M[&N*HH]E#L'M)=SM?^%@?]0S_P`F/_L:/^%@?]0S_P`F/_L:XJBCV4.P>TEW
M.U_X6!_U#/\`R8_^QH_X6!_U#/\`R8_^QKBJ*/90[![27<[7_A8'_4,_\F/_
M`+&C_A8'_4,_\F/_`+&N*HH]E#L'M)=SM?\`A8'_`%#/_)C_`.QH_P"%@?\`
M4,_\F/\`[&N*HH]E#L'M)=SM?^%@?]0S_P`F/_L:/^%@?]0S_P`F/_L:XJBC
MV4.P>TEW.U_X6!_U#/\`R8_^QH_X6!_U#/\`R8_^QKBJ*/90[![27<[7_A8'
M_4,_\F/_`+&C_A8'_4,_\F/_`+&N*HH]E#L'M)=SM?\`A8'_`%#/_)C_`.QH
M_P"%@?\`4,_\F/\`[&N*HH]E#L'M)=SM?^%@?]0S_P`F/_L:/^%@?]0S_P`F
M/_L:XJBCV4.P>TEW.\LO''VN^M[;^SMGG2+'N\_.,G&<;:Z^O(=$_P"0YI__
M`%\Q_P#H0KUZL*L5%JQM3DY+4\O\9?\`(SWG_`/_`$!:Q*V_&7_(SWG_``#_
M`-`6L2NF'PHPE\3"BBBJ)"BBB@`HJS:V,MRZA58[NBJ,LWT%=9IW@N4E7N62
M`=2H^9^OY#]:B4U'<I1;V.*`+'`!)]J5E9?O*1]17I@\/:-:1YN22,_>FEV_
MRQ1%I'AZ=MD/DR,>R7!)_P#0JCVR+]DSS*BO0KWP9;RI_HTS!L'B4`@_B.1^
MM<IJN@76G28D3`/1ARK?0_T-7&I&6Q,H-;F11000<'@T59`4444`%%%%`!11
M10`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%
M`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`
M%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`%W1/^0Y
MI_\`U\Q_^A"O7J\AT3_D.:?_`-?,?_H0KUZN:ONCHH[,\O\`&7_(SWG_``#_
M`-`6L2MOQE_R,]Y_P#_T!:Q*WA\*,9?$PHHHJB0-7M-T^2[GC54+.Y^1?7W/
MM52WC\V8*1\O4UZ%X=M(]+TN74[K"ETR/4)V`]S_`(5G.5D:1C=EB"RL/#EE
M]JF'F3``%N"Q/3"_K6#?>);^[!2-A;QD](^&QVR?\,5IV>G2>()7U#4"4@8%
M88D/('3.?;]3[=:7_"*W/]H"`S1B(@L).Y`_V>N>1[<]:RCRW][<M\UO=V,$
MDL2S$DGDD]Z2NS^P:#I`47;(\HZ^82Y/_`1V_"CS_#-V1#MMUSW\LQ?^/8'\
MZKVG9$^S\SFK'5[ZP9?(G;8./+<Y7'T[?A6\/$UG=Z9-'?V^9-N/*'(D^A[<
M_EVS4&I^%6A7S+*7>"0/+D(!Y..#T[U;3PG`--9"VZ\89$F3M!],>G^-3)TW
MJ4E-:'$W$`E!8??_`)UGG@X-;#*R,R.I5E."",$&J-['AA(,8/!^M="9B5:*
M**8@HHHH`***?!$]Q/'#$NZ21@BC.,DG`H`917<2:?I/A73HY;^W2^O)<@*P
M!&<9X!Z`<<XSS[XIK7>@ZSH=S+);6=E=*KA%+*K[@/E((P2.:S]IU2T-.3NS
MB:*M6.G7FHR&.SMWF8==HX'U/0=.]2:AH^H:8JM>6S1JQP&R&&?3(XJ[J]B+
M/<HT5V'@VQL_[*O]0OH(9HD.,21ARH5<DC/KD?E7+6]M<7USY5M"TLK'[J+_
M`(=!^E)23;78;C9)D%%7M0T;4-,1'O+9HD<X#9##/ID$U!965S?W`@M(6ED(
MSA>P]2>PIW5KBL]B"BNS\)>'GBO[O^U;,9C155)4#*=W.0>0<8[>IKEKM5NM
M4G%E$6229C$D:?PY.``/;M24TVTAN+2N5:*U+GPYJUK;F>:R=8U&20RM@>I`
M.15"UMIKRX6"VC,DK9VJ.IP,T[IBLR*BM:/PQK,C.%L'^4X.YE7\LGG\*HVM
MJ\NH1VKQ2EC($9%'S]>1@]^O6CF0697HKH?%[VWVBVB@TS[`RH68&-$+@G`^
M[GT-58?#&LS1"1;!PI[.RJ?R)!I*2M=Z#<7>R,BBG.C1NR2*4=3AE88(/H16
MYX,L8K[7`)T22.*)I"CJ&#=%P0?][/X4Y2LKB2N[&#17?>,]*M(M$\ZTM((6
MCE4LT<84D'(QD>Y%.\)^'[:+3%N+ZWAFENL,BRHK;5QQC.>2.?R]*S]JN7F+
M]F[V//Z*Z77X;<^,(;6WL%$<9C5XH5`\P?>/`QS@X_"D\5"&>^L[2STHV<Q!
M^4QHAD+$`?=/L?SJE.]B7&USFZ*U5\-ZP\_DBQDW[=W)`&/KG%4+JUFL[AX+
MF-HY4.&5O\]/>J4D]F*S1#175:YY-IX=M[9M(^SW3!$:=XD!)`^8@@DY)'ZU
MCQZ!JLL44D=E*R38V,,$$'D'V'N>*2FFKL;C8S:*MZAI=[ICHE[`8BXRN2"#
M^(XIVGZ1?ZF&-E;/*J\%L@+GTR>,\]*?,K7%9[%*BK\NC:C#;/<RVK)#&2&=
MB``0<>OKQ5"FFGL)IH****`"BBB@`HHHH`****`"M#3]):]MWG-S!;QJXC!E
M)&6/0<`X'N:SZT])U6/3E8/;-(VX,'CF,;?0D=5]J4KVT&K7U*CV5RF287("
ME]P&1M!P3GTSQFK4^AWT4(E$+NAD$:X0Y8XSTQGVJS+KZ2V<D1L465XGA#I(
M0JJS[\!<=C[U,OB@K,)?L8+"?S5S+P`4"$=/0=>V:F\NQ5H]S%:RN4NQ:R0O
M'.2`$<;3S]:O+H4O]I264EU;1N@3YF8X8N!@#`R>M5]6U#^T;I91%Y2(@C5-
MV<`>^!Z^E7(M;@749KR6R9W>-(TVS;3'A0I(.T\G'X9IOFL)<I'/H%U!:&9I
M(6<8W0JQW`%BH/3&"1Z]Q574-.FT^:.&4JSR1AP$.[&>V>_3M5NZUI9M.:U2
MT$;LBQ&3S"?W:MN48QUZ<^U5;J_::2TDC7RWMHDC4YSDKWH7-U!\O09%87,E
M]'9^4R3R,%"."I&?7-7(M%66^^R#4;7<P!1@6(;/;@<8]Z8=9O)]9BU*3;+<
M1L"%"X!`[8%3W>OFXNGG^SD-]F:W0M+N9<DY8MCG@D?C2?,"Y2E;Z>UU-<Q6
M\J2/"K,H7/[T#KM_#G%/FT>[2ZEMX8VN7A4&7R5+!#Z'W%0Z==_8=0@N@F_R
M7#;<XSCMFKVFZS]E#H]LTVZ83IME*$./7'4>U-\RV!6ZE'[!>?9OM/V6;R,9
M\S8=N,XZ_6GG2M0#HALK@-(<(#&<L<9_E5[_`(2*0KAH>?(:(X?C)DW[L8_#
M'ZUJWWB*Q@=7LO\`21+)(\J-N&`Z@'EAP<CH,BDY2[#M'N<W:Z=<7.HK8E?)
MF)((ERNW`R<_@*LG0KEVD^RR174<<1E+Q$\#.,8(R#[4V74_.U?^T'M5>,8'
ME%CC`&!\P[^]6G\0([L/L;&-K=H#NG+.<D')?'.,<#TH;ET!<I0_LC4MVT6-
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MLY4L8^`<@=.N11>78=HF"05)!!!'!!I*FO+E[R[FN9``\KER%Z`DYJ&K(+NB
M?\AS3_\`KYC_`/0A7KU>0Z)_R'-/_P"OF/\`]"%>O5S5]T=%'9GE_C+_`)&>
M\_X!_P"@+6)6WXR_Y&>\_P"`?^@+6)6\/A1C+XF%(:6D-4R4:.BVWVFY2/.#
M+(L><9QD_P#UZ[OQ0S?9K33;<!/M,@4>@`Q@?F1T]*Y3P:%.K6P?&-[=?7:<
M?K77:VH;6]'#_=\QB/K\O_UJYI/WD;Q7NLDUB9[.UM+&P.R:5UCB/)VA<<_3
MIGV)JX7$S"VN2([@?,C(<9Z_,N>?J.>N.1UH7SL?%>FH?N"-R/J0V?Y"L?Q>
M[1ZS"\;%76%2&!Y!W-4*-[(MNUV9VK:7=:?<MY^Z178E9L$A_J?6J**SNJ(I
M9F.``,DFNRTS5K?7+5["\7;,R8.2/GXY(]#GG%)!I]GX;@EO9Y!--R(R1M_X
M"!SR?7T_&M%4:T:U,^1/5;$EI%_8>E";4[@R-'_JTSD(2,!5]3C\N>V<Y^CZ
M_<7&M[;EP(9_D5.@0_P_X?C[5AZC?S:C=-/,>O"J#PH]!1I7_(6L_P#KNG_H
M0I^ST;>XN?56-#Q9:BWU<R(,+,@?@8&>A_EG\:P;@!H'!],UUOC?K9?\#_\`
M9:Y5@""#TJJ;O%$S^)F31116I`4444`%:_A2%)_$EDD@R`Q<#/=5+#]0*R*F
MM+F2SNXKF+&^)PZYZ$@]_:E)730T[.YT7C^1VUJ%#NV+`"H)XY8Y(_3\JQGT
M;4(]-&H/;E;4@'>S`<$X!QG/.1VKH9/&\,_EF?1HY6C.Y2TH.T^HRO%8VO\`
MB"XUMU#+Y-NG*Q`YY]2>YK.'.DE8N7*[NYTNA13:/H&^_N+>RMILMD*QE)8<
M'.<`X`P`#TZ=:L^+)HX/"(C+ROYOEQHTH^8X(;+9P<X4_C6.?&PDMHDN=+CG
MEC`(=W&-X'WL;>/PK/\`$/B5]<AAB%OY"1L6(\S=N/0=ATY_.LU"3E=HMRBH
MV1T$8_LOX>,2J;YHCG!Z^8<`_4*1^56O#UG#I?AE9Y)H[:2=/,>X./EW?=Z^
MF1QTSFN6USQ(NK:=#9)9"V2)PPQ)NX`(`Q@>M3Z?XM-OI26%[81WL:?*-[X!
M4<@$$'./\*;A)Q^8*<;G2ZS)#%X3N!<W#78>/"2E<;R3\AXXXX/X54MD'A_P
M2;RU"_:98DD:0CG+$8Z^@;Z<>YKFO$'B*;6Q%'Y(@@C.0@;=D^I/'\NYJY8^
M+_)TN.QO-/CO$0!1O<`%1T!&TYQ_04>SDHASJYT>B:G>MX7FU*_82NH=XS@+
MN4#@''N"*S_"%G%I^A7&LR('E*.RX/1%SQ[$D']*S-6\7?VEI,EB;$1;PHWK
M+D#!!Z8]O6JVA>)9-(MI+62W6YMW)(1FQ@GKV/'M1R2L]`YU='3>#-3U#4TO
M)+Z4R(I41ML"C/.1P![5E>!+9)=9O+J)<0Q)M0-]X;CQ^@-5;[Q=)+8&ST^R
MBL8F!5MASP?3``'?\^U0^'_$@T2TEA6R$KR/N\SS-O;`&,?7\Z?)*SLMQ<RN
MKO8Z;P]J]YJVN7[&56L(<B-0H'4_*?7H#W[UB^'U%YXZGN(64QI)-+G^\IRH
MQ_WT*I^'O$::';RQBQ$SRMDOYFW@#@8P??\`.HO#NNKH<D[FT%P\H`!W[2H&
M<CH>O'Y4<C5[(.=:7-+5(KC6O&KQ6ODR_9L8\T?(`N"0V.OS$C\:ZFVN(KC5
MA%_:9DN;=&\R"%=L1YP<]>02/XN,?6N"TG7I=.U>;4&B69I]WF+G;G)SP>W(
MK8C\;10RO)#H\49D.9"L@!<^I.WGO^=*<)/1(<9QW9C>*9TN/$=ZZ9P'"<^J
M@*?U%;_P^MU2*]OI`H48C5R>@'+?A]W\JXV:5YYI)I#N>1BS'U)Y-;5CXC6R
MT"73([(%I5</-YG4MQG&/3`Z]JTE%\G*B(R7-=G4Z?!+KO@Z&.>4EYWS(_0X
M$N3CCK@'%7;34&OO$-S#`P^S6<6Q_P#:E8_R`4CZYKDM*\7MI>D1V4=D'>,-
MMD:3`R23TQ[^M5]`\2#1+2:);)9I)'W>89-O&,`$8YQS^=9.E+4M36AH>'F_
MM3QO<WOF%DC\R1&QU7[BC\C^E.CQJOQ#9MKM%;N<Y/W=@QGZ;Q^M9/AWQ!_8
M7VC_`$7S_.V_\M-N,9]CZTW0=<_LB\GNY+=KF:5=N3)MQDY/8YR0*MQ=W;M8
ME26AU-SJ]_+XUCTN"816ZE=Z[`=XV[SR1D9'%9OB1$U/QK:V81G"B..4>HR6
M./\`@)K+T_Q";+7;K4VM_-,^X!#)C;E@>N.P&*9:Z[Y/B&35I;=IG9F9$\S&
MW/`YQS@<4E!IW78;FFM>YL^.2U[K6GZ='MW8&&)[NV,'_OD?G6EXMU2\TL6-
MKI;+')*2-JH&;`P%`!]<^G:N2GUE;CQ&-6DMC@.K^4).Z@`?-CU`/2I=0\0"
M_P!=M=2>U*BW"XC$GWMK%ASCU/I0H/338.=:F_\`$*<"UL[;:"7<ON[C`Q^N
M[]*E\27\WAS3+"STTB,L"/,VJ3A0,\8QDELY_P`:YK4]0_X277+3,?V;?L@^
M]OQECST'][I7?9U2)K>`)!<<#S;ICLQ@\_)SR1[XSZ5#7*DF4O>;:,CQ3=2Q
M^#85N5)GN!$DF1@AL;CQ]5KSZNI\>:C%=7\-K"P?[,&WL#GYCC*_AC]<=JY:
MMJ2M$SJ.\@HHHK0S"BBB@`HHHH`****`"BBB@`HHHH`****`"BBB@#:T*<I:
M7D5O=16EXY39+(^S*C.X!CT[?7%:;R:/<7>^Z^S7$CS0Q2RF0H#\AWN,$<9'
M7I7)45+A=W*4K*QU=L-+FL;(3?8<0QR!E>4ABV_N,C.1S_+IBD1='MK^VCB%
MN5>[D#3"<YCC!&WD'H<GDURM6+"*">[2*YE>-'.-R+N.>W&12Y/,?-Y&O=P:
M2NB[XC!YOE(499296D/W@R]`.OZ5GSOIAT:W6&.4:@'/FN3\I7G_`.M^M69]
M!DDO9X--+3K;MY<C2;8_GR1M&3STJM>::UM!#('!W0+,ZL0I&7*X`[]*%;N#
MOV-9+G.E0BWU&W@M4M62:W;!9Y.<_)W)XP>U3+::&L=F':T+!U$FV?[RF-B2
M3G^\!V&*PXM'O9M,?4$A8P(>N#DCG)'L,<U8_L,>;9(MTKK<1O([H,A`N<X]
M>AI-+N--]C3LH-$EFBFE6TC1X8R\33GY268-CG.<!>_&>G-)&NF6^D77V>2V
M#R6[HS--^\+>8/EV],8`.160VD%-+M[MYE1IYA&%;@*I&0S'M_AS5Z'PT)+R
M:+[3(T44<3%XH2Y)<9'RCG'6D[=P5^PS7[?3(;.'[$UN95D*MY,N[*[003SZ
MYYX^E5[V32SJ5HVF))%"-GF>:?XL\U5N[+[/;6TX?<LVX=,893@C\L'\:U(O
M#L4[6QM[QYHY$=V*PG=\N,[1GG)..W2JT2U8M6]$;%_J5H\.HLEU"7NHY58!
MQD["53OW#`CUJIXMN$N(I##>"6/S00HO%D4C!Z(.15.+PSYT5VT=RQ:!W508
MBOW5W?-DY7/0<&H-%T%]3\T/(\++M"KY>2=V>3R/E&.OO4)16M]BFY/2P+/%
M=:#;VDDL$!%V`2`,A=OWV'4]>M;%G<V]G)!`+RW>6&W5"5F"J?WVXX?V';O6
M-/HBP:6MV]QAB0&&SY1EF7KUR-N>E6(_#L4M_%##=/+#);M/O$6&P#CH3WXQ
MSWIOE?42N8MZ4:]G,;AT,C%6"XW#/!QVJ&IKR$6]W-"-^(W*_.NUN/45#6J,
MV7=$_P"0YI__`%\Q_P#H0KUZO(=$_P"0YI__`%\Q_P#H0KUZN:ONCHH[,\O\
M9?\`(SWG_`/_`$!:Q*V_&7_(SWG_``#_`-`6L2MX?"C&7Q,*0TM%4R4:>@W"
MV]U%*V[$4RNVWKC(_P`#7<>*%>)K"_52R6TN7`]"0?Z8_$5YQ:/Y<X!.`W!K
MT30YXM9T5]/N?O1J$(!P=O\`"WX8_3GK7/-6M(WCK=$OB+(AL]4MVW"V<-P<
M!E;'?\A^-0:_9?VQ80W]B`[(I.T#YF7T^H.>/K26>HK80RZ5K/R^6I5&`)$B
M>GY=/\16-I.LMI=TXC#/:.Q)C8\@=B.V?YU,8OIT&VNO4RT9HW5T8JRG((."
M#5B_U"YU&17N7W%%P`!@#U./4UTDJ>'M78RF86\I^9SN\LY/KG@GZ4Q=)\.P
M'S)+\2JH)*&=3G_OGFK]HNJU(Y'T9RQC<('*,$/`;'!_SD5J^&K%KS5(Y.D5
MN1(Q]QT'YC\@:MZ]K=I=68L;*$&,$'S"NT+C^Z/T_.GZ)KEII^D21,A6X4EE
M')$A/3Z=A^%#<G'8$DI;E;Q;=+/JHB1B5A0*1GC=U./T_*L"<XA<YQP:EDD:
M61I)#N=R68^I/6J=[)A1&.IY/TK2*LK$-W=RG1115DA1110`445=T:T^W:O:
M6Q0NKR#>H.,J.6Y^@-#=E<$KES2_#&I:I$)HD2*$C*O*<!OH!D_CC%3WW@[4
M[*TDN&:WE2-2S"-SD`<D\@5K>.]2>W6WTNWS$A3>^W@%>5"\=N#Q]*Y^P\0W
M=AIDMA$D+PR[L^8"2,C!`YQ^E9)SDKHT:BG8R:*Z/0_#L-SITFIZI.UO9J"4
M*$9;!Y)X/';&,D_K>N?#^BWNCW.H:3/,!`C'N5)49((89Z>_>J=2*=A<CM<X
MZBNC\*>'H-:CN9+IID2,JJ&,@`GG/4'V_.F:CI6DI<65GIUZUQ<3RK')(&!5
M0<#H!W)]3TH]HKV%R.USGZ*[6_\`#OAS2I(OMUY=+OR54G.[&,YVKQUK*\5Z
M##HT]N;9W:.<-\KG)!!'Z<BA5$W8;@T<_177)X=TK2;.&;7[EQ-(3B)#QTZ<
M`DX[G@?UK>)/#UK8V$.HZ=+(]O*1P_.`PR".!Q]?:A5(MV!P:5SFJ*[&P\)6
M$FB07M_=R6[2*'9BZA`I/'4<9&._4UDQZ;IEQX@>UCOUCT]%#>=)(%+<#@$C
M&<G]#0JB=P<&C$HKOH?"VCW9EMXX;Z(P$#[0WRB7K]W(P1QU`K'\%6>GW%^L
MEQ*YNXWW10A3MP!]XG&.O3D=*7M59M![-W2.>N+6>U95N(9(689"R*5)'K@]
MJT6\/7B:+_:LCPI!M#!6+;\$X'&,<\=^];/CI].EN"1-(VH1A8C&.%5>6R>.
M>OKWI?%6E#2=&A6/4;V4,ZQ^3+-E-H!/"^Q`I<[=O,?(E<X^BNNA\,Z=IVFP
MWFO7$L;.P_=IT&1D*<`G/'M47B'PW:6VE)JFF22-`VUF5SP%;H1G!ZD<<]?:
MJ]I&]A<CM<Y:BNMTGPWI=QX?CU.^N9XAABY5AM`#$=,$]JFOO#NCR>''U#3I
MI`(T++(Y/SX."""!Z$#&.:7M8WL'LW:YQE%%%:$!1110`4444`%7%U;4E4*N
MH784#``F;`_6J=%%@"BBB@`HHHH`****`"BBB@`HHHH`****`"BBB@`HHHH`
M****`"BBB@`JY86-]<,)[.UDF$;CE5)&1SBJ=:]GJ<=IH3VX2*69[C=MD#?*
MNW&X$$<YI2O;0:MU$MO$-Y;374J)"?M,AE964X5LDY'/OWS56YU&2ZB5)HHF
M*Q")7P=P`8MGKU.2/I6W%>Z2MA:Q>;`)8VB8LUMG&,[P>.<_7'TK/U.YM)I+
MAK*2*.!XD"0F'YA@C*YQU[YSS^E2K7V*>VYGK=W"6KVJRD0NP9E]2,_XFM&P
MO+F.33UDMG:$))#'L4[I%<G=CU(+4VWU2VBT*:Q:S1IG8$2<\_>Y//49XXQZ
MU?L=16[DTU))?,N4CGCY'W692$'IZ=*)>@+U,V;4M1GT?R)2SV@E`\PCN!PN
M?H,U;MK_`%=+Z7R['S)%BCWQ>4Q`"`;&(SG..?QH;5K1?#T5M;F6*Z@F21!P
M1N`.YNGO]>GI5^WUO3C?W;7$IV2^0XEPX)*)A@"N"#G..U2_0:]3"U&[>:UL
MT='!`>4NPQO9VY(]N`/J#6BVHZP)[9%TY(_-#%8EMR!/N`#$COP!TQ5+4F3^
MRM.09SF5QGJ$+?+G\0U;$6KZ="88WO)+H%90TCHXV[@N-W.2>,97M3>VP+?<
MH-?ZLWVZ<V"[\E9)O(.Z#Y=I`/;Y>.:ATR^U1I6>"`WTD:@J94,IBP<@KZ8K
M536["(WNV??&6<Q))&S.Q:/:<,3P,_WNU5M&U/38(PA\RR*RQ3,VXR>:4SD<
M`8SGZ4NFP==RC_:M^UAD1(40I&\^PDG!W*I[=>>F>*M+?ZG/=1!-+A=6A)6W
M6W)1D9LEL9SR1US3VU72Y=%-LT<RGSTD,0(^?DECG'H<?E5QM=L);V%UG\M&
MM1'()8BR@A]RKA<'CGD<=/>A^@+U.7O+B6ZNY9[C_6R,2W&.?I4-6M3N$N]3
MNKF-2J2RLZ@]<$U5K5;&;+NB?\AS3_\`KYC_`/0A7KU>0Z)_R'-/_P"OF/\`
M]"%>O5S5]T=%'9GE_C+_`)&>\_X!_P"@+6)6WXR_Y&>\_P"`?^@+6)6\/A1C
M+XF%%%%42(16KHVIRVEQ')&^)H_7HX[BLNDY!R."*B2*3/4)!8>)M/`5U690
M#ZM$>_ID=O0URM_H]]I^6GA)C'_+1.5_^M^-9-AJDEM.D@<QR*?ED']:[&P\
M8!AB]A&#TDAZ?D?YY_"LDI1^'5&C:EON<K17<&;PY?A]QM,DY8L/+8GZG!HC
MMO#<!WJUF?\`>E#_`*$FG[7R%[/S.-MK6>ZE$=O$\C''"CI]?2NDL?"Z)9S2
MZDZHY0[<-Q%Q]XGC./RJW-XFTRTA"6:F7`^5(TV*/S_H*Y76O$US?`Q,P6/_
M`)Y1].O&3W_^M2O.7D.T8^92N'6WW`L&P2`5Z-]*S&8LQ9NII7=I&W,<FFUN
MD9,****8@HHHH`*U/#-U%9:_:3SMMC#%2W8;@5R?;GFLNBAJZL-.SN=]XE\-
M7.LW\=W9S0A#&%.]C[G(P#QS67X@T[1=(TI;:,B;4N`7WG*]R2N<#C@#W[]:
MYA99$1D61E5NJ@X!IE9J#5KO8MS3Z'H;1'6_!4-MI\R/(L<:.O3E0,J?3IG\
MNQJ&Z:T\-^%9=.EFC>[FC8,B=69N,_0#N<9Q7"1R/$VZ-V0],J<4VDJ7GH'.
M=WI"+I_@&YF=F0SQR-SQ@GY%Q]<#\ZY[PA:_:O$5L&3<D696]L#@_P#?6*Q:
MW?"NK66C7,\]U',[L@1/+`(`SDYR1Z"AQ<4[=04DVO(Z?6?#[ZQK]M=>9$;.
M-`LHR23M8DK@>N<=>.?QQ_$&NVMWXCT\Q2!K6RE4M*!G)W`MC'4``?KUXKFK
MRY:ZN[B?&WSY&D*@],G.*@HC3[L'/L>B>)]%N==EL7LY8S;A6RY/`!P=P]<_
MTK+\9:G;30V^CZ?B3RG&[RSD#`P$'KU_2N1$DBH4#L$;DJ#P:;1&G:UWL#G>
M]NIW?CR2.UTBRL8P5!?*@=`JKC'_`(\*9X`MH#:W-T`CW0?8`<95<<>XR2?R
M]JX>GPS2P/OAD>-\8W(Q!Q^%'L_=Y;AS^]<]0L[F]M=(N[G4I(IKB+?(8X\8
MC`7(3CO_`(US/P]C0ZA=RF0"18@JIZ@GD_A@?G7)4JLRL&4D$="#0J6C7</:
M:IG0ZGH\W_"7I;W&)!>3^;B,DD1LYSVZ@`U>\?72'4[*W=-R1(9&P>H8]/\`
MQW]:X_-%4H:IOH+FT:/0_%.DSZ_'8R:=+#)$A8%M_&#CGCJ.*H>+]3M+?28=
M&LY][)M5P,'"IQACZY`X]JXY99$5E61E5OO`'`-,J8TK6N]AN=[G>>)R=-\'
M6MB0F]Q'$P!_NC<2/Q`_.E\1J=,\$V]F8U5G\N)P.S8W$_FOZUP5%"I[:@Y[
MA1116IF%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`
M!1110`4444`:MOH-S<QQR1/&5D$9!S_>8K^A'-+%H%Q.JO#+&Z/L*MR,AF*Y
M_`CFJD.IWD$*113E40.%``X#?>_SV[40ZG>00I%%.51`X4`#@-][_/;M4VD5
M[I<C\/W$H5HY8FC?80_.-K=3]%/6H-/TI[Z-Y!<001JXC5I21N<YP!Q[5%'J
M5Y%`L*3L(U1XPN!PK?>'XU);ZSJ%J,07&P;0N`B]!T[=>>O6CW@]TM6F@236
MT5T\L9B,B*Z*3N"L^WKC&<]LT^7PS<E)98639YC".-B=S*&VYSC'ZU2&M:BL
M"0BY/EH%`!13T8,.<9."*#K.H&!H?M+;&8L<*`<D[C@XR!GG`I6F.\30E\.!
M;>()=0M('E$TH8[(U0#/;.02?TJ./PS/(P'VNV"NR+$Y+8DW`E<<>W>JSZ_J
MDDD<C766C)*_(HZC!SQSGWIAUK4&D$AN"6$BR@E5X91@8X[`GCI1:87B6X-`
MDNOLRI)'$TL>XEB6R=Y7H!QT^E'_``CDPB+O=VL9"%V5F;*J'VD].F:JQ:WJ
M,*!([G:H4*!L7@`EAV]2>:CDU6]EW;YL[XVC/R*,J6W$=/7FBT@O$T%\.S'S
M8C+"LD<K*9"QVX";^F/3O21>'I'ED@$L3L?),<JL=I$AX.,?X53.LZ@2Y^T<
MR$EOD7DE=I[?W>*2+6+^)@T<^"JQJ/D7HGW>W:BT@O$MGP[,%$GVNU\G9N\W
M<VW.[;MZ=<BJRZ1*VJ7%B98D-ON,DK$[0%ZGIFK&E^()K$E9D,\6PHJA@A7+
M;LYP>^>H^F*@?6KS[;+<PNL1DE:3`4'EN"#D<C'8\4>\'NDT?A^:1V7[7:@&
M011,7.)6(!`7CT(ZXZU)_P`(U,$5GO+6,E8V=69LH'Z9X]>.*JIKNII)+(MT
MP:4[F.U3SC&1QQQQQBHFU2\92#-D%44_*.B?=[=J+2"\2"Y@>UN9;>3&^)RC
M8Z9!P:BI\\TEQ/)-*VZ21B['&,DG)IE607=$_P"0YI__`%\Q_P#H0KUZO(=$
M_P"0YI__`%\Q_P#H0KUZN:ONCHH[,\O\9?\`(SWG_`/_`$!:Q*Z'QO:RP^()
M9W7$<X4HW8X4`CZ\?J*YZMX?"C&?Q,****HD****`$Q0-RG*D@^HI:*328[D
M@N9P,;S^0H^U3_W_`-!4=%'*%Q6=W^\Y/U-)113L*X4444`%%%%`!1110`44
M44`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!111
M0`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`
M!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110!=T3_D.
M:?\`]?,?_H0KUZO)_#=M+=:]9K"I8QRK(W'`52"2?\]<5ZQ7+7W1T4=C.UO1
M[?6;(P3Y5A\T<@ZH?ZCU'_ZZXB]\%:K!)BV$=TA)P58*0/<-_0FO2*2LXU)1
MV+E!2W/,/^$1US_GR_\`(J?XT?\`"(ZY_P`^7_D5/\:]/HJ_;2)]E$\P_P"$
M1US_`)\O_(J?XT?\(CKG_/E_Y%3_`!KT^BCV\@]E$\P_X1'7/^?+_P`BI_C1
M_P`(CKG_`#Y?^14_QKT^BCVT@]E$\P_X1'7/^?+_`,BI_C1_PB.N?\^7_D5/
M\:]/HH]O(/91/,/^$1US_GR_\BI_C1_PB.N?\^7_`)%3_&O3Z*/;R#V43S#_
M`(1'7/\`GR_\BI_C1_PB.N?\^7_D5/\`&O3Z*/;R#V43S#_A$=<_Y\O_`"*G
M^-'_``B.N?\`/E_Y%3_&O3Z*/;R#V43S#_A$=<_Y\O\`R*G^-'_"(ZY_SY?^
M14_QKT^BCV\@]E$\P_X1'7/^?+_R*G^-'_"(ZY_SY?\`D5/\:]/HH]O(/91/
M,/\`A$=<_P"?+_R*G^-'_"(ZY_SY?^14_P`:]/HH]O(/91/,/^$1US_GR_\`
M(J?XT?\`"(ZY_P`^7_D5/\:]/HH]O(/91/,/^$1US_GR_P#(J?XT?\(CKG_/
ME_Y%3_&O3Z*/;R#V43S#_A$=<_Y\O_(J?XT?\(CKG_/E_P"14_QKT^BCV\@]
ME$\P_P"$1US_`)\O_(J?XT?\(CKG_/E_Y%3_`!KT^BCV\@]E$\P_X1'7/^?+
M_P`BI_C1_P`(CKG_`#Y?^14_QKT^BCV\@]E$\P_X1'7/^?+_`,BI_C1_PB.N
M?\^7_D5/\:]/HH]O(/91/,/^$1US_GR_\BI_C1_PB.N?\^7_`)%3_&O3Z*/;
MR#V43S#_`(1'7/\`GR_\BI_C1_PB.N?\^7_D5/\`&O3Z*/;R#V43S#_A$=<_
MY\O_`"*G^-'_``B.N?\`/E_Y%3_&O3Z*/;2#V43S#_A$=<_Y\O\`R*G^-'_"
M(ZY_SY?^14_QKT^BCV\@]E$\P_X1'7/^?+_R*G^-'_"(ZY_SY?\`D5/\:]/H
MH]O(/91/,/\`A$=<_P"?+_R*G^-'_"(ZY_SY?^14_P`:]/HH]O(/91/,/^$1
MUS_GR_\`(J?XT?\`"(ZY_P`^7_D5/\:]/HH]M(/91/,/^$1US_GR_P#(J?XT
M?\(CKG_/E_Y%3_&O3Z*/;2#V43S#_A$=<_Y\O_(J?XT?\(CKG_/E_P"14_QK
MT^BCVT@]E$\P_P"$1US_`)\O_(J?XT?\(CKG_/E_Y%3_`!KT^BCVT@]E$\P_
MX1'7/^?+_P`BI_C1_P`(CKG_`#Y?^14_QKT^BCVT@]E$\P_X1'7/^?+_`,BI
M_C1_PB.N?\^7_D5/\:]/HH]M(/91/,/^$1US_GR_\BI_C1_PB.N?\^7_`)%3
M_&O3Z*/;2#V43S#_`(1'7/\`GR_\BI_C1_PB.N?\^7_D5/\`&O3Z*/;2#V43
MS#_A$=<_Y\O_`"*G^-'_``B.N?\`/E_Y%3_&O3Z*/;2#V43S#_A$=<_Y\O\`
MR*G^-'_"(ZY_SY?^14_QKT^BCVT@]E$\P_X1'7/^?+_R*G^-'_"(ZY_SY?\`
MD5/\:]/HH]M(/91/,/\`A$=<_P"?+_R*G^-'_"(ZY_SY?^14_P`:]/HH]M(/
M91/,/^$1US_GR_\`(J?XT?\`"(ZY_P`^7_D5/\:]/HH]M(/91/,/^$1US_GR
M_P#(J?XT?\(CKG_/E_Y%3_&O3Z*/;2#V43S#_A$=<_Y\O_(J?XT?\(CKG_/E
M_P"14_QKT^BCVT@]E$\P_P"$1US_`)\O_(J?XT?\(CKG_/E_Y%3_`!KT^BCV
MT@]E$\P_X1'7/^?+_P`BI_C1_P`(CKG_`#Y?^14_QKT^BCVT@]E$\P_X1'7/
M^?+_`,BI_C1_PB.N?\^7_D5/\:]/HH]M(/91/,/^$1US_GR_\BI_C4MOX,UF
M5R)(8X0!]Z20$'_OG->E44>VD'LHF1X?\/P:)"VUO.N'^_*1CCL`.P_SZ5L4
,E+63;;NS1)+1'__9
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
