<SEC-DOCUMENT>0001137171-13-000138.txt : 20130404
<SEC-HEADER>0001137171-13-000138.hdr.sgml : 20130404
<ACCEPTANCE-DATETIME>20130403175824
ACCESSION NUMBER:		0001137171-13-000138
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20130403
FILED AS OF DATE:		20130404
DATE AS OF CHANGE:		20130403

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:		13740952

	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>caledonia6k04032013.htm
<DESCRIPTION>CALEDONIA MINING CORPORATION - 6K
<TEXT>
<HTML>
<HEAD>
     <TITLE>FG - Filed by Filing Services Canada Inc. (403) 717-3898</TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">&nbsp;</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">FORM 6-K</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">SECURITIES AND EXCHANGE COMMISSION</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">Washington, DC 20549</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">&nbsp;</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">Report of Foreign Private Issuer</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">Pursuant to Rule 13a-16 or 15d-16</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">Of the Securities Exchange Act of 1934</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">For the month of
April 2013</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">Commission File Number: 000-13345</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">&nbsp;</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">CALEDONIA MINING CORPORATION</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">(Translation of registrant&rsquo;s name into
English)</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">1710 &ndash; 1177 West Hastings Street</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">Vancouver, British Columbia V6E 2L3</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">Canada</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">(Address of principal executive offices)</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">&nbsp;</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">Indicate by check mark whether the registrant
files or will file annual reports under cover Form 20-F or Form 40-F</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">Form 20-F___<U>x</U>___ Form 40-F _____</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">&nbsp;</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">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): ____</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">&nbsp;</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">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): ____</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">&nbsp;</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">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.</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">Yes ____ No&nbsp;&nbsp; <U>x&nbsp;&nbsp;</U></font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">If &ldquo;Yes&rdquo; is marked, indicate below
the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">&nbsp;</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><font face="Times New Roman">Signatures</font></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">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.</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font face="Times New Roman">&nbsp;</font></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="border-collapse: collapse; font-size: 10pt" width="100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="line-height: 115%; font-family: 'Times New Roman', Times, Serif" width="691"><font face="Times New Roman">&nbsp;</font></TD>
    <TD STYLE="line-height: 115%; font-weight: bold" width="804"><font face="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;<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Caledonia Mining Corporation</FONT></font></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="line-height: 115%; font-family: 'Times New Roman', Times, Serif" width="691"><font face="Times New Roman">&nbsp;</font></TD>
    <TD STYLE="line-height: 115%" width="804"><font face="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;<FONT STYLE="font: 10pt Times New Roman, Times, Serif">(Registrant)</FONT></font></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="line-height: 115%; font-family: 'Times New Roman', Times, Serif" width="691"><font face="Times New Roman">&nbsp;</font></TD>
    <TD STYLE="line-height: 115%" width="800"><font face="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;<FONT STYLE="font: 10pt Times New Roman, Times, Serif">By:</FONT></font>
      <font face="Times New Roman">/s/&nbsp; Carl Jonsson&nbsp;</font></TD>
</TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="line-height: 115%; font-family: 'Times New Roman', Times, Serif" width="691"><font face="Times New Roman">&nbsp;</font></TD>
    <TD STYLE="line-height: 115%" width="804"><font face="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;<FONT STYLE="font-style: normal; font-variant: normal; font-weight: normal; font-size: 10pt">Name: &nbsp;Carl Jonsson</FONT></font></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="line-height: 115%; font-family: 'Times New Roman', Times, Serif" width="691"><font face="Times New Roman">&nbsp;</font></TD>
    <TD STYLE="line-height: 115%" width="802"><font face="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;<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Title: &nbsp;&nbsp;&nbsp;Director and Secretary</FONT>&nbsp;</font></TD>
</TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">Dated:
April 3, 2013</font></P>

<P STYLE="font: normal 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font face="Times New Roman">&nbsp;</font></P>

<P STYLE="font: normal 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>





<P STYLE="text-align: center; margin: 0">&nbsp;</P>



<P STYLE="text-align: center; margin: 0">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0"><B><font face="Times New Roman">Exhibit Index</font></B></P>

<P STYLE="text-align: center; margin: 0">&nbsp;</P>

<div align="center">
 <center>
 <table border="0" cellpadding="0" cellspacing="0" width="100%">
  <tr>
   <td width="10%"><font size="2" face="Times New Roman">Exhibit</font></td>
   <td width="90%"><font size="2" face="Times New Roman">Description</font></td>
  </tr>
  <tr>
   <td width="10%"></td>
   <td width="90%"></td>
  </tr>
  <tr>
   <td width="10%"></td>
   <td width="90%"></td>
  </tr>
  <tr>
   <td width="10%"><font size="2" face="Times New Roman">99.1</font></td>
   <td width="90%"><font size="2" face="Times New Roman"><a href="aif.htm">Annual
    Information Form</a></font></td>
  </tr>
 </table>
 </center>
</div>

<P STYLE="margin-top: 0; margin-bottom: 0"><font face="Times New Roman">&nbsp;</font></P>

<HR>



<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0"></P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>aif.htm
<DESCRIPTION>ANNUAL INFORMATION FORM
<TEXT>
<html>

<head>
<meta name="GENERATOR" content="Microsoft FrontPage 4.0">
<meta name="ProgId" content="FrontPage.Editor.Document">
<title>FG - Filed by Filing Services Canada Inc. (403) 717-3898</title>
</head>

<body>

<p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 16pt/13pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 16pt/13pt Times New Roman, Times, Serif"><b>ANNUAL
INFORMATION FORM</b></p>
<p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 16pt/13pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 12pt/13pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: small-caps 12pt/13pt Times New Roman, Times, Serif; LETTER-SPACING: 0.75pt"><font style="LETTER-SPACING: 0pt">Form
51-102F2 prescribed by National Instrument 51-102</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="BORDER-BOTTOM: #000000 2px solid; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt 'Times New Roman', Times, Serif"><b>CALEDONIA
MINING CORPORATION (the "Company" or "Caledonia")</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 10pt/13pt Times New Roman, Times, Serif">Corporate
Name</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="BORDER-BOTTOM: #000000 1px solid; TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt 'Times New Roman', Times, Serif"><b>March
29, 2013</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 10pt/13pt Times New Roman, Times, Serif">Date
of Annual Information Form</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="BORDER-BOTTOM: #000000 1px solid; TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt 'Times New Roman', Times, Serif"><b>December
31, 2012</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 108pt; FONT: 12pt/13pt Times New Roman, Times, Serif">Date
of Latest Financial Year End</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>This
Annual Information Circular contains certain statements that are prospective and
reflect management's expectations regarding the Company's future growth,
results of operations, performance and business prospects and opportunities. All
statements other than statements of historical fact are forward-looking
statements that involve various risks and uncertainties. There can be no
assurance that such statements will prove to be accurate, and actual results and
future events could differ materially from those anticipated in such
circumstances. Readers are cautioned not to place undue reliance on
forward-looking information.</b></p>
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        <td style="TEXT-ALIGN: center; WIDTH: 100%">&nbsp;</td>
      </tr>

  </table>
</div>
<div style="PAGE-BREAK-BEFORE: always; MARGIN-TOP: 6pt">
  <table style="WIDTH: 100%" cellSpacing="0" cellPadding="0">

      <tr>
        <td style="TEXT-ALIGN: center; WIDTH: 100%">2
          <!-- Field: /Sequence -->
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      </tr>

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  <tr>
    <td width="13%"></td>
    <td width="82%"></td>
    <td width="4%"></td>
  </tr>
  <tr valign="bottom">
    <td align="center" colspan="3"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">TABLE
      OF CONTENTS</font></b></td>
  </tr>
  <tr>
    <td colspan="3">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      1.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">CORPORATE
      STRUCTURE</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Name,
      address and incorporation</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1.2</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Inter-corporate
      Relationships</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">1.3</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Transfer
      Agent and Registrar</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      2.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">GENERAL
      DEVELOPMENT OF THE BUSINESS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">2.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Three
      Year History</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      3.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">DESCRIPTION
      OF THE BUSINESS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">3.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">General</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      4.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">MINERAL
      PROPERTIES AND PROJECTS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">6</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Blanket
      Mine, Zimbabwe</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">6</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">4.2</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Nama
      Property, Zambia</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">13</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      5.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">RISK
      FACTORS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">17</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      6.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">DIVIDENDS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">20</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      7.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">CAPITAL
      STRUCTURE</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">7.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Capital</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      8.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">MARKET
      FOR SECURITIES</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">8.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Trading
      Price and Volume</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">21</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      9.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">DIRECTORS
      AND OFFICERS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">9.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Name,
      Occupation and Security Holdings of Directors and Officers</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">22</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">9.2</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Cease
      Trade Orders, Bankruptcies, Penalties or Sanctions</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">23</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      10.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">PROMOTERS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      11.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">INTEREST
      OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      12.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">MATERIAL
      CONTRACTS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">24</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      13.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">INTERESTS
      OF EXPERTS</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">13.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Experts
      named</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">13.2</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Interests
      of Experts</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      14.</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ADDITIONAL
      INFORMATION</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">14.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Further
      Information</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">14.2</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Forward
      Looking Statements</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">25</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">ITEM
      15</font></b>&nbsp;</td>
    <td align="left" nowrap style="TEXT-INDENT:2.520096pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">AUDIT
      COMMITTEE INFORMATION</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">26</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">15.1</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Audit
      Committee Charter</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">26</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">15.2</font></b>&nbsp;</td>
    <td align="left" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Audit
      Committee Composition</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">26</font></b>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" nowrap style="TEXT-INDENT:35.999695pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">15.3</font></b>&nbsp;</td>
    <td align="left" nowrap style="TEXT-INDENT:2.520096pt"><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">External
      Auditor Fees</font></b>&nbsp;</td>
    <td align="right" nowrap><b><font size="2" face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">26</font></b>&nbsp;</td>
  </tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 10pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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        <td style="TEXT-ALIGN: center; WIDTH: 100%">&nbsp;</td>
      </tr>

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        <td style="TEXT-ALIGN: center; WIDTH: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->
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<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 12pt/13pt Times New Roman, Times, Serif">ITEM
1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CORPORATE STRUCTURE</p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 12pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">1.1</td>
      <td>Name, address and incorporation</td>
    </tr>

</table>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt/13pt Times New Roman, Times, Serif">(1)
<font style="FONT-SIZE: 11pt">The Company exists pursuant to the <i>Canada
Business Corporations Act</i>.</font></p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">(2)
The Company has the following addresses:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; WIDTH: 59%; PADDING-RIGHT: 5.4pt; FONT: 11pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt"><b>Offices</b></font></td>
      <td style="TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; WIDTH: 41%; PADDING-RIGHT: 5.4pt; FONT: 11pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt"><b>Address</b></font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT: 11pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">-
        Canadian Registered and Representational Office</font></td>
      <td style="PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt">
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Suite
        1201 - 67 Yonge Street, Toronto, Ontario, Canada M5E 1J8</p>
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT: 11pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">-
        Canadian Representational Office&nbsp;&nbsp;</font></td>
      <td style="PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt">
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">1710
        - 1177 W. Hastings Street, Vancouver, B.C., Canada, V6E 2L3</p>
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT: 11pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">-
        African Administrative Office</font></td>
      <td style="PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt">
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">P.O.
        Box 834, Saxonwold, 2132,</p>
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">South
        Africa.</p>
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">24
        Ninth Street, Lower Houghton, Johannesburg, 2198 South Africa</p>
      </td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 54pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">1.2</td>
      <td style="TEXT-ALIGN: justify">Inter-corporate Relationships</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Company has the following subsidiaries, all of which are wholly owned unless
indicated:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="FONT-VARIANT: normal; FONT-STYLE: normal; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal" cellSpacing="0" cellPadding="0" width="811">

    <tr style="VERTICAL-ALIGN: top">
      <td style="FONT-SIZE: 10pt" width="499" colSpan="2">&nbsp;<font style="FONT-SIZE: 11pt"><b>Subsidiary
        Names</b></font></td>
      <td style="FONT-SIZE: 10pt" width="308">&nbsp;<font style="FONT-SIZE: 11pt"><b>Incorporated</b>&nbsp;</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"></td>
      <td width="308"></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Blanket Mine
        (1983) (Private) Limited <font style="FONT-FAMILY: Arial Unicode MS,sans-serif">-</font>
        49% owned</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Zimbabwe</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Blanket
        (Barbados) Holdings Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Barbados</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Caledonia
        Holdings (Africa) Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Barbados</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Caledonia
        Holdings Zimbabwe (Private) Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Zimbabwe</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Caledonia Kadola
        Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Zambia</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Caledonia Mining
        Services Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Zimbabwe</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Caledonia Mining
        (Zambia) Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Zambia</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Caledonia Nama
        Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Zambia</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Caledonia
        Western Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">Zambia</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="FONT-SIZE: 12pt" width="499" colSpan="2">Dunhill Enterprises
        Inc.</td>
      <td width="308"><font style="FONT-SIZE: 11pt">Panama</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Eersteling Gold
        Mining Company Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">South Africa</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Fintona
        Investments (Proprietary) Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">South Africa</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Greenstone
        Management Services (Proprietary) &nbsp;Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">South Africa</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="499" colSpan="2"><font style="FONT-SIZE: 11pt">Maid O<font style="FONT-FAMILY: Arial Unicode MS,sans-serif">'</font>
        the Mist (Proprietary) Limited</font></td>
      <td width="308"><font style="FONT-SIZE: 11pt">South Africa</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="FONT-SIZE: 12pt" width="499" colSpan="2">Mapochs Exploration (<font style="FONT-SIZE: 11pt">Proprietary</font>)
        Ltd</td>
      <td width="308"><font style="FONT-SIZE: 11pt">South Africa</font></td>
    </tr>
    <tr>
      <td width="35">&nbsp;</td>
      <td width="462">&nbsp;</td>
      <td width="308">&nbsp;</td>
    </tr>

</table>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">1.3</td>
      <td style="TEXT-ALIGN: justify">Transfer Agent and Registrar</td>
    </tr>

</table>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 36pt; FONT: 11pt Times New Roman, Times, Serif">Equity
Financial Trust Company, 400 - 200 University Avenue,</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 36pt; FONT: 11pt Times New Roman, Times, Serif">Toronto,
Ontario, Canada M5H 4H1</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 36pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 36pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; GENERAL DEVELOPMENT OF THE BUSINESS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">2.1</td>
      <td style="TEXT-ALIGN: justify">Three Year History</td>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Company is involved in mining and mineral exploration in Southern Africa. It
owns and maintains on a "care and maintenance" basis the Eersteling Gold
Mine in South Africa.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Effective
April 1, 2006 the Company purchased 100% of the issued shares of the Zimbabwe
incorporated Company Caledonia Holding Zimbabwe (Pvt) Ltd which held 100% of the
shares in Blanket Mine (1983) (Pvt) Ltd. Caledonia became the owner and operator
of the Blanket Gold Mine ("Blanket Mine") in Zimbabwe. The Company has
expanded the production since it acquired the Blanket Mine. Total gold
production in 2012 was 45,623 ounces, and in 2011 was 35,826 ounces, and in 2010
was 17,707 ounces. During January and February, 2013, production was 6,684
ounces - an annualized rate of 40,104 ounces.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">On
September 5, 2012 the agreements to give effect to the indigenisation of Blanket
Limited became effective, see 3.1 (c) below.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
only products currently produced by the Company is gold and a small quantity of
silver (+-13% of total production ounces) from the Blanket Mine.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Company's mineral exploration activities have been focussed in northern South
Africa, Zimbabwe, and Zambia</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DESCRIPTION OF THE BUSINESS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
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      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">3.1</td>
      <td>General</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt"></td>
      <td>&nbsp;</td>
    </tr>

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    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 36pt">(a)</td>
      <td><b>Summary</b></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><font style="LETTER-SPACING: -0.15pt">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><font style="LETTER-SPACING: -0.15pt">The
Company's business during the past three completed fiscal years - in the
period commencing January 1, 2010 - has been focused primarily on the operation
of the Blanket Mine in Zimbabwe and increasing its gold production and achieving
the Indigenisation of the Blanket Mine as described in sub-clause 3.1(c) below.
Reference is made to Clause 4.1 for details with respect to the Blanket Mine.
The source of the Company's revenue in the past three completed fiscal years
has been the proceeds from the sale of gold produced by Blanket Mine and minor
silver and interest amounts.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><font style="LETTER-SPACING: -0.15pt">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><font style="LETTER-SPACING: -0.15pt">The
Company has during the past three completed fiscal years conducted exploration
activities in Zimbabwe and Zambia. The Company's main exploration efforts
have, other than gold exploration in the vicinity of the Blanket Mine in
Zimbabwe, been focused on exploration of for copper and cobalt at the
Company's "Nama" property in Zambia - discussed in more detail in Clause
4.2.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">This
document should be in conjunction with the Company's Management Discuss and
Analysis Documents which can be found on under the Investors section on
Caledonia's website http://www.caledoniamining.com.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 36pt">(b)</td>
      <td><b>General Comments</b></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Caledonia's
activities are focussed in Southern Africa. Generally, in the gold mining
industry and exploration in Southern Africa, the work is not seasonal, except
where heavy seasonal rainfall can affect surface mining or exploration.
Production operations at Blanket Mine are not seasonal, but exploration
activities at Nama are.</p>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Caledonia
is not dependent, to any material extent, on patents, specialized equipment, or
new manufacturing processes. The Company's exploration and production
operations are dependent on the Company obtaining and maintaining all of
required permits, licences and authorizations.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: bold 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">All
mining and exploration activities are conducted under the various Economic,
Mining, and Environmental and Licencing Regulations of the country where such
operations are being carried out. It is always Caledonia's objective that
these regulations be complied with or are exceeded by the Company to satisfy the
Company's best practices and to avoid any risks of environmental damage and/or
of its activities being suspended.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">Over
the past three years, the gold market has been operating in an upward cycle.
Blanket Mine's profitability is dependent on the international price of gold
- which varies from time to time. Caledonia is not dependent on any key
contracts which could materially affect the business, but is dependent on
Blanket's ability to sell and receive the proceeds of gold sales and remit
management fees and dividends to Caledonia.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">The
Reserve Bank of Zimbabwe has failed to redeem the Gold Bonds which were issued
to Blanket Limited in 2009 due to non-payment for gold previously sold by
Blanket Mine in 2008 - and also failed to give any reliable verification of when
they would be paid. As a result of this failure, during 2010, Caledonia wrote
off the Bonds to $nil value in the books of account. The Principal and accrued
interest of the Bonds as at December 31, 2012 was US$ 4,002,236.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
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    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 36pt"><font style="FONT-WEIGHT: normal">(c)</font></td>
      <td>
        <p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: bold 11pt/13pt Times New Roman, Times, Serif">Indigenization
        of Blanket</p>
      </td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">In
2008 the Zimbabwean parliament passed the Indigenisation and Economic
Empowerment Act 2007 ("Act") that stipulated that 51% ownership of all
companies had to reside in the hands of Indigenous Zimbabwean citizens.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">On
February 20, 2012<b> </b>Caledonia announced it had signed a Memorandum of
Understanding ("MoU") with the Minister of Youth, Development,
Indigenisation and Empowerment of the Government of Zimbabwe pursuant to which
Caledonia agreed that indigenous Zimbabweans would acquire an effective 51%
ownership interest in the Blanket Mine for a paid transactional value of
US$30.09 million.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Pursuant
to the above, Caledonia entered into agreements with each of the following
Indigenous Shareholders to allow them to subscribe for 51% ownership interest in
Blanket as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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  <table CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0">
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      <td STYLE="width: 0"></td>
      <td STYLE="width: 17pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td STYLE="text-align: justify"><font STYLE="font-size: 11pt; color: black">A
        16% interest was sold to the National Indigenisation and Economic
        Empowerment Fund (NIEEF) for US$11.74 million.</font></td>
    </tr>
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      <td STYLE="width: 0"></td>
      <td STYLE="width: 17pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td STYLE="text-align: justify"><font STYLE="font-size: 11pt; color: black">A
        15% interest was sold to Fremiro, which is owned by Indigenous
        Zimbabweans, for US$11.01 million.</font></td>
    </tr>
  </table>
  <table CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0">
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      <td STYLE="width: 0"></td>
      <td STYLE="width: 17pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td STYLE="text-align: justify"><font STYLE="font-size: 11pt; color: black">A
        10% interest was sold to Blanket Employee Trust Services (Private)
        Limited (BETS) for the benefit of present and future managers and
        employees of Blanket for US$7.34 million. The shares in BETS are held by
        the Blanket Mine Employee Trust (Employee Trust) with Blanket's
        employees holding participation units in the Employee Trust.</font></td>
    </tr>
  </table>
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      <td STYLE="width: 0"></td>
      <td STYLE="width: 17pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td STYLE="text-align: justify"><font STYLE="font-size: 11pt; color: black">A
        10% interest was donated to the Gwanda Community Share Ownership Trust
        (Community Trust). Blanket undertook and paid a non-refundable donation
        of US$1 million to the Community Trust.</font></td>
    </tr>
  </table>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: 52.65pt; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Effective
November 14, 2012 four Zimbabweans were appointed to the Board of Directors of
Blanket - each representing one of the four entities to whom the 51% of the
shares of Blanket were issued.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; MINERAL PROPERTIES AND PROJECTS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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    <tr style="VERTICAL-ALIGN: top">
      <td width="1"></td>
      <td width="49"><b>4.1</b></td>
      <td width="756" colSpan="2"><b>Blanket Mine, Zimbabwe</b></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="1"></td>
      <td width="49">&nbsp;</td>
      <td width="756" colSpan="2">&nbsp;</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td width="1"></td>
      <td width="49"></td>
      <td width="56">(a)</td>
      <td width="698">&nbsp;<u>General description of mine and production
        operations</u></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Blanket Mine, which was discovered and recorded its first gold production in
1906. On April 1, 2006, the Company acquired effective ownership of Blanket
which consists of underground mining and processing of several closely-spaced
gold-bearing mineral deposits defining a mineralized trend of approximately 4.5
kilometres in extent. Major infrastructure consists of underground workings, a
processing plant, a tailings dam and a village for the Mine's employees. Since
the original start of the operations, the mine area has a reported production of
in excess of 1,000,000 oz. of gold, at an average recovered grade of 4.79 g/t
Au.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Blanket Mine property is located in south western Zimbabwe approximately 140 km
south of Bulawayo and 16 km northwest of the town of Gwanda. The property is
held by mining claims covering approximately 2,883 hectares (approximately 7,125
acres). It is fully accessible by a public highway.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Company previously published mineral reserve and mineral resource figures for
the Blanket Mine in a report entitled "NI 43-101 Technical Report on the
Blanket Mine, Zimbabwe" ("MSA Report") dated June 28, 2011, prepared by
MSA Geoservices (Pty) Ltd. ("MSA"), a geological consulting company based in
South Africa. MSA reviewed the reserve and resource calculation procedures for
the Blanket Mine as at December 31, 2010. MSA's calculation figures are shown
in the following table.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>MINERAL
RESERVES - December 31, 2010</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
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      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; WIDTH: 39%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Classification</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Tonnes</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Grade
        (Au g/t)</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 21%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Gold
        Content-ounces</b></font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Proven
        Ore</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">Total
        Proven Ore including pillars*</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">1,326,000</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">4.02</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">171,400</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Probable
        Ore</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">Operating
        and Development Areas</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2,513,700</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">3.66</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">295,800</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Total
        Proven + Probable Ore</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">3,839,800</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">3.78</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">467,200</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Reserve
estimate is based on a gold price of US$1,100/oz.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>MINERAL
RESOURCES</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 11pt Times New Roman, Times, Serif" cellSpacing="0" cellPadding="0">

    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; WIDTH: 39%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Classification</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Tonnes</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Grade
        (Au g/t)</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 21%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Gold
        Content-ounces</b></font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Indicated</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">510,000</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">3.79</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">62,100</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Inferred</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2,408,000</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">5.27</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">**</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Tonnages
and ounces are rounded to the nearest 100 respectively</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Resource
estimate is based on a gold price of US$1,100/oz.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Note
*</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pillar tonnages have been
discounted by 50%</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt Times New Roman, Times, Serif"><b>Note
**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>In keeping with the requirements of
NI 43-101, Inferred Resources are reported without estimates of metal quantities</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 72pt">(i)</td>
      <td style="TEXT-ALIGN: justify">1 tonne = 1,000 kilograms = 2,204.6 pounds</td>
    </tr>

</table>
<table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 72pt">(ii)</td>
      <td style="TEXT-ALIGN: justify">Some numbers may not add due to rounding</td>
    </tr>

</table>
<table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 72pt">(iii)</td>
      <td style="TEXT-ALIGN: justify">1 ounce troy = 31.1035 grams</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Mr.
Mike Robertson Pr. Sci. Nat., and Mr. Bruno Bvirakare Pr. Sci. Nat., both
consultants with the MSA Group, are the "Independent Qualified Persons" for
Blanket's reserves and resources as required by National Instrument 43-101 of
the Canadian Securities Administrators.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b><i>Cautionary
note to U.S. Investors concerning estimates of Inferred and Indicated Resources.
</i></b>The above table uses the terms "inferred resources" and "indicated
resources." While these terms are recognized and required by Canadian
regulations, the US Securities and Exchange Commission does not recognize them.
They have a great amount of uncertainty as to their existence, and great
uncertainty as to their economic feasibility. It cannot be assumed that all or
any part of an Inferred or Indicated Mineral Resources will ever be upgraded to
a higher category. Investors are cautioned not to assume that part or all of an
inferred or indicated resource exists or is economically mineable.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
full MSA Report can be viewed on the Company's website -
www.caledoniamining.com - or on SEDAR at www.sedar.com.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Since
the calculation of the above December 31, 2010 figures the Company has mined
662,074 tonnes with an average recovered gold grade of 3.82 grams per tonne some
of which has been from within the reserves and resource figures set out above.
Management of Blanket Mine has concluded that on-going work and exploration on
the property has resulted in the establishment of replacement reserves and
resources. An updated calculation of Blanket's reserves and resources as at
December 31, 2012 has been prepared by Blanket Mines' Technical staff
following the standards and procedures required by NI43-101 of the Canadian
Securities Administrators and the results are presented in the following table.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>MINERAL
RESERVES - December 31, 2012</b></p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 11pt Times New Roman, Times, Serif" cellSpacing="0" cellPadding="0">

    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; WIDTH: 39%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Classification</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Tonnes</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Grade
        (Au g/t)</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 21%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Gold
        Content-ounces</b></font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Proven
        Ore</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">Total
        Proven Ore including pillars <b>*</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid">1,767,000</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid">3.93</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid"><b>223,000</b></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Probable
        Ore</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid">&nbsp;</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">Operating
        and Development Areas</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid">2,140,000</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid">3.66</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid"><b>252,000</b></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Total
        Proven + Probable Ore</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid"><b>3,907,000</b></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid"><b>3.78</b></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid"><b>475,000</b></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Reserve
estimate is based on a gold price of US$1,500/oz.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>MINERAL
RESOURCES</b></p>
<table style="FONT-VARIANT: normal; FONT-STYLE: normal; WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal" cellSpacing="0" cellPadding="0" height="58">

    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; WIDTH: 39%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid" height="19"><font style="FONT-SIZE: 11pt"><b>Classification</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid" height="19"><font style="FONT-SIZE: 11pt"><b>Tonnes</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid" height="19"><font style="FONT-SIZE: 11pt"><b>Grade
        (Au g/t)</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 21%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid" height="19"><font style="FONT-SIZE: 11pt"><b>Gold
        Content-ounces</b></font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid" height="19"><font style="FONT-SIZE: 11pt"><b>Indicated</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid" height="19">&nbsp;&nbsp;448,000</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid" height="19">3.81</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid" height="19"><b>54,900</b></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: justify; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid" height="20"><font style="FONT-SIZE: 11pt"><b>Inferred</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid" height="20">2,290,000</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid" height="20">5.30</td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: right; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 12pt; BORDER-RIGHT: windowtext 1pt solid" height="20"><b>&nbsp;&nbsp;&nbsp;**</b></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Tonnages
and ounces are rounded to the nearest 1000 and 100 respectively</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Resource
estimate is based on a gold price of US$1,500/oz.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Note
*</b> Pillar tonnages have been discounted by 50%</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt Times New Roman, Times, Serif"><b>Note
** </b>In keeping with the requirements of NI 43-101, Inferred Resources are
reported without estimates of metal quantities</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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      <td style="WIDTH: 72pt">(i)</td>
      <td style="TEXT-ALIGN: justify">1 tonne = 1,000 kilograms = 2,204.6 pounds</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 72pt">(ii)</td>
      <td style="TEXT-ALIGN: justify">Some numbers may not add due to rounding</td>
    </tr>

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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Relative
to the previous and independent estimate of reserves and resources as at
December 2010, the Reserves have increased by 1.7% in terms of contained gold.
Resources expressed in terms of tonnage have declined by 6.1% over the same
period.</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Dr.
T. N. Pearton, BSc Eng. (Mining Geology), PhD (Geology), and Fellow of the
Geological Society of South Africa is the "Qualified Person" and is
responsible for and has reviewed the Blanket's 2012 reserves and resources as
required by National Instrument 43-101 of the Canadian Securities
Administrators.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 16.65pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Blanket Mine exploits a fairly typical Achaean 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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Two
main types of mineralization are recognized:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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      <td style="WIDTH: 18pt"><font style="FONT-SIZE: 11pt">&#1470;</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">a
        disseminated sulphide replacement type, which comprises the bulk of the
        ore shoots</font></td>
    </tr>

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      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 18pt"><font style="FONT-SIZE: 11pt">&#1470;</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">quartz veins
        that tend to have long strikes but are not uniformly mineralized.</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Three
types of mining methods are used at the Blanket Mine:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 21.6pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">Underhand
        stoping in the narrow ore bodies</font></td>
    </tr>

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      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 21.6pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">Shrinkage
        stoping where blocky sidewalls are evident</font></td>
    </tr>

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      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 21.6pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">Long hole
        stoping in the wider ore bodies, using 15 meter sub-levels.</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Government of Zimbabwe has enacted regulations covering water and effluent
disposal. Under these regulations two required permits have been issued to the
Blanket Mine covering the sewage effluent and mill tailings disposals. 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 by an independent consulting company.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Pursuant
to Zimbabwe's Mining General Regulations, certain closure obligations are
required to be fulfilled and these are covered in a "Closure Plan" dated
December 2012.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Current
operational status</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">At
December 31, 2012 Blanket Mine employed approximately 850 permanent employees
and 71 contractors who work on various of its more specialised development
projects. It has developed and continues to develop the necessary skills for
both current and 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="TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0px; FONT: bold 12pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: bold 11pt/13pt Times New Roman, Times, Serif">Geological
Setting</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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. 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, from a gold
resource area that has given rise to no less than 268 gold mines.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Property
Geology</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt 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 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.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">The
geological sequence strikes north-south, dips vertically and consists, from east
to west, of a basal felsic unit which is not known to be mineralized. It is
generally on this lithology type that the various mine tailings disposal sites
have been located. Above this basal felsic 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 on the next</font> <font style="FONT-SIZE: 11pt">unit,
<i>the mafics</i> and an 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 post metamorphic regionally developed deformation zone
characterized by areas of high strain, wrapping around relatively undeformed
remnants of the original basaltic lava flows. It is within the higher strain
regime (highly sheared rocks) that the wider of the ore bodies are located.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 6pt; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 6pt; FONT: 11pt Times New Roman, Times, Serif"><b>Mining
Operations</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">As
a result of the completion of the No. 4 Shaft Expansion Project in late 2010,
the underground mining areas can now produce up to 1,100 tonnes of ore daily
using predominately long-hole open stoping methods. Blanket Mine now produces in
excess of 40,000 ounces per year and is implementing a four year Expansion
Program to progressively increase gold production to 76,000 ounces by the end of
2016.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Metallurgical
Process</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">In
terms of Blanket's 4 year Expansion Program the crushing and milling circuits
will be expanded to handle 3,000 tonnes per day capacity by additions and
improvements to them. Their throughput capacity is more than sufficient to
handle the planned increases in mine production from the No. 4 Shaft Expansion
Project, and will in future process any ore mined from the Subsidiary's
Satellite properties - referred to below.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">All
run of mine ore ("ROM") is crushed underground to minus 150mm, hoisted to
surface and crushed to minus 12mm in the surface 2-stage crushing circuit. This
material is then currently 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 'gravity'
gold. The Knelson Concentrator tails are pumped through cyclones whose underflow
reports to the open-circuit regrind ball mill. The product from the Knelson
tails cyclone overflow and the regrind mill discharge are pumped into a
carbon-in-leach ("CIL") plant consisting of eight, 600 cubic metre 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 are done on site. During electro
winning the gold is deposited on steel wool cathodes, the loaded cathodes are
acid-digested and the resultant gold solids from this acid digestion together
with 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 CIL plant has an overall design
capacity of 3,800 tonnes of milled ore per day.</p>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Dore bars are delivered, as required by Zimbabwean law, to the Zimbabwe
Government-operated Fidelity Refiners in Harare for sampling and onward export
to Rand Refineries in South Africa. Rand Refineries undertakes the final
refining and buys the resultant gold with 99.90% of the proceeds being credited
to Blanket'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 -
which is also purchased by Rand Refinery.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><b>Zimbabwe
Exploration</b></p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">Blanket's
exploration and development activities in Zimbabwe are currently being conducted
on the Blanket Mine mining areas and on the first 4 satellite mines [see (i) to
(ii) on Page 11 below]. Blanket's exploration title holdings number 86
registered mining claims in the Gwanda Greenstone Belt, which are referred to as
the "Satellite properties". These claims cover an area of about 2,500
hectares. Fifty four (54) of these blocks are registered as precious metal
(gold) claims covering 497 hectares, and 31 blocks are registered as base metal
(Cu, Ni, As) claims covering a total area of 2,085 hectares.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>At Blanket
Mine</b></p>
<p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">The
current Blanket Mine mining area has eight near-vertical ore shoots between
Jethro and Lima shafts. An additional six ore shoots occur outside the above
mining limits but are included within the producing claims area. The longer term
future of Blanket Mine depends primarily on the remaining life (resources) of
these 14 ore shoots. Exploration at Blanket is therefore focused on determining
the continuity of these mineralized shoots to depth. Ore shoots AR Main, AR
South, and Blanket Reef, which comprise the deepest areas of mining at Blanket,
have been exposed down to 750 meters below surface. However, the ore shoots on
neighboring Vubachikwe Mine have been mined down to 1,100 meters below surface,
suggesting that Blanket has at least this potential to increase its resources.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt/13pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt; FONT-WEIGHT: normal">The
exploration for the downward continuation of the known mineralized shoots will
be achieved by diamond drilling from specially excavated drill chambers situated
in cross-drives some 250 metres from the 22 Level haulage (which is 750 m below
surface) and also from the 18 Level Haulage (630m below surface). </font><font style="FONT-WEIGHT: normal">Crosscuts
(side tunnels) on 18 Level have been completed and the crosscuts on the 22 Level
Haulage are now being excavated to provide the required drilling platforms from
which the ore bodies below the 22 Level can be drilled for resource evaluation
purposes.<font style="FONT-SIZE: 11pt"> Holes drilled from these chambers will
target the mineralized shoots at various depths down to 350 metres below 22
Level.</font></font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">To
reduce the pressure of material movements on the 18 Level and 22 Level haulages,
increased mining activity has taken place in the upper levels of the AR Main and
AR South ore bodies where there are remnants from earlier mining activities and
undeveloped zones of medium grade material which are economic to mine at
prevailing gold prices. Approximately 1.6 kilometres of the 22 Level haulage has
already been mined and equipped; on-going development (excavation) towards the
north-west is expected to reach Lima and complete the remaining 1.4 kilometres
distance to Lima Shaft by the end of 2014.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="FONT-VARIANT: normal; FONT-STYLE: normal; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">&nbsp;</p>
<p style="FONT-VARIANT: normal; FONT-STYLE: normal; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal"><b>No.
6 Winze Project</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">This
project, which was recently approved by the new Blanket Board, will provide more
rapid access to the Blanket ore body below 22 Level by deepening the existing
No. 6 Winze. An existing Double Drum Winder is currently being upgraded and
refurbished and will be installed in a new winder chamber to be excavated on 18
Level. The winze, from 120m above 22 Level, will be widened to accommodate the
tipping station for the two x 3 tonne ore skips, and the shaft will then be sunk
down to 1,080m with stations and main haulage levels being developed on 870m (26
Level) and 1,000m (30 Level) and with the skip loading station at 1060m. Ore and
development waste will then be hoisted up the deepened No. 6 winze to 22 Level
where it will be tipped into the No 4 shaft system for crushing and hoisting to
surface via the No 4 Shaft. The capital cost of this project is estimated to be
US $4.4 million, which will be funded from Blanket's internal cash flows.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">Work
on this project has commenced and it is expected that this project will be
completed in late 2015. Once complete, management expects that production from
the Blanket ore body below 22 Level will progressively increase to approximately
600 tonnes of ore per day. This production will be in addition to the continued
target production from other areas of Blanket mine of 1,300 tonnes of ore per
day from early 2015.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">It
is anticipated that the above drilling program will lead to a complete
reassessment of Blanket's resource base and provide an opportunity to review the
mine's production strategy, specifically in terms of further increases in
production beyond 1,000 tonnes per day and the requirement for additional
infrastructure to achieve such incremental production.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">A
target production rate of 76,000 oz. gold per annum in 2016 has been set as a
goal to be achieved following the above exploration program, although the
achievement of this goal will depend on the outcome of exploration and the
prevailing investment climate in Zimbabwe.</font></p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Blanket's
other exploration efforts are currently focused on the GG and Mascot Projects
that are within trucking distance of the Blanket plant. The status of these
properties is as follows:</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
GG Project</b></p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">Drilling
programs were carried out at GG during 2005/6. Seventeen diamond cored holes
were drilled amounting to 4,751 metres of drilling. <font style="COLOR: black">Two
zones of potentially economic gold mineralization have been established down to
a depth of approximately 200 meters each with a strike of approximately 150
metres. A prospect shaft is currently being sunk to a depth of 120 metres below
shaft collar and </font></font>underground development is planned for the 60m
and 90m and 120m levels<font style="COLOR: black; FONT-SIZE: 11pt"> to expose
the extent of the mineralization and to facilitate a more detailed evaluation,
sampling and mine planning. It is intended to truck any payable material
approximately 7 kilometres to the Blanket plant for processing.</font></p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><font style="COLOR: black; FONT-SIZE: 11pt">Work
commenced on sinking a shaft in the third quarter of 2012 and the shaft has now
reached a depth of 90m against a target of 120 m. </font>During shaft sinking
operations, the shaft encountered a mineralized quartz shear with a near
vertical orientation. As the shaft sinking extended below 40m, this quartz shear
swelled and occupied the full width of the shaft. This zone of mineralisation
has persisted down to 60m and on assay returned an average grade of 6.0g/t gold.
The sulphide intensity of this mineralised shear exposed by the shaft between
the 60m and 90m levels appear to have weakened but the shear structure remains
intact. Underground diamond drilling will be undertaken to evaluate the
mineralisation of this structure.</p>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Horizontal
development has commenced on the 60m level, cubbies have been mined to allow for
diamond drilling of the identified mineralised zones and three holes have been
drilled, all of which made positive intersections. The excavation of the station
at the 90m level has commenced and once completed the shaft will continue to be
sunk to its targeted depth of 120m below shaft collar. Further diamond drilling
is in progress to allow for a better understanding of the geometry of the
identified zones. 3,000m of diamond drilling is planned from the 60m level.</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Investment
in the GG project to date has been US$626,000 which has been funded from
Blanket's internal cash flows.</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mascot, Penzance and Eagle Vulture (collectively the Mascot Project)</b></p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Mascot Project Area comprises of three existing shafts (Mascot, Penzance and
Eagle Vulture) extending down to depths of between 140 metres and 450 meters and
other surface infrastructure, much of which is in need of extensive
rehabilitation. Each of these shafts operated until the mid-1960'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
believes that the application of modern exploration and processing techniques
may allow some or all of these shafts to operate profitably on a sustainable
basis. Priority has been given to the rehabilitation and installation of
infrastructure at Mascot and Eagle Vulture shafts. Work at Penzance has been
deferred pending completion of work and underground development at Eagle Vulture
and Mascot.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">Blanket
carried out a geological assessment of these claims which was followed up by a
diamond drilling program that established both the continuity of the mineralized
shoots and the presence of mineralized blocks that were left behind by the early
miners. Each of the above mines is located on a discrete shear zone which
displays broadly similar characteristics as the Blanket ore shoots.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b><i>Mascot</i></b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b><i>&nbsp;</i></b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Mascot
was previously mined down to approximately 300 metres, exploiting an ore body
which narrowed continuously with depth. The decrease in the extent of the mined
out ore at depth is thought to have been the result of limitations on mining
localised low ore grades and thereby not exposing the full extent of the
mineralized zone. Drilling undertaken by Blanket has indicated the existence of
two further mineralised zones, one on either side of the mined out area.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">During
the second quarter of 2012, following the installation of the ZESA electricity
connection, surface infrastructure was installed (headgear, winder house and
winder, electricity substation and reticulation, and a 1,000cfm compressor) and
the shaft was re-accessed down to 120 metres and found to be in reasonably good
condition.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">During
the third quarter of 2012 work focussed on re-equipping the shaft: rope guides
were installed down to 120metres, the ladder-ways and all station platforms were
installed and the installation of air, water and pump lines is 90% complete.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Underground
development commenced in November 2012 simultaneously on 1 and 2 levels towards
the two new mineralised zones which have been identified by surface drilling.
44m has been advanced from the shaft both east and west.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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<p style="TEXT-ALIGN: justify; FONT-VARIANT: normal; FONT-STYLE: normal; TEXT-INDENT: 0px; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">&nbsp;</p>
<p style="TEXT-ALIGN: justify; FONT-VARIANT: normal; FONT-STYLE: normal; TEXT-INDENT: 0px; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">Investment
to date at Mascot has been U$$338,000, which has been funded from Blanket's
internal cash flows.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b><i>Eagle
Vulture</i></b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Eagle Vulture mine was previously mined down to approximately 100 metres below
surface and is the most developed property at the Mascot Project Area. It is a
"pinch and swell" ore-zone structure characterized by a cherty quartz vein.
This shaft has now been refurbished down to the shaft bottom and development
work towards the ore-zone strike extremities commenced in the first quarter of
2012. The development plan at Eagle Vulture is to advance through waste material
towards a mineralised zone that has been identified by surface drilling.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Investment
to date at Eagle Vulture has been US$139,000, which has been funded from
Blanket's internal cash flows.</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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      <td style="WIDTH: 36pt">4.2</td>
      <td style="TEXT-ALIGN: justify">Nama Property, Zambia</td>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">On
May 1, 2008, an NI 43-101 compliant report was prepared on the Nama property -
which is owned by the Company's wholly owned subsidiary Caledonia Nama Limited
("Nama"). The Report (the "Nama Report") was prepared for the Company by
Applied Geology &amp; Mining (Pty) Ltd. an independent geological consulting
company based in South Africa and can be viewed on www.sedar.com or on the
Company's website: www.caledoniamining.com. David Grant Pr.Sci. Nat., C.Geol,
the author of the Nama Report was the Company's Qualified Person with respect
to the information contained in the Report.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Nama property lies on the north-western flank of the Zambian Copperbelt and has
potential for high tonnage, lower-grade cobalt-copper-nickel mineralization. The
property is located in the Solwezi District, of the North-Western Province of
Zambia, adjoining the border of the Democratic Republic of Congo.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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 mineralization 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
mineralization.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Company 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 -
predominantly on the A, B, C and the D anomalous cobalt areas. The drilling
amounted to 323 reverse circulation holes totaling 38,119 metres followed by
five diamond drill holes totaling 1,445 m. 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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Current
Status of Licences</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 11.5pt; FONT: 11pt/11.55pt Times New Roman, Times, Serif">On
September 17, 2008 Caledonia's Zambian subsidiary Caledonia Nama Limited was
granted four contiguous 25 year Large Scale Mining Licenses replacing the
previous Prospecting and Retention Licences held. They cover an area of
approximately 800 square kilometers on the northern extension of the Zambian
Copperbelt. They lie immediately northwest of the operating Konkola Copper mine
and adjoin the large scale mining licence area of the Vale/African Rainbow
Minerals joint venture where a new copper mine has recently been commissioned.</p>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 11.5pt; FONT: 11pt/11.55pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 11.5pt; FONT: 11pt/11.55pt Times New Roman, Times, Serif">The
Zambian Development Agency has also granted Nama a 10 year investment license
which provides for 10 years of income tax concessions, commencing effective
April 1, 2008 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: 11pt Times New Roman, Times, Serif">On September
24, 2012 Caledonia announced that, following discussions with the Zambian Mines
Development Department (the "Department"), Caledonia must comply with
certain conditions to continue to hold the Nama Licences. These conditions are:</p>
<p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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      <td style="WIDTH: 18pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">Compliance
        with all the conditions of grant of the Large Scale Mining Licenses</font></td>
    </tr>

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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 18pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">An
        undertaking, in writing, to the Ministry of Mines, Energy and Water
        Development that Caledonia will remedy all non-compliant conditions of
        Grant</font></td>
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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 18pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td><font style="FONT-SIZE: 11pt">Commencement of cobalt production by
        30th June 2013;</font></td>
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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 18pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td><font style="FONT-SIZE: 11pt">Submission of an updated copper sulphide
        ore resource and reserve statement and associated feasibility study and
        program of operations by 30th June, 2013;</font></td>
    </tr>

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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 18pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td><font style="FONT-SIZE: 11pt">Commencement of copper sulphide resource
        exploitation by 31st March 2015;</font></td>
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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 18pt"><FONT STYLE="font-family: Symbol">&#183;</FONT></td>
      <td><font style="FONT-SIZE: 11pt">Submission of regular reports on
        progress of technical studies to treat cobalt ore which is not amendable
        to traditional processing methods</font></td>
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</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Further
discussions have been held with the Department to clarify the precise terms of
certain of these conditions. Caledonia intends to comply with these conditions
and believes that its proposed course of action will do so.</p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Types of
Mineralization at Nama</b></p>
<p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Cobalt
Mineralization</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">Exploration
activities have defined three main styles of mineralization in the Nama Licence
area:</p>
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    <tr style="VERTICAL-ALIGN: top">
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      <td style="WIDTH: 36pt">a)</td>
      <td>"A-type" mineralization - Co and Cu attached to Fe and Mn oxides
        in friable decomposed rocks ;</td>
    </tr>

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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 36pt">b)</td>
      <td>"C<sup>S</sup>-Type" mineralization - Co occurs with Fe oxides in
        sandstones/siltstones and associated surface ferricrete accumulations.</td>
    </tr>

</table>
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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 36pt">c)</td>
      <td>"C<sup>D</sup>-Type" mineralization - Co occurs in ferricrete
        crusts - oxidized and leached rock capping over igneous dykes</td>
    </tr>

</table>
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      <td style="WIDTH: 18pt"></td>
      <td style="WIDTH: 36pt">d)</td>
      <td>"D-Type" mineralization - Characterised by Co-enriched hematite
        and magnetite bodies which outcrop as massive deposits.</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Although
the existing "A-type" resource body, with its higher 'oxide' 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 associated iron and manganese enrichments make this a 'hybrid
style' of mineralization. Metallurgical work on this Type A hybrid material
has resulted in the development a metallurgical process route which will be
implemented during the course of 2013. In view of the fact that Type A Co ores
have not previously been exploited on the Copperbelt, the process plant will be
build up in two phases with an eventual target monthly throughput rate of 60,000
tonnes so that refinements can be implemented as and when they are developed.
Under the current economic conditions only the Type A deposits are considered to
be economically viable.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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<p style="TEXT-ALIGN: justify; FONT-VARIANT: normal; FONT-STYLE: normal; TEXT-INDENT: 0px; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">&nbsp;</p>
<p style="TEXT-ALIGN: justify; FONT-VARIANT: normal; FONT-STYLE: normal; TEXT-INDENT: 0px; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal"><b>Ore
Shale hosted Copper deposits</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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 North (Lubambe) mining property. The Ore Shale is known from previous
shallow drilling to extend into the Nama license for a distance of at least 4 km
from its eastern boundary. The neighboring Nchanga and Lubambe Mines have both
defined and are mining substantial copper resources on their properties. The
exploration activities in 2011 at Nama resulted in the definition of two
resource targets (being "Nama Copper" and "Kafwira") characterized as
belonging to the Ore Shale-hosted style of copper mineralization</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><b>2011
Exploration program</b></p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Objectives</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Nama Copper Target area was identified as a priority target for typical Copper
Belt Ore Shale primarily in view of its proximity to the neighboring Lubambe
mine. The primary objective of the 2011 exploration program was to test for the
presence of the Ore Shale in the target area by drilling five widely spaced
vertical diamond core holes. A secondary objective was to establish the economic
potential of this portion of the Ore Shale, a unit which is well mineralized on
the adjacent mining properties of the Lubambe and Nchanga mines.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Work
Done</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Drilling
commenced in March 2011 and a total of 5,352 metres was drilled over 8 months.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Ore
Shale Results</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">All
five boreholes intersected the Ore Shale, the intersection depths being between
300 m and 1,460 m. The Ore Shale intersected was considerably deeper than
anticipated from the available data, owing to a major fold structure which
caused the strata in the licence area to plunge some 600 metres deeper.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Typical
Ore Shale intersected in these holes is finely laminated shale with minor ore
minerals and partial oxidation along shears. Based on the low copper values
intersected in the Ore Shale by the five drill holes, the Company's geologists
have recommended against further drill testing of the deep Ore Shale along the
fold structure in favor of shallower copper mineralization which is considered
to be of greater economic interest.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">In
two boreholes copper mineralization was noted in a zone of alteration
immediately above the Ore Shale. This zone of alteration (the "Alteration
Zone") is quite distinct from the Ore Shale style of mineralization.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>The
Alteration Zone</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">A
zone of pervasive alteration containing copper sulphides was first intersected
in borehole NKC 03 at a depth of about 300 to 400 metres and about 600 metres
above the Ore Shale. In all, a total thickness of 117 metres was erratically
mineralized of which a more consistent zone of 56 metres was found to have a
weighted average content of 0.48% copper. This copper mineralization appears to
be unique in this area of the Zambian Copperbelt both in terms of the style and
the age of the rocks affected. Although the grade is relatively low, the sheer
volume of rock affected results in an overall copper content greater than most
economic Ore Shale intersections. The size of the Alteration Zone together with
the quantity of copper contained supports the conclusion that the Alteration
Zone is a major copper-bearing system which has reacted with a large volume of
rock and hence has the potential to be a substantial economic resource.</p>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Boreholes
NKC 04 and 05 were drilled so as to intersect a shallower portion of the Ore
Shale. Both holes intersected a zone of alteration immediately above the Ore
Shale. These intersections of the Alteration Zone have similar characteristics
to those observed in NKC 03, to the extent that they are regarded as being part
of a widespread style of alteration. Although the weighted average grades are
uniformly low, copper values as high as 6% Cu occur where the mineralization
occurs in fracture vein filings. A distinctive feature of the Alteration Zone is
that, unlike other copper mineralization in the region, this zone is not
enriched in cobalt.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>2012
Exploration Program</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Company conducted a program of drilling - and related work - that continued
into 2013 on account of technical difficulties and the onset of the rainy
season. It consisted of 21 holes drilled for a total of 10,903 meters.<font style="COLOR: black">
A zone of copper mineralization approximately 1300 metres on strike by 750
metres down dip was identified by the drilling. The mineralization is in the
form of an alteration zone immediately above the well-known Ore Shale of the
Copperbelt. The alteration zone is a bleached arkose and has a width of between
5 metres and 45 metres in which mineralization occurs as disseminated
chalcopyrite.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
2012 work program identified a breccia zone which has displaced a portion of the
mineralised zone resulting in a partial loss of mineralised zone. In-fill
drilling on the north-eastern and north-western limits of the target area also
identified that the grade and thickness of the mineralised zone has decreased in
those areas.</p>
<p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Percussion
drilling will be undertaken on the identified zone in 2013 to improve resource
definition close to surface. Caledonia expects to issue a NI 43-101 compliant
copper resource and reserve statement by June 30, 2013 and a feasibility study,
by the end of 2013, on the possible mining of near-surface oxide material.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Approximately
2,400m of diamond drilling will be carried out on additional zones of
mineralisation that have been identified to the west and south of the
mineralised zone and a further 5,000m of diamond drilling will be commenced on a
broad copper geochemical anomaly which has been identified further to the west
of the identified zone.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
budgeted cost of the 2013 exploration program, the preparation of the NI 43-101
and the feasibility study is approximately US$2.2 million, which will be funded
from Caledonia's cash on hand.</p>
<p style="TEXT-INDENT: 0.5in; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Dr.
Pearton, BSc Eng. (Mining Geology), PhD (Geology), and Fellow of the Geological
Society of South Africa, is Caledonia's VP Exploration and a "Qualified
Person" as defined by NI 43-101, is the Company's Qualified Person with
respect to the Nama Property and consents to the Nama information in the form
and context in which it appears on pages 13 to 16 inclusive.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/11.55pt Times New Roman, Times, Serif"><b>4.4
Eersteling Gold Mining Company Limited ("EGMC")</b></p>
<p style="MARGIN: 0px; FONT: 11pt Arial, Helvetica, Sans-Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 11.5pt; FONT: 11pt Times New Roman, Times, Serif">The
Eersteling Gold Mine, owned by EGMC, a wholly owned subsidiary of the Company,
remains on care and maintenance. No additional impairment has been made against
the carrying value as management believe the realisable value of the assets
exceeds the carrying value recorded in the annual financial statements.</p>
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<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; RISK FACTORS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">In
addition to the other information in this Form the following risks should be
considered:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mineral Exploration and Development</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">The
Company'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.
Further development of the properties will only proceed upon obtaining
satisfactory exploration results. Mineral exploration and development involve a
high degree of risk and few properties which are explored are ultimately
developed into producing mines. 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. 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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
long-term profitability and sustainability of the Company's operations will be
in part directly related to the cost and success of its exploration programs 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.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Operating Hazards and Risks</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">Mineral
production and exploration involves many risks, which even a combination of
experience, knowledge and careful evaluation may not be able to overcome. 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 and possible
legal liability for any and all damage. Fires, power outages, labor disruptions,
flooding, explosions, cave-ins, landslides and the inability to obtain suitable
or adequate machinery, equipment or labor are some of the risks involved in the
operation of mines and the conduct of exploration programs. 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.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Economics of Developing Mineral Properties</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">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. 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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
marketability of any minerals acquired or discovered may be affected by numerous
factors which are beyond the Company'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. Depending on the price of minerals produced, the Company may
determine that it is not commercially feasible to commence or continue
commercial production.</p>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b><i>&nbsp;</i></b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Environmental Factors and Regulations</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">All
phases of the Company's operations will be subject to environmental and other
regulations, pursuant to the laws and regulations of the countries in which they
are located. 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. There is no assurance that future
changes in environmental regulations, if any, will not adversely affect the
Company's exploration programs or its operations. There is no assurance that
regulatory and environmental approvals will be obtained on a timely basis or at
all. 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. 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'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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
exploration programs 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. 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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Risks
of environmental damage at the Blanket Mine are regularly assessed and programs
are in place to ensure that environmental damage is not caused.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additional Financing</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b><i>&nbsp;</i></b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">The
Company does currently have sufficient financial resources to undertake further
planned exploration programs on its properties and, in particular, to undertake
all of the work which it has announced it wishes to do. 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. Failure to obtain additional financing could result in delay or
indefinite postponement of further exploration.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Metal Prices</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">The
Company's revenues are, and are expected to be, derived from the mining and
sale of minerals from its properties or interests related thereto. The price of
those commodities has fluctuated widely, particularly in recent years, and is
affected by numerous factors beyond the Company'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. The
effect of these factors on the price of base and precious metals, and therefore
the economic viability of the Company's operations cannot be accurately
predicted. Blanket'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>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Competition and Agreements with Other Parties</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">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 it does. Competition could adversely affect the
Company's ability to acquire suitable properties for exploration in the
future.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Governmental Regulation</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">Exploration
and development of the Company's properties will be affected to varying
degrees by:</p>
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      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">government
        regulations relating to such matters as environmental protection,
        health, safety and labor;</font></td>
    </tr>

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      <td style="WIDTH: 36pt"><font style="FONT-SIZE: 11pt">(ii)</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">mining laws;</font></td>
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      <td style="WIDTH: 3pt"></td>
      <td style="WIDTH: 36pt"><font style="FONT-SIZE: 11pt">(iii)</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">restrictions
        on production; price controls; tax increases;</font></td>
    </tr>

</table>
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    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 3pt"></td>
      <td style="WIDTH: 36pt"><font style="FONT-SIZE: 11pt">(iv)</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">maintenance
        of claims;</font></td>
    </tr>

</table>
<table style="MARGIN-TOP: 0px; FONT: 12pt/13pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 3pt"></td>
      <td style="WIDTH: 36pt"><font style="FONT-SIZE: 11pt">(v)</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">tenure;</font></td>
    </tr>

</table>
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    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 3pt"></td>
      <td style="WIDTH: 36pt"><font style="FONT-SIZE: 11pt">(vi)</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">expropriation
        of property; and</font></td>
    </tr>

</table>
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    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 3pt"></td>
      <td style="WIDTH: 36pt"><font style="FONT-SIZE: 11pt">(vii)</font></td>
      <td style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 11pt">the
        obtaining and maintaining of required permits and licences.</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 39pt; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">There
is no assurance that future changes in such regulation, if any, will not
adversely affect the Company's operations.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Government
approvals and permits are required in connection with the exploration activities
proposed for the various properties. To the extent such approvals are required
and not obtained, the Company's planned exploration activities may be delayed,
curtailed, or cancelled entirely.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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.
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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Amendments
to current laws, regulations and permitting requirements affecting mineral
exploration and mining activities could have a material adverse impact on the
Company's operations and prospects.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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. Compliance with governmental regulations is included in the
Company'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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Claims Titles and Indigenous laws</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 12pt 0px 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">As
the Company's properties and efforts are all in South Africa, Zimbabwe and
Zambia, they are subject to the indigenization (Black Empowerment) laws of those
countries. Zimbabwe's Indigenisation laws have been fully satisfied. The
Company could, however, be forced to sell further 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, if the
applicable laws are changed.</p>
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<p style="TEXT-ALIGN: justify; MARGIN: 12pt 0px 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">Other
parties may dispute the Company'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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">The
Company currently has sufficient experienced employees to carry out all of its
announced current plans. 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. Hiring and retaining skilled
executives, consultants, contractors and employees in Southern Africa is a
significant problem at the present time.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Conflicts of Interest</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">There
are no existing material conflicts of interest between the Company and any of
its directors or officers. However, certain directors and officers of the
Company are directors, officers and/or shareholders of other companies,
including companies engaged in mineral exploration. 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. Conflicts of interest affecting the
directors and officers and senior management of the Company will be governed by
the applicable laws. 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 2011 there were no
notified or identified conflicts of interest between the Company and its
directors or senior management.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><b>(l)</b>&nbsp;<b>&nbsp;&nbsp;&nbsp;</b>&nbsp;&nbsp;&nbsp;&nbsp;
<b>Foreign Currency risk</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 13.75pt; FONT: 11pt Times New Roman, Times, Serif">As
Caledonia operates in an international environment, some of Caledonia'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'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's consolidated financial statements.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 13.75pt; FONT: 11pt 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 Caledonia and may also
affect the carrying amount of Caledonia's assets and the amount of
shareholders' equity.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 13.75pt; FONT: 11pt Times New Roman, Times, Serif"><font style="COLOR: black">Caledonia
has certain financial assets and liabilities denominated in foreign currencies.</font><font style="LETTER-SPACING: -0.1pt">
Caledonia does not use any derivative instruments to reduce its foreign currency
risks.</font></p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIVIDENDS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 6pt 4.55pt 6pt 0px; FONT: 11pt Times New Roman, Times, Serif">There
are no restrictions on the Company which would prevent it from paying dividends.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">On
January 25, 2013 the Company's Board of Directors declared a dividend of
$0.005 (1/2 cent) Cdn. per share. The dividend was paid on February 22, 2013 to
the shareholders of record as at February 8, 2013.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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<p style="TEXT-ALIGN: justify; FONT-VARIANT: normal; FONT-STYLE: normal; TEXT-INDENT: 0px; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">&nbsp;</p>
<p style="TEXT-ALIGN: justify; FONT-VARIANT: normal; FONT-STYLE: normal; TEXT-INDENT: 0px; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">Caledonia
will continue to maintain its strong financial position so that it can implement
its stated growth strategy and retain the flexibility to take advantage of any
further opportunities that may arise without the need to raise third party
finance. The Caledonia Board will assess further dividend payments at least
annually in light of Caledonia's financial performance and financial resources
at that time.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CAPITAL STRUCTURE</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -36pt; MARGIN: 0px 0px 0px 36pt; FONT: bold 11pt/12pt Times New Roman, Times, Serif">7.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Capital</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -36pt; MARGIN: 0px 0px 0px 36pt; FONT: 11pt/12pt Times New Roman, Times, Serif"><font style="FONT-WEIGHT: normal">&nbsp;</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">The
authorized capital of the Company consists of an unlimited number of Preference
Shares - none of which are issued - and an unlimited number of Voting Common
Shares - of which </font>517,061,780<font style="FONT-SIZE: 11pt">, were
issued as of 28 March, 2013. All of the Voting Common Shares have equal voting
and other rights and restrictions and rank <i>pari passu </i>with each other.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">During
2012 the Company issued a total of 13,912,500 shares pursuant to the exercise of
share purchase options by eight option holders - all at an exercise price of
$0.07 per share. The Company received proceeds from the exercise of the options
totaling $973,875</font><font style="FONT-SIZE: 8pt">.</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">At
a Special Meeting of the shareholders of the Company held January 24, 2013 the
shareholders resolved to consolidate the Company's voting common shares on the
basis of one post-consolidation voting common shares for every 10
pre-consolidation voting common shares. The consolidated shares will be called
for trading on the various securities markets on which the Company's shares
trade on April 12, 2013. Shareholders have been asked to submit the share
certificates they hold representing non-consolidated shares to be exchanged for
certificates representing consolidated shares.</p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; MARKET FOR SECURITIES</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">8.1</td>
      <td style="TEXT-ALIGN: justify">Trading Price and Volume</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">The
Common Shares of the Company are quoted for trading in the U.S. on the NASDAQ
OTC (Over-the-Counter) Bulletin Board and, since October 2011, on the OTCQX, and
on the AIM Market in London since June 27, 2005. The principal marketplace for
the Company is the listing of the shares on the Toronto Stock Exchange. During
the year January 1, 2012 - December 31, 2012 47,481,478 shares of the Company
traded on the Toronto Stock Exchange at prices that ranged between a high of
$0.135 and a low of $0.06 per share. On a monthly basis the 2012 trading details
on the Toronto Stock Exchange are as follows</font><font style="FONT-SIZE: 8pt">:</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 11pt Times New Roman, Times, Serif" cellSpacing="0" cellPadding="0">

    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; WIDTH: 23%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Date</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 23%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>High</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 21%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Low</b></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 33%; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt"><b>Volume
        Traded</b></font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/12</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.105</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.090</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">1,760,124</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/11</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.115</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.090</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">9,009,831</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/10</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.100</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.085</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">5,373,259</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/09</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.095</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.085</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2,278,922</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/08</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.110</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.075</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">5,564,568</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/07</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.080</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.060</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2,151,271</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/06</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.085</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.065</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2,000,175</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/05</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.090</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.065</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">4,100,211</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/04</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.095</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.070</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">3,017,818</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/03</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.135</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.085</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">5,465,586</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/02</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.125</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.110</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2,500,590</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">2012/01</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.130</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">0.080</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 11pt">4,259,123</font></td>
    </tr>

</table>
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<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIRECTORS AND OFFICERS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">9.1</td>
      <td style="TEXT-ALIGN: justify">Name, Occupation and Security Holdings of
        Directors and Officers</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="FONT-VARIANT: normal; FONT-STYLE: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: #000000 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-TOP: #000000 1pt solid; BORDER-RIGHT: #000000 1pt solid" vAlign="center" width="164" align="middle">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Name,
        Office Held and</b></p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif"><b>Municipality
        of Residence</b></p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
      </td>
      <td style="BORDER-BOTTOM: #000000 1pt solid; PADDING-BOTTOM: 2.9pt; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-TOP: #000000 1pt solid; BORDER-RIGHT: #000000 1pt solid" vAlign="center" width="311" align="middle"><b>Principal
        Occupations During Past Five Years</b></td>
      <td style="BORDER-BOTTOM: #000000 1pt solid; TEXT-ALIGN: center; PADDING-BOTTOM: 2.9pt; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-TOP: #000000 1pt solid; BORDER-RIGHT: #000000 1pt solid" vAlign="center" width="164" align="middle"><b>Positions
        held Since</b></td>
      <td style="BORDER-BOTTOM: #000000 1pt solid; TEXT-ALIGN: center; PADDING-BOTTOM: 2.9pt; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-TOP: #000000 1pt solid; BORDER-RIGHT: #000000 1pt solid" vAlign="center" width="165" align="middle">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Number
        of Shares</b></p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>Beneficially
        Owned,</b></p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif"><b>Controlled
        or Directed as of March 1, 2013</b></p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Stefan
        E. Hayden <sup>(3)(4)(5)(6)(7)</sup> President, Chief Executive Officer
        &amp; Director</p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">Johannesburg,
        South Africa</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-BOTTOM: 2.9pt; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311"><font style="FONT-SIZE: 11pt">President
        and Chief Executive Officer of the Company and Director of all the
        Company's subsidiary companies.</font></td>
      <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; PADDING-BOTTOM: 2.9pt; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164"><font style="FONT-SIZE: 11pt">1997</font></td>
      <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; PADDING-BOTTOM: 2.9pt; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165"><font style="FONT-SIZE: 11pt">10,380,000</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">James
        Johnstone <sup>(1)(6)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Director</p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">Gibsons,
        British Columbia, Canada</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">Retired.
        Formerly Chief Operating Officer of the Company and Director of several
        of its subsidiary companies.</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">1997</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">100,000</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt/6pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">F.
        Christopher Harvey, <sup>(1)(6)</sup> Director, Oakville, Ontario,
        Canada</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt/6pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">Retired.
        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="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt/6pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">1993</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">1,103,300</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt/6pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Carl R.
        Jonsson,<sup>(2) (3) (4) (5)</sup></p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">Chairman,
        Director &amp; Secretary, Vancouver, British Columbia, Canada</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt/6pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">Lawyer.
        Principal of Tupper, Jonsson &amp; Yeadon, Lawyers, of Vancouver,
        Canada.</p>
        <p style="MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt/6pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">1992</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px 0px 2.9pt; FONT: 11pt Times New Roman, Times, Serif">559,469</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Robert
        W Babensee <sup>(1)(2)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Director,
        Toronto, Ontario, Canada</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Retired
        Chartered Accountant. Formerly an assurance specialist in the Canadian
        accounting firm of BDO Canada LLP (retired December 31, 2004). Formerly
        the CFO of Golden China Resources, a company whose shares were listed on
        the TSX Venture Exchange.</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">2008</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">200,000</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Steven
        Curtis <sup>(5)(7)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">VP
        Finance, Chief Financial Officer &amp; Director, Johannesburg, South
        Africa</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Financial
        Director Avery Dennison SA (Pty) Ltd. until March 2006. Since then, VP
        Finance, Chief Financial Officer and Director of the Company and
        Director of certain of its subsidiary companies.</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">2006</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">2,700,000</p>
      </td>
    </tr>
    <tr>
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Richard
        Patricio<sup>(7)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Director,
        Toronto, Ontario</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Canada</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Solicitor</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">2012</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Nil</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Leigh
        Wilson<sup>(1)(7)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Director,
        Rowayton, Connecticut, USA</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Principal
        of Third Wave Associates, Chairman of the Victory Portfolios, and
        Director of Mutual Fund Directors Forum</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">2012</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Nil</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">John
        Kelly<sup>(1)(7)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Director,
        Pound Ridge, New York, USA</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="FONT-VARIANT: normal; FONT-STYLE: normal; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">Chief
        Operating Officer of Liquidnet Holdings, Inc.</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">2012</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Nil</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Mark
        Learmonth<sup>(7)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Vice-President,
        Business Development, Johannesburg, South Africa</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">Vice-President
        of the Company focused on investor and shareholder relations and
        corporate development</td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; FONT-VARIANT: normal; FONT-STYLE: normal; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">2008</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">920,000</p>
      </td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: black 1pt solid; BORDER-LEFT: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Trevor
        Pearton<sup>(6)</sup></p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Vice-President
        Exploration Johannesburg, South Africa</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="311">
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Vice-President
        of the Company acting as Exploration Manager of the Company and its
        subsidiaries</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="164">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; FONT-VARIANT: normal; FONT-STYLE: normal; MARGIN: 0px; FONT-FAMILY: 'Times New Roman', Times, Serif; FONT-SIZE: 11pt; FONT-WEIGHT: normal">2004</p>
      </td>
      <td style="BORDER-BOTTOM: black 1pt solid; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; BORDER-RIGHT: black 1pt solid" width="165">
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
        <p style="TEXT-ALIGN: center; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Nil</p>
      </td>
    </tr>

</table>
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      <tr>
        <td style="TEXT-ALIGN: center; WIDTH: 100%">&nbsp;</td>
      </tr>

  </table>
</div>
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  <table style="WIDTH: 100%" cellSpacing="0" cellPadding="0">

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          23<!-- Field: /Sequence -->
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      </tr>

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<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Directors and Officers, together, own 15,963,796 Voting Common Shares, being
3.1% of the issued Voting Common Shares.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><i>Notes:</i></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><i><sup>(1)</sup>
Member of Audit Committee, <sup>(2)</sup> Member of Compensation Committee, <sup>(3)</sup>
Member of Corporate Governance Committee, <sup>(4)</sup> Member of Nominating
Committee, <sup>(5) </sup>Member of Disclosure Committee; <sup>(6)</sup> Member
of Technical Committee; <sup>(7)</sup> Member of Strategic Planning Committee.</i></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
appointment of each of the Directors expires annually as of the date of the
Annual Meeting of the Company's shareholders - which is normally held in May
of each year.</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -36pt; MARGIN: 0px 0px 0px 36pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">9.2</td>
      <td style="TEXT-ALIGN: justify">Cease Trade Orders, Bankruptcies,
        Penalties or Sanctions</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -36pt; MARGIN: 0px 0px 0px 36pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">None
of the Company'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 - 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. In the case of each company Mr. Jonsson held the
positions incidental to his acting as the Solicitor for the companies:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 25.2pt">-</td>
      <td style="TEXT-ALIGN: justify">Director and Secretary, August 1987 -
        August 2003, of Global CT &amp; T Telecommunications Ltd. Cease Trade
        Order was issued against it for failure to file and distribute financial
        statements - which has not been rescinded.</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -25.2pt; MARGIN: 0px 0px 0px 25.2pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 25.2pt">-</td>
      <td style="TEXT-ALIGN: justify">Director and Secretary of Global Net
        Entertainment Corp. Cease Trade Order was issued against it for failure
        to file and distribute financial statements - which was rescinded when
        the financial statements were filed.</td>
    </tr>

</table>
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  &nbsp;
  <table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

      <tr style="VERTICAL-ALIGN: top">
        <td style="WIDTH: 0px"></td>
        <td style="WIDTH: 25.2pt">-</td>
        <td style="TEXT-ALIGN: justify">Director until February 4, 2005 of
          TelcoPlus Enterprises Ltd. Cease Trade Order was issued against it for
          failure to file and distribute financial statements - which was
          rescinded when the financial statements were filed.</td>
      </tr>

  </table>
  <table style="WIDTH: 100%" cellSpacing="0" cellPadding="0">

      <tr>
        <td style="TEXT-ALIGN: center; WIDTH: 100%">&nbsp;</td>
      </tr>

  </table>
</div>
<div style="PAGE-BREAK-BEFORE: always; MARGIN-TOP: 6pt">
  <table style="WIDTH: 100%" cellSpacing="0" cellPadding="0">

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        <td style="TEXT-ALIGN: center; WIDTH: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->
          24<!-- Field: /Sequence -->
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      </tr>

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<p style="TEXT-ALIGN: justify; TEXT-INDENT: 25.2pt; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0cm; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PROMOTERS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; INTEREST OF MANAGEMENT AND
OTHERS IN MATERIAL TRANSACTIONS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">None
of the Directors or Officers of the Company has any current - or within the
last three completed Financial Years - any direct interest in any material
transactions of the Company or its subsidiaries - other than as stated below
and other than Share Purchase Option Agreements that have been granted to them
- as detailed in Item 12 below - or with respect to the remuneration they
received for their services to the Company.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">During
2012 options were exercised by six of the Company's Directors and Officers as
a result of which they bought a total of 12,462,500 shares at an exercise price
of $0.07 per share - from which the Company received proceeds of $872,375.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">During
the year options held by three Directors as to 4,000,000 shares - exercisable
at $0.07 per share, expired without being exercised.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="MARGIN: 0px; FONT: 12pt/12pt Times New Roman, Times, Serif">Caledonia
also had the following related party transactions:</p>
<p style="MARGIN: 0px; FONT: 12pt/12pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 11pt Times New Roman, Times, Serif" cellSpacing="0" cellPadding="0">

    <tr>
      <td style="PADDING-LEFT: 6pt; WIDTH: 67%; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt; VERTICAL-ALIGN: top"><u>(Amounts
        in $000)</u></td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; WIDTH: 11%; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt; VERTICAL-ALIGN: bottom"><u>2012</u></td>
      <td style="PADDING-LEFT: 6pt; WIDTH: 11%; PADDING-RIGHT: 6pt; VERTICAL-ALIGN: top">
        <p style="TEXT-ALIGN: right; MARGIN: 0px; FONT: 12pt/12pt Times New Roman, Times, Serif"><u>2011</u></p>
      </td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; WIDTH: 11%; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt; VERTICAL-ALIGN: bottom"><u>2010</u></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">&nbsp;</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">$</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">$</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">$</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt"><font style="COLOR: black; FONT-SIZE: 11pt">Fees
        and allowances paid to a Corporation which provides the services to
        Caledonia of Stefan Hayden<sup>(1)</sup></font></td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">704</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">588</td>
      <td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1.4pt; PADDING-LEFT: 5.65pt; PADDING-RIGHT: 5.65pt; FONT-SIZE: 12pt; PADDING-TOP: 1.4pt" noWrap>552</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt"><font style="FONT-SIZE: 11pt">Rent
        for office premises paid to a company owned by members of the
        President's family</font></td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">43</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">48</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">49</td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt"><font style="FONT-SIZE: 11pt">Legal
        fees &nbsp;paid to a law firm of which&nbsp;&nbsp;the Chairman is a
        Principal</font></td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">95</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">97</td>
      <td style="TEXT-ALIGN: right; PADDING-LEFT: 6pt; PADDING-RIGHT: 6pt; FONT-SIZE: 12pt">58</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 0px 2cm; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><sup>(1)
</sup>Caledonia has an agreement with Epicure Overseas S.A. ("Epicure"), for
management services to be provided by Stefan Hayden, President and CEO.
Caledonia is required to pay a base annual remuneration and an expense
allowance, both adjusted for inflation, and bonuses, as set out in the
agreement. 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="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; MATERIAL CONTRACTS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
Company and its Subsidiaries did not enter into any material contracts during
the fiscal year January 1, 2012 - December 31, 2012 except:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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      </tr>

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<table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">(a)</td>
      <td style="TEXT-ALIGN: justify">the contracts executed with respect to the
        Indigenization of the Blanket Mine - detailed in Item 3.1(c);</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: -36pt; MARGIN: 0px 0px 0px 36pt; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: 11pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">(b)</td>
      <td style="TEXT-ALIGN: justify">Option agreements dated September 10, 2012
        were executed with 19 Directors and Officers of the Company, and
        Directors, Officers and employees of - and service providers to -
        subsidiaries of the Company. The options are all exercisable at and for
        $0.09 per share and expire September 10, 2017.</td>
    </tr>

</table>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; INTERESTS OF EXPERTS</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<table style="MARGIN-TOP: 0px; FONT: bold 12pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">13.1</td>
      <td><font style="COLOR: black; FONT-SIZE: 11pt">Experts named</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Julian
Verbeek, B.Sc. Geology, an independent consultant, was the Qualified Person for
the Rooipoort and resource calculations in the Table on page 16, as required by
National Instrument 43-101 of the Canadian Securities Administrators.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">Mr.
David Grant, C.Geol, FGS, Pr.Sci.Nat., an independent consultant was the
Qualified Person for the Nama Property in 2008 when he authored the Nama Report
referred to on page 11.</p>
<p style="MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">Mike
Robertson, Pr. Sci.Nat., and Bruno Bvirakre Pr.Sci.Nat., both consultants with
the MSA Group, are the "Independent Qualified Persons" for Blanket's
reserves and resources as required by National Instrument 43-1-1 of the Canadian
Securities Administrators.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif"><font style="FONT-SIZE: 11pt">Dr.
Pearton, BSc Eng. (Mining Geology), PhD (Geology), and Fellow of the Geological
Society of South Africa, is Caledonia's VP Exploration and a "Qualified
Person" as defined by NI 43-101, </font>is currently the Company's Qualified
Person with respect to the Blanket and Nama Properties.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">13.2</td>
      <td>Interests of Experts</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">The
named experts have no personal interests in any of the Company's properties.
Trevor Pearton is not independent as he is employed full-time by the Company as
its Vice-President Exploration. He holds options to purchase 1,050,000 shares of
the Company.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 11pt/13pt Times New Roman, Times, Serif">ITEM
14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ADDITIONAL INFORMATION</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<table style="MARGIN-TOP: 0px; FONT: bold 12pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">14.1</td>
      <td><font style="COLOR: black; FONT-SIZE: 11pt">Further Information</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">Further
specific information may be found in the Company's December 31, 2012 Audited,
Consolidated, Year-End Financial Statements and in its Annual MD &amp; A. These
documents may be viewed on SEDAR at http://www.sedar.com and on the Company's
website at www.caledoniamining.com 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's securities,
securities authorized for issuance under equity compensation plans. Information
is also contained in the Company's 2012 U.S. Securities Commission Form 20F
Annual Report which can be viewed on the SEC website at www.sec.gov.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">14.2</td>
      <td>Forward Looking Statements</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif"><b>&nbsp;</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 11.5pt; FONT: 11pt/11.55pt Times New Roman, Times, Serif">This
Annual Information Form contains certain forward-looking statements relating but
not limited to the Company's expectations, intentions, plans, and beliefs.
Forward-looking information can often be identified by forward-looking words
such as "anticipate", "believe", "expect", "goal", "plan",
"intend", "estimate", "could", "should", "may" and
"will" 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>
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<p style="TEXT-ALIGN: justify; MARGIN: 0px 0px 11.5pt; FONT: 11pt/11.55pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt 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.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt Times New Roman, Times, Serif">&nbsp;</p>
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      <td></td>
    </tr>

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<p style="TEXT-INDENT: -72pt; MARGIN: 0px 0px 0px 72pt; FONT: bold 12pt/13pt Times New Roman, Times, Serif">ITEM
15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AUDIT COMMITTEE INFORMATION</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">15.1</td>
      <td>Audit Committee Charter</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">Attached
as Schedule "A" is a copy of the Company's Audit Committee Charter -
adopted November 9, 2006.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">15.2</td>
      <td>Audit Committee Composition</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">The
Company's Audit Committee is comprised of directors Robert Babensee, James
Johnstone, Christopher Harvey, Leigh Wilson and John Kelly. Some information
with respect to them is given in Clause 10.1. They are all considered
independent and are all considered to be financially literate. Messrs.
Johnstone, Harvey, Wilson and Kelly are considered financially literate as a
result of their decades of business experience. 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. All members of the Audit Committee, 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 with 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="TEXT-INDENT: -36pt; MARGIN: 0px 0px 0px 36pt; FONT: bold 11pt/12pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="MARGIN-TOP: 0px; FONT: bold 11pt/12pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellSpacing="0" cellPadding="0" width="100%">

    <tr style="VERTICAL-ALIGN: top">
      <td style="WIDTH: 0px"></td>
      <td style="WIDTH: 36pt">15.3</td>
      <td>External Auditor Fees</td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">The
fees charged by the Company's external independent auditor, BDO Canada LLP,
Chartered Accountants for the last two completed fiscal years of the Company are
as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 11pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
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<p style="TEXT-INDENT: 0.5in; MARGIN: 0px; FONT: 12pt Times New Roman, Times, Serif">&nbsp;</p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman, Times, Serif" cellSpacing="0" cellPadding="0">

    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; WIDTH: 22%; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt"><i>Financial
        Year Ending</i></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt"><i>Audit
        Fees</i></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 20%; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt"><i>Audit
        Related Fees</i></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 19%; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt"><i>Tax
        Fees</i></font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; WIDTH: 19%; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-TOP: windowtext 1pt solid; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt"><i>All
        Other Fees</i></font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">December
        31, 2011</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">$261,772</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">Nil</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">Nil</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">Nil</font></td>
    </tr>
    <tr style="VERTICAL-ALIGN: top">
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; BORDER-LEFT: windowtext 1pt solid; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">December
        31, 2012</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">$342,790</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">Nil</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">$1,500</font></td>
      <td style="BORDER-BOTTOM: windowtext 1pt solid; TEXT-ALIGN: center; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; FONT-SIZE: 9pt; BORDER-RIGHT: windowtext 1pt solid"><font style="FONT-SIZE: 9pt">Nil</font></td>
    </tr>

</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 9pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0px; FONT: 9pt/13pt Times New Roman, Times, Serif">&nbsp;</p>
<p style="MARGIN: 0px">&nbsp;</p>

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