Mr. Mark Learmonth reports

BLANKET PRODUCTION UPDATE AND 2012 OUTLOOK

Caledonia Mining Corp. has provided information on its gold production from the Blanket mine in Zimbabwe during fourth quarter 2011 which ended Dec. 31, 2011.

• 10,533 ounces of gold produced during fourth quarter 2011, representing an 8.1-per-cent increase on third quarter 2011 (9,743 ounces), and a 69-per-cent increase on fourth quarter 2010 (6,227 ounces);
• Total 2011 gold production was 35,826 ounces, a 102-per-cent increase over the annual gold production in 2010 of 17,707 ounces;
• Targeted 2012 annual gold production of 40,000 ounces.

Blanket production

The company is pleased to announce a successful year at the Blanket mine which produced 35,826 ounces of gold, an increase of 102 per cent over the previous year.

In accordance with the company's aim to continuously improve operations at Blanket, the following infrastructure, process and equipment investment programs were undertaken during the final quarter of 2011:

• Considerable work on the refurbishment of the level 14, 18 and 22 underground haulages continued throughout the fourth quarter and this is expected to be completed by the end of first quarter 2012. This program is essential to support and sustain the company's increased underground production.
• The installation of an automatic cyanide measuring and dosing system on the CIL circuit was commissioned. This installation is providing both better control over, and a detectable reduction in, cyanide usage per tonne of ore milled.
• Certain rectification and maintenance work on the 825-metre-deep No. 4 shaft was commenced during November, 2011. This work is expected to be completed by the end of February, 2012, and once completed will allow Blanket to increase the speed of the No. 4 shaft winder, thereby increasing hoisting capacity. As noted in the third quarter management's discussion and analysis (MD&A), this work may have an adverse effect on gold production in the first quarter of 2012.
• A belt scale was installed on the No. 1 conveyor belt so that all ore tonnages delivered from various ore sources such as the level 14 mid-shaft loading station, Lima, and in due course the satellite properties such as GG and Mascot, can be individually and accurately measured. The reprogrammed computerized recording system is expected to be commissioned during early February and the system is then expected to facilitate further metallurgical optimization.

Outlook

Following a year in which Caledonia has increased production at Blanket by 102 per cent to 35,826 ounces (2010 gold production was 17,707 ounces), the company is now confident that it will be able to achieve its targeted gold production of 40,000 ounces for the current financial year. Discussions with the government of Zimbabwe regarding the indigenization of the Blanket mine have continued.