Mr. Mark Learmonth reports

CALEDONIA ENTERS INTO 6-MONTH GOLD PRICE HEDGE

Caledonia Mining Corp. has entered into a six-month cap-and-collar hedge over 15,000 ounces of production using a collar value of $1,050 (U.S.) per ounce and a cap value of $1,080 (U.S.) per ounce.

The hedge will provide Caledonia with greater certainty as to its cash flows in the period up to July, 2016, by when it is expected that operating cash flows at Blanket will benefit from the projected increase in gold production.

Blanket has completed the first year of a six-year investment program in terms of which it will invest $70-million (U.S.) over the years 2015 to 2021 with the objective of increasing production to approximately 80,000 ounces of gold by 2021. When the revised investment plan was announced in October, 2014, the anticipated capital investment in the three years 2015 to 2017 was $50-million (U.S.); it is now expected to be approximately $45-million (U.S.).

The hedge comprises a series of weekly contracts. If the gold price at the end of each contract falls below the collar value, Caledonia will receive the value of the shortfall below the collar multiplied by the hedged ounces. If the gold price at the end of each contract falls between the cap-and-the-collar value, Caledonia will pay to the hedge counterparty the excess over the collar value multiplied by the hedged ounces. If the gold price at the end of each contract exceeds the cap value, Caledonia will pay to the hedge counterparty the difference between the cap and the collar multiplied by the hedged ounces. There are no other fees or expenses arising in terms of the hedge. The hedge arrangement is a financial instrument between Caledonia and a financial counterparty: Blanket will continue to sell 100 per cent of its gold to Fidelity Printers and Refiners in Zimbabwe.

Caledonia intends to maintain its existing dividend policy of paying 1.125 U.S. cents per quarter.

We seek Safe Harbor.