CALEDONIA MINING CORPORATION Results for the second quarter ended 30 June 2012 ww.caledoniamining.com Company Presentation August December 2011 August 2012
Disclaimer This presentation does not constitute, or form part of, any offer to sell or issue or any solicitation of any offer to purchase or subscribe for, any shares in Caledonia, nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, or act as an inducement to enter into any contract or agreement thereto. Certain forward looking statements may be contained in the presentation which include, without limitation, expectations regarding metal prices, estimates of production, operating expenditure, capital expenditure and projections regarding the completion of capital projects as well as the financial position of the company. Although Caledonia Mining Corporation ( Caledonia ) believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be accurate. Accordingly, results could differ from those projected as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other business and operational risks. Accordingly, neither Caledonia, nor any of its directors, officers, employees, advisers, associated persons or subsidiary undertakings shall be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying upon this presentation or any future communications in connection with this presentation and any such liabilities are expressly disclaimed 2
Agenda Overview Operations Blanket Gold Mine, Zimbabwe Indigenisation at Blanket Exploration at Blanket Nama Base Metals Project Zambia Financials Conclusion 3
Results Highlights Q2 gold production - 11,560 oz 26% higher than Q1 2012 41% higher than Q2 of 2011 Q2 Cash costs US$547/oz 16% lower than Q1 2012 Q2 EBITDA - $9.19m Broadly similar to previous 3 quarters after deduction of US$1m Community donation Q2 Profit after tax - $5.5m $1.6m lower than Q1 2012 due to Indigenisation costs and higher taxation during Q2 Cash at 30 June 2012 - $18.3m undrawn Zimbabwe facility of US$2.4m 4
Results Highlights Gold production has almost quadrupled since Q1 2010 Q1 2012 production temporarily affected by maintenance work Strong and sustained increases in EBITDA Q2 2012 EBITDA is after US$1m indigenisation expense 5
Safety Intensive management interventions have resulted in a reduction in the TIIR. Total Injury Incident Rate is a measurement of all accidents that have occurred regardless of injury or not expressed per 200,000 man-hours worked. This includes accidents that could have caused injuries. 6
Blanket Gold Mine, Zimbabwe Gold Production Tonnes milled per quarter increases in 2011 as capital projects are completed Tonnes milled in Q1 2012 were lower as planned due to scheduled maintenance on No. 4 Shaft Tonnes milled in Q2 2012 returns to target rate of approximately 1,000tpd Blanket Mine Production Statistics Period Tonnes milled (t) Grade (g/t) Recovery (%) Gold Produced (oz) Q1 2011 61,437 4.02 92.2% 7,322 Q2 2011 60,913 4.52 92.9% 8,226 Q3 2011 85,442 3.81 93.1% 9,743 Q4 2011 90,967 3.86 93.4% 10,533 Higher grade in Q2 due to mine plan encountering higher grade zone in AR areas than expected. Grade expected to revert to the long term average of 3.83g/t. Improved gold recoveries due to recent investment, and also assisted by higher grades Q1 2012 83,353 3.67 93.2% 9,164 Q2 2012 90,315 4.24 93.9% 11,560 Source: Caledonia Q2 2012 MD&A 7
Blanket Gold Mine, Zimbabwe Costs Sustained reduction in cash costs per ounce Temporary increase in costs in Q1 2012 due to lower production and non-recurring consumable items 8
Blanket Gold Mine, Zimbabwe Cost Reductions due to Improved Efficiency Continuous investments since 2009 have substantially improved Blanket s operating efficiency No. 4 Shaft Expansion completed in late 2010 allows increased production, thereby spreading fixed costs over more production No 4 Shaft has a highly efficient, automated loading system which reduces hoisting costs Level18-22 Ore pass (completed Q3 2011) reduces multiple handling of ore: reduces costs and allows increased tonnage throughput Investments in milling and CIL circuits have increased recoveries and reduced the quantity of the consumables required to produce each ounce of gold o Cost /tonne processed fell from $29/t in Q1 of 2011 to $25.25/t in Q2 of 2012 o Cyanide usage (approx. $3,300/t delivered) reduced from 1.4Kg/t processed to 0.87Kg/t processed o Gold recovery increased from 92.0% in 2010 to 93.9% in Q2 of 2012 9
Blanket Gold Mine, Zimbabwe A Low-Cost African Gold Producer Blanket s cash costs are highly competitive Blanket s operations benefit from: o tight cost control o amenable mine environment, o efficient metallurgical plant o efficient labour structure Sources: Company Announcements In 2011 Blanket won EMA awards for Safety, Health and Environment 10
Indigenisation at Blanket Rapid progress to implement the Memorandum of Understanding 10% of Blanket to be donated to local community 41% of Blanket to be sold for US$30.09m Transaction documents have been signed: approval from Reserve Bank of Zimbabwe is the only remaining condition precedent outstanding Completion anticipated once the Reserve Bank Approval is received Caledonia has received its Certificate of Compliance Blanket is the first Indigenised Zimbabwean gold producer US$30.09 sale transaction is vendor-financed by Caledonia Reflects the absence of third party funding for Zimbabwean transactions Purchasers will repay their facilitation loans from 80% of their attributable Blanket dividends Outstanding facilitation loans attract interest at LIBOR plus 10% Further advance dividend payments to community of $4m prior to mid-2013 will temporarily affect Blanket s cash flows 11
Exploration at Blanket Work on L22 Haulage to Lima has recommenced following completion of No. 4 Shaft maintenance work Installation of ZESA electricity connections in Q2 now allows work to commence at Mascot and GG GG: shaft sinking work has commenced and will continue down to 120 metres Mascot: Shaft has been re-accessed down to 120metres and will be re-equipped Underground development work continues at Eagle Vulture Future contributions to production depends entirely on the outcome of underground exploration and development. 12
Exploration at Blanket Newly constructed contractor camp at GG (June 2012) 13
Exploration at Blanket GG: new concrete-lined shaft down to 15 metres (Aug 2012) GG: new headgear (Aug 2012) 14
Exploration at Blanket Mascot: new transformer and headgear (Aug 2012) Eagle Vulture: deposition of development waste (Aug 2012) 15
Nama Base Metals Project, Zambia Caledonia holds Licences covering over approximately 800 sq. km. adjacent to Konkola and Vale/ARM properties Konkola East licence area was the first target area: 5 holes drilled in 2011 identified a new copper-bearing mineralised zone 16
Zambian Base Metals Nama Substantial Copper-Cobalt Opportunity Caledonia holds Licences covering approx 800 sq. km. adjacent to Konkola and Vale/ARM properties 2011 drilling identified a new copper-bearing mineralised zone at Konkola East Target 17
Zambian Base Metals Nama Substantial Copper-Cobalt Opportunity Mineralisation identified in 2011 2012 work programme to date comprised further 12 holes and 4,970m of drilling 2012 work confirms the existence of a substantially larger mineralised zone ( OS2 ) than was identified in 2011 strike length of 1,300m and dip extent of 900m mineralisation intersected between 98m to 579m thickness of mineralised zone: 10 to 27m average copper grade: 0.52% Map is illustrative open to the west Further work has commenced on the identified OS2 mineralised zone Identify possible westward extension Improve confidence level 18
Summary Financials Summary Profit and Loss Summary Profit and Loss (C$'m) 3 Months to June 30 12 Months to 31 Dec 2011* 2012 2011* 2012 Revenues 12.0 18.6 23.2 36.1 Royalty -0.6-1.3-1.0-2.5 Operating costs -5.2-6.3-10.1-12.8 Depreciation -0.6-0.9-1.2-1.8 Gross Profit 5.6 10.1 10.8 19.1 Admin expenses -0.7-1.2-1.5-2.0 Share based payment - - -1.1 - Indigenisation donation - -1.0 - -1.0 Foreign exchange - 0.4-0.4 Operating Profit 4.9 8.3 8.3 16.4 Finance charges -0.0-0.0-0.2-0.1 Profit before tax 4.8 8.2 8.1 16.4 Income tax -2.0-2.7-3.3-3.8 Profit after tax 2.9 5.5-4.8 12.6 EPS (basic) (cents) 0.57 1.1 0.95 2.5 19 * Re-stated by re-allocating withholding taxes from Administrative expenses to Income Tax expense
Summary Financials Summary Balance Sheet Summary Balance Sheet (C$'m) Dec 31 June 30 2011 2012 Fixed Assets 34.2 35.5 Inventories 4.5 4.7 Prepayments 0.3 0.3 Trade receivables 3.7 4.6 Advance paid - 1.8 Cash and equivalents 9.7 18.3 Total current assets 18.2 29.7 Total Assets 52.4 65.2 Long term liabilities 7.8 7.9 Trade creditors 4.1 4.2 Bank overdraft 0.4 0.1 Total liabilities 12.4 12.2 Capital and reserves 40.0 52.9 Total equity and liabilities 52.4 65.2 20
Summary Financials Summary Cash Flow Summary Cash Flow (C$'m) 6 Months to June 30 2011 2012 Cash flow from operations 9.9 17.8 Indigenisation donation 0.0-1.0 Advance payment 0.0-1.8 Taxation paid -2.5-3.7 Net capital investment -5.2-2.8 Financing 1.7 0.2 Increase in cash 3.9 8.6 Cash b/fwd 1.1 9.7 Cash c/fwd 5.0 18.3 21
Conclusion Strong operational performance at Blanket Exploration/Development activity at Blanket is now accelerating ZESA connections now completed at Mascot and GG Scheduled No.4 Shaft maintenance completed: work on L22 Haulage has recommenced Blanket is strongly cash generative and can fund further growth Blanket has received its Indigenisation Compliance Certificate, which provides a more stable platform to plan and implement future growth Encouraging drilling results at the Nama Base Metals Project in Zambia Caledonia has sufficient cash to continue further work 22
Conclusion Superior Shareholder Returns Sources: Company Announcements 23
Contacts Caledonia Mining Website: www.caledoniamining.com Share Codes: TSE - CAL; OTCQX CALVF; AIM - CMCL Stefan Hayden, President and CEO Tel: +27 11 447 2499 Email: shayden@caledoniamining.com Mark Learmonth, Vice President Tel: +27 11 447 2499 Email: marklearmonth@caledoniamining.com Research: Edison Investment Research www.edisoninvestmentresearch.co.uk/research 24