ww.caledoniamining.com Minesite Forum, London 19 th May 2011
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
Caledonia Group Overview Mining, exploration and development company, listed on TSX:CAL and AIM:CMCL; traded on NASDAQ (BB): CALVF Blanket Gold Mine, Zimbabwe Production capacity increased to 40,000oz pa Considerable exploration upside Nama base metals exploration, Zambia Preliminary exploration for traditional copperbelt ores is under way South African PGE exploration 3
Caledonia Group Overview Q1 2011 Results Highlights Gold production: 7,322 ounces 17% increase on Q4 2010 134% increase on Q1 2010 Gross profit: $5.2m 90% increase on Q4 2010 10 times higher than Q1 2010 Cash cost: $648/oz Further reductions possible as production increases and after completion of developments to enhance operational efficiency. Strong cash generation: $4.5m of operational cash flows before $3.5m of capital expenditure (development and sustaining) 4
Blanket Gold Mine, Zimbabwe 5
Blanket Gold Mine, Zimbabwe Overview Located in the south of Zimbabwe Production capacity has increased from 24,000oz pa to 40,000oz per annum following completion of an expansion project in late 2010 Expected to be a low-cost operator at production level of 40,000oz pa Exploration and development creates scope for further increases in production, funded by strong internal cash flows Outstanding and long-standing management team: 100% indigenous Zimbabweans 6
Blanket Gold Mine, Zimbabwe Reserves Blanket is situated on the 70km x15km Gwanda Greenstone Belt Existing reserve base currently to support 10 years production at 40koz per annum Historically exploration was limited due to deteriorating political and economic conditions until January 2009. Exploration and development work has re-started on Blanket s mining & lease areas and the satellite properties Over $4m budgeted exploration and development expenditure in 2011 and early 2012 7
Blanket Gold Mine, Zimbabwe Gold Production Production re-started in April 2009 after 6 month cessation Production increase in 2009 was curtailed by high levels of power interruptions in mid-2010 Full standby generating capacity now installed Commissioning of the No. 4 Shaft Expansion Project in Q3 2010 increases production capacity to 40,000 oz pa $8m project funded by local borrowings and internal cash flows Further developments in first half 2011 removing the remaining constraints to producing at 10,000 oz/quarter 8
Blanket Gold Mine, Zimbabwe Electricity Supply Power outages in mid-2010 had a serious effect on production, costs and cash generation The first standby generator was installed in June 2010. Additional generators installed in May 2011 will allow full operations to continue during power interruptions Substantial improvement in electricity supply in recent months: but still prudent to install back-up power 9
Blanket Gold Mine, Zimbabwe Costs 60% of Blanket s costs are fixed: higher production results in lower cost per ounce Blanket has increased its workforce by only 6% to achieve production rate of 40k.oz Despite pay rises, labour cost per ounce has fallen from US$326/oz (40% in Q1 2010) to US$167/oz (32% in Q1 2011) Increase in electricity charge ($145,000 per month to over $330,000 per month) to secure greater reliability 10
Blanket Gold Mine, Zimbabwe Exploration Blanket Level 22 Haulage Development Level 22 Haulage will connect No. 4 Shaft to known resources at Eroica and Lima Haulage provides a platform for exploration drilling for continuations of known ore-shoots Total haulage length will be 3km, of which 1.5km has already been completed. Cost to complete is $2.4m, funded by internal resources over 24 months Further mine development (e.g. additional central shaft) will depend on exploration results 1.5km of L22 Haulage to be completed 11
Blanket Gold Mine, Zimbabwe Satellite Developments Blanket has several brownfield exploration projects close to the current mine Immediate focus: GG, 7km from Blanket Mascot Project Area, 42km from Blanket Crushed ore will be trucked to Blanket which has surplus milling and CIL capacity Increased throughput at Blanket will further reduce costs per ounce as fixed overheads are spread over higher production 12
Blanket Gold Mine, Zimbabwe Exploration Satellite Projects: GG GG is 7kms from the Blanket Met. Plant. Geochemical analysis and surface drilling indicates attractive exploration targets Headgear and winder have been installed & shaft-sinking to 120m has commenced Development and exploration work is expected to take 18 months. If successful, a mine plan will be developed in mid-2012 Project funded by internal cash resources: indicative capital cost approx. US$600,000 Indicative production rate of 150tpd, subject to exploration success GG: headgear and winder house 13
Blanket Gold Mine, Zimbabwe Exploration Satellite Projects: Mascot Project Area Mascot Project Area comprises 3 mines (Mascot, Penzance and Eagle Vulture), each with vertical shafts down to 150-450m and other infrastructure Considerable exploration work has been done with encouraging results. Headgears and winders installed; shafts have been re-opened and are being rehabilitated Development and exploration work can commence quickly using existing infrastructure Mine plan to be developed in early 2012 All work will be funded using internal cash resources: indicative capital cost approx US$1.3m at Mascot and Eagle Vulture Eagle Vulture: headgear and winder and compressor houses Indicative production rate 300-400tpd from all 3 mines sites, subject to exploration success 14
Zimbabwe Overview and Indigenisation Zimbabwe: Overview Indigenisation Government of National Unity ( GNU ) since early 2009 Economic Stabilisation Zimbabwe Dollar abolished in Jan 2010: eradicated hyper-inflation Conservative economic policies Liberalised commercial environment Restrictions on gold exports abolished: Blanket exports gold and retains 100% of sales proceeds in US$ Gold miners have access to foreign exchange required to purchase consumables and capital items Legislation requires 51% Indigenous Zimbabwean ( IZ ) ownership by Feb 2015 On-going political debate regarding: What level of IZ ownership? Equity and credits? Who are eligible IZ owners? (employees, women, local communities etc) Requirement for local listing on ZSE? Caledonia supports IZ participation on a commercially acceptable basis Caledonia has submitted an Indigenisation Plan and awaits a response Taxation 4.5% royalty 25% income tax 15
Zambian Base Metals - Nama Introduction Caledonia holds Licences covering over 810 sq. km. adjacent to Konkola and Vale/ARM properties Konkola East licence area is the first target: 4 preliminary holes to be drilled to 800m in 2011 16
Zambian Base Metals Konkola East Target X Y 17
Zambian Base Metals Konkola East Target Area of 25 square km to be explored Larger if the Ore Shale extends to the west Dips to the south-east From surface to 800 m depth Potentially 400 million tonnes of Ore Shale 18
South African PGE Location Caledonia holds prospecting licences for two early-stage PGE exploration projects Rooipoort on the Northern Limb of the Bushveld Igneous Complex (BIC) Mapochsgronde on the Eastern Limb of the BIC Caledonia is in discussions with the South African government regarding the extension of the prospecting licences 19
Summary The Investment Case Diversified explorer/developer/producer jurisdictions: Zimbabwe, Zambia, South Africa commodities: gold, platinum, base metals (copper, cobalt, nickel, iron) virtually debt free and highly cash generative from December 2010 Blanket Gold Mine in Zimbabwe is the cash engine Successful commissioning on time of a major capital project, transforms Blanket s economic dynamics produces sufficient free cash flow to fund its own growth and development and to maintain all Caledonia s offices & other operations surplus cash-flows from Blanket in the current gold environment funds initial exploration work at Zambian base metals project Subsequent drilling and mine developments in Zambia and South Africa would be funded by internal cash flows but will also require significant additional new capital 20
Contacts Caledonia Mining Website: www.caledoniamining.com 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 21