TORONTO, ONTARIO — (Marketwire) — 05/10/12 — Caledonia Mining Corporation (the „Company“) (TSX: CAL)(OTCQX: ALVF)(AIM: CMCL) is pleased to announce its operating and financial results for the first quarter 2012 („Q1“ or the „Quarter“), which are reported below in Canadian dollars unless otherwise indicated.
Indigenisation at the Blanket Mine
Caledonia and Blanket have proceeded to implement the MoU, which is acknowledged by the signatories as being a binding agreement, pursuant to which Indigenous Zimbabweans will acquire an effective 51% ownership of the Blanket Mine for a paid transactional value of US$30.09 million on the following basis:
The first transaction for the sale of 15% of Blanket to Flemiro Investments, a Zimbabwean-registered investment company, which has been incorporated to represent a diverse group of Indigenous Zimbabweans, for a consideration of US$11.008 million has been signed (the „Agreement“). Caledonia will facilitate the vendor funding of this transaction which will be repaid by way of future dividends from Blanket. Outstanding balances on the facilitation loans in terms of the Agreement will attract interest at a rate of 10% over the 12-month LIBOR. The timing for the repayment of the facilitation loans will depend on the future financial performance of the Blanket Mine. Caledonia expects to redeploy the sale consideration in its projects.
Completion of the Agreement is subject to several conditions precedent which include certain approvals from the Reserve Bank of Zimbabwe and Caledonia receiving confirmation from the Government of Zimbabwe that full implementation of the terms of the MoU constitutes compliance by Blanket and Caledonia with the requirements of the Indigenisation Act.
Documentation for the formation of The Blanket Mine Employee Trust and the subsequent sale of a 10% interest in Blanket mine to the Trust has been finalised and this transaction is expected to be concluded shortly.
Caledonia has submitted agreements to the parties concerned regarding the remaining two transactions pursuant to the MoU being the sale of a 16% interest to the National Indigenisation and Economic Empowerment Fund and the donation of a 10% interest to a Gwanda Community Share Ownership Trust and their responses are awaited.
Blanket-s audited revenues and profit after tax for the year to December 31, 2011 were US$56.6 million and US$19.2 million, respectively.
Nama Base Metals Project, Zambia
The first phase of the 2012 drilling programme at the Nama base metals project in Zambia commenced in March 2012 on the Konkola East target area. Phase 1 of the 2012 programme comprises 6 holes of approximately 2,400 meters of diamond drilling and has the objective of identifying an upward extension of the mineralised zone identified in the 2011 exploration programme. The first two holes have been completed and assay results are awaited. The third hole is in progress. It is anticipated that Phase 1 of the 2012 programme will be completed in the third quarter of 2012.
Commenting on Caledonia-s performance, Stefan Hayden, President and CEO, said: „The first quarter of 2012 was a solid performance from the Blanket Mine in Zimbabwe, particularly after taking into account the necessary maintenance work on the main No. 4 Shaft. Blanket-s gold production for the Quarter was 9,164 ounces, which was in line with our previous guidance. The shaft maintenance work has now been completed and gold production has already improved significantly. Gold production in April was 3,722 ounces, which represents an annualised rate of over 44,000 ounces of gold. I therefore remain confident that the Blanket Mine will achieve its target 2012 production of 40,000 ounces of gold.
„We have made significant and rapid progress on implementing the Memorandum of Understanding signed with the Government of Zimbabwe on February 20 regarding the indigenisation of the Blanket Mine. The first transaction in terms of the MoU, being the sale of a 15% interest in Blanket Mine to Indigenous Zimbabweans, has been signed. The second transaction, being the sale of a 10% interest to The Blanket Mine Employee Trust, is well advanced and I expect this to be concluded shortly.
„Underground development work has already started at Eagle Vulture, which is the first of Blanket-s satellite exploration projects to be progressed. The electricity connections to the GG and Mascot exploration projects are now nearing completion and we expect to commence underground work on both projects imminently.
„Blanket will fund all of its immediate investment requirements from its internally generated cash, both at the satellite projects and the down-dip exploration at Blanket Mine. Depending on the outcome of these projects, Blanket may, in due course, be able to increase production above 40,000 ounces of gold per annum. The Blanket crushing and metallurgical plant has surplus capacity and any incremental ore could be treated without any requirement for new investment.
„Phase 1 of the 2012 Exploration Programme at the Nama Project in Zambia, commenced at the end of March. We remain hopeful that the further exploration work at Nama will indicate the potential existence of a significant copper deposit.
„Caledonia-s balance sheet has strengthened further due to the strong operational cash generation. Caledonia will use its cash resources of over $16 million to fund the current year-s exploration at Nama and any further exploration at Nama. Caledonia-s strong and improving cash position also allows it the flexibility to take advantage of any new opportunities that might arise.“
The unaudited, condensed consolidated Financial Statements and the Management Discussion and Analysis, for the quarter to March 31, 2012 are available from the Company-s website and from SEDAR.
Further information regarding Caledonia-s exploration activities and operations along with its latest financials and Management Discussion and Analysis may be found at .
Contacts: Caledonia Mining Corporation Mark Learmonth + 27 11 447 2499
Canaccord Genuity Limited John Prior + 44 20 7523 8350
Canaccord Genuity Limited Sebastian Jones + 44 20 7523 8350
Newgate Threadneedle Josh Royston +44 20 7653 9850
Newgate Threadneedle Beth Harris +44 20 7653 9850
Newgate Threadneedle Terry Garrett +44 20 7653 9850
CHF Investor Relations Stephanie Fitzgerald +1 416 868 1079 x 222
