FOR: CALEDONIA MINING CORPORATION
TSX SYMBOL: CAL
OTC Bulletin Board SYMBOL: CALVF
AIM SYMBOL: CMCL
January 29, 2010
Reserve Bank of Zimbabwe Defaults on Bond Repayment to Caledonia Mining and Update on Timeline for Completion
of No.4 Shaft Expansion
TORONTO, ONTARIO--(Marketwire - Jan. 29, 2010) - Caledonia Mining Corporation ("Caledonia")
(TSX:CAL)(OTCBB:CALVF)(AIM:CMCL) reports that its wholly owned subsidiary, Blanket Mine ("Blanket") will not
receive payment in respect of the Special Tradable Gold-backed Foreign Exchange Bonds ("the Bonds") issued by
the Reserve Bank of Zimbabwe ("RBZ") and which fall due for redemption on 1 February 2010 at a value of
US$3,181,019 including interest accrued thereon of US$235,631.
The Bonds were issued to Blanket in 2008 by the RBZ as consideration for gold delivered by Blanket to a
subsidiary of the RBZ in terms of the prevailing legislation. The RBZ's inability to pay in cash for gold
deliveries eventually forced Blanket to suspend production in October 2008 due to the shortage of foreign
currency to purchase consumables. In January 2009, outstanding amounts due to Blanket (and other gold
producers) were converted into the Bonds which matured on 1 February 2010 and accrued interest at 8% per annum.
The RBZ, in a Monetary Policy Statement released on 29 January 2010, has advised that all Bonds will be rolled
over for a further 6 months pending the outcome of "constructive engagements" between the RBZ and the
Zimbabwean Ministry of Finance in respect of the Zimbabwean Government's RBZ-held debt. The RBZ also states
that "various other initiatives are being pursued to meet all outstanding obligations".
Blanket is currently completing the No.4 Shaft Expansion Project (the "Project") which will increase production
to 40,000 oz per annum. The Project is funded by a $1.25m debt facility and internal cashflows. Blanket's
cashflows continue to suffer from the combined effects of the late repayments of substantial amounts due from
the Zimbabwe Revenue Authority for outstanding VAT refunds, and the continuing unscheduled power outages, the
frequency and duration of which has increased in recent weeks.
Completion of the Project has been delayed by several years due to the failure of the Zimbabwean Government to
pay for historic gold deliveries. This delay has resulted in the progressive depletion of the available ore
reserves above 14 Level during the delay period such that Blanket can only produce approximately 1,500 oz per
month until the crushing and loading Stations below 22 Level have been completed, which is scheduled for July
2010. Production at a rate of 1,500 oz per month until completion of the 22 Level crushing and loading stations
will mean that Blanket's cash generation will be lower than previously anticipated.
As the Bond has not been repaid and in the interests of progressing the Project, further expenditure on the
planned extension of 22 Level Haulage has been suspended until internal cashflows allow this activity to
resume. Development of the 22 Level Haulage is intended to facilitate an extension of Blanket's operating life
at a production rate of 40,000 oz per annum. Depending on exploration results, the 22 Level development may
also allow for a further increase in production beyond 40,000 oz per annum. A temporary suspension of lateral
development on the 22 Level Haulage will not affect Blanket's ability to produce at the increased level of
40,000 oz per annum once the No.4 Shaft Expansion Project has been completed, but may ultimately delay further
potential increase in production above 40,000oz pa. Blanket's reduced cashflows also dictate that the Project
completion timetable be extended. Blanket is now scheduled to achieve annualized gold production of 40,000 oz
in Quarter 4 of 2010. Appropriate provision will be made against the RBZ bonds in the financial accounts for
2009, which will be released by March 31 2010.
Further information regarding Caledonia's exploration activities and operations along with its latest
financials may be found at www.caledoniamining.com.
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FOR FURTHER INFORMATION PLEASE CONTACT:
Caledonia Mining
Mark Learmonth
+27 11 447 2499
www.caledoniamining.com
OR
BuckBias
Alex Buck
+44 7932 740 452
OR
RBC Capital Markets
Martin Eales
+44 20 7029 7881
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Caledonia Mining Corp
