2003
SECOND QUARTER REPORT
[CALEDONIA MINING CORPORATION LOGO]
CALEDONIA
Mining Corporation
================================================================================
UNIT #9, 2145 DUNWIN DRIVE, MISSISSAUGA, ONTARIO CANADA, L5L 4L9
TEL: (905) 607-7543 FAX: (905) 607-9806
WORLD WIDE WEB: HTTP://WWW.CALEDONIAMINING.COM
PRESIDENT'S MESSAGE
During the quarter, the Corporation's subsidiary, Barbrook Mines Limited
accounted for its first operating expenses at the Barbrook Gold Mine. Revenue
was then received from the first gold poured in early July. The resultant loss
was offset to a degree by a foreign exchange gain of $128,000 during the quarter
($304,000 year to date) resulting from the strengthening of the South African
Rand against the dollar. This currency fluctuation has been largely compensated
by the increase in the US dollar price of gold so that the Rand price of gold
continued to remain at over R80,000 per Kg.
The overall loss for the quarter was $1,406,000 ($0.006 per share). The
year-to-date loss was $1,614,000 ($0.007 per share) compared to a loss of
$837,000 for the same six month period in 2002.
The Corporation remains bullish on the prospects for the precious metals markets
and believes that it is well positioned to benefit from any improvement in the
gold and platinum sectors..
DISCUSSION AND ANALYSIS ON RESULTS OF OPERATIONS
South Africa
At the Barbrook Gold Mine stope development and production continued during the
quarter. Underground production did not meet target figures largely because
development shortfalls delayed the opening of stoping areas. Additional crews
have been hired and improved infrastructure has been installed to correct this
shortfall. Stope preparation in the main stoping area has been advanced and
benching commenced in May.
The mill circuit was commissioned and ore is being processed in the crushing,
grinding, flotation, concentrate regrinding, pre-aeration and Pre-Ox circuits.
Gold is being leached in the 6-stage carousel Pump cell - RIL section, absorbed
onto resin, recovered in the elution section and transferred to electro-winning.
The electro-winning circuit was commissioned at the end of June with the initial
gold being poured during the first week of July. It is planned that the Plant
will reach operating targets during September 2003.
The Rooipoort Exploration Project, approximately 8 kilometers east of
Potgietersrus and about 30 km southwest of Caledonia's Eersteling gold mine in
the Limpopo province of South Africa is considered to be highly prospective for
platinum deposits. The recently completed comprehensive desk study was based on
the airborne geophysics and the down dip drilling on the adjacent property
undertaken by Anglo Platinum and Falconbridge during the 1970's. Based on this
desk study, we have sufficient confidence for the planned initial drilling
program without the need for further geophysics. The study has confirmed the
likely presence of Merensky like and UG-2 like platinum reefs, and potentially
the continuation of the Plat reef mineralisation, on the property. These three
reefs are the dominant platinum bearing reefs in the Bushveld geological Complex
found in the Rooipoort area. A trenching and drilling program to investigate
these occurrences is now being planned with trenching to commence in late August
2003. Sampling, assaying and quality control (QC) programs are being put in
place prior to the mobilisation of the drills.
The Eersteling Gold Mine remained on care and maintenance during the quarter
while a hydrological survey was commenced preparatory to starting with the
dewatering of the shafts. This survey should be completed by the end of third
quarter. Present plans are to defer returning the Eersteling gold mine to
commercial production until after the commencement of exploration on
Eersteling's highly prospective Rooipoort platinum property.
At the Goedgevonden diamond prospect near Stilfontein in North West Province a
combined gravimetric and magnetometric survey was commenced in June over two
target blocks each measuring 800m by 800m. The results of this survey are being
analysed.
Zambia
Caledonia and their joint venture partners, Motapa Diamonds Inc., are planning
this year's exploration program for the Mulonga Plain joint venture.
At the Kashiji Plain licence area a number of aeromagnetic generated geophysical
anomalies will be evaluated by ground geophysics. Targets of merit will then be
drill tested.
On the Mulonga Plain licence, work will be concentrated in the southeastern
portion of the Mulonga Plain anomaly to follow-up on the encouraging geochem
results obtained last year.
Elsewhere in Zambia, the Luamfula, Ngosa and Konkola West prospecting licences
were renewed for a two-year period. These licence areas form part of the Kalimba
licence group and are prospective for copper, cobalt and nickel.
Canada
Kikerk Lake
The property is located in the Coronation Gulf region of Nunavut. The
diamondiferous Potentilla and Stellaria kimberlites were identified on the
property in 2001 and 2002 respectively.
The winter portion of the 2003 exploration program announced in March has now
been completed. Three electromagnetic anomalies associated with indicator
mineral dispersions and underlying lakes approximately one km west of Potentilla
were tested by drilling. At one anomaly, two angle holes drilled at inclinations
of 46 degrees and 65 degrees from horizontal intersected approximately 0.6 m and
0.3 m of kimberlite respectively. This anomaly is located about 1.2 km west of
the Stellaria kimberlite associated with a two km long linear structure. No
kimberlite was intersected at the other two anomalies.
Exploration on the Kikerk Lake property will continue during the summer. Field
activities will include follow-up on a number of unexplained indicator mineral
and geophysical anomalies through heavy mineral sampling, ground geophysical
surveys and prospecting.
Exploration on the Kikerk Lake property is governed by a joint venture agreement
among Ashton Mining of Canada Inc. ("Ashton"), the Corporation and Northern
Empire Minerals Ltd. Ashton has a 52.5 percent interest in the property and has
exercised an option with Caledonia to increase its interest to 59.5 percent by
completing a feasibility study, at which time the Corporation's interest will
reduce to 10.5%. Northern Empire has a 30 percent joint venture interest and is
participating in the current program.
Financing
Subsequent to the end of the quarter, the Corporation raised $5 million, before
closing costs, through the sale of 20 million Units under a Private Placement
financing. Each unit was priced at $0.25 and comprises one common share of
Caledonia and one half-share warrant. Each full warrant entitles the holder to
purchase one common share of Caledonia at a price of $0.35 for a period of
eighteen months. The funds raised will be use to financing the return to full
operation of the Barbrook Gold Mine, the Corporation's ongoing exploration
activities in Southern Africa, and for general corporate purposes.
On behalf of the Board of Directors
(signed) S.E. Hayden,
Chairman of the Board, President and
Chief Executive Officer
August 25th 2003
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements based on current
expectations. These forward-looking statements entail various risks and
uncertainties that could cause actual results to differ materially from those
reflected. Risk and uncertainties about the Corporation's business are more
fully described in the Management's Discussion and Analysis published in the
Corporation's Annual Report, Form 20F and the Annual Information Form.
CALEDONIA MINING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF CANADIAN DOLLARS)
JUNE 30, DECEMBER 31,
(UNAUDITED) 2003 2002
- ----------- --------- ------------
ASSETS
Current
Cash and short term deposits $ 1,133 $ 1,864
Accounts receivable 284 113
Prepaid expenses 115 117
--------- ------------
1,532 2,094
INVESTMENT AT COST 79 79
CAPITAL ASSETS 7,909 7,715
MINERAL PROPERTIES 15,960 14,879
--------- ------------
$ 25,480 $ 24,767
--------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable $ 1,100 $ 1,267
Loan payable 25 69
--------- ------------
1,125 1,336
PROVISION FOR SITE RESTORATION 524 506
NON-CONTROLLING INTEREST 774 774
--------- ------------
2,423 2,616
--------- ------------
SHAREHOLDERS' EQUITY (NOTE 1)
Share capital 152,085 149,623
Contributed surplus 209 209
Compensation warrants 235 177
Deficit (129,472) (127,858)
--------- ------------
23,057 20,151
--------- ------------
$ 25,480 $ 24,767
========= ============
On behalf of the Board:
________________________ Director
(signed) J. Johnstone
________________________ Director
(signed) F. C. Harvey
CALEDONIA MINING CORPORATION
CONSOLIDATED STATEMENTS OF DEFICIT
(IN THOUSANDS OF CANADIAN DOLLARS)
THREE MONTH PERIOD SIX MONTH PERIOD
ENDED JUNE 30, ENDED JUNE 30,
(UNAUDITED) 2003 2002 2001 2003 2002 2001
- ------------ --------- --------- --------- --------- --------- ---------
DEFICIT, Beginning of period ($128,066) ($123,936 ($122,558 ($127,858 ($123,527 ($122,332
NET (LOSS) FOR THE PERIOD (1,406) (428) (254) (1,614) (837) (480)
--------- --------- --------- --------- --------- ---------
DEFICIT, end of period ($129,472) ($124,364 ($122,812 ($129,472 ($124,364 ($122,812
========= ========= ========= ========= ========= =========
CALEDONIA MINING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD SIX MONTH PERIOD
ENDED JUNE 30, ENDED JUNE 30,
(UNAUDITED) 2003 2002 2001 2003 2002 2001
- ----------- ------- ------- ------- ------- ------- -------
REVENUE AND OPERATING COSTS
Revenue from sales $ - $ 24 $ 33 $ 53 $ 30 $ 33
Operating costs 1,232 136 13 1,304 203 13
-------- ------- ------- -------- ------- -------
GROSS PROFIT (LOSS) (1,232) (112) 20 (1,251) (173) 20
-------- ------- ------- -------- ------- -------
COSTS AND EXPENSES
General and administrative 258 266 290 628 588 522
Interest 44 - 18 64 24 38
Other expense (income) (note 2) (128) 49 (34) (329) 54 (60)
-------- ------- ------- -------- ------- -------
174 315 274 363 666 500
-------- ------- ------- -------- ------- -------
(LOSS) BEFORE NON-CONTROLLING INTEREST (1,406) (430) (254) (1,614) (839) (480)
Non-controlling interest - (2) - - (2) -
-------- ------- ------- -------- ------- -------
NET (LOSS)FOR THE PERIOD ($ 1,406) ($ 428) ($ 254) ($ 1,614) ($ 837) ($ 480)
======== ======= ======= ======== ======= =======
(LOSS) PER SHARE
Basic ($ 0.006) ($0.003) ($0.002) ($ 0.007) ($0.005) ($0.003)
======== ======= ======= ======== ======= =======
CALEDONIA MINING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD SIX MONTH PERIOD
ENDED JUNE 30, ENDED JUNE 30,
(UNAUDITED) 2003 2002 2001 2003 2002 2001
- ----------- -------- ------- ------- ------- ------- -----
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net (loss) for the period ($ 1,406) ($ 428) ($ 254) ($1,614) ($ 837) ($480)
Items not involving cash
Change in provision for site restoration - - - 18 - -
Non-controlling interest - (2) - - (2) -
-------- ------- ------- ------- ------- -----
(1,406) (430) (254) (1,596) (839) (480)
Change in non-cash working capital balances (67) (47) 11 (336) 86 166
-------- ------- ------- ------- ------- -----
(1,473) (477) (243) (1,932) (753) (314)
-------- ------- ------- ------- ------- -----
INVESTING ACTIVITIES
Purchase of investment - (79) - - (79) -
Expenditures on capital assets (10) (27) - (194) (27) -
Expenditures on mineral properties (45) (79) - (1,081) (13) -
-------- ------- ------- ------- ------- -----
(55) (185) - (1,275) (119) -
-------- ------- ------- ------- ------- -----
FINANCING ACTIVITIES
Loan payable (5) (1,275) - (44) (1,030) -
Issue of share capital and compensation warrants net of issue costs 9 2,672 292 2,520 2,672 292
-------- ------- ------- ------- ------- -----
4 1,397 292 2,476 1,642 292
-------- ------- ------- ------- ------- -----
INCREASE (DECREASE) IN CASH FOR THE PERIOD (1,524) 735 49 (731) 770 (22)
CASH AND CASH EQUIVALENTS, beginning of period 2,657 125 4 1,864 90 75
-------- ------- ------- ------- ------- -----
CASH AND CASH EQUIVALENTS, end of period $ 1,133 $ 860 $ 53 $1,133 $ 860 $ 53
======== ======= ======= ======= ======= =====
CALEDONIA MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
CERTIFICATION
The Chief Executive Officer and the Vice President Finance confirm the veracity
and soundness of these financial and operating results and have provided the
board of directors with confirmation supporting this.
BASIS OF PRESENTATION
These financial statements have been prepared on the basis of a going concern,
which contemplates that the Company will be able to realize assets and discharge
liabilities in the normal course of business. The Company's ability to continue
as a going concern is dependent upon attaining profitable operations and
obtaining sufficient financing to meet its liabilities, its obligations with
respect to operating expenditures and expenditures required on its mineral
properties.
MEASUREMENT UNCERTAINTIES
Preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. The more significant areas
requiring estimates relate to mineral resources, future cash flows associated
with capital assets and mineral properties. Management's calculation of mineral
resources and cash flows are based upon engineering and geological estimates and
financial estimates including gold prices and operating costs. Actual results
could differ from those estimated.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
together with all its subsidiaries.
The Company's principal consolidated subsidiaries are Barbrook Mines Limited
(100% owned) ("Barbrook"), Eersteling Gold Mining Company Limited (96% owned)
("Eersteling") and Caledonia Mining (Zambia) Limited, Caledonia Kadola Limited,
Caledonia Nama Limited and Caledonia Western Limited (all 100% owned)
(collectively known as "Caledonia Zambia").
FINANCIAL DISCLOSURE NOTE
The unaudited interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles for interim
reporting. In the opinion of management all adjustments required for a fair
presentation are included in these statements in accordance with the accounting
policies of the Company. The interim consolidated financial statements should be
read in conjunction with the year end 2002 audited financial statements for the
detailed note disclosure which is not materially different to these interim
financial statements.
1. SHARE CAPITAL
Issued and Outstanding
On January 6, 2003, the Company concluded a private placement financing
for $3.0 million gross proceeds comprised of 12,000,000 units. Each
unit is comprised of one common share and one half common share
purchase warrant issued at $0.25 per unit. In addition, a total of
1,200,000 whole broker warrants were issued with each warrant
exchangeable for one whole common share. Whole warrants are
exchangeable for shares at $0.33 per share for a period of one year
from closing. A total of 6,720,000 units and 672,000 whole broker
warrants were closed on December 31, 2002 for gross proceeds of
$1,680,000. The balance of the private placement of $1,320,000 was
closed on January 6, 2003. The remaining 528,000 broker warrants were
issued upon closing at an assigned value of $0.11 per warrant for a
total consideration of $58,000. Share issue costs associated with the
January 6, 2003 closing amounted to $119,000 and have been charged to
share capital.
During the first quarter of the year a total of 6,512635 common share
were issued pursuant to the exercise of common share purchase warrants
for total proceeds of $1,270,000 and a further 106,475 common shares
were issued for the exercise of stock options for proceeds of $40,000.
A further 50,000 common shares were issued pursuant to the exercise of
common share purchase warrants for total proceeds of $9,000 during the
second quarter.
As of June 30, 2003 the Company has 223,744,380 common shares
outstanding (December 31, 2002 - 211,795,270). The basic loss per share
has been calculated based upon a weighted number of common shares
outstanding as follows:
For the period ended June 30, 2003 - 222,696,111
For the quarter ended June 30, 2003 - 223,702,622
Stock Options
Options to purchase common shares have been granted to directors,
officers, employees and consultants at exercise prices determined by
reference to the market value on the date of grant. Vesting of options
is made at the discretion of the board of directors at the time the
options are granted. As at June 30, 2003, the Company has stock options
outstanding for the purchase of 11,398,700 common shares (as at
December 31, 2002 - 12,680,800 common shares). All of the options
outstanding are exercisable. A total of 106,475 options were exercised
during the first quarter of 2003 for proceeds of $40,000. There were no
stock options granted during the first or second quarter of 2003. A
total of 1,175,625 stock options expired as unexercised during the
second quarter.
Warrants
As of June 30, 2003, the Company has outstanding warrants to purchase
an aggregate of 12,029,731 common shares.
2. OTHER EXPENSE (INCOME)
Included in other expense (income) are unrealized foreign exchange
gains of $304,000 (2002 - 2002 - loss of $54,000; 2001 - gain of
$36,000)
3. SUBSEQUENT EVENT
Subsequent to the end of the quarter, the Company raised $5 million,
before closing costs, through the sale of up to 20 million units under
a Private Placement financing. Each unit was priced at $0.25 and
comprised one common share of the Company and one half share warrant.
Each full warrant entitles the holder to purchase one common share at a
price of $0.35 for a period of eighteen months. The funds raised will
be used to finance the return to full operation of the Barbrook gold
mine, the Company's ongoing exploration activities in Southern Africa
and for general corporate purposes.
Corporate Directory
BOARD OF DIRECTORS
S. E. Hayden
J. Johnstone
F. C. Harvey
W. I. L. Forrest
C. R. Jonsson
OFFICERS
S. E. Hayden
Chairman of the Board, President and
Chief Executive Officer
F. C. Harvey
Technical Director
J. Johnstone
Vice-President Operations and
Chief Operating Officer
S. W. Poad
Vice-President Finance and
Administration
J. Smith
Vice-President Exploration
HEAD OFFICE
CANADA - HEAD OFFICE
Caledonia Mining Corporation
Unit #9
2145 Dunwin Drive
Mississauga, Ontario
L5L 4L9 Canada
Tel: (905) 607-7543
Fax: (905) 607-9806
SHARES LISTED
The Toronto Stock Exchange
Symbol "CAL'
NASDAQ OTC BB
Symbol "CALVF"
CAPITALIZATION
(June 30, 2003)
Authorized: Unlimited
number of common shares
Issued Common Shares: 223,744,380
Warrants: 11,398,700
Options: 12,029,731
SOLICITORS
Borden Ladner Gervais LLP
Suite 4100, Scotia Plaza
40 King Street West
Toronto, Ontario
M5H 3Y4 Canada
Tupper, Jonsson & Yeadon
1710-1177 West Hastings Street
Vancouver, British Columbia
V6E 2L3 Canada
AUDITORS
BDO Dunwoody LLP
Chartered Accountants
Suite 3200, 200 Bay Street
Royal Bank Plaza, South Tower
Toronto, Ontario
M5J 2J8 Canada
REGISTRAR &
TRANSFER AGENT
Equity Transfer Services Inc.
Suite 420
120 Adelaide Street West
Toronto, Ontario
M5H 4C3 Canada
Tel: (416) 361-0152
Fax: (416) 361-0470
BANK
Canadian Imperial Bank Of Commerce
6266 Dixie Road
Mississauga, Ontario
L5T 1A7 Canada
INTERNET
Web Site:
http://www.caledoniamining.com