2003
THIRD QUARTER REPORT
[CALEDONIA MINING CORPORATION LOGO]
CALEDONIA
Mining Corporation
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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, Caledonia commenced drilling on its Rooipoort platinum
project in South Africa and completed the first full quarter of operation at the
Barbrook Gold Mine. Mining operations at Barbrook reached their targeted tonnes
and exceeded the gold grades at the quarter end and are expected to continue for
the foreseeable future. Metallurgical gold recoveries have been lower than
targeted due to equipment breakdown and highly refractory gold that has not
responded to the installed metallurgical process. By early November, additional
equipment in the Flotation circuit was installed and commissioned and should
improve gold recoveries both in the flotation and resin-in-leach (RIL) gold
recovery circuits. During the quarter the mine produced 14,080 tonnes of ore at
a grade of 6.82 g/t and the mill processed 10,171 tonnes of feed ore at a grade
of 6.53 g/t and produced 19.5 kg gold. During October, the mine produced over
6,000 tonnes of ore grading well in excess of the targeted 6.0 g/t.
The South African currency, the Rand continued to strengthen against the US
dollar. The currency fluctuation is generally offset by the increase in the US
dollar price of gold so that the Rand price of gold continued to remain at about
R85,000 per Kg.
Caledonia is pleased to announce that Mr. Jacques du Plessis has been appointed
as General Manager of Caledonia's African operations. Mr. Du Plessis, a South
African citizen, is a Mining Engineer and has had over 30 years experience in
the South African mining industry and over 15 years in senior management
positions. Mr. Du Plessis will take over the immediate responsibility for the
Barbrook and Eersteling gold mines.
Caledonia's overall loss for the quarter was $1,072,000 ($0.004 per share). The
year-to-date loss was $2,686,000 ($0.012 per share) compared to a loss of
$1,373,000 ($0.008 per share) for the same nine-month period in 2002.
Caledonia continues to be 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 reached the targeted
tonnage and exceeded the predicted grade during the quarter. Underground
production met and exceeded the target figures due to the opening of new stoping
areas. Additional crews were hired and improved underground infrastructure has
been installed. Stope preparation in the main stoping areas has been advanced
that should ensure that future targeted tonnages are met.
The mill operated throughout the quarter but excessive end liner wear restricted
throughput to 10,171 tonnes from the targeted 6,000 tonnes per month. Treated
gold grades at 6.5 g/t were about 9% above the target. The mill end plates were
temporarily repaired and thereafter the mill throughputs reached the target
levels. The erratic and high sulphide content of the fresh underground ore led
to difficulties in flotation control and reduced the gold recovery. To
compensate for variable sulphide feed, an Imhoflot cleaner section has been
installed which will further upgrade the flotation concentrate grade and reduce
the concentrate mass generated. This addition will also improve the gold
leaching recovery in the RIL section. The recently mined ore, although of
significantly higher grade contains a much higher level of refractory gold in
the form of arsenopyrite than had previously been encountered. This higher grade
gold associated mineral gives much lower gold recovery than the more normal
quartz, pyrite and pyrrhotite associated gold. Overall plant gold recovery for
the quarter was unacceptably low at just over 30% compared to the target of 70%.
The gold recovery should increase significantly with the introduction of the
Imhoflot cleaner section and improvements in the RIL circuit. Alternative
metallurgical equipment is also being investigated and the metallurgical
management is being further upgraded.
The Rooipoort Exploration Project, approximately 8 kilometres 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. Based on the comprehensive desk study completed in the 2nd
quarter of this year, that was based on the high resolution airborne geophysics
and the down dip drilling on the adjacent farm undertaken by Anglo Platinum/JCI
and Falconbridge during the 1970's, an initial stratographic drilling program
was developed. This drill program has been costed and contracts for the initial
diamond drilling and assaying of the core generated have been negotiated. The
previously mentioned desk study has confirmed the likely presence of Merensky
like and UG-2 like platinum reefs, and potentially the continuation of the Plat
reef mineralization, on the property. These three reefs are the dominant
platinum bearing reefs in the Bushveld geological Complex found in the Rooipoort
area.
A trenching program to investigate these occurrences commenced in late August
2003 and was abandoned due to the depth of soil and colluvium (3 to 15 m) in the
area. Sampling, assaying and quality control (QC) programs have been put in
place prior to the start of the trenching and the mobilisation of the drills.
Drilling commenced in September 2003 and this initial 15-hole program will be
completed in the fourth quarter. Further announcements can be expected in the
near future.
The Eersteling Gold Mine remained on care and maintenance during the quarter. A
hydrological survey was carried out in the quarter preparatory to the
commencement of shaft dewatering. It is planned that the Eersteling gold mine's
return to commercial production will be delayed until the results of the
exploration program at Eersteling's Roodepoort property located just east of the
Eersteling metallurgical plant are received and evaluated. The Roodepoort
property, fully owned by Eersteling, is thought to be prospective for a shallow,
open-pit gold deposit.
At the Goedgevonden diamond prospect near Stilfontein in North West Province
more detailed ground gravimetric and magnetometric surveys were conducted in the
2nd quarter over the pipe and other prospective targets in the area. This survey
has indicated the existence of a northward extension to the known pipe that
potentially increases its size by 30%. This extension has not been previously
tested.
On the Eleazar diamond property, 5 km northeast of Goedgevonden a further survey
was conducted. This survey, centered over a prominent shallow depression has
shown a gravity anomaly that may indicate the presence of a previously unknown
kimberlite.
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 aero magnetic generated geophysical
anomalies will be evaluated by ground geophysics The next phase of exploration
will include further aero-magnetic surveys over a new area of anomalous
kimberlite indicator mineral values. An extension of the Kashiji Plain licence
area is being sought. Any new 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 geochemical results
obtained last year. The complex geomorphic evolution of Mulonga Plain requires a
reappraisal of the large amount of accumulated information to more accurately
define the appropriate future exploration methodology.
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/Nama licence group and are prospective for copper, cobalt and nickel.
Interest has been expressed by a Zambian mining company for a source of
cobalt/copper concentrate suitable for their Zambian operation. An evaluation is
being conducted to determine if such a concentrate could be produced at Nama
from the higher cobalt/copper anomaly "A" area. This shallow partially-oxidized
"A" deposit was discovered by Caledonia in 1995/1996. The "A" anomaly is only
one of several cobalt anomalous areas that combine to a resource of about a
billion tonnes of low-grade cobalt/copper
shallow mineralization. Nama is located immediately west and adjacent to the
Konkola mining area on Zambia's famous Copperbelt.
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 summer portion of the 2003 exploration program has now been completed. A
total of 100 samples were taken from 6 discrete areas across the claims. This
sampling was carried out to follow-up on a number of unexplained indicator
mineral and geophysical anomalies through heavy mineral sampling, ground
geophysical surveys and prospecting. The samples will be analysed and the
information used to determine the termination of indicator mineral trains.
As part of the requirements for taking them to lease, all claims were surveyed
during the quarter. The Mining Recorder is now reviewing these lease
applications.
Exploration on the Kikerk Lake property is governed by a joint venture agreement
among Ashton Mining of Canada (Ashton), Caledonia and Stornoway Diamond
Corporation (Stornoway), the successor company of Northern Empire Minerals
Limited. In 2003, Caledonia's joint venture parties have spent an amount of
about $575,000 on the Kikerk Lake property. 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. Stornoway has a 30 percent joint venture interest and
has participated in the recent programs. Caledonia has a fully carried interest
in the property until a "fully-engineered" feasibility study has been completed.
Financing
In the quarter, Caledonia 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 Caledonia and one half
common share warrant. Each full warrant entitled the holder to purchase one
common share of Caledonia at a price of $0.35 for a period of eighteen months
from the date of closing. The funds raised are being used to finance full
production of the Barbrook Gold Mine, Caledonia'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
November 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 Caledonia's business are more fully
described in the Management's Discussion and Analysis published in Caledonia's
Annual Report, Form 20F and the Annual Information Form.
CALEDONIA MINING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF CANADIAN DOLLARS)
SEPTEMBER 30, DECEMBER 31,
(UNAUDITED) 2003 2002
- ----------- ------------ -----------
ASSETS
Current
Cash and short term deposits $ 4,228 $ 1,864
Accounts receivable 269 113
Prepaid expenses 126 117
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4,623 2,094
INVESTMENT AT COST 79 79
CAPITAL ASSETS 8,123 7,715
MINERAL PROPERTIES 16,070 14,879
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$ 28,895 $ 24,767
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable $ 916 $ 1,267
Loan payable 25 69
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941 1,336
PROVISION FOR SITE RESTORATION 524 506
NON-CONTROLLING INTEREST 774 774
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2,239 2,616
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SHAREHOLDERS' EQUITY (note 1)
Share capital 156,596 149,623
Contributed surplus 209 209
Broker compensation warrants 395 177
Deficit (130,544) (127,858)
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26,656 20,151
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$ 28,895 $ 24,767
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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 NINE MONTH PERIOD
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 2003 2002 2001
- ----------- --------- --------- --------- --------- --------- ---------
DEFICIT, Beginning of period ($129,472) ($124,364 ($122,812 ($127,858 ($123,527 ($122,332
NET (LOSS) FOR THE PERIOD (1,072) (536) (465) (2,686) (1,373) (945)
--------- --------- --------- --------- --------- ---------
DEFICIT, End of period ($130,544) ($124,900 ($123,277 ($130,544 ($124,900 ($123,277
========= ========= ========= ========= ========= =========
CALEDONIA MINING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD NINE MONTH PERIOD
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 2003 2002 2001
- ------------ ------- ------- ------- ------- ------- -------
REVENUE AND OPERATING COSTS
Revenue from sales $ 259 $ 2 $ 11 $ 312 $ 32 $ 44
Operating costs 921 143 149 2,225 346 162
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GROSS MARGIN (LOSS) (662) (141) (138) (1,913) (314) (118)
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COSTS AND EXPENSES
General and administrative 378 472 257 1,006 1,060 779
Interest 33 - 26 97 24 64
Other expense (income) (note 2) (1) (77) 44 (330) (23) (16)
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410 395 327 773 1,061 827
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(LOSS) BEFORE NON-CONTROLLING INTEREST (1,072) (536) (465) (2,686) (1,375) (945)
Non-controlling interest - - - - (2) -
------- ------- ------- ------- ------- -------
NET (LOSS) FOR THE PERIOD ($1,072) ($ 536) ($ 465) ($2,686) ($1,373) ($ 945)
======= ======= ======= ======= ======= =======
(LOSS) PER SHARE
Basic ($0.004) ($0.003) ($0.003) ($0.012) ($0.008) ($0.006)
======= ======= ======= ======= ======= =======
CALEDONIA MINING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD NINE MONTH PERIOD
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 2003 2002 2001
- ----------- ------- ------- ------- ------- ------- -------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net (loss) for the period ($1,072) ($ 536) ($ 465) ($2,686) ($1,373) ($ 945)
Items not involving cash
Change in provision for site restoration - - - 18 (2) -
Non-controlling interest - - - - - -
------- ------- ------- ------- ------- -------
(1,072) (536) (465) (2,668) (1,375) (945)
Change in non-cash working capital balances (180) (169) (264) (516) (83) (98)
------- ------- ------- ------- ------- -------
(1,252) (705) (729) (3,184) (1,458) (1,043)
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INVESTING ACTIVITIES
Purchase of investment - - - - (79) -
Expenditures on capital assets (214) (159) 51 (408) (186) 51
Expenditures on mineral properties (110) (46) - (1,191) (59) -
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(324) (205) 51 (1,599) (324) 51
------- ------- ------- ------- ------- -------
FINANCING ACTIVITIES
Loan payable - - - (44) (1,030) -
Issue of share capital and compensation warrants net of issue costs 4,671 1,448 668 7,191 4,120 960
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4,671 1,448 668 7,147 3,090 960
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INCREASE (DECREASE) IN CASH FOR THE PERIOD 3,095 538 (10) 2,364 1,308 (32)
CASH AND CASH EQUIVALENTS, beginning of period 1,133 860 53 1,864 90 75
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CASH AND CASH EQUIVALENTS, end of period $ 4,228 $ 1,398 $ 43 $ 4,228 $ 1,398 $ 43
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CALEDONIA MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 compensation
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 third quarter of 2003, the Company concluded a private
placement financing for $5.0 million gross proceeds comprised of
20,000,000 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 2,000,000 whole
broker warrants were issued with each warrant exchangeable for one
whole common share. Whole warrants are exchangeable for shares at $0.35
per share for a period of eighteen months from the date of closing. The
2,000,000 broker compensation warrants issued upon closing were
assigned a value of $0.08 per warrant for total consideration of
$160,000. Share issue costs of $540,000 and have been charged to share
capital.
During the first nine months of the year a total of 7,405,706 common
share were issued pursuant to the exercise of common share purchase
warrants for total proceeds of $1,446,000 and 106,475 common shares
were issued for the exercise of stock options for proceeds of $40,000.
As of September 30, 2003 the Company has 244,587,452 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 September 30, 2003 - 225,326,974
For the quarter ended September 30, 2003 - 230,502,911
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 September 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, second or third quarters of
2003. A total of 1,175,625 stock options expired as unexercised during
the second quarter.
Warrants
As of September 30, 2003, the Company has outstanding warrants to
purchase an aggregate of 23,136,660 common shares.
2. OTHER EXPENSE (INCOME)
Included in other expense (income) is an unrealized foreign exchange
gain of $296,000 (2002 - gain of $22,000; 2001 - gain of $46,000)
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
(September 30, 2003)
Authorized: Unlimited
number of common shares
Issued Common Shares: 244,587,452
Warrants: 23,136,660
Options: 11,398,700
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