TORONTO, ONTARIO--(Marketwire - Aug. 12, 2011) - Caledonia Mining Corporation ("Caledonia") (News - Market indicators)(OTCBB:CALVF)(AIM:CMCL) is pleased to announce its second quarter and half year 2011 operating and financial results. 

The financial results below are reported in Canadian dollars, except where otherwise stated.

• Gold produced at the Blanket Mine in Zimbabwe in the quarter was 8,226 ounces, 141% higher than the 3,408 ounces of gold produced in 2^nd quarter of 2010.
  
  
• Gold production increased by 12% from the 7,322 ounces produced in the preceding quarter. 
  
  
• The average price per ounce of gold sold in the 2^nd quarter of 2011 was US$1,512 compared to US$1,192 in the 2^nd quarter of 2010.
  
  
• Gross Profit (i.e. before depreciation, amortization and administrative expenses) was $6,226,000, over 300% higher than the $1,534,000 achieved in the 2^nd quarter of 2010.
  
  
• Caledonia recorded net profit before tax of $3,836,000, over 800% higher than the $413,000 achieved in the 2^nd quarter of 2010.
  
  
• Average gold recovery increased to 92.9% from 92.2% in the first quarter 2011, reflecting the recent investment in the milling and Carbon-in-Leach ("CIL") circuits.
  
  
• Cash operating costs at the Blanket Mine in the quarter were US$585 per ounce of gold produced, compared to US$648 per ounce in the 1^st quarter of 2011 and US$816 per ounce in the 2^nd quarter of 2010. 
  
  
• Blanket made payments in the quarter totalling US$3,307,000 (Q1 2011, US$1,442,000) in respect of direct and indirect taxes, royalties, licence fees and other payments to the Government of Zimbabwe.
  
  
• At June 30, 2011 the Corporation had gross cash and cash equivalents of $5,033,000 (March 31, 2011 $2,217,000).
  
  
• The drilling program at the Nama base metals project in Zambia commenced in March 2011 to identify typical copper-belt type mineralization. This program continues and the results are expected in the 4^th quarter of 2011.
  
  

Commenting on the results, Stefan Hayden, President and CEO, said: "Caledonia has had a very strong performance for the second quarter and first half of 2011. The further increase in production coupled with the strength in the gold price and a continued reduction in Blanket's operating costs has resulted in a substantial improvement in Caledonia's profitability and cash generation. 

We have made significant progress in addressing the remaining production constraints which, once solved, should enable us to reach our target of 10,000 ounces per quarter. The new raise bored ore pass became fully operational at the end of July and has substantially improved the efficiency of the underground operations and reduced ore handling costs. 

The 10 MVA standby electrical generating system was commissioned at the end of May and Blanket can now maintain full operations during any interruption to the normal power supply. Electricity supply was reasonably stable during the quarter but, as anticipated, Blanket experienced several interruptions and the standby generators operated as designed for approximately 51 hours during the second quarter. 

The installation of a second new gyratory crusher, a new triple-deck screen and the commissioning of the standby generators required a five day planned interruption in production during the second quarter. The new crushers and screen are operating well and have contributed to the improved recovery and reduced costs.

Production for the quarter was also impacted by the raise boring of a ventilation raise, a shortage of spare parts for key items of equipment, and the need to remediate some sections of the underground haulages to allow for increased shunting speeds. The historic lack of investment over the past years due to the shortage of funding, which is common to virtually all mines in Zimbabwe, contributed to an increased incidence of equipment breakdowns at the higher production levels which are now being achieved. This will be an area of focus for Management for the second half of the year. It is now anticipated that Blanket will achieve its target production level of 40,000 ounces per annum by the start of the fourth quarter of 2011.

Caledonia submitted an indigenization proposal on May 9, 2011 and awaits a formal response from the Minister. Caledonia continues to work closely with, amongst others, the Chamber of Mines Zimbabwe (the "Chamber") regarding the continued engagement between the Chamber and the Minister in respect of the indigenisation of the mining sector. 

During the second quarter Blanket made payments of approximately US$3.3 million to the Government of Zimbabwe in respect of direct and indirect taxation, royalties, licence fees etc. I hope that payments of this magnitude will address the widespread misconception in Zimbabwe that mining companies do not pay tax. 

The initial drilling program on the Konkola West area of the Nama base metals project in Zambia commenced during March 2011 to identify whether typical copper-belt type mineralisation, which is the primary type of mineralisation found in Zambian copper and cobalt deposits, exists similar to that on the adjacent property to the east of the Nama Licence Area. At the end of the second quarter, 2 holes had been drilled and the drill rig was being moved to the 3^rd hole. This drilling program is expected to be completed by early in the fourth quarter 2011 and the final assay results received thereafter. The conclusions arising from this program will be made available once management has received and evaluated all of the results. This is anticipated to be during the fourth quarter of 2011."

Caledonia Management will host a conference call starting at 1000 (EDT) on August 15, 2011. Please dial-in 10 minutes beforehand and quote the conference ID number: 837504#.

Further information regarding Caledonia's exploration activities and operations along with its latest financials and Management Discussion and Analysis may be found at www.caledoniamining.com