Financial Highlights

 ----------------------------------------------------------------------- -- (C$ 000's)                          Q2 2009   Q2 2008   1H 2009   1H 2008 ------------------------------------------------------------------------- Sales from continuing operations      2,364     2,883     2,364     5,387 Operating costs                       1,483     1,357     2,571     2,616 Gross Income/(loss) from  continuing operations                  881     1,526      (207)    2,771 ------------------------------------------------------------------------- Income/(Loss) after tax before  discontinued operations               (162)     (261)     (962)      530 Net Income/(loss) for the period  after discontinued operations         (199)     (285)   (1,039)      436 Net Income/(loss) per share before  discontinued operations, basic  and fully diluted                 ($0.0003) ($0.0005)  ($0.002)   $0.001 ------------------------------------------------------------------------- 

For the quarter ended June 30, 2009 Caledonia made a net profit of $19,000 from continuing operations before taking in account an unrealized foreign exchange loss of $181,000 arising from the translation of subsidiary balance sheets (other than Blanket) at the period end into Canadian dollars. Caledonia had revenue of $2.36 million from the sale of 2,164 ounces of gold by the Blanket Mine (an average of US$935.05 per ounce), a gross operating profit of $881,000 and a net loss of $162,000 or $0.0003 per fully diluted share.

Mining operations and gold production recommenced at the Blanket mine on April 7, 2009 after Blanket had obtained the necessary licenses and approvals to export gold from Zimbabwe and had received delivery of the necessary operating supplies. The ramp-up of production during the second quarter was adversely affected by shortages of working capital and by continued electricity outages, which were frequently prolonged and without notice. Blanket mitigated the effect of the power outages on production by re-scheduling operations and by using surplus processing capacity to catch up on lost production. By the end of the second quarter, the frequency and duration of electricity outages had improved slightly. Blanket has also now obtained adequate working capital facilities and continues to rebuild its stock of operating supplies and critical parts. By June 30, Blanket had achieved plant throughput of over 400 tonnes per day and total gold production in the second quarter was 2,746 ounces.