3rd Quarter Results

Caledonia Mining Corporation
15 November 2007


                          Caledonia Mining Corporation

           Caledonia Mining Announces its Third Quarter 2007 Results

Toronto, Ontario - November 15, 2007: Caledonia Mining Corporation ('Caledonia')
(TSX: CAL, NASDAQ-OTCBB: CALVF, AIM: CMCL) is pleased to announce its third
quarter 2007 operating and financial results.

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

Financial Highlights

+---------------------------------------+---------------+---------------+
|(C$ 000's)                             |        Q3 2007|        Q3 2006|
+---------------------------------------+---------------+---------------+
|Sales from continuing operations       |         $1,950|         $4,539|
+---------------------------------------+---------------+---------------+
|Operating Income/ from continuing      |            774|          2,377|
|operations                             |               |               |
+---------------------------------------+---------------+---------------+
|Unrealised foreign exchange loss       |        (1,017)|        (1,659)|
+---------------------------------------+---------------+---------------+
|Income/(loss) from continuing          |          (855)|          (455)|
|operations                             |               |               |
+---------------------------------------+---------------+---------------+
|- per share basic and diluted          |       ($0.001)|       ($0.001)|
+---------------------------------------+---------------+---------------+
|Discontinued operations (loss)         |           (80)|        (2,619)|
+---------------------------------------+---------------+---------------+
|Net (loss) after discontinued          |          (935)|        (3,074)|
|operations                             |               |               |
+---------------------------------------+---------------+---------------+
|- per share basic and diluted          |       ($0.002)|       ($0.007)|
+---------------------------------------+---------------+---------------+

For the quarter ended September 30, 2007 Caledonia reported revenue of $1.95
million from the Blanket gold mine on sales of 2,262 ounces of gold and a net
loss of $935,000 or ($0.002) per fully diluted share. Gold revenue for the
quarter has been boosted by $454,000 due to retrospective changes made by the
Reserve Bank of Zimbabwe to the gold support price. Additional revenue was
received in the third quarter for gold sold in the second quarter.

The loss for the quarter mainly results from an unrealised foreign exchange loss
of $1.01 million being recorded due to the revision in the rate of exchange
announced by the Reserve Bank of Zimbabwe. The rapid devaluation of the Zimbabwe
dollar versus the US dollar affects the carrying value of the US dollar
denominated loan of $5.7 million that Blanket Mine owes to Caledonia Mining and
results in an unrealized foreign exchange loss on translation.

Gold production of 2,448 ounces for the quarter was impacted by severe power
shortages and foreign currency availability problems. Despite these challenges,
the No.4 shaft has been partially commissioned enabling the mine to resume
underground operations at the forecast production level of up to 600 tonnes per
day. By the end of October the equipping of the shaft to the bottom 24 level was
completed. In an attempt to minimize future power shortages, the Blanket mine
has negotiated an agreement with the power authority ZESA to provide an
uninterrupted power supply in return for payment in US dollars. If a continuous
power supply materializes there is an opportunity to increase gold production in
the fourth quarter. Gold production in October amounted to 1,595 ounces. However
the overall completion date for the No.4 shaft refurbishment has been extended
to the second quarter of 2008 as the foreign currency shortages have impacted on
Blanket's ability to purchase the required additional equipment and materials to
complete the expansion project as originally planned.

Commenting on the results, Stefan Hayden, President and CEO, said 'In view of
the extremely challenging operating environment we are currently experiencing in
Zimbabwe, I believe Blanket's gold production of 2,448 ounces is a solid
performance.

The lack of hard currency funds and the severe power shortages have impacted
both production this quarter as well as the No.4 shaft expansion timetable which
we are now anticipating to complete by the second quarter of 2008, provided the
operating environment does not deteriorate further.

Looking ahead we hope the newly negotiated power agreement will improve the
power supply going forward, which would enable us to increase production during
the fourth quarter as evidenced by the increased production in October. However
the foreign currency shortages could still hamper our operational efforts.

The 2007 Nama drilling program is now complete for the year, having targeted
anomalies A, C and D. Resource modeling for these anomalies is planned for the
fourth quarter 2007, with a new NI 43-101 resource planned by the end of the
first quarter 2008.

During the quarter the Environmental Impact Assessment ('EIA') for the new
access road and power line was completed and is in the process of being
submitted to the Environmental Council of Zambia for final approval. This EIA
will be expanded to cover the anticipated future mining operations.'

For more information, please contact:

Stefan Hayden, President & CEO    Alex Buck                Jonathan Wright
Caledonia Mining                  Buck-bias                Seymour Pierce
Tel: [phone]              Tel: [phone]    Tel: [phone]

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

Management's Discussion and Analysis

This Interim MD & A covers the Company's results for the period from January 1,
2007 to September 30, 2007 - and the period thereafter to November 7, 2007. It
is to be read in conjunction with the Company's 3rd quarter financial statements
prepared to September 30, 2007, according to Canadian GAAP, its Annual
Management Discussion and Analysis for the fiscal year ended December 31, 2006,
the audited financial statements of the Company prepared to December 31, 2006,
and the Company's 2006 Annual Report. All of these documents have been filed on
SEDAR and are available at www.sedar.com or on the Corporation's website at
www.caledoniamining.com.

Please note that all currency references in this document are to Canadian
dollars.

1. OPERATIONAL REVIEW, OVERALL PERFORMANCE AND RESULTS OF OPERATIONS

(a) Blanket Mine- Zimbabwe

Management regrets to announce that a fatal accident took place at the Lima
surface crushing plant on October 15, 2007 in which one of our employees was
killed. No other employees were injured. Investigations by the Inspector of
Mines are continuing.
The table below shows the 3rd quarter, YTD 2007 and October 2007 production
results.

+-----------------------+--------------+---------------+--------------+
|                       | 3rd Quarter  |  9 months to  | October 2007 |
|                       |    Actual    |September 2007 |    Actual    |
+-----------------------+--------------+---------------+--------------+
|Ore processed -tonnes  |    21,825    |    60,559     |    12,407    |
+-----------------------+--------------+---------------+--------------+
|Grade g/t              |     3.93     |     3.05      |     4.44     |
+-----------------------+--------------+---------------+--------------+
|Recovery %             |     86%      |      83%      |     90%      |
+-----------------------+--------------+---------------+--------------+
|Sands Processed -      |    5,066     |    125,137    |      -       |
|tonnes                 |              |               |              |
+-----------------------+--------------+---------------+--------------+
|Sands Grade g/t        |     1.13     |     1.29      |      -       |
+-----------------------+--------------+---------------+--------------+
|Sands Recovery %       |     54%      |      62%      |      -       |
+-----------------------+--------------+---------------+--------------+
|Ounces gold from ore   |    2,328     |     5,370     |    1,595     |
+-----------------------+--------------+---------------+--------------+
|Ounces gold from Sands |     120      |     3,414     |      -       |
+-----------------------+--------------+---------------+--------------+
|Total ounces produced  |    2,448     |     8,784     |    1,595     |
+-----------------------+--------------+---------------+--------------+
|Total ounces sold      |    2,262     |     9,471     |    1,523     |
+-----------------------+--------------+---------------+--------------+

Contrary to the project plan, the mine suffered a prolonged shutdown from
February 15 to July 26 due to power supply and foreign currency availability
problems beyond Management's control. During July production was halted and the
mine put on care and maintenance to save costs as the high grade sands were
depleted and the contractor cost of transporting the sands to the plant
escalated. In order to rapidly access the new mid-shaft loading bins
underground, the decision was taken to speed up equipping of the No. 4 shaft by
operating around the clock when power availability allowed. This decision paid
dividends, as Blanket was able to partially commission the No. 4 shaft to haul
from 14 level on July 26, thereby allowing the mine to resume underground
operations at the forecast production level of up to 600 tonnes per day ('TPD').

Production constraints experienced in the last two months of the quarter were
mainly due to severe power shortages and to the delayed and unpredictable
receipt of US Dollar payments for gold sold and delivered to Fidelity Printers
and Refiners the agent of the Reserve Bank of Zimbabwe (RBZ). Blanket has
concluded an agreement with the power authority ZESA in order to attempt to
overcome the power supply problem. From mid October Blanket will pay ZESA in US
Dollars for an uninterrupted power supply. As a result of this agreement some
improvement in production levels are anticipated in the 4th quarter, if Blanket
actually receives both the agreed uninterrupted power supply and its foreign
currency for gold sales timeously.

Plant

Frequent power disruptions during the last two months of the 3rd quarter only
allowed the shafts and metallurgical plant to operate for 76% of the available
time, processing 21,825 tonnes instead of a forecast 36,400 tonnes. Both the
partially completed No 4 shaft expansion and the plant are currently running
well although foreign currency shortages are beginning to affect the plant
availability in some sections, in particular the crushing and screening plant
and the carbon in leach (C.I.L) sections. Discussions are ongoing with RBZ to
try and improve the receipt of foreign currency for gold delivered.

As a result of managements continuing efforts to improve pollution control
measures at Blanket Mine the Governmental Environment Management Agent (EMA) has
now upgraded the slimes dam from the red to the yellow category and management
intends to strive for achievement of the highest ('green') safety category.
Capital Expenditure


At the beginning of the 3rd quarter the No 4 shaft was successfully commissioned
from surface to the 14 level where the two mid-shaft loading bins are located.
Also at this time, equipping had reached the 18 level to enable commencement of
underground operations utilizing mid shaft loading. This plan was successful as
evidenced by the declared production. Although planned production resumed at the
pre-shutdown level of 600 TPD, maintaining this proved difficult due to severe
daily power outages and the sporadic and unpredictable payments of foreign
currency. These currency restrictions make it extremely difficult to procure and
import foreign inputs in a timeous and scheduled manner.

As a result of the above power and foreign currency shortages, only 60% of the
forecast production was achieved during the quarter. Not only did the above
restrictions affect production but they also delayed the further equipping of
the No 4 shaft from 18 level to the current shaft bottom on 24 level. This final
equipping was eventually completed by the end of October. Further delays are
anticipated if sufficient foreign currency is not timeously received from the
RBZ as these will impact severely on Blanket's ability to purchase the required
additional equipment and materials to complete this phase of the expansion
project. All these delays have resulted in extending the estimated completion
date of the project to the 2nd quarter 2008. This latest estimate is based on
the assumption that the foreign currency and power situation does not
deteriorate further.

Exploration and Project Development

All exploration expenditure was scaled back during the 3rd quarter largely as a
result of the limited foreign currency resources being channeled to the partial
commissioning of No 4 shaft. The following exploration took place at three sites
in the Gwanda Greenstone belt:-

  • Surface mapping and partial ground magnetometer surveys were carried out
    over a 1,000m by 500m grid around Mascot and this work is still in progress.


  • At Abercorn, property definition work by way of boundary clearing was
    carried out with limited sampling of old workings and reconciling of
    previous ground magnetometer and soil geochemistry work to identify
    anomalous zones, was undertaken. Follow up work will continue in the 4th
    quarter.


  • The GG pilot shaft was sunk to 15 meters and currently lining of the
    shaft collar is in progress. This has been delayed due to the non
    availability of cement.

A review of our property holdings in the Bindura area was undertaken prior to
further discussions with our partners in the Mazoe joint venture.

Outlook
Management is reviewing all our properties that are within economic trucking
distance of the Blanket plant to evaluate future production opportunities. One
such property is the GG (discussed above) where shaft sinking has commenced.

The supply of continuous power from ZESA, if it materializes, will certainly
afford the mine the opportunity to increase production from the 4th quarter
provided the RBZ does not continue to delay gold payments.

There is a need to increase exploration activity in the Gwanda Greenstone belt
in order to realize the full potential of our property holdings. This will
depend on the availability and priority use of the mine's foreign exchange
funds.

The socio-economic environment in the country remains an area of grave concern
and there are no signs of improvement. The situation remains fluid and changes
from day to day making it difficult to make any meaningful business forecasts.

(b) Discontinued Operations

Negotiations regarding the possible sale of the Barbrook Mine and Eersteling
Gold Mine continued during the quarter. A number of interested and financially
able parties joined the process and continue to conduct their due diligence. The
Board of Directors has decided that the Corporation should continue to seek
buyers who will purchase the assets on acceptable terms.

(c) Exploration and Project Development

Gold Exploration - Zimbabwe

All Blankets exploration permits are in place and are current.

Exploration activities were scaled down when the Blanket shaft was shutdown in
mid February to direct all available resources to the shaft expansion project. A
total of $10,000 was spent on exploration during the 3rd quarter ($55,000 for
the nine months to date).

Rooipoort and Grasvally Platinum Exploration Project - South Africa

Soil geochemical sampling within the Rooipoort Platinum Exploration Project near
Mokopane (Potgietersrus) continued. During the quarter $30,000 was spent on
exploration ($84,000 for the nine months to date).

Soil geochemical sampling on the rights acquired from Falconbridge Ventures
Africa (FVA) continued with a total of 19,300 line meters of sampling achieved
on Moordrift 289 KR. for the period under review.

Approximately 8,500 line meters of soil geochemical sampling remains to be done
on Jaagbaan 291 KR, an adjacent FVA property to complete this phase of the
project.

The application to the South African authorities to transfer the recently
obtained Falconbridge property rights to one of Caledonia's wholly owned
subsidiary company's has been finalized by the regional DME office in Polokwane
and submitted to DME head office in Pretoria for approval.

Nama Copper/Cobalt - Zambia

Exploration work continued smoothly at Nama during the dry winter field season
and in accordance with the planned dates, with the exception of the Reverse
Circulation (RC) drilling. During the quarter $1,008,285 was spent on planned
exploration.

The drilling of all the diamond drill core holes, both for geological and bulk
density measurement purposes, was completed on October 5 and the diamond drill
rigs have moved off site.

Bulk density measurements are required in order to determine ore volumes and
tonnages for mining purposes with an acceptable level of accuracy. These bulk
density drill holes were therefore sited so as to provide information of a
geological nature in critical areas and thereby provide the added benefit of
improving the definition and understanding of the ore bodies.

Diamond drilling amounted to 3,140 meters during the 3rd quarter with a total of
4,099 meters having been completed for the 2007 exploration field season,
against a planned 4,000 meters. The diamond drilling breakdown per Anomaly area
is as follows:

+---------+-------------------+---------------+----------------------------------+
|Anomaly  |Diamond Drill Holes|Meters Drilled |Comment                           |
+---------+-------------------+---------------+----------------------------------+
|    A    |         7         |     1,769     |Geological and assay data         |
+---------+-------------------+---------------+----------------------------------+
|    A    |         4         |      320      |Bulk Density & Geological data    |
+---------+-------------------+---------------+----------------------------------+
|    C    |         3         |      770      |Geological and assay data         |
+---------+-------------------+---------------+----------------------------------+
|    C    |         8         |      640      |Bulk Density & Geological data    |
+---------+-------------------+---------------+----------------------------------+
|    D    |         6         |      600      |Bulk Density & Geological data    |
+---------+-------------------+---------------+----------------------------------+
|  Total  |        28         |     4,099     |                                  |
+---------+-------------------+---------------+----------------------------------+

A total of 2,256 meters of Reverse Circulation ('RC') drilling was completed
this quarter. To date 3,229 meters of RC drilling has been completed during the
2007 exploration season. The results per anomaly area are shown below:

+---------+--------------------+---------------+---------------+
|Anomaly  |RC Drill Holes      |Meters Drilled |Comment        |
+---------+--------------------+---------------+---------------+
|    C    |         23         |     1,309     |Completed      |
+---------+--------------------+---------------+---------------+
|    D    |         24         |     1,920     |Completed      |
+---------+--------------------+---------------+---------------+
|Sub Total|         47         |     3,229     |               |
+---------+--------------------+---------------+---------------+
|    D    |         28         |     2,211     |Planned for Nov|
+---------+--------------------+---------------+---------------+
|    A    |         2          |      160      |Planned for Nov|
+---------+--------------------+---------------+---------------+
|    Q    |         4          |      430      |Planned for Nov|
+---------+--------------------+---------------+---------------+
|Sub Total|         34         |     2,801     |               |
+---------+--------------------+---------------+---------------+
|  Total  |         81         |     6,030     |               |
+---------+--------------------+---------------+---------------+

Initially, the Anomaly D area proved to be problematic in terms of RC drilling,
with only 53% of the planned RC drilling being completed on account of the large
volumes of water that were encountered below the water table level in this area.
The boreholes became difficult to air flush and the 'down the hole drilling
equipment' tended to become clogged. This slowed down the RC drilling rate
significantly. The problem was largely resolved by the end of September when the
contractor moved a large high pressure/large air volume compressor on site.
Drilling operations are now continuing on a 24 hour continuous drilling cycle
and this has lead to a significant improvement in productivity. The earlier than
usual onset of the rains in early November has made it impossible to drill some
outstanding areas of Anomaly D and Anomaly Q which is a new compelling
geochemical target. In order to obtain at least some geological information on
Anomaly Q this season, a shallow pit and trench program is being implemented but
may be restricted by the water table depth.

The drill core is being logged and split on site prior to dispatch to an
accredited analytical laboratory in Ndola, Zambia for analysis of Cobalt,
Copper, Nickel and Manganese. To date all of the core samples from the
geological holes at Anomaly 'A' have been dispatched and results are still
awaited. Quality Control and Quality Assurance control procedures are in place
to verify the accuracy of the drill core splitting and handling and the
laboratory results.

Preliminary analytical results from the RC drilling at anomaly 'C' support the
geological model proposed to date. The resource modeling and re-evaluation of
the anomalies is planned once all results have been returned by the laboratory
and the field work observations have been evaluated. A revised independent
Technical Report compliant with NI 43-101 standards will be issued once this
work is completed.

Five widely-spaced pits were dug on the southern boundary of the Konkola West
area, within an area reporting anomalous Cobalt soil geochemical values. The
pits were dug to a depth of 4 to 5 meters and have all been sampled and the
samples have been submitted for analysis. A deeply weathered soil profile was
encountered in all the holes with no recognizable geological units being
encountered. It is possible that the area may be underlain by a deeply weathered
intrusive. All pits have now been closed in accordance with our rehabilitation
program. Depending on the outcome of the pit sampling, further exploration work
will be planned and conducted in this area during next year's exploration
program.

Overall, the exploration program at Nama is progressing well and within budget
under the management of the Country Manager and the supervision of Godfrey
Griffin, Pr. Sci. Nat. Caledonia's Exploration Manager and QP for the Nama
exploration programs.

The metallurgical testing to establish the likely product specification of the
cobalt hydroxide product has been completed. Based on this metallurgical test
work the cobalt hydroxide specification has been discussed with, and is
acceptable to the various potential cobalt hydroxide purchasers. Draft long-term
supply agreements are being finalized, and will be forwarded to the various
cobalt refiners for their final comments and inputs later this month.

During the quarter the Nama Environmental Impact Assessment (EIA) covering the
new access road and power line routes to the proposed Nama Plant Site was
completed, and is in the process of being submitted to the Environmental Council
of Zambia for their final approval. This EIA study will be expanded to cover the
anticipated future mining operations at Nama.

A fabrication and installation quotation for a 20 tonne per day test process
plant has been received and is being evaluated. It is intended that this plant
will be used for Nama metallurgical plant optimization.

Kadola Copper/Cobalt - Zambia

No progress has been made with regards to the finalization of the renewal of the
Kadola group of three licenses despite many hours of negotiation with members of
the Department of Mines at all levels of seniority. However the outcome of this
application is expected to be made known shortly as the period of the Zambian
Government moratorium is rapidly approaching its finalization deadline.

Notwithstanding these delays a favorable outcome is expected in the form of a
retention license for a limited time period.

Goedgevonden Diamonds - South Africa

Discussions with an interested party who has signed a confidentiality agreement
with Caledonia have commenced and will be further reported on as and when any
agreement is reached.

(d) Financing

There were no capital raising efforts during the quarter and the activities of
the company were funded from the proceeds of the exercise of warrants that took
place in the second quarter. Blanket Mine in Zimbabwe continues to fund its
activities from internally generated funds.

2. SUMMARY OF QUARTERLY RESULTS

The following information is provided for each of the eight most recently
completed quarters of the company - ending on the dates specified - in thousands
of Canadian dollars:

+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|                 |Sept 30/|June 30|Mar 31/ |Dec 31/|Sept 30/|June 30/|Mar 31/ |Dec 31/ |
|QUARTER ENDED    |   07   |  /07  |   07   |  06   |   06   |   06   |   06   |   05   |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Sales from       |  $1,950| $1,539|  $3,319| $9,045|  $4,539|      $1|      $1|      $2|
|continuing       |        |       |        |       |        |        |        |        |
|operations       |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Operating income/|     774|  (424)| (1,076)|  3,095|   2,377|   (254)|   (293)|   (167)|
|(loss) from      |        |       |        |       |        |        |        |        |
|continuing       |        |       |        |       |        |        |        |        |
|operations       |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Unrealized       | (1,017)|  (707)|     255|  1,576| (1,659)|     124|     102|     929|
|Foreign exchange |        |       |        |       |        |        |        |        |
|gain/(loss)      |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Income/(loss)    |        |       |        |       |        |        |        |        |
|from continuing  |   (855)|    364| (3,909)|  3,840|   (455)|   (683)|   (387)|   (318)|
|operations       |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|- per share basic|($0.002)| $0.001|($0.008)| $0.008|($0.001)|($0.002)|($0.001)|($0.001)|
|and diluted      |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Discontinued     |    (80)|  (126)|   (254)|(1,282)| (2,619)| (2,210)| (1,879)| (1,736)|
|operations (loss)|        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Net Income(loss) |   (935)|    238| (4,163)|  2,558| (3,074)| (2,893)| (2,266)| (2,054)|
|after            |        |       |        |       |        |        |        |        |
|discontinued     |        |       |        |       |        |        |        |        |
|operations       |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Revaluation of   |    (76)|      -|       -|      -|       -|       -|       -|       -|
|investments to   |        |       |        |       |        |        |        |        |
|fair value       |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|Comprehensive    |($1,011)|   $238|($4,163)|    N/A|     N/A|     N/A|     N/A|     N/A|
|loss             |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+
|- per share basic|($0.002)|$0.0005|($0.008)| $0.006|($0.007)|($0.007)|($0.006)|($0.006)|
|and diluted      |        |       |        |       |        |        |        |        |
+-----------------+--------+-------+--------+-------+--------+--------+--------+--------+

Note: As there are no extraordinary items the disclosed net losses per share are
identical to the total loss before extraordinary item.

Comprehensive loss is shown as N/A for 2006 and 2005 as the Accounting Standard
Section was only applicable from January 1, 2007.

The effect of the dilution on the earnings per share has been calculated for
each quarter of 2006 as a profit was earned before discontinued operations for
the year. No calculation for 2007 or 2005 was made as the result for the year
was a loss and the diluted earning per share would be anti-dilutive.

As can be seen from the table above, the loss from continuing operations in the
3rd quarter 2007 resulted from the unrealized loss on foreign exchange.

The effective exchange rate applicable to the 'Gold Support Price' is still
considered the most appropriate rate of exchange to translate the results of
Blanket Mine into Canadian Dollars and meets the requirements of Canadian GAAP.
The table below shows the exchange rates used now and in the past in Z$ per US$

+-------------------+------------------+------------------+------------------+
|                   |3rd Quarter rate  |2nd Quarter rate  |1st Quarter rate  |
|Z$ per US$1        |of exchange       |of exchange       |of exchange       |
+-------------------+------------------+------------------+------------------+
|Sales revenue      |     156,590      |      14,220      |       713        |
+-------------------+------------------+------------------+------------------+
|Other income       |                  |                  |                  |
|statement items    |     150,507      |      21,070      |       758        |
+-------------------+------------------+------------------+------------------+
|Monetary assets and|                  |                  |                  |
|liabilities        |     168,645      |      47,451      |       758        |
+-------------------+------------------+------------------+------------------+
|All other assets   |                  |                  |                  |
|and liabilities    |      101.19      |      101.19      |      101.19      |
+-------------------+------------------+------------------+------------------+

The RBZ announced retrospective changes, in 2007, to the Gold Support Price (see
table below) and the resulting effective rate of exchange gives a more accurate
representation of the purchasing power of the Zimbabwean dollar, compared to the
fixed official rate of exchange of Z$30,000:US$1

+-----------------+--------+---------+-----------+---------+---------+---------+
|Period 2007      |Jan-Apr |Apr27-May|1June-1July|1        |1        |From 1   |
|                 |26      |         |           |July-1Aug|Aug-1Sep |Sep      |
+-----------------+--------+---------+-----------+---------+---------+---------+
|Average Gold     |        |         |           |         |         |         |
|price US$/ounce  |$657    |$667     |$656       |$666     |$665     |$712     |
+-----------------+--------+---------+-----------+---------+---------+---------+
|Gold support     |        |         |           |         |         |         |
|price Z$/gram    |Z$16,000|Z$350,000|Z$1 million|Z$3      |Z$3,5    |Z$4      |
|                 |        |         |           |million  |million  |million  |
+-----------------+--------+---------+-----------+---------+---------+---------+
|Effective Z$:US$ |        |         |           |         |         |         |
|exchange rate    |Z$758   |Z$16,317 |Z$47,451   |Z$140,219|Z$163,712|Z$174,748|
+-----------------+--------+---------+-----------+---------+---------+---------+
|Old Mutual       |        |         |           |         |         |         |
|Implied Rate     |Z$10,464|Z$26,184 |Z$126,828  |Z$139,747|Z$322,517|Z$295,444|
+-----------------+--------+---------+-----------+---------+---------+---------+

The 'Old Mutual Implied Rate' is calculated by dividing the 'Old Mutual Plc
share price' on the Zimbabwe Stock Exchange by the 'Old Mutual Plc share price'
on the London Stock Exchange. Management note that as the official exchange rate
is not freely floating it does not reflect the impact of the hyper-inflationary
economy and does not give shareholders a fair perspective of the results of the
operation.

The table below demonstrates what the consolidated results of Caledonia Mining
Corporation would have been if the 'Old Mutual Implied Rate' had been used to
translate the results of Blanket Mine. At this time the 'Old Mutual Implied
Rate' is not considered to be compliant with Canadian GAAP requirements.

+---------------------------+----------------------+------------------------+
|                           |                      |                        |
|Nine months to September   |At Gold Support Price |At Old Mutual Implied   |
|2007- thousands of Canadian|rate of exchange      |rate of exchange        |
|dollars                    |                      |                        |
|                           |                      |                        |
+---------------------------+----------------------+------------------------+
|Sales Revenue              |        $6,808        |         $6,788         |
+---------------------------+----------------------+------------------------+
|Gross (loss)income         |        (726)         |         3,649          |
+---------------------------+----------------------+------------------------+
|Unrealised foreign exchange|        1,468         |         6,868          |
|loss                       |                      |                        |
+---------------------------+----------------------+------------------------+
|Net (loss)                 |       (4,935)        |        (5,908)         |
+---------------------------+----------------------+------------------------+
|Current Assets             |        2,954         |         2,228          |
+---------------------------+----------------------+------------------------+
|Current Liabilities        |        2,519         |         2,285          |
+---------------------------+----------------------+------------------------+
|Total Assets               |        27,400        |         23,965         |
+---------------------------+----------------------+------------------------+
|Income Statement average   |                      |                        |
|rate of exchange for the   |       150,507        |        190,576         |
|quarter                    |                      |                        |
+---------------------------+----------------------+------------------------+
|Period end rate of exchange|       168,645        |        398,900         |
+---------------------------+----------------------+------------------------+

For the nine month period ending September 2007 the net gross revenue was
$6,808,000 from the sale of 9,471 ounces of gold (2006 - $4,540,000 from 8,023
ounces). The ounces of gold are not comparable as 2007 includes the operations
of Blanket Mine only and 2006 included the operations of Barbrook Mine and
Blanket Mine from 1 July 2006. The ounces of gold sold by Blanket Mine in the
3rd quarter amounted to 2,262 ounces (2,922 in the 2nd quarter and 4,287 ounces
in the 1st quarter). The reduced ounces in the 3rd quarter 2007 are due to the
planned production reduction detailed in 1(a) above. The loss from continuing
operations for the 3rd quarter was $855,000 (2nd quarter income $364,000, loss
$3,909,000 1st quarter, income $3,840,000 4th quarter 2006 and loss $455,000 for
3rd quarter 2006) and mainly results from a foreign exchange loss of $1,017,000
(gain of $1,975,000 2nd quarter and loss $2,427,000 1st quarter) being recorded
due to the revision in the rate of exchange announced by the RBZ. The rapid
devaluation of the Zimbabwe dollar versus the US dollar affects the carrying
value of the US dollar denominated loan of US$5,700,000 that Blanket Mine owes
to Caledonia Mining Corporation and results in an unrealized foreign exchange
loss on translation.

The revised monetary policy as explained below, under Liquidity, resulted in
improved revenues from gold sales if settled in Zimbabwe dollars. Of the 2,262
ounces sold in the 3rd quarter 50% were sold for Zimbabwe dollars. Gold revenue
for the 3rd quarter was boosted by $454,000 due to retrospective monetary policy
adjustments resulting in additional revenue being received, in the quarter, for
gold sold in the previous quarter. Blanket Mine produced an operating profit for
the 3rd quarter of $774,000 (2nd quarter loss $424,000 and 1st quarter loss of
$1,076,000). Underground mining resumed on July 26, 2007 after the successful
commissioning of the winder on No 4 shaft but continuing power shortages
prevented the mine from achieving its 600 tonnes per day target on a sustained
basis.

The loss from discontinued operations of $80,000 for the quarter represents the
holding costs of Barbrook and Eersteling as the sale process progresses.

3. LIQUIDITY

As of September 30, 2007 the company had a working capital surplus of $435,000
(surplus of $2,332,000 at June 30 and $1,978,000 deficit at March 31, 2007 and a
surplus of $2,874,000 as at December 31, 2006). Despite late payments for gold
sold to the RBZ, Blanket Mine ended the quarter with local borrowings of 
$27,000. These funds were used to pay local creditors and staff costs. As at the
end of the 3rd quarter $509,885 was owed by the RBZ for gold sold of which
$250,000 was received on October 20, 2007. Due to subsequent sales of gold the
RBZ owed Blanket Mine $1,100,000 for gold delivered to Fidelity Printers and
Refiners as of November 1, 2007.

On October 1, 2007 the RBZ announced new monetary policy measures to address the
rampant inflation in Zimbabwe and the critical cash flow shortages being
experienced by industry. Items that affect Blanket mine are summarized in the
table below:

+---------------------------+---------------------------+---------------------------+
|Policy Item                |Old Policy from July 1,    |New Policy from October 1, |
|                           |2007                       |2007                       |
+---------------------------+---------------------------+---------------------------+
|Gold revenue per gram when |Z$1,000,000 per gram       |Z$5,000,000 per gram       |
|sold for Zimbabwe dollars  |                           |                           |
+---------------------------+---------------------------+---------------------------+
|Gold revenue ratio when    |60% received in US dollars |65% received in US dollars |
|sold for US dollars        |and 40% received in        |and 35% received in        |
|                           |Zimbabwe dollars           |Zimbabwe dollars           |
+---------------------------+---------------------------+---------------------------+
|Method of calculating      |Gold ounces x US$ price of |Gold ounces x US$ price of |
|Zimbabwe dollars for the   |gold x Z$250 x 60 (drought |gold x Z$270,000           |
|35% and 40% above          |relief factor) = Zimbabwe  |                           |
|                           |dollar revenue. Effective  |                           |
|                           |exchange rate Z$15,000:    |                           |
|                           |US$1                       |                           |
+---------------------------+---------------------------+---------------------------+
|Exchange rate paid when US |Z$15,000: US$1             |Z$270,000: US$1            |
|dollars sold to RBZ        |                           |                           |
+---------------------------+---------------------------+---------------------------+
|Retention period of US     |Indefinite                 |Indefinite                 |
|dollars                    |                           |                           |
+---------------------------+---------------------------+---------------------------+

With the implementation of the new policies it is expected that Blanket Mine
will generate sufficient cash to be self funding (subject to electricity
availability), for working capital and limited capital expenditure projects.

Funding requirements for exploration activities and general working capital of
non Zimbabwean operations were met from the proceeds received from the exercise
of warrants in April 2007.

There are no other capital commitments that have a call on the available
resources of Caledonia Mining Corporation.

4. RELATED PARTY TRANSACTIONS

During the 3rd quarter of 2007 the company had the following related party
transactions, all amounts in thousands of Canadian dollars.

                                                        2007   2006   2005
Management, administrative services and benefits paid
or accrued to a company which employs the Company's     $129   $118   $108
President

Rent paid to a company owned by members of the            12     12     12
President's family

These related party transactions were in the normal course of operations and are
recorded at the ruling exchange amount.

5. CRITICAL ACCOUNTING POLICIES

Apart from the estimate of the rate of exchange to be used to translate the
results of Blanket Mine, there are two other major areas where accounting
estimates are made, asset impairment and asset retirement obligation. As
significant impairment provisions have already been made against the assets and
there is a reasonable level of certainty around the estimate it is considered
unlikely that any change in estimate would result in a material impact on the
results of the company. Based on non-binding purchase offers made for Barbrook
and Eersteling Mines no further asset impairment has been made against these
assets. The asset retirement obligation is also considered to be estimated with
a reasonable degree of certainty, although the original estimation was
calculated some years ago. The estimation is accreted annually at 5% and thus
any change in circumstances is considered unlikely to have a material impact on
the results of the company or its operations.

In 2005 the Company adopted the accounting guideline issued by the Canadian
Institute of Chartered Accountants in respect of consolidation of variable
interest entities effective for years after November 1, 2004. The Company has
reviewed its interests and determined that the new guideline has not had a
material effect on the results of operations or the financial condition of the
Company.

6. CONTROLS

The CEO and CFO have evaluated the effectiveness of the Company's disclosure
controls and procedures and assessed the design of the Company's internal
control over financial reporting as of December 31, 2006, pursuant to the
certification requirements of Multilateral Instrument 52-109.

The Company has a Disclosure Committee consisting of four Directors and one
Officer, and has disclosure controls and procedures which it follows in an
attempt to ensure that it complies with all required disclosures on an adequate
and timely basis. The Company's Directors and Management, and the Disclosure
Committee, are making all reasonable efforts to ensure that the Company's
disclosures are made in full compliance with the applicable rules and
requirements. All reasonable efforts are also being made to ensure that the
Company's disclosure controls and procedures provide reasonable assurance that
material information relating to the Company, including its consolidated
subsidiaries, is made known to the Company's Certifying Officers by others
within those entities.

7. FORWARD LOOKING STATEMENTS

This Management Discussion and Analysis contains certain forward-looking
statements relating but not limited to the Company's expectations, intentions,
plans and beliefs. Forward-looking information can often be identified by
forward-looking words such as 'anticipate', 'believe', 'expect', 'goal', 'plan',
'intend', 'estimate', 'could', 'should', 'may' and 'will' or similar words
suggesting future outcomes, or other expectations, beliefs, plans, objectives,
assumptions, intentions or statements about future events or performance.

Forward-looking information may include reserve and resource estimates,
estimates of future production, unit costs, costs of capital projects and timing
of commencement of operations, and is based on current expectations that involve
a number of business risks and uncertainties. Factors that could cause actual
results to differ materially from any forward-looking statement include, but are
not limited to, failure to establish estimated resources and reserves, the grade
and recovery of ore which is mined varying from estimates, capital and operating
costs varying significantly from estimates, delays in obtaining or failures to
obtain required governmental, environmental or other project approvals,
inflation, changes in exchange rates, fluctuations in commodity prices, delays
in the development of projects and other factors. Forward-looking statements are
subject to risks, uncertainties and other factors that could cause actual
results to differ materially from expected results.

Potential shareholders and prospective investors should be aware that these
statements are subject to known and unknown risks, uncertainties and other
factors that could cause actual results to differ materially from those
suggested by the forward-looking statements. Shareholders are cautioned not to
place undue reliance on forward-looking information. By its nature,
forward-looking information involves numerous assumptions, inherent risks and
uncertainties, both general and specific, that contribute to the possibility
that the predictions, forecasts, projections and various future events will not
occur. Caledonia undertakes no obligation to update publicly or otherwise revise
any forward-looking information whether as a result of new information, future
events or other such factors which affect this information, except as required
by law.

8. ADDITIONAL INFORMATION

(a) As at November 7, 2007 the following securities of the Company were
    outstanding:

    - 487,869,280 common shares.

    - 18,588,000 common share purchase options at an average price of $0.198 
      maturing at various dates until January 23, 2017

    - 33,287,626 common share purchase warrants exercisable at a price of $0.20 
      per share at dates between 28 December 2007 and February 3, 2008.

(b) For further information about Caledonia reference is also made to its 2006
    Annual Information Form dated April 10, 2007 filed on SEDAR which can be 
    seen at www.sedar.com

Management's Responsibility for Financial Reporting

To the Shareholders of Caledonia Mining Corporation:

The accompanying unaudited consolidated financial statements of Caledonia were
prepared by management in accordance with accounting principles generally
accepted in Canada, consistently applied and within the framework of the summary
of significant accounting policies in these consolidated financial statements.
Management is responsible for all information in the quarterly report. All
financial and operating data in the quarterly report is consistent, where
appropriate, with that contained in the consolidated financial statements.

The Board of Directors discharges its responsibilities for the consolidated
financial statements primarily through the activities of its Audit Committee
composed of three directors, all of whom are not members of management. This
Committee meets with management to assure that it is performing its
responsibility to maintain financial controls and systems and to approve the
quarterly consolidated financial statements of Caledonia.

The consolidated financial statements have not been reviewed by Caledonia's
auditors.

S. E. Hayden                                      S.R. Curtis
President and                                     Vice-President Finance
Chief Executive Officer                           and Chief Financial Officer



                                                  Caledonia Mining Corporation
                                                    Consolidated Balance Sheet
                                            (in thousands of Canadian dollars)

Unaudited                                              September 30 December 31
                                                               2007        2006
Assets

Current
Cash and cash equivalents                                      $681      $1,252
Accounts receivable                                             799       1,407
Inventories (note 4)                                          1,293       5,738
Prepaid expenses                                                 28          61
Assets held for sale                                            153         315
                                                              2,954       8,773

Capital assets and mineral properties held for sale          11,955      11,449

Investment at cost (note 5)                                      34          79
Capital assets                                                  212         212
Mineral properties                                           12,245      10,943
                                                             24,446      22,683
                                                            $27,400     $31,456

Liabilities and Shareholders' Equity

Current
Accounts payable (note 4)                                    $2,519      $5,945
                                                              2,519       5,945

Asset retirement obligation                                     718         811
Asset retirement obligation - held for sale                     312         364
                                                              3,549       7,120

Shareholders' Equity
Share Capital (note 1)                                      195,006     190,626
Contributed surplus                                           1,029         989
Accumulated other comprehensive income/(loss)                  (45)           -
Deficit                                                   (172,139)   (167,279)
                                                             23,851      24,336
                                                            $27,400     $31,456

The estimate of the exchange rate used to translate Blanket Mine in the
comparative Financial Statements has not been changed and thus the comparatives
are as previously reported.

On behalf of the Board:
     
     'S E Hayden'           Director

     'R Fasel'              Director

The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.

                                                            Caledonia Mining Corporation
                                                       Consolidated Statement of Deficit
                                                      (in thousands of Canadian dollars)

               For the three months ended September 30               For the nine months
                                                                      ended September 30

Unaudited                  2007       2006       2005         2007       2006       2005
Deficit, beginning   ($171,204) ($166,763) ($156,986)   ($167,279) ($161,604) ($151,924)
of period
Net (loss) for the        (935)    (3,074)    (2,564)      (4,860)    (8,233)    (7,626)
period
Deficit end of       ($172,139) ($169,837) ($159,550)   ($172,139) ($169,837) ($159,550)
period

                                                           Caledonia Mining Corporation
                    Consolidated Statement of Operations and Comprehensive Income(Loss)
                            (in thousands of Canadian dollars except per share amounts)

              For the three months ended September 30               For the nine months
                                                                     ended September 30

Unaudited                     2007     2006      2005        2007        2006     2005
Revenue and operating
costs
Revenue from sales          $1,950   $4,540        $-      $6,808      $4,540       $4
Operating costs              1,176    2,163       221       7,534       2,710      588
Gross Income (loss)            774    2,377     (221)       (726)       1,830    (584)

Costs and expenses
General and                    542      986       342       1,584       1,719    1,565
administration
Interest                        65      (2)       (1)         120         (2)        0
Amortization                     4       79        36         510          99       51
Other expenses (income)      1,017    (945)     1,227       1,457       1,539    1,233
(Note 3)
                             1,628      118     1,604       3,671       3,355    2,849

(Loss)Income before          (854)    2,259   (1,825)     (4,397)     (1,525)  (3,433)
discontinued operations
Taxation                       (1)        -         -         (3)
(Loss) Income after tax      (855)    2,259   (1,825)     (4,400)     (1,525)  (3,433)
before discontinued
operations
Net (loss) for                (80)  (5,333)     (739)       (460)     (6,708)  (4,193)
discontinued operations
Net (loss) for the period    (935)  (3,074)   (2,564)     (4,860)     (8,233)  (7,626)
after discontinued
operations
Revaluation of                (76)        -         -        (76)           -        -
Investments to fair value
Comprehensive (loss) for
the period                ($1,011)      N/A       N/A    ($4,935)         N/A      N/A
Net (loss) per share
before discontinued
operations
Basic and fully diluted   ($0.002) ($0.005)  ($0.005)    ($0.009)    ($0.004) ($0.011)
(note 2)

Net (loss) per share
after discontinued
operations
Basic and fully diluted   ($0.002) ($0.007)  ($0.008)    ($0.010)    ($0.020) ($0.024)
(note 2)

Comprehensive (Loss) for 2006 and 2005 is shown as N/A as Standard 1530 dealing
with Comprehensive Income only came into effect for Caledonia from January
1,2007.

The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.



                                                                  Caledonia Mining Corporation
                                                    Statement of Changes in Shareholder Equity
                                                           (in thousands of Canadian dollars )

                          Share         Contributed  Accumulated Other      Deficit      Total
                        Capital             Surplus      Comprehensive
                         Amount                                 Income 
Balance at December    
31, 2006               $190,626                $989                 $-    $(167,279)   $24,336
Warrants exercised        3,330                                                          3,330
Warrants exercised        1,050                                                          1,050
Adjustment to opening                                                                 
balance change in
accounting policy                                                   31                      31
Expense on options issued                        50                                         50
Options cancelled                              (10)                                       (10)
Investments revaluation
to fair value                                                      (76)                   (76)
Net loss for the period                                                      (4,860)   (4,860)
Balance at September   $195,006              $1,029               ($45)   ($172,139) ($23,851)
30, 2007

The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.

                                                     Caledonia Mining Corporation
                                             Consolidated Statement of Cash Flows
                                              (in thousands of Canadian dollars )

             For the three months ended September 30    For the nine months ended
                                                                     September 30

Unaudited                    2007     2006     2005        2007     2006       2005
Cash provided by (used in)

Operating activities
Net (loss) income before   ($855)   $2,259 ($1,825)    ($4,400) ($1,525)   ($3,433)
discontinued operations

Adjustments to reconcile        3      297      400         415      356        444
net cash from operations
(note 4 )

Changes in working            396    3,357      107       1,766      669      (135)
capital balances (note 4)
                            (456)    5,913  (1,318)     (2,219)    (500)    (3,124)

Investing Activities
Expenditure on capital      (959)  (1,304)  (1,579)     (2,339)  (1,436)    (1,784)
assets and mineral
properties
Investment in Blanket
Mine net of cash                -    (859)        -           -    (859)          -
received on acquisition
                            (959)  (2,163)  (1,579)     (2,339)  (2,295)    (1,784)
Financing activities
Bank overdraft                  -        -        -           -    (197)          -
(decrease)
Shares held in Escrow           -  (3,014)        -           -        -          -
Issue of share capital
net of issue costs              -    2,160       69       4,380    7,559      3,235
                                -    (854)       69       4,380    7,362      3,235
Cash flow from
discontinued operations
Operating activities         (80)  (5,333)    (739)       (460)  (6,708)    (4,193)
Amortization                    5    1,767      290          21    2,893        764
Investing Activities            -      262      889                (922)    (1,274)
                             (75)  (3,304)      440       (439)  (4,737)    (4,703)

Increase (decrease) in    (1,490)    (408)  (2,388)       (617)    (170)    (6,376)
cash for the period
Cash and cash               2,171    1,314    2,482       1,298    1,076      6,470
equivalents, beginning
of the period
Cash and cash                 681      906       94         681      906         94
equivalents, end of the
period

Cash and cash
equivalents at end of
the period relate to:
Continuing operations         691    1,187       99         691    1,187         99
Discontinued operations      (10)    (281)      (5)        (10)    (281)        (5)
                             $681     $906      $94        $681     $906         94

The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.



Caledonia Mining Corporation
Summary of Significant Accounting Policies
(in thousands of Canadian Dollars)

Nature of Business

The Company is engaged in the acquisition, exploration and development of
mineral properties for the exploitation of base and precious metals. The ability
of the Company to recover the amounts shown for its capital assets and mineral
properties is dependent upon the existence of economically recoverable reserves;
the ability of the Company to obtain the necessary financing to complete
exploration and development; and future profitable production or proceeds from
the disposition of such capital assets and mineral properties.

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, realizing
proceeds from the disposal of mineral properties 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 the exchange rate used to translate the results of
Blanket Mine into Canadian dollars, mineral resources, future cash flows
associated with capital assets and mineral properties. Management's calculation
of reserves and resources and cash flows are based upon engineering and
geological estimates and financial estimates including gold prices and operating
costs. The amount ultimately recovered could be materially different than the
estimated values.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
together with all its subsidiaries, all 100% owned. All significant
inter-company balances and transactions have been eliminated on consolidation.

Barbrook Mines Limited                 Caledonia Mining (Zambia) Limited
Blanket (Barbados) Holdings Limited    Caledonia Nama Limited
Blanket Mine (1983) (Private) Limited  Caledonia Western Limited
Caledonia Holdings (Africa) Limited    Eersteling Gold Mining Company Limited
Caledonia Holdings Zimbabwe Limited    Fintona Investments (Proprietary) Limited
Caledonia Kadola Limited               Greenstone Management Services
                                       (Proprietary) Limited
Caledonia Mining Services Limited      Maid O'Mist (Proprietary) Limited


Cash and Cash Equivalents

Cash and cash equivalents represent cash on hand in operating bank accounts,
cash in transit at period end between Blanket Mine in Zimbabwe and Greenstone
Management Services in South Africa and money market funds maturing in less than
three months.

Inventories

These include gold in circuit (WIP) and bulk consumable stores. WIP is valued at
the lower of the cost of production, on an average basis, at the various stages
of production or net realizable value if the cost of production exceeds the
current gold price. Bulk consumable stores are valued at the lower of cost or
net realizable value on an average basis.

Investments

The market securities are recorded at fair value. Changes in fair value are
recognized in the statements of operations and comprehensive income.

Revenue Recognition

Revenue from the sale of precious metals is recognized when the metal is
delivered to the respective refineries, benefits of ownership are transferred
and the receipt of proceeds is substantially assured.

Capital Assets

Producing Assets
Producing assets are recorded at cost less grants, accumulated amortization and
write-downs. Producing plant and equipment assets are amortized using the
unit-of-production method on the ratio of tonnes of ore mined or processed to
the estimated proven and probable mineral reserves as defined by the Canadian
Institute of Mining, Metallurgy and Petroleum.

Other producing assets are amortized using the straight line method basis on the
estimated useful lives of the assets. The estimated life of the producing assets
ranges up to 10 years. Repairs and maintenance expenditures are charged to
operations; major improvements and replacements which extend the useful life of
an asset are capitalized and amortized over the remaining useful life of that
asset. Barbrook Mine and Eersteling Gold Mine have been put up for sale and are
thus presented as assets for sale in these financial statements.

Non-Producing Assets
Non-producing assets are recorded at cost less write downs. At the time of
commercial production, the assets are reclassified as producing. During
non-producing periods, no amortization is recorded.

Mineral Properties

Producing Properties
When and if properties are placed in production, the applicable capitalized
costs are amortized using the unit-of-production method as described above.
Blanket Mine was acquired during 2006 and has been consolidated into these
results from July 1, 2006 and, as such, has been presented as a producing asset
in these financial statements.

Non-Producing Properties
Costs relating to the acquisition, exploration and development of non-producing
resource properties which are held by the Company or through its participation
in joint ventures are capitalized until such time as either economically
recoverable reserves are established or the properties are sold or abandoned.

A decision to abandon, reduce or expand activity on a specific project is based
upon many factors including general and specific assessments of mineral
reserves, anticipated future mineral prices, anticipated costs of developing and
operating a producing mine, the expiration date of mineral property leases, and
the general likelihood that the Company will continue exploration on the
project. However, based on the results at the conclusion of each phase of an
exploration program, properties that are not suitable as prospects are
re-evaluated to determine if future exploration is warranted and that carrying
values are appropriate.

The ultimate recovery of these costs depends on the discovery and development of
economic ore reserves or the sale of the properties or the mineral rights. The
amounts shown for non-producing resource properties do not necessarily reflect
present or future values.

Discontinued Operations

During the fourth quarter of 2006 Barbrook Mine was subjected to illegal
industrial action by employees of a labour broker. Due to the damage caused
during and after the industrial action the mine was placed on care and
maintenance. At a subsequent meeting of the Board of Directors it was resolved
that Barbrook Mine and Eersteling Gold Mine would be put up for sale.

As a consequence of this decision Barbrook and Eersteling Mine's results for
2007 and preceding years have been disclosed under discontinued operations.

Asset Impairment

Long-lived assets are reviewed for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If changes in circumstances indicate that the carrying amount of
an asset that an entity expects to hold and use may not be recoverable, future
cash flows expected to result from the use of the asset and its disposition must
be estimated. If the undiscounted value of the future cash flows is less than
the carrying amount of the asset, impairment is recognized based on the fair
value of the assets.

Strategic Alliances

The Company has entered into various agreements under which the participants
earn a right to participate in the mineral property by incurring exploration
expenditures in accordance with the conditions of the agreements. Upon
satisfaction of the conditions of the agreement a joint venture may be formed
with customary joint venture terms and provisions and then accounted for on a
proportionate consolidation basis. Until a joint venture is formed only the
expenditures on the properties incurred by the Company are reflected in these
financial statements.

Foreign Currency Translation

Balances of the Company denominated in foreign currencies and the accounts of
its foreign subsidiaries are translated into Canadian dollars as follows:

     (i)    monetary assets and liabilities at period end rates;
     (ii)   all other assets and liabilities at historical rates, and
     (iii)  revenue and expense transactions at the average rate of exchange
            prevailing during the period.

Exchange gains or losses arising on these translations are reflected in income
in the year incurred.

Blanket is a self-sustaining operation and operates in Zimbabwe in a hyper
inflationary economy. Accordingly the results of these operations have been
translated into Canadian Dollars using the temporal method as described above
and exchange gains or losses arising on these translations are reflected in
income in the year incurred.

In the preparation of the financial statements shown on pages 12-15 the
effective exchange rate derived from the Gold Support price, has been used to
translate the results of Blanket Mine into Canadian dollars.

Due to the hyper inflationary nature of the Zimbabwe economy it was decided to
change the basis on which to estimate the exchange rate to be used in
translating the results of Blanket Mine into Canadian dollars. This is a change
in estimate and not a change in accounting policy.

This change was made during the second quarter of 2007 and has been applied to
the results of all the quarters of 2007. It has been decided that the effective
exchange rate applicable to the 'Gold Support Price' is the most appropriate
rate of exchange to use at this point in time and meets the requirements of
Canadian GAAP. The table below shows the exchange rates used now and in the past
in Z$ per US$

+---------------+------------------+-------------------+-----------------+
|               | 3rd Quarter rate |2nd Quarter rate of|1st Quarter rate |
|               |   of exchange    |     exchange      |   of exchange   |
+---------------+------------------+-------------------+-----------------+
|Sales revenue  |     156,590      |      14,220       |       713       |
+---------------+------------------+-------------------+-----------------+
|Other income   |                  |                   |                 |
|statement items|     150,507      |      21,070       |       758       |
+---------------+------------------+-------------------+-----------------+
|Monetary assets|                  |                   |                 |
|and liabilities|     168,645      |      47,451       |       758       |
+---------------+------------------+-------------------+-----------------+
|All other      |                  |                   |                 |
|assets and     |      101.19      |      101.19       |     101.19      |
|liabilities    |                  |                   |                 |
+---------------+------------------+-------------------+-----------------+

Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, future tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Future tax assets and liabilities are measured using
enacted or substantively enacted tax rates expected to apply when the asset is
realized or the liability settled. The effect on future tax assets and
liabilities of a change in tax rates is recognized in income in the period that
substantive enactment or enactment occurs.

Adoption of New Accounting Standards retrospectively at January 1, 2007
i) Financial Instruments- Recognition and Measurement (Section 3855).This
standard sets out criteria for the recognition and measurement of financial
instruments for fiscal years beginning on or after October 1, 2006. This
standard requires all financial instruments within its scope, including
derivatives, to be included on a Company's balance sheet and measured either at
fair value or, in certain circumstances when fair value may not be considered
most relevant, at cost or amortized cost. Changes in fair value are to be
recognized in the statements of operations and comprehensive income.

All financial assets and liabilities are recognized when the entity becomes a
party to the contract creating the item. As such, any of the Company's
outstanding financial assets and liabilities at the effective date of adoption
are recognized and measured in accordance with the new requirements as if these
requirements had always been in effect. Any changes to the fair values of assets
and liabilities prior to October 1, 2006 are recognized by adjusting opening
deficit or opening accumulated other comprehensive income.
All financial instruments are classified into one of the following five
categories: held for trading, held-to-maturity, loans and receivables,
available-for-sale financial assets, or other financial liabilities. Initial and
subsequent measurement and recognition of changes in the value of financial
instruments depends on their initial classification.

ii) Comprehensive Income (Section 1530)
Comprehensive income is the change in shareholders' equity during a period from
transaction and other events from non-owner sources. This standard requires
certain gains and losses that would otherwise be recorded as part of the net
earnings to be presented in other 'comprehensive income' until it is considered
appropriate to recognize into net earnings. This standard requires the
presentation of comprehensive income and its components in a separate financial
statement that is displayed with the same prominence as the other financial
statements. Accordingly, the Company now reports a Statement of Shareholder
Equity which includes the account 'accumulated other comprehensive income' in
the shareholders' equity section of the consolidated balance sheet.

The adoption of Sections 3855 and 1530 determines how the Company records its
investment in Motapa Diamonds Inc. and Old Mutual Plc which are now classified
as financial instruments 'available for sale' and thus have to be reported at
fair value. The adjustment to opening balance to recognize this was $31 any
further unrealized gains or losses in the nine months ended September 30, 2007
are reported in the current period

Change in Accounting Policies
There have been no other changes in accounting policy during the current or
preceding years.





Caledonia Mining Corporation
Notes to the Consolidated Financial Statements
(in thousands of Canadian Dollars unless otherwise indicated and except for
share and per share amounts)

1. Share Capital

(a) Authorized
    An unlimited number of common shares.
    An unlimited number of preference shares.
(b) Issued

                                       Number of Shares         Amount
Common shares
Balance December 31, 2004                   301,112,286       $173,304
Issued pursuant to private placements        52,738,888          4,733
Warrants exercised                           16,863,962          2,016
Balance, December 31, 2005                  370,715,136       $180,053
Issued pursuant to private placement         15,437,626          1,475
Issued pursuant to a private placement       34,828,259          3,924
Issued pursuant to acquisition               20,000,000          3,014
Issued pursuant to a private placement       17,000,000          2,160
Balance December 31 , 2006                  457,981,021       $190,626
Balance March 31 , 2007                     457,981,021       $190,626
Warrants exercised                           22,890,000          3,330
Warrants exercised                            6,998,259          1,050
Balance June 30 , 2007                      487,869,280       $195,006
Balance September 30 , 2007                 487,869,280       $195,006

On April 27, 2007 warrants amounting to 22,890,000 units were exercised and an
equivalent number of shares were issued at a price of $0.15 per share realizing
$3,330,495 after commission and on May 12, 2007 warrants amounting to 6,998,259
units were exercised and an equivalent number of shares were issued at a price
of $0.15 per share realizing $1,049,739.

(c) Stock Option Plans and Stock-Based Compensation

The Company has established incentive stock option plans (the 'Plans') for
employees, officers, directors, consultants and other service providers. Under
the Plans, as at September 30, 2007, the Company has the following options
outstanding:

              Number of Options Exercise Price         Expiry Date
                        803,000        $ 0.330    February 9, 2008
                      9,950,000        $ 0.235      April 24, 2012
                        225,000        $ 0.345        June 2, 2012
                        610,000        $ 0.260      April 29, 2014
                        200,000        $ 0.260     August 15, 2014
                      4,000,000        $ 0.110   February 15, 2015
                      1,000,000        $ 0.140       July 11, 2010
                        300,000        $ 0.130         May 11,2016
                        200,000        $ 0.110     January 23,2017
                      1,300,000        $0.1125        May 31, 2012
                     18,588,000





The continuity of the options granted, exercised, cancelled and expired under
the Plans during 2007, 2006 and 2005 are as follows:

+---------------------------------+-------------+--------------------+
|                                 |  Number of  |Weighted Avg.       |
|                                 |   Options   |Exercise Price      |
+---------------------------------+-------------+--------------------+
|Options outstanding at December  |   13,108,700|       $0.26        |
|31, 2004                         |             |                    |
+---------------------------------+-------------+--------------------+
|Granted                          |    5,000,000|       $0.12        |
+---------------------------------+-------------+--------------------+
|Cancelled or expired             |  (1,210,700)|      ($0.43)       |
+---------------------------------+-------------+--------------------+
|Options outstanding at December  |   16,898,000|       $0.21        |
|31, 2005                         |             |                    |
+---------------------------------+-------------+--------------------+
|Granted                          |      300,000|       $0.13        |
+---------------------------------+-------------+--------------------+
|Granted                          |      150,000|       $0.115       |
+---------------------------------+-------------+--------------------+
|Cancelled or expired             |    (110,000)|      ($0.27)       |
+---------------------------------+-------------+--------------------+
|Options outstanding at December  |   17,238,000|       $0.21        |
|31, 2006                         |             |                    |
+---------------------------------+-------------+--------------------+
|Cancelled or expired             |    (150,000)|      ($0.115)      |
+---------------------------------+-------------+--------------------+
|Granted                          |      200,000|       $0.11        |
+---------------------------------+-------------+--------------------+
|Options outstanding at March 31, |   17,288,000|       $0.204       |
|2007                             |             |                    |
+---------------------------------+-------------+--------------------+
|Granted                          |    1,300,000|      $0.1125       |
+---------------------------------+-------------+--------------------+
|Options outstanding at June 30,  |   18,588,000|       $0.198       |
|2007                             |             |                    |
+---------------------------------+-------------+--------------------+
|Options outstanding at September |   18,588,000|       $0.198       |
|30, 2007                         |             |                    |
+---------------------------------+-------------+--------------------+

The options to purchase common shares noted above, have been granted to
directors, officers, employees and service providers at exercise prices
determined by reference to the market value of the common shares on the date of
grant. The vesting of options is made at the discretion of the board of
directors at the time the options are granted.

(d) Warrants

The Company has issued the following common share purchase warrants pursuant to
private placements which are outstanding as of September 30, 2007:

Number of Warrants   Shares for      Exercise   Expiry Date
                     Warrants        Price

    33,287,626       1 for 1        $0.20       Various to
                                                February 03, 2008

On April 27, 2007 warrants amounting to 22,890,000 units were exercised and an
equivalent number of shares were issued at a price of $0.15 per share realizing
$3,330,495 after commission and on May 12,2007 warrants amounting to 6,998,259
units were exercised and an equivalent number of shares were issued at a price
of $0.15 per share realizing $1,049,739. On September 28, 2007 17,000,000
warrants expired.

The detail of the warrants outstanding is detailed below.

+----------+-----------------------+-------------+-------------------+
|    Number|Description            |  Exercise   |     Validity      |
|          |                       |    Price    |                   |
+----------+-----------------------+-------------+-------------------+
|17,850,000|Common share purchase  |    $0.20    |Until December 28, |
|          |warrants               |             |2007               |
+----------+-----------------------+-------------+-------------------+
|10,000,000|Common share purchase  |    $0.20    |Until January 31,  |
|          |warrants               |             |2008               |
+----------+-----------------------+-------------+-------------------+
| 2,715,476|Common share purchase  |    $0.20    |Until February 1,  |
|          |warrants               |             |2008               |
+----------+-----------------------+-------------+-------------------+
| 2,722,150|Common share purchase  |    $0.20    |Until February 3,  |
|          |warrants               |             |2008               |
+----------+-----------------------+-------------+-------------------+



The continuity of warrants issued and outstanding is as follows:

                                                      Number of
                                                       Warrants

                 Outstanding December 31, 2004       39,232,909
                 Exercised                         (16,863,962)
                 Expired                           (22,368,947)
                 Issued pursuant to private          17,850,000
                 placements
                 Outstanding December 31, 2005       17,850,000
                 Issued pursuant to private          67,265,885
                 placements
                 Outstanding December 31, 2006       85,115,885
                 Outstanding March 31, 2007          85,115,885
                 Exercised                         (22,890,000)
                 Exercised                          (6,998,259)
                 Expired                            (4,940,000)
                 Outstanding June 30, 2007           50,287,626
                 Expired                           (17,000,000)
                 Outstanding September 30, 2007      33,287,626
                 

2. Net Income/(Loss) Per Share

The net basic income(loss) per share figures have been calculated using the
weighted average number of common shares outstanding during the third quarter
which amounted to 487,869,280 (2006 - 455,209,281;) and year to date 474,568,573
(2006 - 412,981,020). Fully diluted earnings per share have not been calculated
as it would be anti-dilutive.

3. Other Expense (Income) before discontinued operations

Other expense (income) is comprised of the following:

                                           2007        2006        2005

Foreign exchange loss                     1,468       1,433         979
Other                                      (11)         106         254
                                         $1,457      $1,539      $1,233

The foreign exchange loss reported for 2007 has arisen due to the rapid
devaluation of the Zimbabwe Dollar versus the US dollar and the fact that
Blanket Mine has a US dollar denominated loan owing to Caledonia Mining
Corporation.

4. Supplemental Cash Flow information

Items not involving cash are as follows:

                                        2007        2006        2005
Amortization                             $15         $99         $51
Asset retirement obligation            (146)
Write down of mineral property           495         293
Compensation warrant expense                                     307
Stock option expense net                  40                     103
Other                                     11          39        (17)
                                        $415        $356        $444

The net changes in non-cash working capital balances for operations are as
follows:
                                        2007        2006        2005
Accounts payable                    ($3,426)        $314          $4
Accounts Receivable                      608          93        (45)
Inventories                            4,445         169       (113)
Prepaid expenses                          33          93          19
Assets held for sale                     106
                                      $1,766        $669      ($135)

The reduction in the value of both inventory and accounts payable is largely due
to the more accurate estimate of exchange rate used to translate the Blanket
Mine financial statements into Canadian dollars. There has also been a reduction
of both inventory and accounts payable levels due to the reduced level of
production during the 3rd quarter caused by power shortages and lack of foreign
currency.

5. Investments

The adoption of Sections 3855 and 1530, retrospectively from January 1, 2007,
determines how the Company records its investment in Motapa Diamonds Inc. and
Old Mutual Plc which are now classified as financial instruments 'available for
sale' and thus have to be reported at fair value. The adjustment to opening
balance to recognize this was $31 any further unrealized gains or losses in the
nine months ended September 30, 2007 are reported in the current period
The investment in Motapa Diamonds Inc is valued at $26 and shares held in Old
Mutual Plc are valued at $8.

6. Contingent Liability

In the Share Sale Agreement dated May 12, 2006 pursuant to which the Company
purchased 100% of the shares of Blanket, the Company agreed that it would, as
soon as reasonably practicable after the Closing of the Agreement, cause Blanket
to implement a share incentive scheme considered by the Directors to be in the
best interests of Blanket, pursuant to which a percentage of the shares of
Blanket will be deposited in a Trust for the benefit of the management and
employees of Blanket. As at September 30, 2007 no scheme had been established,
nor were any shares of Blanket deposited in a Trust for the purposes of such a
scheme. The Company and the Board of Directors of Blanket, have expressed their
intention to delay the establishment of the required scheme pending the passing
of anticipated Zimbabwe laws relating to the indigenization of the mining
industry, as it is recognized that the Zimbabwean laws, when passed, will likely
have a material impact on the structure of the proposed scheme and the
percentage of the issued shares of Blanket required to be put into trust for the
purposes of the scheme.




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