<PAGE>

                                                                    EXHIBIT 99.1


                                      2002
                                  ANNUAL REPORT








                                    CALEDONIA
                               MINING CORPORATION



<PAGE>





                                TABLE OF CONTENTS

2.       Performance Highlights

3.       Letter to Shareholders

4.       Activity Report on Properties

9.       Management Discussion and Analysis of Financial Results

13.      Management's Responsibility for Financial Reporting

14.      Auditors' Report

15.      Financial Statements

33.      Directors and Management

34.      Corporate Directory

Note:    All figures in the 2002 Annual Report are in Canadian dollars unless
         otherwise noted.



                              CORPORATE OBJECTIVES

Caledonia Mining Corporation ("Caledonia") was formed on February 5, 1992. The
focus of the Caledonia group of companies is to identify and acquire properties
and projects early in the development cycle, and then add value by either
operating or joint venturing, or disposing of mineral assets at the most
economically opportune time. Caledonia defines its operations as the
acquisition, funding, development, and operation of mineral properties, with the
possibility of divestiture at different points in time on the valuation curve,
possibly when the asset is in production or perhaps when it is at the
exploration stage. The economics of the divestiture decision governs the timing
of any such transaction. Cognisant of the economic risks and vagaries inherent
in the exploration for, and mining of mineral resources Caledonia will continue
to seek and develop only those mineral assets with the potential to be low cost
producers.


ENVIRONMENTAL POLICY

Caledonia Mining Corporation ("Caledonia") and its Board of Directors are
committed to maintain the highest environmental standards such that its
operations and/or its products do not present an unacceptable risk to its
employees, its customers, the public or the environment. Caledonia and its
subsidiaries operate under an environmental code of practice that encompasses
the following:

I.     Caledonia directs its employees and its subsidiary companies to conduct
       their exploration and operations activities in a professional,
       environmentally responsible manner, in compliance with all applicable
       legislation and policies in the jurisdictions in which they undertake
       business.

II.    Caledonia liaises closely with the applicable government regulatory
       bodies and the public to optimize communication and an understanding of
       Caledonia's activities in relation to environmental protection.

III.   Caledonia is committed to the diligent application of technically proven,
       economically feasible, environmental protection measures throughout its
       exploration, development, mining, processing and decommissioning
       activities.

IV.    Caledonia on a regular ongoing basis monitors its environmental
       protection management programs to ensure their compliance with the
       applicable regulatory requirements.

It is the responsibility of all the employees of Caledonia and its subsidiaries
to carry out their employment activities in accordance with this code of
practice. Operational line management has the direct responsibility for regular
environmental protection management.


/s/ S. E. HAYDEN,                                  /s/  J. JOHNSTONE,
Chairman of the Board, President and               Vice-President Operations and
Chief Executive Officer                            Chief Operating Officer


<PAGE>



PERFORMANCE HIGHLIGHTS              (1) Filon Sur to June 30 for year 2000 only.

<TABLE>
<CAPTION>
                                                  2002          2001          2000          1999          1998
                                                -------       -------       -------        ------       -------
<S>                                             <C>           <C>           <C>            <C>          <C>
          FINANCIAL - C$ 000'S
Revenue from Sales                                   27           124         6,623        14,701        15,523
Gross Profit (Loss)                                (103)         (126)          304         2,090         2,771
Expenses (General and Administration,
    Interest and Amortization)                    1,578         1,130         2,143         3,853         7,566
Net Income (Loss) - before Write-Downs           (1,741)       (1,195)        7,412         3,082        (4,439)
Net Income (Loss) - after Write-Downs            (4,331)       (1,195)        7,412        (7,460)      (50,437)
Cash                                              1,864            90            75            51            91
Current Assets                                    2,094           184           200         2,179         4,175
Assets                                           24,767        24,973        25,063        33,189        50,831
Current Liabilities                               1,336         2,701         2,556         5,143         7,678
Long Term Liabilities                             1,280         1,813         1,813        21,747        34,032
Working Capital (Deficiency)                        758        (2,517)       (2,356)       (2,964)       (3,503)
Shareholders' Equity                             22,151        20,459        20,694         6,299         9,121
Total Capital Expenditures                          300            --            --           345           464
Expenditures on Mineral Properties                  624            23           120           353         2,458
Financing Raised                                  4,786         1,078           979           497         2,452

           SHARE INFORMATION
Market Capitalization ($ Thousands)              86,836         9,086        10,374         3,441         4,578
Shares Outstanding (Thousands)                  211,795       165,202       148,202        68,830        41,615
Warrants & Options (Thousands)                   28,055        19,566         7,566         7,566         3,986
Earnings (Loss) per Share                         (0.02)        (0.01)         0.08         (0.12)        (1.35)
TSE Share Price High                               0.44          0.09          0.35          0.15          0.72
TSE Share Price Low                               0.060          0.04          0.05          0.05          0.09
TSE Share Volume (Thousands)                     81,234        22,310        22,939        16,397         6,254
NASDAQ Share Price High (US$)                     0.281          0.06          0.18          0.09          0.50
NASDAQ Share Price Low (US$)                      0.040          0.02          0.03          0.03          0.06
NASDAQ Share Volume(Thousands)                  271,404        74,714        61,919        34,815        36,721

        OPERATING RESULTS (1)
Gold Production (Ounces)                             52           114        14,558        32,300        32,567
Silver Production (Ounces)                            4            --       122,665       240,675       227,945
Average Cost per Ounce Gold (US $) Sold              --            --           240           204           216
Average Revenue per Ounce Gold (US $) Sold           --            --           285           288           296
Year End Gold Resource (Thousand Ounces)          2,489         2,930         2,930         3,487         3,519
</TABLE>


                                       1


<PAGE>


LETTER TO SHAREHOLDERS

Although the base metals experienced another difficult year during 2002 as
copper, cobalt, zinc and lead prices remained at cyclical lows, precious metals
prices, and in particular gold started to break out of their long price slump
progressively from January and peaked above $350 per ounce during December 2002.

As a result of the increasing gold price, Caledonia decided during February 2002
to return the Barbrook Mine to limited production whilst it tested the
mineability of a high grade gold zone and also tested the new Caledonia
developed "PreOx" process and Resin-in-Leach (RIL) on the Taylor's ore body.
With the steady increase in the gold price, it was decided to re-commence
commercial scale mining operations and since then work has been carried out to
refurbish the mine, metallurgical plant and other surface infrastructure. Mining
commenced in January 2003 and the first gold was produced during March 2003. The
plant start-up was delayed by management's decision to install a Resin
pumped-cell leach carousel in preference to a RIL circuit.

Strong diamond exploration in the Coronation Gulf area of Nunavut, Canada
continued unabated during 2002 with further discoveries being reported. A
mini-bulk sample of the Potentilla kimberlite pipe was taken during the second
quarter from which a 0.34 carat colorless diamond was recovered. Potentilla has
an estimated diamond content of 17.4 carats per 100 tonnes. The 2002 winter and
summer exploration programs focused on the Stellaria kimberlite pipe where 105
kg and 111 kg samples were recovered by diamond drilling. Testing of these two
drill samples recovered 146 diamonds from the 216 kg of sample. Stellaria is
located about 700 metres from the Potentilla pipe. The discovery of 2
diamondiferous pipes on the Kikerk property confirms the need for further
exploration of the property.

During 2002 exploration work continued on the Mulonga Plain diamond joint
venture in Zambia, at the Kikerk Lake diamond property in Northern Canada and at
the Goedgevonden diamond prospect in South Africa. Additional properties
acquired by Caledonia during 2002 include the Rooipoort property east of
Potgietersrus in South Africa that is highly prospective for platinum group
metals and other exploration areas of interest located adjacent to the
Goedgevonden kimberlite pipe.

Further details of Caledonia's properties are to be found elsewhere in this
report, and the very latest information on all Caledonia's properties and
interests can be found on the Caledonia website http://www.caledoniamining.com.

As can be seen from these financial statements, Caledonia continues to remain
largely debt free and will continue to focus its efforts on advancing its
assets. An amount of $5.2 million, net of financing costs was raised during 2002
from private placements and the exercise of warrants. During early 2003, a
further $ 1.2 million, net of financing costs was raised from the portion of the
private placement carried over from December 2002 and from the exercise of
warrants. During 2003, Caledonia intends to extend this focus to include the
addition of income producing assets in order to fund its activities and further
acquisitions.

My thanks to Caledonia's management, directors, staff, joint venture partners,
and particularly to our shareholders for supporting Caledonia during the
challenges and opportunities of another year. The management and directors look
forward to your continued confidence as we work diligently towards the objective
of building Caledonia into a significant international mining company.




On behalf of the Board of Directors,
/s/ S.E. HAYDEN,
Chairman of the Board, President and
Chief Executive Officer
May 9th, 2003


                                       2

<PAGE>


2002 ACTIVITY REPORT

Caledonia owns a diversified portfolio of carefully selected properties in
Canada, Zambia, South Africa, and Democratic Republic of Congo with excellent
exploration potential for gold, diamond, platinum group metals, nickel, copper
and cobalt. These properties, some of which are under joint venture agreements
with major mining companies, are the key assets of Caledonia and should in
future provide shareholders with significant returns. However, the realization
of value from a mineral resource property requires time, money and expertise. It
remains a Caledonia strategic objective to enter into joint venture agreements
with major mining companies, as this enables Caledonia to conserve its cash
resources and allows it to draw on the expertise and skills of joint venture
partners to develop its properties. Continuing low base metal prices has
resulted, in recent years, in a reduction of exploration activities by the large
mining companies. Consequently this has made it difficult for Caledonia to
obtain JV partners for its 3 major base metal properties in Zambia and the
Congo.

This report details only those properties where there has been significant
activity during the 2002 year. Where properties have been largely inactive, no
descriptive report is presented and information on these properties can be
obtained by referring to the 1998 to 2000 annual reports. Copies of these
reports can be obtained either from the Caledonia Head Office in Mississauga,
Ontario, Canada or can be downloaded from our website at
"www.caledoniamining.com".

                                      GOLD

BARBROOK MINES LIMITED - SOUTH AFRICA

Barbrook is located near the town of Barberton in the Mpumalanga province of
South Africa. The mine was placed on care and maintenance in July 1997. In 1997
the monthly underground mining and milling rate was 17,000 tonnes of ore. The
design capacity of the metallurgical plant is 30,000 to 40,000 tonnes per month
for free-milling oxide ores, or 25,000 tonnes per month for the harder
metallurgically more complex refractory sulphide ores.

GOLD RESERVES & RESOURCES (UNDILUTED) - AS AT DECEMBER 31, 2002

<TABLE>
<CAPTION>
CATEGORY                                   TONNES     GOLD GRADE - G/TONNE     GOLD OUNCES
--------                               ----------     --------------------     -----------
<S>                                    <C>                            <C>        <C>
RESERVES
Proven Reserves                           229,204                     6.00          44,207
Probable Reserves                         237,077                     4.98          37,970
                                       ----------                     ----       ---------
         TOTAL RESERVES                   466,281                     5.48          82,177
                                       ==========                     ====       =========

RESOURCES
Measured Resources                        485,756                     4.92          76,840
Indicated Resources                     1,011,996                     4.98         161,943
Inferred Resources                      8,830,869                     5.77       1,637,341
                                       ----------                     ----       ---------
         TOTAL RESOURCES               10,328,621                     5.65       1,876,124
                                       ==========                     ====       =========

TOTAL MINERAL RESERVES & RESOURCES     10,794,902                     5.64       1,958,301
                                       ==========                     ====       =========
</TABLE>

The mineability, geology, and mineralization of the Taylor's ore body was
re-evaluated and re-modelled during 2002 to determine the optimum mining methods
to minimize grade dilution. Mining has commenced in the Taylors ore zone between
10 and 7 levels. Geological sampling and evaluation on adjacent blocks in the
Taylors zone is ongoing. Development and stope tonnages from this area will
supplement the present production allowing the mill throughput to be increased
to the 8,000 tonnes per month range. In addition, ore samples from the Daylight
zone are being taken and tested to confirm the metallurgical amenability of this
material in the new "PreOx" and resin-in-leach circuit. If these tests prove
positive the Daylight area will provide the plant with a readily accessible
additional ore source of higher than average grade ore.


                                       3

<PAGE>


In mid-2002 management decided to recommence commercial production at Barbrook
and the refurbishing of the mine, the underground, and the surface
infrastructure commenced in August 2002. The refurbishment of the underground
essentially comprised of re-equipping for mining and underground development,
the replacement of wooden access ways and electric cables, the stripping and
maintenance of locos, winches, fans, and the clearing and re-equipping of the
ore delivery systems etc. The first stopes were started during January 2003 and
by March 2003 the mining rate had increased to 4,000 tonnes per month with the
initial planned mining rate of 6,000 tpm scheduled for May 2003. By the end of
February the mine had built up a stockpile of over 3,000 tonnes of ore at a
grade of about 6.3 g/t for processing.

Surface refurbishment was mainly confined to the administration areas, the
change-house, lamp room, security barracks, training and first aid rooms, the
mine stores and workshops, the assay laboratories, explosive magazines, the
metallurgical plant and the tailings deposition area.

The planned date of mid December 2002 for the plant commissioning was delayed
due to the decision to install the latest technology of pump cells in the new
resin-in-leach circuit. Because of the lower initial tonnage (6,000 tpm)
throughput planned it was decided at an early stage to reconfigure a smaller
primary and secondary milling circuits to cater for this lower tonnage. The 250
kW Vecor re-grind mill in the old 25,000 tpm circuit is presently being used as
the primary ball mill and the Sala 90 kW tertiary mill is now being utilized as
the concentrate regrind mill.

A flash-flotation cell has been installed in the Vecor primary mill circuit to
recover as much of the free and flotation-recoverable gold as early in the
process circuit as possible and to reduce gold lock-up in the primary mill. A
Knelson concentrator has also been installed in the primary Vecor mill circuit
to recover free gold. The existing rougher flotation circuit has been fully
refurbished.

A new pre-aeration section has been refurbished and commissioned, and the
existing cleaner flotation cells have been converted into the PreOx circuit. A
brand new, 6-stage Pumped Cell resin in leach circuit ("PRIL"), the new resin
elution, electrowinning circuits, the refurbished induction furnace and smelt
house, and the associated security systems have been constructed and
commissioned. As previously stated, the PRIL section is fitted with the
state-of-the-art Anglo American-patented pump cells that have been designed and
fabricated by Kemix S.A.

The tailings deposition area has been rehabilitated and the tailings delivery
lines, which have been re-routed to avoid an environmentally sensitive area,
have been pressure tested and the flotation tailings line extended. There has
been a significant enhancement of the environmental and operating codes of
practice and procedures to prevent the risk of pollution off the mine property
and increase mine safety.

The required regulatory and environmental practices have been evaluated, the
risk assessments have been carried out and the required Codes of Practices drawn
up and implemented. Barbrook was granted its Section 9 permanent mining
authorization in March 2003.

It is planned to increase the mined and processed tonnage to 8,000 tonnes per
month as the underground and stope development progresses and provides greater
mining flexibility.

EERSTELING GOLD MINING COMPANY LIMITED - SOUTH AFRICA

Eersteling Gold Mining Company Limited is listed on the Johannesburg Stock
Exchange and is 96.4% owned by Caledonia. The mine is located near the city of
Polokwane (Pietersburg) in the Limpopo Province of South Africa. Production was
halted in early 1997 due to the prevailing low gold prices. The property is less
than 10% explored and Caledonia intends, based on a sustainable economic Rand
gold price, to recommence commercial production at Eersteling during the 2003
year.

GOLD RESOURCES (UNDILUTED) - AS AT DECEMBER 31, 2002
<TABLE>
<CAPTION>
RESOURCE CATEGORY                   TONNES     GOLD GRADE - G/TONNE     GOLD OUNCES
-----------------                ---------     --------------------     -----------
<S>                              <C>                           <C>          <C>
Measured                            60,527                     7.43          14,457
Indicated                          537,232                     7.78         134,382
Inferred                         2,048,961                     5.79         381,600
                                 ---------                     ----         -------
      TOTAL MINERAL RESOURCE     2,646,720                     6.23         530,439
                                 =========                     ====         =======
</TABLE>



                                        4

<PAGE>

With the significant increase in the gold price during late 2002, and with the
added interest of the Rooipoort Platinum prospect (discussed later) there has
been a significant interest shown by a number of other mining companies in
joint-venturing the Eersteling property for a re-commencement of commercial gold
mining operations, further gold exploration, and for the exploration of the
Rooipoort platinum property.

In 2002 Eersteling applied for its required Section 9 permanent mining
permission and this was granted during April 2003. Once the Barbrook Mine has
reached commercial production during the 2nd quarter of 2003, work to return
Eersteling to production will immediately commence provided an economically
sustainable Rand gold price continues to prevail. Present planning is to
commence the de-watering of the underground areas during the 2nd quarter so as
to allow the commencement of the refurbishment and development underground
during the 3rd quarter of 2003. Depending upon the refurbishment work required
in the metallurgical plant it is likely that the processing of the mine ore will
commence during the 4th Quarter of 2003 or the 1st Quarter of 2004. Dependant
upon a study of the economics of transportation and processing, Eersteling may
elect to transport its gold-bearing flotation concentrate to the Barbrook
metallurgical complex for treatment using the new PreOx and PRIL processing
technology.

                                   BASE METALS

NAMA: COPPER / COBALT - ZAMBIA

Caledonia Mining Nama Limited, a wholly owned subsidiary of Caledonia, holds
five contiguous exploration licences in northern Zambia and host open-pittable
near-surface low grade cobalt / copper mineralization. The 2001/2002
soil-sampling program carried out jointly by Caledonia and BHP Billiton was
completed over the majority of the remaining licence area. This program
identified a number of high priority anomalous targets within the required
geological setting. These targets will be followed up in the search for the
suspected presence of larger, deeper, sulphide ore bodies. The exploration
information that has been gained on the Nama group of licences will be
invaluable in developing exploration models and strategy at the nearby Katanga
joint ventures in the D. R. of Congo.

During 2001/2002, the 2,260 geochemical soil samples that were collected during
2000 and 2001 were processed and the results from these soil samples have been
analysed. An additional four anomalies including one drill target have been
identified for the future exploration programs.

KADOLA GROUP: GOLD / COPPER / COBALT / NICKEL / PYRITE - ZAMBIA

Caledonia Mining Kadola Limited, a wholly owned subsidiary of Caledonia, holds
three exploration licences covering 6,099 km2 of the southernmost extension of
the "Zambian Copperbelt". Within the licence areas, several distinct targets
have been identified.

Joint venture partners are being sought for these base metal prospective
properties. It is probable that a reduction in property holding will be made in
2003 to comply with the normal exploration policy. This will not result in any
material reduction in Caledonia's key areas of mineralization.

                                    DIAMONDS

CANADA

KIKERK LAKE

In 2001 and 2002, Caledonia announced the discoveries of two diamondiferous
kimberlites, "Potentilla" and "Stellaria", on the Kikerk Lake property in
Nunavut, by its joint venture partner and operator of the property, Ashton
Mining of Canada Inc. ("Ashton"). The two kimberlite pipes are approximately 700
metres apart.

The Potentilla kimberlite is represented by a magnetic anomaly with approximate
dimensions of 140 x 60 metres and comprises two different facies within the
kimberlite pipe: an upper diatreme facies underlain by a hypabyssal facies.
Drill results suggest that the kimberlite extends 65 metres from the centre of
the anomaly along its longest dimension is orientated north south and has
maximum surface dimensions of 110 metres by 50 metres.


                                       5

<PAGE>

The Stellaria kimberlite was discovered by drilling a single vertical hole into
a geophysical anomaly having a surface dimension of approximately 160 metres by
50 metres. A second hole was drilled in summer from a location 40 metre
northwest of the discovery hole at an angle of 60 degrees from the horizontal
towards the vertical discovery hole. The drill passed through 16 metres of
overburden and 52 metres of dolomite before intersecting 21 metres of
hyperbyssal kimberlite, giving Stellaria an estimated true width of 13 metres.

The drill data suggests that the Stellaria kimberlite is a 13 metre-wide dyke
dipping, at an angle of 72 degrees to the northwest. Based on the mineral
indicator and geophysical data, Stellaria has a maximum strike length of
approximately 400 metres.

A 5.83 tonne mini-bulk sample from Potentilla was taken during the Winter 2002
program and returned the following results:

<TABLE>
<CAPTION>
       KIMBERLITE       SAMPLE WEIGHT       DIAMONDS RECOVERED        ESTIMATED DIAMOND CONTENT
         FACIES            (TONNES)              (CARATS)                        (cpht)
                                           --------------------       -------------------------
                                           >0.8 mm     > 1.0 mm         FOR DIAMONDS > 1.0 mm
     ------------       -------------      -------     --------       -------------------------
<S>                          <C>             <C>         <C>                     <C>
     Breccia                 4.48            1.07        0.86                    19.20
     Hypabyssal              1.35            0.21        0.16                    11.85
                             ----            ----        ----                    -----
     TOTAL                   5.83            1.28        1.02                    17.50
</TABLE>


The largest diamond recovered came from the breccia and was a 0.34 carat
colourless composite crystal with small inclusions. The second largest diamond,
recovered from the hypabyssal phase, was a 0.09 carat stone. Using a 1.0 mm
square screen aperture, 1.02 carats of diamonds greater than 1.00 mm were
recovered, representing an estimated diamond content of 17.5 carats per hundred
tonnes ("cpht").

Two samples of Stellaria were obtained from drilling in the winter and the
summer programs. The results from caustic fusion analysis of the two drill core
samples returned the following results:

<TABLE>
<CAPTION>
                                                                  TOTAL DIAMONDS
DRILL PROGRAM     SAMPLE WEIGHT     -----------------------------------------------------------------------
                      (KG)          >/= 0.1 MM IN       >/= 0.5MM IN      >/= 0.5 MM IN       >/= 1.0 MM IN
                                    TWO DIMENSIONS     TWO DIMENSIONS     TWO DIMENSIONS     TWO DIMENSIONS
-------------     -------------     --------------     --------------     --------------     --------------
<S>                   <C>                  <C>                 <C>                 <C>                 <C>
    Summer            110.7                67                  22                  10                  1
    Winter            105.4                79                  13                   1                  0
                      -----                --                  --                  --                  -
    TOTAL             216.1               146                  35                  11                  1
</TABLE>

The data from the two drill holes is insufficient to infer an accurate diamond
concentration of the Stellaria Kimberlite. The summer program also included the
collection of more than 250 indicator minerals in the vicinity of Potentilla and
Stellaria kimberlites to investigate unexplained geophysical and indicator
mineral anomalies. The data from these indicator mineral samples will assist in
identifying priority targets for the 2003 drilling program.

Caledonia currently has a 17.5% interest in the Kikerk Lake property, Ashton
currently holds a 52.5% interest, having incurred in excess of $750,000 in
exploration expenditures on the property. This can be increased to 59.5% if
Ashton funds Caledonia's share through a completed feasibility study.

A formal joint venture agreement between the parties was signed during March
2002.


                                       6

<PAGE>

ZAMBIA

Caledonia has a joint venture agreement with BHP World Exploration Inc. and its
affiliate Motapa Diamonds Inc., collectively "the BHP Entity", on the Mulonga
Plain, Kashiji Plain and Kakenge River licences in Western Zambia. Motapa is the
project operator on behalf of the Joint Venture. The BHP Entity is now vested
with a 60% participating interest and Caledonia has the remaining 40% interest.
In terms of the joint venture, the BHP Entity will continue to fund operations
through the completion of a feasibility study at which point their interest will
increase to 75%. Caledonia will then have various options including that of BHP
funding the project through to commercial production.

MULONGA PLAIN:

During the 2002 field program 1,450 metres on eight targets were drilled in
order to gain further stratographic information. The drill holes were sited on a
variety of geophysical anomaly types having the potential to have kimberlite as
the causative source. Overburden thickness varied between 60 and 180 metres. The
key results of the drilling program have been the resolution of thickness,
extent and the character of young sedimentary rocks accumulated over the older
crystalline basement rocks. The nature or these sediments can significantly
affect the geophysical signature that could be expected from a kimberlite body.
Motapa is applying this improved, constrained geological model to the existing
geophysical interpretive work in a review of existing, untested prospective
kimberlite targets. The objective is to identify new drill targets and to
re-prioritize existing drill targets with the refined information for the 2003
drilling program.

KASHIJI PLAIN:

This licence area is located in Northwest Zambia, adjacent to the Angolan
border. Airborne magnetic and ground magnetic, electromagnetic and gravity
geophysical surveys were completed in early summer over a series of 30 magnetic
anomalies. In late summer, an abbreviated exploration program drilled seven of
these targets. A key aim of the program was to develop a model of the overburden
and bedrock geology from which to re-interpret geochemical and the ground
geophysical data. The core from the drill samples is being tested for kimberlite
indicator mineral recovery and analysis.

In addition to the drilling, follow-up heavy mineral sampling was carried out in
the southern and central parts of the licence area to confirm and evaluate
kimberlite indicator mineral recoveries. The initial review was positive with
confirmation that the kimberlite indicator mineral recoveries generated from the
initial reconnaissance work are reproducible at a number of sites. Motapa
believe that these may be close to the primary source. All results should be
available in early 2003.

Motapa remain confident about the prospects of both Mulonga Plain and Kashiji
Plain areas. The have commented that the 2002 programs have significantly
improved their understanding of the property geology that will aid future
exploration. Additional detailed geochemical and geophysical work will be
required to prioritise untested drill targets and to develop new targets as the
new information is fully evaluated.

KAKENGE RIVER LICENCE:

The Kakenge licence, lying immediately east of the southern portion of the
Mulonga licence and east of the Zambezi River is along strike of the defined
anomalous area within the Mulonga licence. In 2002, some further confirmatory
work was carried out on Kakenge as priority work was given to Mulonga and
Kashiji Plain areas.

SOUTH AFRICA

VIER EN TWINTIG RIVIER, PRUISSEN AND ROOIPOORT

In 2002 Caledonia acquired Prospecting and Option Agreements over three
exploration properties in South Africa that it believed to be prospective for
diamonds and platinum. During 2002 Caledonia added, via its JSE listed
subsidiary company Eersteling Gold Mining Company Limited, the Rooipoort
Platinum prospect, located about 30 km south west of Eersteling's gold mine and
dropped its option on the Vier en Twintig Rivier and the Pruissen properties.


                                       7

<PAGE>

THE GOEDGEVONDEN EXPLORATION PROJECT

Caledonia has signed a Prospecting and Option Agreement over the Goedgevonden
diamond bearing kimberlite pipe located approximately 20 kilometres north of the
Stilfontein Gold Mine in the Klerksdorp district of the North West Province in
South Africa. In early 2002, Caledonia signed Prospecting and Option Agreements
over adjacent areas of interest, including the exploration rights to the
Syferfontein kimberlite pipe that is located about 1 km northeast of the
Goedgevonden pipe and other adjacent areas of interest.

Previous prospecting activities carried out in the mid 1970's on Goedgevonden
indicated that the pipe is oval in shape and covers a surface area of
approximately 27,000 square metres. This work also confirms that the pipe was
drill intersected at a depth of 425 metres, and that further down dip extensions
remain undefined. Previous drilling reported an average diamond content of 35 to
45 cpht, with one hole yielding 65 cpht. A fair portion of the diamonds
recovered from the drilling were gem quality with a notable tendency toward pink
coloured diamonds.

Caledonia conducted a Stratagem geophysical survey in November 2001 prior to
planning a preliminary drilling program in 2002. The preliminary drilling
program was for 7, 8" and 12" diameter reverse-circulation drill holes, the
collection of the drill samples and diamond recovery. Four holes were drilled in
the centre of the pipe, three to a depth of 150 metres, and the other to 120
metres. The three remaining holes were drilled to delineate the pipe in more
detail. All of the 7 holes drilled entered the kimberlite at a depth of about 6
metres, and the 4 centrally-located holes were stopped whilst still in the
kimberlite. A total of about 56 tonnes of drill sample was collected and
processed through a Van Eck and Lurie dense-media separation ("DMS") plant and
wet Sortex machine. From the diamond recoveries it was confirmed that the
Goedgevonden pipe was diamondiferous, and sufficient gem quality diamonds were
recovered to warrant a larger bulk sample.

The bulk sampling program planned for late 2002 was delayed by the early summer
rains. In the interim Caledonia acquired the time domain airborne geophysics
over the area and will complete its interpretation of this in April 2003. Based
on these conclusions Caledonia plans to commence a large diameter auger drill
sampling program once the summer rains have ceased and the area water table has
dropped sufficiently to facilitate the large diameter auger drilling. The
program is designed to provide a sufficiently large and representative bulk
sample to verify the grade and quality of diamonds found in the undisturbed,
heavily weathered kimberlite overlying the competent kimberlite rock. Based on
these results a bankable feasibility may then be initiated.


                                    PLATINUM

THE ROOIPOORT EXPLORATION PROJECT

Caledonia's 96% subsidiary Eersteling Gold Mining Company Limited acquired the
rights in 2002 to explore and develop the mineral rights on the farm Rooipoort
46 KS from Anglo Platinum Mining Services in exchange for certain surface rights
held by Eersteling in the Pietersburg area. Rooipoort 46 KS is approximately 8
kilometres east of Potgietersrus and about 30 km southwest of Caledonia's
Eersteling gold mine in the Limpopo Province of South Africa and is considered
to be highly prospective for platinum deposits.

Caledonia has been in negotiation with a number of parties in 2002 to escalate
the return of Eersteling to production and simultaneously commence the platinum
exploration and exploitation if found to be commercially viable. These
negotiations continued into 2003. A comprehensive desk study on Rooipoort, based
on airborne geophysics and the down dip drilling on the adjacent farm undertaken
by Anglo Platinum has been completed. This study has confirmed the likely
presence of both the Merensky and the UG-2 platinum group metals on the
property.

It is planned to carry out ground geophysics immediately the prospecting permit,
expected during May 2003, has been received from the Department of Mineral and
Energy. This will likely be followed immediately by a drilling program.


                                       8


<PAGE>

MANAGEMENT DISCUSSION AND ANALYSIS

(Expressed in Canadian dollars unless otherwise stated)


FORWARD-LOOKING STATEMENTS

Statements regarding Caledonia's expectations as to the effectiveness of its
plan of business, exploration and development programs, production of gold and
certain other information presented in this report constitute forward looking
statements (as defined in the US Securities Exchange Act of 1934). Such
statements are based on assumptions and estimates related to future economic and
market conditions. While the reasonableness of such assumptions and estimates is
reviewed by management, unusual or unanticipated events may occur which render
them inaccurate. Under such circumstances, future performance may differ
materially from present expectations.


CORPORATE GOVERNANCE

The management of the Company is responsible for the preparation and
presentation of the annual financial statements, management's discussion and
analysis ("MD&A") and other information contained in this annual report. The
financial statements have been prepared in accordance with Canadian generally
accepted accounting principles and reconciled to United States generally
accepted accounting principles in Note 15 of the notes to the consolidated
financial statements.

Management of the Company is held accountable to the Board of Directors (the
"Board") who are in turn elected annually by the shareholders of the Company.
The Board is responsible for reviewing and approving the financial statements
and the MD&A. Performance of this responsibility is delegated by the Board to
the Audit Committee comprised of three directors two of which are not members of
management. The external auditors have complete access to the Audit Committee to
discuss audit, financial reporting and related matters resulting from the annual
audit. The auditors are appointed annually by the shareholders to conduct an
audit of the consolidated financial statements in accordance with generally
accepted auditing standards.

The Toronto Stock Exchange Committee on Corporate Governance in Canada issued a
report in December, 1994 containing guidelines for effective corporate
governance of corporations. The by-laws of The Toronto Stock Exchange were
subsequently amended to require each listed corporation incorporated in Canada
to make annual disclosure of its corporate governance practices with reference
to those guidelines. The Board believes that sound corporate governance
practices are essential to the effective operation of Caledonia and that these
practices should be reviewed regularly to ensure that they are appropriate.

Caledonia's directors and management have responded to the need to establish
forward-looking governance policies and to constantly evaluate and modify them
to ensure their effectiveness. Caledonia's disclosure is set out in the
Management Proxy Circular relating to Caledonia's June 24th 2003 Annual and
Special Meeting of Shareholders. This disclosure statement has been prepared by
the Corporate Governance Committee of the Board and has been approved by the
Board of Directors.


GENERAL

The Company is in the business of locating, acquiring, exploring and, if
warranted, developing and exploiting mineral properties. The principal current
geographical areas of interest are in southern Africa and Canada. Exploration
activities for new projects, where possible, are generally conducted through
joint venture partnerships with major mining companies. The Company also has two
past producing mines located in South Africa, one of which Barbrook, is
presently being refurbished in response to the improving price of gold.


                                       9

<PAGE>

However, as was the case in the past three years, Caledonia along with other
companies in the junior resource industry continued to experience difficult
economic times during most of 2002. The raising of finance in April 2002 allowed
management to commence the refurbishment work to bring the Barbrook mine back
into production and to carry out preliminary sampling work on the Goedgevonden
diamond pipe. The financing also allowed Caledonia to significantly reduce its
short-term loan debt. Through-out 2002, the primary focus of management has been
the continuation of operations without incurring significant debt, the
continuing development of the assets of Caledonia and the procurement of longer
term financing.

During the period from mid 1994 to early 1995 Caledonia expanded rapidly with
the acquisition of the Barbrook and Eersteling gold mines in South Africa, the
Cononish gold property in Scotland and the acquisition of essentially 100% of
the remaining interest of the Filon Sur gold mine in Spain, which was not
already owned by Caledonia. Exploration activities were pursued for alluvial
diamonds in the Northwest Territories of Canada and other property interests
were added to the property portfolio in southern Africa. During this period,
gold revenue per ounce was in the US$400 range and Caledonia was optimistic that
the two South African gold mines could be brought successfully into production.
Plans were also underway to develop the gold property in Scotland. The expansion
programme was financed in part by the issue of common stock during a period when
the share price achieved an all time high of $13.13 per share. Debt financing
was also used for the expansion resulting in the issue of approximately $20.4
million of convertible debentures. Bank financing of US$10.5 million US was used
to expand the production capacity of the Filon Sur gold mine in Spain.

Subsequent to this expansion activity, revenue derived from gold production
started to decline due to the falling price of gold and market support eroded as
investors searched for better returns from other industry sectors. In response,
Caledonia cut back dramatically on exploration programs, placed higher cost gold
mining operations on care and maintenance status and slashed administrative
expenditures. Discussions during 1999 with the lender for a further
restructuring of the Filon Sur debt continued, culminating in an agreement to
sell Filon Sur and gain access to future financing for Caledonia. Similarly,
discussions with the convertible debenture holders resulted in the conversion of
the debentures to common shares in 1999.

In September 2000, Caledonia completed the sale and debt restructuring of
Caledonia's subsidiary Filon Sur. Caledonia is now essentially debt free, the
secured short-term debt has been reduced to $69,000 with the largest creditors
being officers of the Company which is included in accounts payable. Except for
minor income from gold production, Caledonia was able to continue through 2002
with funding received from two equity financings and the exercise of warrants.

A small quantity of gold and silver was recovered from the limited mining
carried out at Barbrook in early 2002.

Going forward, the objectives of the Company are to complete the refurbishment
of the Barbrook mine and commence commercial production. Efforts to grow the
asset base through exploration will continue on the Goedgevonden diamond pipe
and the Rooipoort platinum prospect, both in South Africa, and encouragement
will be provided to the Company's joint exploration partners to continue
activity at the Kikerk Lake project in Canada and the Mulonga Plain project in
Zambia.

RISK FACTORS

There are many risk factors facing companies involved in the mining industry.
The following factors are those which are the most applicable to the Company.
The discussion which follows is not inclusive of all potential risks. Risk
management is an ongoing exercise upon which the Company spends a substantial
amount of time. While it is not possible to eliminate all of the risks inherent
to the mining business, the Company strives to manage these risks, to the
greatest extent possible, to ensure that its assets are protected.

Some of the more common elements of risk are as follows:

INDUSTRY

Exploring and developing mineral properties is inherently risky in nature and
few properties that are explored are ultimately developed into producing mines
due to events or circumstances which cannot be reasonably predicted in advance.
Exploration or mining operations may be subject to risks or hazards such as
labour disputes, environmental events, unexpected geological formations, natural
disasters or estimation errors for example. The occurrence of any single event
could result in the creation of uneconomic conditions which could result in the
termination of exploration programs or development projects. The Company
attempts to mitigate industry inherent risks as much as possible through
insurance programs and on going risk management assessment reviews.


                                       10

<PAGE>

POLITICAL RISK

The Company's foreign operations located in southern Africa could be adversely
affected by war, civil disturbances and activities of the foreign governments
which could disrupt markets or restrict the movement of funds. In order to limit
the exposure of the Company to these risks, financing requirements for project
exploration activities is provided on an as required basis or where possible
funded through the joint venture partners. The Company, at present, does not
maintain political risk insurance for its foreign exploration projects.

PRECIOUS METAL PRICE

The principal business activity of the Company is the exploration for precious
and base metals, platinum and diamonds. The future development of economically
exploitable properties is largely dependent on the movement in the price of
diamonds, platinum and precious and base metals. These prices fluctuate on a
daily basis and are affected by a number of factors beyond the control of the
Company. A sustained decline in diamonds, platinum, precious and base metal
prices could result in the termination of exploration or development activities
on any exploration property. This could result in a write down of the property
carrying values or the termination of a property interest. Although metal prices
cannot be predicted with certainty, the Company monitors supply/demand
conditions, among other issues, all of which affect world prices in order to
assess the feasibility of continuing exploration activities.

ENVIRONMENTAL

Exploration projects and producing operations are subject to the environmental
laws and regulations of the country in which the activities are undertaken. The
environmental standards continue to change and the world trend is to a longer
more complex process. The Company continuously reviews environmental matters and
undertakes to comply with changes as expeditiously as possible. Where
appropriate, provisions are made in the financial statements for any potential
environmental liability.

LIQUIDITY

As of December 31, 2002 the Company had working capital of $0.8 million compared
to a deficiency of $2.5 million at December 31, 2001. Cash and short term
deposits increased from $0.09 million at the end of 2001 to $ 1.9 million at
December 31, 2002.

During 2002, Caledonia raised $5.2 million in equity financing from a private
placement by issuing 27,409,655 common shares and a from the exercise of common
share purchase warrants. Details of financing activities are presented in note 6
(b) of the notes to the consolidated financial statements. During 2003 it is
expected that further cash requirements of Caledonia will be met from private
placement equity financing activity and cash flow from gold production at
Barbrook.

FINANCIAL REVIEW OF OPERATIONS

For the year ended December 31, 2002, the Company recorded a net loss after
write downs of $ 4.3 million ($0.023 per share) compared to a net loss of $1.2
million ($0.008 per share) in 2001. The loss in 2002 resulted from the write
down of mineral properties of $2.6 million and losses from operating activities
of $1.6 million. There was no capital asset or mineral property write down in
2001. The loss from operating activities of $1.6 million has increased from $1.1
million in 2001 reflecting a higher level of activity associated with efforts to
refurbish the Barbrook operation and increased general and administrative
expenses. The expensing of $0.2 million of stock option grants is included in
general and administrative for 2002. There was no similar charge for 2001.

Despite the difficulties experienced in general by the mining industry in 2002
with continuing low base metal prices throughout the year and low gold prices in
the early part of the year, Caledonia moved forward on several fronts.
Exploration activities by Caledonia's joint venture partners continued in Zambia
and in Canada. Exploration at Kikerk Lake in Nunavut, Canada identified a second
diamondiferous kimberlite - the Stellaria kimberlite. Positive results from the
first pipe, Potentilla, together with the Stellaria pipe and other discoveries
in the area, maintained interest in diamond exploration activities in the
Coronation Gulf area of Canada. In Zambia, the BHP entity continued exploration
activity on the Mulonga Plain diamond joint venture. In South Africa, the
Syferfontein diamond property, adjacent to Caledonia's Goedgevonden diamond
prospect was added to Caledonia's portfolio of exploration properties during the
year as was the Rooipoort platinum prospect. The options on the Vier-en-Twintig
and Pruissen properties in South Africa were dropped.


                                       11

<PAGE>

The main focus of Caledonia's activities in 2002 was the re-evaluation of
geology and mining at Barbrook and the start of refurbishment of the mine and
plant to enable a resumption of production in 2003, field exploration at the
Goedgevonden diamond prospect to develop a bulk mining program for 2003 and a
desk study of all the available data at the Rooipoort platinum prospect, near
Eersteling, to determine a drilling program for 2003.

In 2002, the sole contributor to revenue from sales were the Barbrook and
Eersteling gold mines in South Africa in an amount of $27,000 as compared to
revenue of $124,000 in 2001. A total of 52 ounces of gold were sold in the 2002
calendar year.

The production and sale of gold for 2003 is difficult to estimate, and will
depend upon the rate and timing of the commercial production achieved at
Barbrook.

The table below provides a quarterly summary of selected financial information
for the year 2002. The table should be reviewed in conjunction with the
information included in the financial statements.


     SELECTED FINANCIAL HIGHLIGHTS - 2002

<TABLE>
<CAPTION>
                                           FIRST         SECOND        THIRD       FOURTH       TOTAL
     000'S EXCEPT PER SHARE AMOUNT        QUARTER        QUARTER      QUARTER      QUARTER      YEAR
     -----------------------------        -------        -------      -------      -------      -----
<S>                                        <C>          <C>          <C>          <C>           <C>
     BALANCE SHEET
     Current assets                            $223         $964       $1,521       $2,094
     Capital assets                           7,424        7,451        7,610        7,715
     Mineral properties                      17,299       17,378       17,424       14,879
     Share capital                         $143,986     $146,658     $148,106     $149,623

     OPERATIONS
     Expenses                                  $351         $315         $395       $3,180(1)   $4,241
     Net loss for the period                   $409         $428         $536       $2,958(1)    4,331
     Loss per share - basic                  $0.002       $0.003       $0.003       $0.014       0.023
</TABLE>

         (1)  Includes write down of mineral properties in an amount of $2,590
              during the fourth quarter.


                                       12

<PAGE>


MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

TO THE SHAREHOLDERS OF CALEDONIA MINING CORPORATION:

The accompanying consolidated financial statements of the Corporation 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 annual report. All
financial and operating data in the annual report is consistent, where
appropriate, with that contained in the consolidated financial statements.

A system of internal accounting control is maintained in order to provide
reasonable assurance that assets are safeguarded and that transactions are
properly recorded and executed in accordance with management's authorization.
This system includes established policies and procedures, the selection and
training of qualified personnel and an organization providing for appropriate
delegation of authority and segregation of responsibilities.

The Board of Directors discharges its responsibilities for the consolidated
financial statements primarily through the activities of its Audit Committee
composed of three directors, two 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
annual consolidated financial statements of the Corporation. The Audit Committee
also meets with the independent auditors to discuss the results of their audit,
their review of internal accounting controls and their audit report prior to
submitting the consolidated financial statements to the Board of Directors for
approval.

The consolidated financial statements have been audited on behalf of the
shareholders by the Corporation's independent auditors, BDO Dunwoody LLP, in
accordance with generally accepted auditing standards. The auditors' report
outlines the scope of their examination and their opinion on the consolidated
financial statements.



/s/ S.E. HAYDEN                                        /s/ S.W. POAD
Chairman of the Board, President and                   Vice-President Finance
Chief Executive Officer                                and Administration


                                       13




<PAGE>

--------------------------------------------------------------------------------
                                                                AUDITORS' REPORT
--------------------------------------------------------------------------------

TO THE SHAREHOLDERS OF
CALEDONIA MINING CORPORATION

We have audited the consolidated balance sheets of Caledonia Mining Corporation
as at December 31, 2002 and 2001 and the consolidated statements of deficit,
operations and cash flow for each of the years in the three year period ended
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards and United States generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable
assurance whether the financials statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2002
and 2001 and the results of its operations and its cash flow for each of the
years in the three year period ended December 31, 2002 in accordance with
Canadian generally accepted accounting principles.

The Company's consolidated financial statements as at December 31, 2002 have
been revised as explained in Note 15(g) and our report dated April 10, 2003 has
been withdrawn.

/s/ BDO DUNWOODY LLP
Chartered Accountants

Toronto, Ontario
April 10, 2003 (except for Note 15(g), which is as of May 26, 2003)

--------------------------------------------------------------------------------
       COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA - U.S. REPORTING CONFLICT
--------------------------------------------------------------------------------

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
the summary of significant accounting policies. The United States reporting
standards also require the addition of an explanatory paragraph when changes in
an accounting policy, such as those involving stock based compensation described
in the summary of significant accounting policies, has a material effect on the
consolidated financial statements. Our report to the shareholders dated April
10, 2003 (except for Note 15(g), which is as of May 26, 2003) is expressed in
accordance with Canadian reporting standards which do not require a reference to
such events and conditions in the auditors' report when these are adequately
disclosed in the financial statements.

/s/ BDO DUNWOODY LLP
Chartered Accountants

Toronto, Ontario
April 10, 2003 (except for Note 15(g), which is as of May 26, 2003)



                                       14
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                                     CONSOLIDATED BALANCE SHEETS
                                              (IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31                                             2002              2001
--------------------------------------------------------------------------------
<S>                                                <C>               <C>
ASSETS

Current
    Cash and short term deposits                      $1,864               $90
    Accounts receivable                                  113                89
    Prepaid expenses                                     117                 5
                                                   ---------         ---------
                                                       2,094               184
INVESTMENT AT COST (Note 1)                               79                --
CAPITAL ASSETS (Note 2)                                7,715             7,424
MINERAL PROPERTIES (Note 3)                           14,879            17,365
                                                   ---------         ---------
                                                     $24,767           $24,973
                                                   =========         =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current
    Accounts payable                                  $1,267            $1,604
    Loan payable (Note 4)                                 69             1,097
                                                   ---------         ---------
                                                       1,336             2,701
PROVISION FOR SITE RESTORATION (Note 3)                  506             1,026
NON-CONTROLLING INTEREST                                 774               787
                                                   ---------         ---------
                                                      $2,616            $4,514
                                                   ---------         ---------

SHAREHOLDERS' EQUITY
    Share capital (Note 6 (b))                      $149,623          $143,986
    Contributed surplus (Note 6 (e))                     209                --
    Compensation warrants (Note 6 (d))                   177                --
    Deficit                                         (127,858)         (123,527)
                                                   ---------         ---------
                                                      22,151            20,459
                                                   ---------         ---------
                                                     $24,767           $24,973
                                                   =========         =========

</TABLE>


On behalf of the Board:

/s/ F.C.HARVEY             Director
------------------------

/s/ J.JOHNSTONE            Director
------------------------

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



                                       15
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                              CONSOLIDATED STATEMENTS OF DEFICIT
                                              (IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31               2002          2001           2000
--------------------------------------------------------------------------------
<S>                                      <C>           <C>            <C>
DEFICIT, beginning of year               ($123,527)    ($122,332)     ($129,744)
NET INCOME (LOSS) FOR THE YEAR              (4,331)       (1,195)         7,412
                                         ---------     ---------      ---------
DEFICIT, end of year                     ($127,858)    ($123,527)     ($122,332)
</TABLE>



--------------------------------------------------------------------------------
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31                                    2002        2001       2000
----------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>         <C>
REVENUE AND OPERATING COSTS
    Revenue from sales                                              $27        $124     $6,623
    Revenue from management services                                 --          --        109
    Operating costs                                                 130         250      6,428
                                                                -------     -------     ------
GROSS PROFIT (LOSS)                                                (103)       (126)       304
                                                                -------     -------     ------
COSTS AND EXPENSES
    General and administrative                                    1,540       1,030      1,225
    Interest                                                         29          84         41
    Amortization                                                      9          16        877
    Other expense (income) (Note 9)                                  73         (61)      (245)
    Write down of mineral property                                2,590          --         --
                                                                -------     -------     ------
                                                                  4,241       1,069      1,898
                                                                -------     -------     ------

(LOSS) BEFORE THE UNDERNOTED                                     (4,344)     (1,195)    (1,594)
    Net gain on conversion of the convertible
       debentures and sale of subsidiary companies  - net            --          --      9,003
       (Note 5)
                                                                -------     -------     ------
INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST                    (4,344)     (1,195)     7,409
    Non-controlling interest                                        (13)         --          3
                                                                -------     -------     ------
NET INCOME (LOSS) FOR THE YEAR                                  ($4,331)    ($1,195)    $7,412
                                                                =======     =======     ======
INCOME (LOSS) PER SHARE (NOTE 8)
    Basic and fully diluted                                     ($0.023)    ($0.008)    $0.080
                                                                =======     =======     ======
</TABLE>


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


                                       16
<PAGE>
--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31                       2002      2001      2000
--------------------------------------------------------------------------------
<S>                                                <C>       <C>       <C>
CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
  Net income (loss) for the year                   ($4,331)  ($1,195)   $7,412
  Adjustments to reconcile net cash from
    operations (Note 10)                             2,795        16    (8,257)
  Changes in non-cash working capital
      balances ( Note 10)                             (473)       58       731

                                                   -------   -------   -------
                                                   ($2,009)  ($1,121)    ($114)
                                                   -------   -------   -------
INVESTING ACTIVITIES
  Cash given up on sale of Filon Sur                   $--       $--     ($721)
  Purchase of investment                               (79)       --        --
  Proceeds from sale of capital assets                            81        --
  Expenditures on capital assets                      (300)       --        --
  Expenditures on mineral properties                  (624)      (23)     (120)
                                                   -------   -------   -------
                                                   ($1,003)      $58     ($841)
                                                   -------   -------   -------
FINANCING ACTIVITIES
  Loan payable                                       ($388)     $118      $979
  Issue of share capital net of issue costs          5,174       960        --
                                                   -------   -------   -------
                                                    $4,786    $1,078      $979
                                                   -------   -------   -------

INCREASE IN CASH FOR THE YEAR                       $1,774       $15       $24
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR            90        75        51
                                                   -------   -------   -------
CASH AND CASH EQUIVALENTS, END OF YEAR              $1,864       $90       $75
                                                   -------   -------   -------
</TABLE>


--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

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.

As of June 30, 2000, the Company has been managing Filon Sur, SA ("Filon Sur"),
a former subsidiary on behalf of private investors. During January 2002, the
mine was placed in liquidation and the management services contract was
terminated.


                                       17
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

BASIS OF PRESENTATION

These financial statements have been prepared on the basis of a going concern,
which contemplates that the Company will be able to realize assets and discharge
liabilities in the normal course of business. The Company's ability to continue
as a going concern is dependent upon attaining profitable operations and
obtaining sufficient financing to meet its liabilities, its obligations with
respect to operating expenditures and expenditures required on its mineral
properties.

MEASUREMENT UNCERTAINTIES

Preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. The more significant areas
requiring estimates relate to mineral resources, future cash flows associated
with capital assets and mineral properties. Management's calculation of 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.

The Company's principal consolidated subsidiaries are Barbrook Mines Limited
(100% owned) ("Barbrook"), Eersteling Gold Mining Company Limited (96% owned)
("Eersteling") and Caledonia Mining (Zambia) Limited, Caledonia Kadola Limited,
Caledonia Nama Limited and Caledonia Western Limited (all 100% owned)
(collectively known as "Caledonia Zambia").

Effective with the close of business on June 30, 2000, the Company recorded the
sale of Filon Sur (previously 99.5% owned) and Filon Sur's wholly owned
subsidiary, Fynegold Exploration Limited ("Fynegold") to the Oak Consortium
("Oak"), a group of private investors, as part of the debt restructuring of
Filon Sur. Accordingly, these consolidated financial statements reflect the
operating activities of Filon Sur and Fynegold up to the close of business as of
June 30, 2000. The Company's revenue from sales and operating costs for the
first six months of 2000 were principally derived from the Filon Sur operation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent cash on hand in operating bank accounts and
short term cash deposits in money market funds.

INVENTORIES

Inventories are stated at the lower of cost, which is determined on the
first-in, first-out basis, and net realizable value.

CAPITAL ASSETS

PRODUCING ASSETS

Producing assets are recorded at cost less grants, accumulated amortization and
write-downs. Producing assets are amortized using the straight line method based
on the estimated useful lives of the assets. The estimated useful life of the
producing assets range from 3 to 5 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. As of December 31, 2002, 2001 and 2000, the Company does not
have any producing capital assets.



                                       18
<PAGE>
--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

NON-PRODUCING ASSETS

Non-producing assets are recorded at cost less write downs. During non-producing
periods, no amortization is recorded.

At the time of commercial production, the assets are reclassified as producing
and amortized in the manner described above.

MINERAL PROPERTIES

PRODUCING PROPERTIES

When and if properties are placed in production, the applicable capitalized
costs 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. As of
December 31, 2002, 2001 and 2000, the Company does not have any producing
mineral properties.

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.

JOINT VENTURES

Certain of the Company's exploration activities are conducted jointly with
others. These financial statements reflect only the Company's expenditures on
these properties.

FOREIGN CURRENCY TRANSLATION

Balances of the Company denominated in foreign currencies and the accounts of
its foreign subsidiaries, excluding Filon Sur, 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. Gains and losses arising on translation of long term
foreign currency denominated liabilities at each year end are reflected in
income in the year incurred effective for years ending after December 31, 2001.
Prior thereto, translation gains or losses arising on long term foreign currency
denominated liabilities were deferred and amortized to earnings over the
remaining life of such liabilities. The Company has no long term debt
denominated in foreign currency.


                                       19
<PAGE>
--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

Filon Sur which was a self-sustaining foreign subsidiary up to June 30, 2000,
was translated at current rates of exchange.

REVENUE RECOGNITION

Revenue from the sale of precious metals is recognized when delivery occurs.

PROVISION FOR SITE RESTORATION

Site restoration costs are accrued when the need for such expenditure is
established, and then written off as part of the cost of production. It is
always possible that the Company's estimate of its ultimate site restoration
liability could change in the near term due to possible changes in laws and
regulations in applicable jurisdictions and changes in cost estimates.

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.

CHANGE IN ACCOUNTING POLICY - STOCK BASED COMPENSATION

The Company has adopted the new accounting standard of the Canadian Institute of
Chartered Accountants ("CICA") for accounting for stock-based compensation
expense effective January 1, 2002 on a prospective basis. Under this standard,
compensation expense on stock options granted to non-employees is recorded as an
expense in the period the options are vested using the fair value method
estimated using the Black-Scholes Option Pricing Model.

The Company does not record compensation expense for stock options granted to
directors, officers and employees. However, additional disclosure of the effects
of accounting for stock-based compensation to directors, officers and employees
as compensation expense, using the fair value method estimated using the
Black-Scholes Option Pricing Model, is disclosed as pro-forma information in
Note 6 (e) which follows. Any consideration paid by directors, officers and
employees on exercise of stock options or purchases of shares is credited to
share capital.


                                       20
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

1.     INVESTMENT AT COST

       On May 9, 2002 the Company participated in a private placement of Motapa
       Diamonds Inc. in an amount of $50 US ($79 Canadian) representing a 0.3%
       interest. Motapa Diamonds Inc. is the Company's joint venture partner on
       the Mulonga Plain diamond exploration project in Zambia.

--------------------------------------------------------------------------------

2.     CAPITAL ASSETS

<TABLE>
<CAPTION>
                                                          2002
                                         --------------------------------------
                                                     Accumulated        Net
                                         Cost (1)   Amortization     Book Value
                                         --------   ------------     ----------
       <S>                                 <C>            <C>            <C>
       Land - plant sites                  $1,833            $--         $1,833
       Plant and equipment
           - non-producing (2)(3)           6,521            664          5,857
       Office furniture                       750            739             11
       Vehicles                               357            343             14
                                           ------         ------         ------
                                           $9,461         $1,746         $7,715
                                           ======         ======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                         2001
                                         --------------------------------------
                                                     Accumulated        Net
                                         Cost (1)   Amortization     Book Value
                                         --------   ------------     ----------
       <S>                                 <C>            <C>            <C>
       Land - plant sites                  $1,711            $--         $1,711
       Plant and equipment
           - non-producing (2)              6,372            664          5,708
       Office furniture                       735            730              5
       Vehicles                               343            343             --
                                           ------         ------         ------
                                           $9,161         $1,737         $7,424
                                           ======         ======         ======
</TABLE>

       (1)    Cost is comprised of the original cost of the asset, less previous
              write downs, removal of cost for disposals and government grants.

       (2)    The non-producing plant and equipment relates to the Barbrook and
              Eersteling properties. In 1997 the mines were placed on care and
              maintenance resulting in write downs to estimated net realizable
              amount.

       (3)    The net book value of the Barbrook plant and equipment at December
              31, 2002 is $4,460. Rehabilitation of Barbrook commenced during
              the second half of 2002 in response to improving gold prices. The
              remainder of plant and equipment of $1,397 relates to Eersteling.

       The recoverability of the carrying amount of the Barbrook capital assets
       is dependent upon the availability of sufficient funding to bring the
       property into commercial production, the price of gold, the exchange rate
       of the South African Rand relative to US dollars and the undertaking of a
       profitable mining operation. The recoverability of the carrying amount of
       the Eersteling capital assets is dependent upon the availability of
       sufficient funding to bring the property into commercial production or
       the value realized from the possible disposal of the assets. As a result
       of these uncertainties, the actual amount recovered may vary
       significantly from the carrying amount.

--------------------------------------------------------------------------------

                                       21
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

3.     MINERAL PROPERTIES

<TABLE>
<CAPTION>
                                                                      2002
                                                     -------------------------------------
                                                                 Accumulated       Net
                                                     Cost (1)   Amortization    Book Value
                                                     --------   ------------    ----------
       <S>                                            <C>               <C>        <C>
       Non-producing - care and maintenance:
         Barbrook, South Africa - gold property (2)    $3,278            $17        $3,261
         Eersteling, South Africa - gold property         357             67           290
       Non-producing - exploration:
         Nunavut, Canada                                  750             --           750
         Zambia                                        10,578             --        10,578
         Other                                            488            488            --
                                                      -------           ----       -------
                                                      $15,451           $572       $14,879
                                                      =======           ====       =======
</TABLE>

<TABLE>
<CAPTION>
                                                                      2001
                                                     -------------------------------------
                                                                 Accumulated       Net
                                                     Cost (1)   Amortization    Book Value
                                                     --------   ------------    ----------
       <S>                                            <C>               <C>        <C>
       Non-producing - care and maintenance:
         Barbrook, South Africa - gold property        $3,461            $17        $3,444
         Eersteling, South Africa - gold property         357             67           290
       Non-producing - exploration:
         Nunavut, Canada                                  750             --           750
         Zambia                                        12,881             --        12,881
         Other                                            488            488            --
                                                      -------           ----       -------
                                                      $17,937           $572       $17,365
                                                      =======           ====       =======
</TABLE>

       (1)    Cost is comprised of the original cost of the asset, less previous
              write downs, removal of cost for disposals and government grants.

       (2)    The carrying amount of the Barbrook mineral property has been
              reduced by $520 since there has been a corresponding reduction in
              the estimated provision for site restoration.

       The Company has entered into joint venture agreements with third parties
       on one Canadian property and one Zambian property valued at $750 and
       $1,044 respectively. The third parties may earn varying percentage
       interests in these properties by carrying out exploration work on the
       properties.

       The recoverability of the carrying amount of the Barbrook, Eersteling and
       Zambian mineral properties is dependent upon the availability of
       sufficient funding to bring the properties into commercial production,
       the price of gold, the exchange rate of the local currency relative to US
       dollars and the undertaking of a profitable mining operation. As a result
       of these uncertainties, the actual amount recovered may vary
       significantly from the carrying amount. The Kadola property in Zambia has
       been written down to $1 due to limited exploration activity.

--------------------------------------------------------------------------------

4.     LOAN PAYABLE

       As part of the restructuring of debt (Note 5), Oak agreed to provide
       short term financing, due on demand, interest accruing at 8%, and secured
       by a General Security Agreement over certain assets of the Company.

--------------------------------------------------------------------------------


                                       22
<PAGE>
--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

5.     NET GAIN ON CONVERSION OF CONVERTIBLE DEBENTURE AND SALE OF SUBSIDIARY

       In 2000, the Company completed the restructuring of its long term debt
       which process commenced in 1999. The result of the restructuring is
       summarized as follows:

       (a)    In 1999, the Company converted 4% Convertible Debentures into
              14,593,750 common shares at a conversion price of a $1.40 per
              share. As a result, $4,185 was allocated to share capital and
              $15,526 to a pre-tax gain on restructuring. An amount of $10,216
              of the gain was deferred since the debenture holders retained the
              right to become a creditor of the Company under certain
              circumstances.

       (b)    On June 30, 2000, as part of a series of transactions, the Company
              disposed of its investment in Filon Sur and Fynegold, including
              its inter-company debt, for nominal consideration to Oak. As part
              of this transaction CIBC Wood Gundy Ireland Limited ("CIBC")
              waived its right to receive payment in cash for a Convertible Note
              (the "Note") which it held as a result of the debt restructuring
              that commenced in 1999. The Note was subsequently purchased by Oak
              from CIBC and settled by the issuance of 79,371,973 common shares
              to Oak pursuant to its original terms of conversion.

              The result of these transactions was the settlement of long term
              debt, disposal of the Company's investment in Filon Sur and
              Fynegold and the realization of the deferred gain from the
              conversion of the Convertible Debentures.

              The deferred gain realized in 2000 was calculated as follows:

<TABLE>
              <S>                                                     <C>
              Realization of deferred gain                            $10,216
              Loss on disposal of Filon Sur and Fynegold              $ 1,213
                                                                      -------
              Net gain                                                $ 9,003
                                                                      =======
</TABLE>

              In addition, as part of the sale and debt restructuring, the
              Company was contracted to provide management services over the
              activities of Filon Sur and Fynegold on behalf of Oak for 30% of
              the distributable cash flow of Filon Sur. The agreement which
              terminated during January 2002 provided that if the Company
              committed an unremedied default under the terms of the agreement,
              the Company would have a liability of $1,000 in liquidation
              damages, which amount would be payable in cash or shares of the
              Company at the Company's election.

--------------------------------------------------------------------------------

6.     SHARE CAPITAL

       (a)    Authorized

              Unlimited number of common shares. Unlimited number of preference
              shares.

       (b)    Issued

<TABLE>
<CAPTION>
                                                                  Number of Shares        Amount
                                                                  ----------------      --------
         <S>                                                           <C>              <C>
         Common shares
           Balance, December 31, 2000                                  148,202,115      $143,026
           Issued pursuant to a private placement - note (1)            17,000,000           960
                                                                       -----------      --------
           Balance, December 31, 2001                                  165,202,115       143,986
           Issued pursuant to private placements - notes (2) & (4)      27,409,655         4,023
           Warrants exercised                                           18,018,000         1,474
           Shares issued for debt - note (3)                             1,165,500           140
                                                                       -----------      --------
           Balance, December 31, 2002                                  211,795,270      $149,623
                                                                       ===========      ========
</TABLE>


                                       23
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

6.     SHARE CAPITAL (CONTINUED)

       (1)    On August 3, 2001 the Company issued 17,000,000 units at $0.06 per
              unit for gross proceeds of $1,020. Each unit is comprised of one
              common share and one common share purchase warrant exercisable at
              $0.075 per share expiring February 3, 2003. Share issue costs of
              $60 have been charged to share capital.

       (2)    On April 12, 2002, the Company completed a private placement for
              proceeds of $3,000 comprised of gross cash consideration of $2,500
              and the retirement of debt of $500. The issue price was $0.145 per
              unit, each unit being comprised of one common share and one half
              common share purchase warrant exercisable at $0.195 per whole
              common share purchase warrant for a period of two years from the
              issue date. A total of 20,689,655 shares were issued pursuant to
              the private placement of which 3,448,029 were issued for the
              retirement of debt. Share issue costs of $328 for the private
              placement have been charged to share capital. In addition, whole
              broker warrants in the amount of 1,724,163 were issued exercisable
              at $0.195 per warrant. A value of $0.06 per warrant was assigned
              to the broker compensation warrants for a total consideration of
              $103.

       (3)    A convertible loan of a subsidiary convertible in common shares of
              the Company was redeemed and converted during the third quarter of
              2002 into 1,165,500 common shares valued at $140.

       (4)    During December 2002, the Company commenced a private placement to
              raise $3,000. As at December 31, 2002 the first closing raised
              gross proceeds of $1,680 resulting in the issuance of 6,720,000
              common shares. The balance of the offering was received on January
              6, 2003 upon completion of the second closing. A total of 12
              million units priced at $0.25 per unit were subscribed (see note
              13). Each unit consisted of one common share and one half common
              share purchase warrant. Each full warrant entitles the holder to
              purchase one common share at a price of $0.33 for a period of one
              year from the date of issue. Share issue costs of $152 have been
              charged to share capital. A total of 672,000 broker warrants were
              issued upon behalf of the first closing under the same terms and
              conditions as noted above. A value of $0.11 per warrant was
              assigned to broker compensation warrants for a total consideration
              of $74.

       (c)    Stock Option Plans

       The Company has established incentive stock option plans (the "Plans")
       for employees, officers, directors, consultants and other service
       providers. Under the Plans, as at December 31, 2002, the Company has the
       following options exercisable and outstanding:

<TABLE>
<CAPTION>
               Number of Shares      Exercise Price                Expiry Date
               ----------------      --------------                -----------
               <S>                          <C>               <C>
                        410,700             $ 0.750             April 28, 2005
                      1,232,100             $ 0.500             April 28, 2003
                        813,000             $ 0.330           February 9, 2008
                        225,000             $ 0.345               June 2, 2012
                     10,000,000             $ 0.235             April 24, 2012
</TABLE>

       The continuity of the options granted, exercised and cancelled under the
       Plans during 2002 and 2001 are as follows and all of the options
       outstanding are exercisable.

<TABLE>
<CAPTION>
                                                                Number of   Weighted Average
                                                                 Options         Price
                                                               ----------   ----------------
       <S>                                                     <C>               <C>
       Options outstanding as at December 31, 2000 & 2001       2,565,800         $0.48
       Options granted                                         10,225,000         $0.24
       Options cancelled                                         (110,000)       ($0.33)
                                                               ----------
       Options outstanding as at December 31, 2002             12,680,800         $0.29
                                                               ==========
</TABLE>


                                       24
<PAGE>


--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

6.     SHARE CAPITAL (continued)

       (d)    Warrants

       The Company has issued the following common share purchase warrants
       pursuant to the private placement which are outstanding as of December
       31, 2002:

<TABLE>
<CAPTION>
       Number of Warrants    Shares for Warrants    Exercise Price       Expiry Date
       ------------------    -------------------    --------------    ------------------
       <S>                         <C>                  <C>           <C>
                  291,375          1 for 1              $0.150        September 19, 2003
           (1)  1,724,163          1 for 1              $0.195            April 12, 2004
               18,653,655          1 for 2              $0.195            April 12, 2004
                6,720,000          1 for 2              $0.330         December 30, 2003
            (1)   672,000          1 for 1              $0.330         December 30, 2003
</TABLE>

       (1)    These warrants represent broker compensation warrants issued
              during the year at an assigned value of $177.

       The continuity of warrants issued and outstanding in terms of equivalent
       shares is as follows:

<TABLE>
<CAPTION>
                                                  Number of Warrants      Equivalent Underlying Shares
                                                  ------------------      ----------------------------
       <S>                                            <C>                        <C>
       Outstanding December 31, 2000                    5,000,000                  5,000,000
       Expired                                         (5,000,000)                (5,000,000)
       Issued pursuant to private placement            17,000,000                 17,000,000
                                                      -----------                -----------
       Outstanding December 31, 2001                   17,000,000                 17,000,000
       Issued pursuant to private placements           27,409,655                 13,704,828
       Issued to Broker                                 2,396,163                  2,396,163
       Issued for conversion of debt                      291,375                    291,375
       Exercised                                      (19,036,000)               (18,018,000)
                                                      -----------                -----------
       Outstanding December 31, 2002                   28,061,193                 15,374,366
                                                      ===========                ===========
</TABLE>



       (e)    Stock Based Compensation

       Options to purchase common shares have been granted to directors,
       officers and employees at exercise prices determined by reference to the
       market value on the date of grant. Vesting of options is made at the
       discretion of the board of directors at the time the options are granted.
       As at December 31, 2002, the Company has stock options outstanding for
       the purchase of 12,680,800 common shares (as at December 31, 2001 -
       2,565,800 common shares). All of the options outstanding are exercisable.

       Pursuant to the new CICA policy of accounting for stock based
       compensation, compensation expense on stock options granted to directors,
       officers and employees, using the fair value method, is disclosed as
       pro-forma information. Of the stock options granted to directors an
       amount of 1,000,000 options were granted as compensation for legal
       services. The fair value assigned to the options in an amount of $209 was
       recorded as an expense and credited to contributed surplus.



                                       25
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

6.     SHARE CAPITAL (continued)

       The fair value of stock options used to calculate compensation expense is
       estimated using the Black-Scholes Option Pricing Model with the following
       assumptions as at December 31, 2002.

<TABLE>
       <S>                                           <C>
       Risk-free interest rate                       3.63%
       Expected dividend yield                       nil
       Expected stock price volatility               48%
       Expected option life in years                 3
</TABLE>

       The pro-forma effect on net loss and loss per share for the period ended
       December 31, 2002 of the actual results had the Company accounted for the
       stock options granted to directors, officers and employees using the fair
       value method is as follows:

<TABLE>
       <S>                                           <C>
       Net loss for the period
       Reported                                      $4,331
       Compensation expense                          $1,916
                                                     ------
       Pro-forma                                     $6,247
                                                     ======
       Basic loss per share
       Reported                                      $0.023
                                                     ======
       Pro-forma                                     $0.033
                                                     ======
</TABLE>

       Option pricing models require the input of highly subjective assumptions
       including the expected price volatility. Changes in the subjective input
       assumptions can materially affect the fair value estimate, and therefore
       the existing models do not necessarily provide a reliable single measure
       of the fair value of the Company's stock options.

--------------------------------------------------------------------------------


7.     INCOME TAXES

       Effective January 1, 2000, the Company calculates income taxes using the
       liability method as explained in the Summary of Significant Accounting
       Policies. The effect of this change was not material to the Company.

       The Company's effective tax rate, which differs from the combined federal
       and provincial statutory income tax rates, may be reconciled as follows:

<TABLE>
<CAPTION>
                                                                 2002               2001                 2000
                                                           ----------------    ---------------    -----------------
                                                             $           %       $         %         $          %
                                                           -----      -----    ----      -----    ------      -----
       <S>                                                <C>         <C>      <C>       <C>      <C>         <C>
       Basic rate applied to pre-tax income (loss)        (1,672)     (38.6)   (509)     (42.6)    3,232       43.6
       Losses and other benefits not tax affected          1,672       38.6     509       42.6       230        3.0
       Non taxable portion of capital loss                    --         --      --         --    (1,998)     (26.9)
       Utilization of prior year losses                                          --         --    (1,464)     (19.7)
                                                           -----      -----    ----      -----    ------      -----
                                                              --         --      --         --        --         --
                                                           =====      =====    ====      =====    ======      =====
</TABLE>

       The Company and its subsidiaries have non-capital losses of approximately
       $15,199 which may be carried forward to reduce future taxable income. The
       right to claim non-capital losses of $1,269, $142, $628, $10,191 and
       $2,969 expires in 2009, 2008, 2007, 2005 and 2004 respectively. The
       Company also has approximately $73,957 in capital losses which can be
       applied to reduce future capital gains. The right to claim these capital
       losses is carried forward indefinitely.


                                       26
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

7.     INCOME TAXES (continued)

       The Company also has the following expenses which are available to be
       applied against future income for income tax purposes:

<TABLE>
          <S>                                                        <C>
          Canadian exploration and development expenses              $7,560
                                                                     ------
          Foreign exploration and development expenses               $1,812
                                                                     ------
</TABLE>

       The benefit of the above tax assets have not been recognized in the
       accounts for financial statement purposes and have been reduced by a
       valuation adjustment.

--------------------------------------------------------------------------------

8.     INCOME (LOSS) PER SHARE

       The income (loss) per share figures have been calculated using the
       weighted average number of common shares outstanding during the
       respective fiscal years which amounted to 187,710,451 (2001 -
       155,285,448; 2000 - 92,750,463). Effective January 1, 2001, the Company
       adopted the treasury method of calculating fully diluted income per share
       on a retroactive basis. Exercise of the outstanding stock options and
       warrants would be anti-dilutive in 2002, 2001 and 2000.

--------------------------------------------------------------------------------

9.     OTHER EXPENSE (INCOME)

       Other expense (income) is comprised of the following:

<TABLE>
<CAPTION>
                                              2002          2001           2000
                                              ----          ----           ----
          <S>                                 <C>           <C>            <C>
          Investment income                   ($7)          ($2)           $--
          Oil and gas net income               (7)          (27)           (24)
          Foreign exchange (gain) loss         87           (32)          (221)
                                              ---          ----          -----
                                              $73          ($61)         ($245)
                                              ===          ====          =====
</TABLE>


--------------------------------------------------------------------------------

10.    STATEMENT OF CASH FLOW

       Items not involving cash are as follows:

<TABLE>
<CAPTION>
                                                        2002    2001       2000
                                                        ----    ----       ----
          <S>                                         <C>        <C>    <C>
          Amortization                                    $9     $16       $877
          Write down of mineral properties             2,590      --         --
          Gain on retirement of long-term debt            --      --    (10,216)
          Loss on disposal of subsidiary companies        --      --      1,213
          Non-controlling interest                       (13)     --         (3)
          Foreign currency translation adjustment         --      --       (128)
          Options granted for legal services             209      --         --
                                                      ------     ---    -------
                                                      $2,795     $16    ($8,257)
                                                      ======     ===    =======
</TABLE>



                                       27
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

10.    STATEMENT OF CASH FLOW (CONTINUED)

       The net changes in non-cash working capital balances for continuing
       operations are as follows:

<TABLE>
<CAPTION>
                                                       2002      2001      2000
                                                       ----      ----      ----
          <S>                                         <C>         <C>      <C>
          Accounts payable                            ($337)      $27      $554
          Accounts receivable                           (24)       29        77
          Inventories                                    --        --       105
          Prepaid expenses                             (112)        2        (5)
                                                      -----       ---      ----
                                                      ($473)      $58      $731
                                                      =====       ===      ====
</TABLE>

       Additional cash flow information:

       In 2002, the Company issued 4,163,529 shares to settle loans payable of
       $640.

       In 2000, the Company issued 79,371,973 shares to settle the Convertible
       Note (see Note 5) for $6,188.

<TABLE>
<CAPTION>
                                            2002           2001            2000
                                            ----           ----            ----
          <S>                                <C>            <C>             <C>
          Cash paid for interest             $--            $--             $5
</TABLE>


--------------------------------------------------------------------------------

11.    FINANCIAL INSTRUMENTS

       Unless otherwise noted, it is the opinion of management that the Company
       is not exposed to significant interest rate, currency or credit risks
       arising from its financial instruments. The fair values of these
       financial instruments approximate their carrying values, unless otherwise
       noted.

--------------------------------------------------------------------------------

12.    RELATED PARTY TRANSACTIONS

       The Company had the following related party transactions:

<TABLE>
<CAPTION>
                                                                                    2002        2001       2000
                                                                                    ----        ----       ----
          <S>                                                                       <C>         <C>        <C>
          Management and administrative services paid or accrued
          to a company which employs the Company's chairman                         $180        $180       $182
                                                                                    ----        ----       ----
          Lease paid to a company that the Chairman is a shareholder of              $63         $57        $58
                                                                                    ----        ----       ----
</TABLE>

       The related party transactions are recorded at the exchange amount.

       The Company has the following related party balances:

<TABLE>
<CAPTION>
                                                                          2002        2001       2000
                                                                          ----        ----       ----
          <S>                                                             <C>         <C>        <C>
          Included in accounts payable
          - owing to a company that employs the Company's chairman        $296        $271       $166
          - owing to directors/officers for unpaid salaries               $556        $588       $391
</TABLE>

--------------------------------------------------------------------------------



                                       28
<PAGE>
--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

13.    SUBSEQUENT EVENT

       On January 6, 2003, the Company concluded a private placement financing
       for $3.0 million gross proceeds comprised of 12,000,000 units. Each unit
       is comprised of one common share and one half common share purchase
       warrant issued at $0.25 per unit. In addition, a total of 1,200,000 whole
       broker warrants were issued with each warrant exchangeable for one whole
       common share. Whole warrants are exchangeable for shares at $0.33 per
       share for a period of one year from closing. A total of 6,720,000 units
       and 672,000 whole broker warrants were closed on December 31, 2002 (see
       Note 6 (b)).

--------------------------------------------------------------------------------

14.    SEGMENTED FINANCIAL INFORMATION

       The Company has been engaged directly or through subsidiaries in the
       production of and the exploration for precious metals in various
       geographical locations.

       The Company's operating segments have been identified based on geographic
       areas as follows:

<TABLE>
<CAPTION>
                                                                        FOR THE YEAR ENDED DECEMBER 31, 2002
                                                                  -------------------------------------------------
                                                                  CORPORATE   SOUTH AFRICA      ZAMBIA        TOTAL
                                                                  ---------   ------------      ------       ------
<S>                                                                  <C>            <C>         <C>          <C>
       Revenue from sales                                               $--            $27         $--          $27
       Operating Costs                                                   --           (130)         --         (130)
       General and administrative                                    (1,405)          (135)         --       (1,540)
       Interest                                                         (29)            --          --          (29)
       Amortization                                                      (9)            --          --           (9)
       Write down of mineral properties                                  --             --      (2,590)      (2,590)
       Other income (expense)                                           (23)           (50)         --          (73)
                                                                     ------         ------      ------       ------
       (Loss) before the undernoted                                  (1,466)          (288)     (2,590)      (4,344)
       Non-controlling interest                                          --             13          --           13
                                                                     ------         ------      ------       ------
       Net income (loss) for the year                                (1,466)          (275)     (2,590)      (4,331)
                                                                     ======         ======      ======       ======
       Identifiable assets                                            2,614         11,743      10,410       24,767
                                                                     ======         ======      ======       ======
       Expenditures on capital assets & mineral properties              $--           $805        $119         $924
                                                                     ======         ======      ======       ======
</TABLE>


<TABLE>
<CAPTION>
                                                                        For the year ended December 31, 2001
                                                                  -------------------------------------------------
                                                                  Corporate   South Africa      Zambia        Total
                                                                  ---------   ------------      ------       ------
<S>                                                                  <C>            <C>         <C>          <C>
       Revenue from sales                                               $--           $124         $--         $124
       Operating costs                                                   --           (250)         --         (250)
       General and administrative                                      (891)          (139)         --       (1,030)
       Interest                                                         (84)            --          --          (84)
       Amortization                                                      --            (16)         --          (16)
       Other income                                                      26             35          --           61
                                                                     ------         ------      ------       ------
       Net income (loss) for the year                                  (949)          (246)         --       (1,195)
                                                                     ======         ======      ======       ======
       Identifiable assets                                              934         11,158      12,881       24,973
                                                                     ======         ======      ======       ======
       Expenditures on capital assets & mineral properties              $--            $--         $23          $23
                                                                     ======         ======      ======       ======
</TABLE>



                                       29
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

14.    SEGMENTED FINANCIAL INFORMATION (continued)

<TABLE>
<CAPTION>
                                                                 For the year ended December 31, 2000
                                                   -----------------------------------------------------------------
                                                      Corporate      Europe   South Africa      Zambia        Total
                                                      ---------      ------   ------------      ------        -----
       <S>                                               <C>         <C>            <C>         <C>          <C>
       Revenue from sales                                   $--      $6,623            $--         $--       $6,623
       Revenue from management services                     109          --             --          --          109
       Operating costs                                       --      (6,367)           (61)         --       (6,428)
       General and administrative                        (1,081)         --           (144)         --       (1,225)
       Interest                                             (36)         (5)            --          --          (41)
       Amortization                                          (2)       (847)           (28)         --         (877)
       Other income                                           7          --            238          --          245
                                                         ------      ------         ------      ------       ------
       Income (loss) before the undernoted               (1,003)       (596)             5          --       (1,594)
       Net gain on conversion of convertible
       debenture and sale of subsidiary companies
                                                          9,003          --             --          --        9,003
       Non-controlling interest                              --           3             --          --            3
                                                         ------      ------         ------      ------       ------
       Net income (loss) for the year                     8,000        (593)             5          --        7,412
                                                         ======      ======         ======      ======       ======
       Identifiable assets                                  912          19         11,258      12,874       25,063
                                                         ======      ======         ======      ======       ======
       Expenditures on capital assets and
       mineral properties                                   $--         $--            $--        $120         $120
                                                         ======      ======         ======      ======       ======
</TABLE>


--------------------------------------------------------------------------------

15.    GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES

       The Company's accounting policies do not differ materially from
       accounting principles generally accepted in the United States ("US GAAP")
       except for the following:

       (a)    Mineral Properties

              US GAAP requires that mineral properties with no proven reserves
              be reflected as expenses in the period incurred.

       (b)    Other Paid in Capital

              Under Canadian GAAP, convertible debentures have been segregated
              into a debt and equity component. The resulting debt discount is
              amortized over the term of the debt and is included with interest
              expense. Under US GAAP, the convertible debentures would be shown
              as debt only and therefore would not include an equity component
              or amortization expense.

       (c)    Employee and Directors Stock Options

              The Company accounts for employee and directors stock options
              under APB Opinion No. 25 under which no compensation cost is
              recognized when the exercise price equals or exceeds the fair
              value at the date of grant.



                                       30
<PAGE>

--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

15.    GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES
       (continued)

              Under Canadian GAAP, effective January 1, 2002 on a prospective
              basis, the Company adopted the new CICA policy of accounting for
              stock based compensation. Compensation expense on stock options
              granted to directors, officers and employees, is not recorded.
              However, disclosure of the effects of accounting for the
              compensation expense, using the fair value method estimated using
              the Black-Scholes Option Pricing Model, is disclosed as pro-forma
              information.

       (d)    Comprehensive Income

              Under US GAAP, comprehensive income must be reported which is
              defined as all changes in equity other than those resulting from
              investments by owners and distributions to owners.

       (e)    Recently Issued Accounting Standards

              In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
              Retirement Obligations". SFAS No. 143 requires the fair value of a
              liability for an asset retirement obligation to be recognized in
              the period in which it is incurred if a reasonable estimate of
              fair value can be made. The associated asset retirement costs are
              capitalized as part of the carrying amount of the long-lived
              assets. SFAS No. 143 is effective for the fiscal year ending
              December 31, 2003. Management has not yet determined the impact of
              this standard.

              In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs
              Associated with Exit or Disposal Activities". SFAS No. 146
              requires that a liability for a cost associated with an exit or
              disposal activity be recognized at the date the liability is
              incurred and is measured and recorded at fair value. This is
              effective for exits or disposal activities initiated after
              December 31, 2002. Management is of the opinion that the adoption
              of SFAS No. 146 will not impact its financial position and results
              of operation.

       (f)    Net Gain on Conversion of the Convertible Debentures and
              Settlement of Debt

              For US GAAP the net gain would be considered an extraordinary
              item.

              For US GAAP purposes a loss is recognized on settlement of debt to
              the extent that the quoted market value of shares and fair value
              of warrants issued at the date of settlement exceeds the carrying
              amount of debt.

       (g)    The Company restated the US GAAP reconciliation note to correctly
              reflect a compensation expense for the intrinsic value
              attributable to stock options granted to directors, officers and
              employees.

              The following table summarises the changes to the US GAAP
              reconciliation note:

<TABLE>
<CAPTION>
                                                      As Previously          As
                                                           Reported    Restated
                                                     --------------    --------
<S>                                                        <C>         <C>
              Balance Sheet
                 Contributed surplus                            209       1,614
                 Deficit                                   (138,988)   (140,393)

              Income Statement
                 Net Loss                                    (2,390)     (3,795)
                 Basic and diluted (loss) per share          (0.013)     (0.020)

</TABLE>



                                       31
<PAGE>
--------------------------------------------------------------------------------
                                                    CALEDONIA MINING CORPORATION
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     (in thousands of Canadian Dollars unless otherwise indicated and except for
                                                              per share amounts)
                                                DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

15.    GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES
       (continued)

       The impact of the foregoing on the financial statements is as follows:

       (a) Income Statement

<TABLE>
<CAPTION>
                                                                                   Restated
                                                                                    2002        2001        2000
                                                                                   --------     ----        ----
<S>                                                                                <C>         <C>         <C>
       Loss for the year before extraordinary item per Canadian GAAP               ($4,331)    ($1,195)    ($1,591)
       Mineral property expenditure with no proven reserves (expensed) or
          previously expensed under US GAAP                                          2,303          (7)       (120)
       Loss on settlement of debt                                                     (362)         --          --
       Compensation expense                                                         (1,405)         --          --
       Loss on sale of subsidiary not considered an extraordinary item
          for US GAAP                                                                   --          --      (1,061)
                                                                                   -------     -------     -------
       Loss for the year before extraordinary item and income taxes per US GAAP     (3,795)     (1,202)     (2,772)
       Utilization of prior year losses                                                 --          --        $291
                                                                                   -------     -------     -------
       Loss for the year before extraordinary item                                  (3,795)     (1,202)     (2,481)
       Extraordinary item per US GAAP
       Net gain on conversion of the convertible debentures $11,551,
          net of tax $291                                                               --          --      11,260
                                                                                   -------     -------     -------
       Net income (loss) per US GAAP                                                (3,795)     (1,202)      8,779
       Foreign currency translation adjustment                                          --          --         795
                                                                                   -------     -------     -------
       Comprehensive net income (loss) per US GAAP                                  (3,795)     (1,202)      9,574
                                                                                   =======     =======     =======
       Basic and diluted (loss) per share before extraordinary item                 (0.020)     (0.008)     (0.030)
                                                                                   =======     =======     =======
       Basic earnings per share on the extraordinary item for the year                  --          --       0.120
                                                                                   =======     =======     =======
       Basic and diluted income (loss) per share for the year                      ($0.020)    ($0.008)     $0.090
                                                                                   =======     =======     =======
</TABLE>

      (b) Balance Sheet

<TABLE>
<CAPTION>
                                                                    2002          2001
                                                                    ----          ----
<S>                                                                <C>           <C>
       Total assets per Canadian GAAP                               $24,767       $24,973
       Mineral properties with no proven reserves expensed          (11,328)      (13,631)
                                                                   --------      --------
       Total assets per US GAAP                                      13,439        11,342
                                                                   ========      ========
       Total liabilities per Canadian and US GAAP                     2,616         4,514
                                                                   --------      --------
       Share capital Canadian GAAP                                 $149,623      $143,986
       Other paid in capital
             Loss on settlement of debt                                $362            --
             Convertible debt                                          (560)         (560)
                                                                   --------      --------
       Share capital US GAAP                                       $149,425      $143,426
                                                                   ========      ========
       Compensation warrants per Canadian and US GAAP                  $177           $--
                                                                   --------      --------
       Contributed surplus per Canadian GAAP                            209            --
             Compensation expense                                     1,405            --
                                                                   --------      --------
       Contributed surplus per US GAAP                                1,614            --
                                                                   --------      --------
       Shareholders' equity
         Deficit end of the year per Canadian GAAP                 (127,858)     (123,527)
         Loss on settlement of debt                                    (362)           --
         Compensation expense                                        (1,405)           --
         Mineral properties with no proven reserves expensed        (11,328)      (13,631)
         Debenture discount amortization                                560           560
                                                                   --------      --------
       Deficit end of year per US GAAP                             (140,393)     (136,598)
                                                                   --------      --------
       Total shareholders' equity US GAAP                           $10,823        $6,828
                                                                   ========      ========
</TABLE>



                                       32
<PAGE>

DIRECTORS AND MANAGEMENT

BOARD OF DIRECTORS                          OFFICERS
S. E. Hayden (1) (2) (3) (4)                S. E. Hayden
Chairman of the Board, President and        Chairman of the Board, President and
Chief Executive Officer                     Chief Executive Officer
Johannesburg, South Africa
                                            F. C. Harvey
J. Johnstone                                Technical Director
Vice President Operations and
Chief Operating Officer                     J. Johnstone
Mississauga, Ontario, Canada                Vice-President Operations and
                                            Chief Operating Officer
F. C. Harvey
Technical Director                          S. W. Poad
Mississauga, Ontario, Canada                Vice-President Finance
                                            and Administration
W. I. L. Forrest (1) (2) (4)
Business Executive                          J. Smith
Gingins, Switzerland                        Vice-President Exploration

C. R. Jonsson (1) (2) (3)
Principal of Tupper Jonsson
& Yeadon
Barristers & Solicitors
Vancouver, British Columbia,
Canada

BOARD COMMITTEE
MEMBERS
(1)  Audit Committee
(2)  Compensation Committee
(3)  Corporate Governance Committee
(4)  Nominating Committee



                                       33
<PAGE>
CORPORATE DIRECTORY

CORPORATE OFFICES                           SOLICITORS

CANADA - HEAD OFFICE                        BORDEN LADNER GERVAIS LLP
CALEDONIA MINING CORPORATION                Suite 4100, Scotia Plaza
Unit 9, 2145 Dunwin Drive                   40 King Street West
Mississauga, Ontario                        Toronto, Ontario M5H 3Y4 Canada
L5L 4L9 Canada
Tel:     (905) 607-7543                     TUPPER, JONSSON & YEADON
Fax:     (905) 607-9806                     1710-1177 West Hastings Street
                                            Vancouver, British Columbia
SOUTH AFRICA                                V6E 2L3 Canada
GREENSTONE MANAGEMENT SERVICES (PTY) LTD.
P.O. Box 587                                AUDITORS
Johannesburg 2000                           BDO DUNWOODY LLP
South Africa                                CHARTERED ACCOUNTANTS
Tel:     (27)(11) 447-2499                  Suite 3200, 200 Bay Street
Fax:     (27)(11) 447-2554                  Royal Bank Plaza, South Tower
                                            Toronto, Ontario M5J 2J8 Canada
ZAMBIA
CALEDONIA MINING (ZAMBIA) LIMITED           REGISTRAR & TRANSFER AGENT
P.O. Box 36604                              EQUITY TRANSFER SERVICES INC.
Lusaka, Zambia                              Suite 420 120 Adelaide Street West
Tel:     (260)(1) 29-1574                   Toronto, Ontario M5H 4C3 Canada
Fax:     (260)(1) 29-2154                   Tel:  (416) 361-0152
                                            Fax:  (416) 361-0470
SHARES LISTED
The Toronto Stock Exchange Symbol "CAL"     BANKERS
NASDAQ OTC BB Symbol "CALVF"                CANADIAN IMPERIAL BANK OF COMMERCE
                                            6266 Dixie Road
CAPITALIZATION at December 31, 2002         Mississauga, Ontario
Authorised: Unlimited                       L5T 1A7 Canada
Shares, Warrants and Options Issued:
Common Shares: 211,795,270
Warrants: 28,061,193
Options: 12,680,800

WEB SITE: http://www.caledoniamining.com



                                       34
<PAGE>


NOTES:


<PAGE>


CALEDONIA MINING CORPORATION
Unit #9
2145 Dunwin Drive
Mississauga, Ontario, Canada
L5L 4L9

Tel:     (905) 607-7543
Fax:     (905) 607-9806
info@caledoniamining.com