Blanket Production Update and 2012 Outlook

TORONTO, Jan. 24, 2012 /CNW Telbec/ - Caledonia Mining Corporation ('Caledonia')

        --  10,533oz gold produced during Q4 2011, representing an 8.1%
            increase on Q3 2011 (9,743oz), and a 69% increase on Q4 2010
            (6,227oz)

        --  Total 2011 gold production was 35,826oz, a 102% increase over
            the annual gold production in 2010 of 17,707oz

        --  Targeted 2012 annual gold production of 40,000oz

Blanket Production

The Company is pleased to announce a successful year at the Blanket Mine which produced 35,826oz of gold, an increase of 102% over the previous year.

In accordance with our aim to continuously improve operations at Blanket, the following infrastructure, process and equipment investment programmes were undertaken during the final quarter of 2011:

        --  Considerable work on the refurbishment of the 14, 18 and 22
            Level underground haulages continued throughout Q4 and this is
            expected to be completed by the end of Q1 2012. This programme
            is essential to support and sustain our increased underground
            production.

        --  The installation of an automatic cyanide measuring and dosing
            system on the CIL circuit was commissioned. This installation
            is providing both better control over, and a detectable
            reduction in, cyanide usage per tonne of ore milled.

        --  Certain rectification and maintenance work on the 825m deep No4
            Shaft was commenced during November 2011. This work is expected
            to be completed by the end of February 2012 and once completed
            will allow Blanket to increase the speed of the No4 Shaft
            Winder, thereby increasing hoisting capacity. As noted in the
            Q3 MD&A, this work may have an adverse effect on gold
            production in the first quarter of 2012.

        --  A Belt Scale was installed on the No1 Conveyor Belt so that all
            ore tonnages delivered from various ore sources such as the 14
            Level mid-shaft loading station, Lima, and in due course the
            satellite properties such as GG and Mascot, can be individually
            and accurately measured. The re-programed computerised
            recording system is expected to be commissioned during early
            February and the system is then expected to facilitate further
            metallurgical optimisation.

Outlook

Following a year in which Caledonia has increased production at Blanket by 102% to 35,826oz (2010 gold production was 17,707oz), we are now confident that we will be able to achieve our targeted gold production of 40,000oz for the current financial year. Discussions with the Government of Zimbabwe regarding the indigenisation of the Blanket Mine have continued.

CALEDONIA MINING CORPORATION

CONTACT:

Caledonia Mining Corporation Collins Stewart Europe Limited

Mark Learmonth John Prior or Sebastian Jones

Tel: + 27 11 447 2499 Tel: + 44 20 7523 8350

marklearmonth@caledoniamining.com







Renmark Financial Communications Inc. Collins Stewart LLC

John Dan Mintz

Boidman: jboidman@renmarkfinancial.com Tel: +1 212 389 8022

Nadia DMintz@collinsstewartllc.com

Marks: nmarks@renmarkfinancial.com

Tel.: (514) 939-3989 or (416) 644-2020

www.renmarkfinancial.com







Newgate Threadneedle

Laurence Read/ Beth Harris/Terry

Garrett

Tel: +44 207 653 9850







Further information regarding Caledonia's exploration activities and

operations along with its latest financials and Management Discussion

and Analysis may be found at www.caledoniamining.com