Caledonia Mining Corporation

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Blanket Gold Mine

Background


#1 Conveyor feeding the two Surface Primary Jaw Crushers

Blanket started production in 1904. Early workers tended to mine the visible gold sections of the pay shoots, i.e. pick the "eyes" out of the mine. Significant early production milestones were: in 1965 Falconbridge acquired the property and increased gold production to an average of approximately 45 kg per month; in 1993 Kinross took over the property and built an enlarged Carbon-in-Leach ("CIL") plant with capacity of approximately 3,800 tonnes per day ("tpd") to treat an old tailings dump together with the run-of-mine ore. Gold production reached a level of 110 kg per month during the tailings treatment years from 1995 to 2007. To date in excess of 1 million ounces of gold have been produced from the property.

On April 1, 2006 a wholly-owned subsidiary of Caledonia Mining Corporation completed the purchase of the Blanket Mine from Kinross. Caledonia has allowed Blanket to make considerable capital investments in its underground, surface and township facilities. These investments culminated in the commissioning of the No 4 Shaft Expansion Project at the end of September 2010 which has increased Blanket's underground production capacity from 500 tonnes per day to over 1,000 tonnes per day thereby increasing gold production capacity from 24,000 ounces per annum to approximately 40,000 per annum by the end of Q4 2010.

Regional Geology

The Blanket Mine is situated in the Gwanda Greenstone Belt, a typical Archaean greenstone-hosted gold deposit. The deposit is situated on the northwest limb of the Gwanda Greenstone Belt along strike from several other prominent gold deposits. Blanket is the largest producing mine in a belt which at one time had 268 operating mines.

The Gwanda Greenstone Belt extends 80 km in an east-west direction and consists predominantly of basaltic rocks (greenstones) with minor felsic and ultramafic units. The belt has been intensely sheared and intruded by granites resulting in complex deformation structures and vertically dipping strata. The shape of the gold ore bodies is controlled by these structures, resulting in their near vertical orientation.

Near vertical shear zones are developed throughout the belt and are the loci of most of the small mines that have been discovered in the area. Most of Blanket's prospects are of this type. Many of these now defunct small mines were shallow, had historically high recovered gold grades and closed towards the end of the 1960s when the gold price was low and the mining and metallurgical techniques available at that time were such that the mines became un-economic. The area has a long history of gold production and remains highly prospective and must therefore be regarded as an attractive exploration area as it has never been subjected to modern exploration techniques.

Property Geology

Since the rock units of the Gwanda Greenstone Belt are tilted on their side and strike north-south in the vicinity of Blanket Mine, the stratigraphic sequence is exposed from the oldest in the east to the youngest in the west. The Felsic unit consisting of quartzite and sericite-quartz schists forms the base of the stratigraphy. No gold deposits have been recorded in this unit. Overlying this unit to the west is the Ultramafic-Mafic unit interlayered with banded iron formations. Gold occurs in this unit at Vubachikwe mine, which is adjacent to Blanket, where the deposits are confined to steeply dipping folds in the banded iron formation layers. The Ultramafic-Mafic unit is in turn overlain to the west by the Mafic unit, a thick sequence of tholeiitic and pillow basalts. Within the Mafic unit a prominent shear zone up to 50 meterswide runs the length of the property and is the locus of all ore bodies on the Blanket property. The sequence is completed by an Andesitic unit which caps the stratigraphic sequence.

Blanket Mine is part of the group of mines that make up the North Western Mining Camp otherwise also called the Sabiwa group of mines. What is today referred to as Blanket Mine is a cluster of mines extending from Jethro in the south, through Blanket itself, Feudal, AR South, AR Main, Sheet, Eroica and Lima in the north. These ore shoots occur in the Blanket shear zone, a low angle transgressive shear characterised by the presence of biotite relative to the massive amphibolites forming the country rocks.

A regional sub horizontal dolerite sill intruded the above sequence and is emplaced about 500 meters below surface. The sill does not cause a significant displacement and although it truncates all the ore shoots, the mineralised shoots continue undisturbed below the sill.

Active mining at the Blanket mine takes place over a 3 km strike that includes 8 discrete ore shoots. Fig NN provides a north-south vertical projection of the various Blanket ore shoots. Mineralisation occurs in near vertical shoots aligned along an approximately north-south axis. The ore shoots vary in shape from the tabular to lensoidal quartz reefs to the massive to pipe-like disseminated sulphide reefs (DSR).

Gold mineralisation occurred as a result of the reaction between rising hot fluids and the iron rich minerals in the shear zones. The reaction involved the formation of sulphide minerals, predominantly arsenopyrite, as the sulphur in solution reacted with iron in the rocks. Gold, which was also transported by the fluids, became attached to the arsenopyrite to form the gold ore. These reaction zones are located within the more ductile tensional high strain areas of the shear zone.


Blanket Mine - Click on map to view larger version.
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Two main types of mineralisation are recognised; disseminated sulphide replacement reefs and quartz-filled reefs and shears.

The first type is the disseminated sulphide replacement type which comprises the bulk of the ore shoots. Typically these zones have a silicified core with fine sprays of disseminated arsenopyrite hosting the best grades. Disseminated sulphide replacement ore bodies range up to 50m in width with a strike between 60m and 90m. Free-milling gold constitutes up to 50% of the total metal content with the remainder occluded within the arsenopyrite.

Quartz-filled shear zones form the second type of mineralisation. Two quartz shears are mined at Blanket Mine, the Blanket Quartz Reef and the Eroica Reef. These reefs tend to have long strikes but are not uniformly mineralized although continuous pay shoots of over 100 m on strike are not uncommon. The Quartz Reef at Blanket has a surface strike of some 500 m, but economic mineralisation is restricted to three 90 m shoots which were defined on surface by the early workers. Grade fluctuations are more extreme in the quartz reefs than in the disseminated type reefs but on average these shears have higher grades and are used as a "sweetener" of ore to the mill.



The tables below summarize the RESERVES AND RESOURCES at December 31, 2012
Cautionary Note to U.S. Investors - the United States Securities and Exchange Commission permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Caledonia uses certain terms in this website - and in some cases press releases - such as "measured", "indicated", and "inferred" "resources", which the SEC guidelines generally prohibit U.S. registered companies from including in their filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F which may be secured from Caledonia, or on the SEC website at: http://www.sec.gov/edgar.shtml.


MINERAL RESERVES as at December 31, 2012 (based on a Gold Price of US$1,500/oz)

Classification

Tonnes

Grade(Au g/t)

Gold Content
(oz)

PROVEN ORE      
Total Proven Ore including pillars* 1,767,000 3.93 223,000
PROVEABLE ORE      
Operating and Development Areas 2,140,000 3.66 252,000
Total Proven + Probable Ore 3,907,000 3.78 475,000


MINERAL RESOURCES (based on a Gold Price of US$1,500/oz)

Classification

Tonnes

Grade(Au g/t)

Gold Content ounces
       
Indicated 448,000 3.81 54,900
       
Inferred 2,290,000 5.30 **
Note * Pillar tonnages are discounted by 50%
Note ** In keeping with the requirements of NI 43-101, Inferred Resources are reported without estimates of metal quantities.

Mr. Mike Robertson Pr. Sci. Nat., and Mr. Bruno Bvirakare Pr. Sci. Nat., both consultants with the MSA Group, are the "Independent Qualified Persons" for Blanket's reserves and resources as required by National Instrument 43-101 of the Canadian Securities Administrators.

Dr. T. N. Pearton, BSc Eng. (Mining Geology), PhD (Geology), and Fellow of the Geological Society of South Africa is the "Qualified Person" and is responsible for and has reviewed the Blanket's 2012 reserves and resources as required by National Instrument 43-101 of the Canadian Securities Administrators.


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