CALEDONIA MINING CORPORATION CALEDONIA'S AFFILIATE DISCOVERS DIAMONDS.

TORONTO--(BUSINESS WIRE)--Jan. 26, 1995--CALEDONIA MINING CORPORATION (TSE:CAL;NASDAQ:CALVF) is pleased to announce that its 32% owned affiliate, Reunion Mining Plc has recovered three small macrodiamonds from the QK-3 kimberlite pipe in the Quest area in northwestern Zimbabwe. The area lies along the northeast extrapolation of the Botswana kimberlite belt. QK-3 is now believed to be the likely source of two diamonds (20 ct and 0.25 ct) reported by previous workers in the 1950s from the rivers draining the area. This discovery confirms the prospectivity of the Joint Venture's Zambezi Valley programme.

The three macrodiamonds were recovered from 18 kilograms of eluvial material taken from surface to 6.5 metres depth in a 24 metre drill hole drilled into upper portion of the QK-3 pipe. Core recovery was only 20-25% due to the unconsolidated nature of the material.

The diamonds have a total weight of 0.04 carats and were recovered in the Joint Venture's laboratory in Zimbabwe. One of the stones was sent to Lakefield Research in Canada and was confirmed as a diamond. The diamonds are clear and exhibit variably resorbed textures; two have relic octahedral shapes. The size of the diamonds are as follows: 1.0 x 0.9 x 0.9 mm; 1.5 x 1.0 x 1.0 mm; and 1.0 mm (round and broken).

The diamonds were recovered from material screened at -4.0 mm to +0.5 mm. The sample preparation method is standard for the separation of kimberlite indicator minerals. Any microdiamonds present in the samples would have reported to the -0.5 mm fines, which were not analyzed, similarly stones greater than 4.0 mm would have been discarded.

The core, from 6.5 metres to 24 metres, was consolidated brown epiclastic kimberlite showing considerable dilution by non- kimberlite material. No macrodiamonds were recovered from this section of core.

The small size of the diamond bearing sample, the core recovery and the type of material drilled precludes any estimation of grade for the pipe. The remaining half of the drill core from the epiclastic kimberlite will be analyzed for micro and macrodiamonds in a commercial laboratory. A follow-up drilling programme to determine the size of the pipe, the phases of kimberlite present and the diamond distribution is scheduled to begin next month.

The Quest area covers 5,500 sq. km. on and to the southeast of Lake Kariba in northwestern Zimbabwe. Three pipes have been discovered in the cluster and exploration is continuing to test other airborne magnetic anomalies.

The Quest area is covered by one of the two joint venture agreements between Reunion and Argosy Mining Corporation of Canada. Under the Quest agreement, Argosy can earn a 50% interest in the area by bearing all exploration costs up to US$1.5 million, at which time Reunion's interest will have been reduced to 25% with local investors holding the remaining 25%.

At Mlibizi in Zimbabwe, a further three kimberlite pipes (K18, K19 and K20) have been discovered and this brings to 32 the total kimberlites discovered by the Reunion/Argosy Joint Venture.

Eleven of the 32 confirmed kimberlites are presently under evaluation. Of these, five pipes have now been given a high priority and will be bulk sampled for diamonds.

In Tanzania the first 18 aeromagnetic anomalies have now been located on the ground. The Joint Venture has purchased a multi- purpose drill that will enable the testing of kimberlite targets on a continuous basis through 1995. Drilling will begin in mid- February. The Reunion/Argosy Joint Venture is in year two of a staged four year exploration program in Zimbabwe and Tanzania. A 1995 budget of $US1.45 million has been allocated to explore the 7.2 million acres currently under licence.

CALEDONIA ADDED TO TSE 300 COMPOSITE INDEX 

The Toronto Stock Exchange has announced that effective at the open on Friday, January 27, 1995, CALEDONIA MINING CORPORATION'S stock will be added to the TSE 300 Composite Index.

CALEDONIA CLOSES FYNEGOLD ACQUISITION

Caledonia has closed the transaction to acquire a 100% direct interest in Fynegold Exploration Limited, Scotland. The Corporation purchased such interest for $US4.25 million and 500,000 common shares of the Corporation.

Caledonia has 27.1 million shares on issue and cash reserves of $16.1 million.

CONTACT: D. S. MACLEOD, 905/564-5213

F. C HARVEY, FAX: [phone]