Caledonia Signs Sale And Option Agreement For Barbrook And Eersteling Gold Mines.

Business Editors

TORONTO--(BUSINESS WIRE)--Nov. 14, 2000

Caledonia Mining Corporation of Toronto (OTCBB:CALVF)(TSE:CAL.) is pleased to announce that it has signed a binding Heads of Agreement ("the Agreement") with Spring Hills Trading Limited ("Spring Hills"), regarding a Purchase and Option Agreement for Caledonia's shareholdings in the Barbrook and the Eersteling gold mines located in South Africa.

Both mines have been on care and maintenance since 1997.

Spring Hills is represented in South Africa by Mr. Gert Jordaan who has a proven track record in managing gold mines having originally purchased the President Steyn and Freddies mines from Anglo American and the number 3 shaft of Lorraine from Anglovaal, all of which were returned to profitability and then resold.

Under the Agreement, Spring Hills will purchase 49% of Caledonia's shares in Eersteling for approximately US$188,900 and 49% of Barbrook and its holding companies for US$6,811,100, which when combined total US$7 million ("Stage 1"). Once Spring Hills has completed Stage 1 it can then exercise an Option to acquire Caledonia's remaining 51% interests in Eersteling for approximately US$196,700 and in Barbrook and its holding companies for US$6,803,300, which when combined total a further US$7 million ("Stage 2"), together with any remaining Caledonia shareholder loan balances in the companies at this Stage.

Payment for each Stage will be made in 30 monthly installments. Any outstanding amounts owing in respect of any Stage will bear interest as from November 1, 2000 at a rate of LIBOR plus 2%. Spring Hills shall be appointed as Manager of both mines in terms of a Management Agreement and shall use its best endeavors to bring Barbrook and Eersteling back into production within three months of signature of these agreements.

Until full payment has been received for both Stages, any monthly profit generated by the mines, after the deduction of the operating costs of the mines (the "Monthly Profit"), shall be distributed to Caledonia in reduction of Caledonia's shareholder loans receivable from the companies. Upon receipt Caledonia shall then pay Spring Hills a management fee equal to 50% of the amount received.

Spring Hills will by November 30, 2000 assume or discharge, except for the shareholder loans, all existing and future liabilities of Barbrook and Eersteling, including the funding of the Rehabilitation Trust for both mines in accordance with the requirements of the South African Department of Minerals and Energy. Spring Hills will also immediately fund the re-commissioning, capital requirements, and working capital required, to bring both mines back into production, and will thereafter in future provide all additional funding required by either mine.

Payment for Stage 1 will commence on December 31, 2000 and finish by May 31, 2003. Spring Hills has the right to complete payment of Stage 1 by January 31, 2002.

The Stage 2 option will expire, if unexercised on June 30, 2003. Spring Hills has the right to complete payment of Stage 2 by November 30, 2002.

Caledonia will retain a 51% voting interest on the Barbrook and Eersteling boards of directors until full payment and interest for both Stages and has been received.

This agreement is subject to any necessary compliance with requirements of Canadian and South African regulatory authorities and the approval of the Caledonia Board of Directors.

The anticipated effects of the transaction on Caledonia are that:

--it should receive the sum of US$7 million plus interest for Stage 1
  and may receive a further US$7 million if the Stage 2 is exercised;

--it should receive 50% of monthly profits made by either mine until
  full payment is received which at the earliest is November 30, 2002;

--liabilities are further reduced as all present and future long and
  short term liabilities of these mines are assumed by Spring Hills;

--these non-producing assets are to be rapidly returned to profitable
  production and thereby turned into revenue producers without further
  cost to the Corporation;

--this transaction is expected to result in significant, consistent
  and predictable cash-flows to the Corporation commencing in December
  2000 which will be utilized to fund the further development of the
  Corporation's activities;

--working capital will increase significantly;

--excluding the effect of revenue receipts from Monthly Profits or
  interest, the transaction is equivalent in total to approximately
  Canadian $0.15 per share if Spring Hills completes the Stage 2
  acquisition.