Caledonia to buy two South African gold mines.

TORONTO--(BUSINESS WIRE)--Dec. 22, 1994--Caledonia Mining Corp., (TSE-CAL; NASDAQ-CALVF) is pleased to announce that, subjected to regulatory approvals and certain other conditions, it has signed an agreement to acquire a 94.2% direct interest in Eersterling Gold Mining Company Limited and a 50% indirect interest in Barbrook Mines Limited for a total consideration of $37.3 million, payable as to 3 million Caledonia common shares at closing plus $2.8 million in cash or shares of Caledonia due seven months after closing.

Two nominees from Barbrook and Eersterling will join the Caledonia board of directors. The transaction is expected to close on or about January 20th, 1995. Eersterling and Barbrook are both producing South African gold mining companies. The other 50% of Barbrook was purchased by Caledonia on December 13th, 1994 at a cost of $11.8 million (see News Release of December 14th, 1994).

The Barbrook mine, which was described in more detail in the News Release of December 14th, 1994, is located in the eastern Transvaal and has a total mineral resource of 12.6 million tonnes at 0.187 ounces gold per tonne, equivalent to 2.3 million ounces of gold, with excellent potential to substantially increase such resources.

The mine is currently producing at a rate of about 20,000 ounces gold per annum from low grade surface ores and is forecast to produce 40,000 ounces in 1995, increasing to 80,000 ounces in 1997 at an operating cost of about $US 200 per ounce.

The Eersterling mine is located in the Pietersburg greenstone formation in the northern Transvaal on the site of the first gold discovery in Southern Africa. The mining claims cover an area of about 19,000 hectares and extend for a distance of about 25 km. Watts, Griffis and McOuat, consulting geologists, Toronto have reviewed the extensive exploration and development information available at Eersterling and report a total mineral resource of 1.9 million tonnes at 0.190 ounces gold per tonne, equivalent to 361,000 ounces of gold.

This resource consists of proven and probable reserves of 137,000 tonnes at 0.148 ounces gold per tonne, plus indicated and inferred resources of 1.8 million tonnes at 0.193 ounces gold per tonne. In addition, there are a number of mineralized zones which have been identified some of which are refractory. These and many other exploration targets on the property will be the subject of a further exploration programme.

Eersterling is equipped with a 25,000 tonnes per month high quality, relatively new, metallurgical plant containing crushing, milling and CIL circuits capable of treating non-refractory ores. A circuit to treat refractory ores is currently under construction.

The plant is presently treating ore at a rate of about 12,000 tonnes per month to produce about 15,000 ounces of gold per annum. Following the construction of the refractory ore treatment circuit and the injection of capital to increase ore reserve development, the mine is forecast to produce 20,000 ounces of gold in 1995 increasing to 30,000 ounces in 1996 at an operating cost of about $US250 per ounce.

Caledonia's 83% owned Spanish gold mine, Filon Sur, is currently producing at a rate of 22,000 ounces gold equivalent per annum at an operating cost of $200 per ounce. Production is forecast to increase to about 64,000 ounces per annum by 1996 at an operating cost of about $US 135 per ounce. Filon Sur has a total mineral resource of 15.1 million tonnes at 0.068 ounces gold equivalent per tonne, equivalent to 1.0 million ounces of gold. Caledonia also has gold reserves of 109,000 ounces located adjacent to the Nickel Plate mine in British Columbia.

Caledonia currently has 23.6 million shares issued with warrants and options outstanding for a further 1.8 million shares. The company has $22.6 million in cash with no outstanding debt other than an unsecured convertible debenture for $17.3 million due in December, 1999.

CONTACT: Caledonia Mining Corp.

              D.S. MACLEOD or F.C. HARVEY,  905/564-5213
              Fax: [phone]