Report of Foreign Issuer (6-k)

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

Of the Securities Exchange Act of 1934

For the month of September 2014

Commission File Number: 000-13345

CALEDONIA MINING CORPORATION

(Translation of registrant’s name into English)

Suite 1000

36 Toronto Street

Toronto, ON M5C 2C5

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F

Form 20-F x Form 40-F_____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _____ No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_____

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Caledonia Mining Corporation

(Registrant)

By: /s/ Steve Curtis

Name: Steve Curtis

Title: VP Finance, CFO, Director

Dated: September 5, 2014

Exhibit Index

Exhibit	Description

99.1	Interim Financial Statements
99.2	Interim MD&A
99.3	Interim Certificate - CEO
99.4	Interim Certificate - CFO

Exhibit 99.1

Caledonia Mining Corporation

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION

To the Shareholders of Caledonia Mining Corporation:

Management has prepared the information and representations in this interim report. The unaudited condensed consolidated financial statements of Caledonia Mining Corporation (“Group”) have been prepared in accordance with International Accounting Standard 34 (“IAS 34”) Interim Financial Reporting and, where appropriate, these statements include some amounts that are based on best estimates and judgment. Management have determined such amounts on a reasonable basis in order to ensure that the unaudited condensed consolidated financial statements are presented fairly, in all material respects.

The Management Discussion and Analysis (“MD&A”) also includes information regarding the impact of current transactions, sources of liquidity, capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.

The Group maintains adequate systems of internal accounting and administrative controls, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that relevant and reliable financial information is produced.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting (“ICOFR”). Any system of internal controls over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

As part of their monitoring and oversight role, the Audit Committee performs a review and conducts discussions with management. No material exceptions were noted based on the additional procedures and no evidence of fraudulent activity was found.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three independent directors. This Committee meets periodically with management and the external auditor to review accounting, auditing, internal control and financial reporting matters.

These condensed consolidated financial statements have not been reviewed by the Group’s auditors.

The unaudited condensed consolidated financial statements for the period ended June 30, 2014 were approved by the Board of Directors and signed on its behalf on August 11, 2014.

(Signed) S. E. Hayden	(Signed) S. R. Curtis

President and Chief Executive Officer	Vice-President, Finance and Chief Financial Officer

Condensed consolidated statements of profit or loss and other comprehensive income
For the 6 months ended June 30
(In thousands of Canadian dollars except for earnings per share amounts)
			For the 3 months ended June 30						For the 6 months ended June 30
	Note		2014			2013			2014			2013


Revenue				15, 555			17,190			32,618			36,408
Less: Royalty				(1,090	)		(1,137	)		(2,285	)		(2, 486	)
Production costs		6		(7,768	)		(6,602	)		(16 556	)		(14,621	)
Depreciation				(1,025	)		(820	)		(2,083	)		(1, 623	)
Gross profit				5,672			8,631			11,694			17,678
Administrative expenses		7		(1,760	)		(3,377	)		(3,607	)		(4,552	)
Foreign exchange (loss)/gain				(129	)		-			128			-
Gain on sale of property, plant and equipment				5			-			5			-
Results from operating activities				3,788			5,254			8,220			13,126
Finance income				-			98			-			165
Finance cost				(29	)		(232	)		(70	)		(363	)
Net finance costs				(29	)		(134	)		(70	)		(198	)
Profit before income tax				3,759			5,120			8,150			12,928
Income and other tax expense				(1,237	)		(1,375	)		(2,537	)		(3,653	)
Profit for the period				2,522			3,745			5,613			9,275
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences for foreign operations				(2,288	)		1,720			(154	)		2,547
Other comprehensive income for the period, net of income tax				(2,288	)		1,720			(154	)		2,547
Total comprehensive income for the period				234			5,465			5,459			11,822
Profit attributable to:
Shareholders of the Company				1,840			3,055			4,265			7,648
Non-controlling interests				682			690			1,348			1,627
Profit for the period				2,522			3,745			5,613			9,275
Total comprehensive income attributable to:
Shareholders of the Company				(426	)		5,037			4,132			10,567
Non-controlling interests				660			428			1,327			1,255
Total comprehensive income for the period				234			5,465			5,459			11,822
Earnings per share
Basic earnings per share			$	0.035		$	0.058		$	0.082		$	0.147
Diluted earnings per share			$	0.034		$	0.058		$	0.080		$	0.146

The accompanying notes on pages 6 to 18 are an integral part of these condensed consolidated interim financial statements.

On behalf of the Board: “S.E. Hayden” - Director and “S.R.Curtis” - Director

Condensed consolidated statements of financial position
(In thousands of Canadian dollars)
			Unaudited			Audited
As at			June 30,			December 31,
	Note		2014			2013
Assets
Property, plant and equipment		8		35,344			33,448
Total non-current assets				35,344			33,448

Inventories		9		6,840			6,866
Prepayments				258			177
Trade and other receivables		10		3,210			3,889
Cash and cash equivalents		11		25,842			25,222
Total current assets				36, 150			36,154
Total assets				71,494			69,602

Equity and liabilities
Share capital				57,607			57,607
Reserves				155,936			156,069
Accumulated deficit				(158,955	)		(161,651	)
Equity attributable to shareholders				54,588			52,025
Non-controlling interest				958			(51	)
Total equity				55,546			51,974

Liabilities
Provisions				2,022			1,572
Deferred tax liability				8 503			8,522
Total non-current liabilities				10,525			10,094

Trade and other payables				4,254			4,600
Income taxes payable				1,169			1,138
Bank Overdraft		11		-			1,796
Total current liabilities				5,423			7,534
Total liabilities				15,948			17,628
Total equity and liabilities				71, 494			69,602

The accompanying notes on pages 6 to 18 are an integral part of these condensed consolidated interim financial statements.

On behalf of the Board: “S.E. Hayden” - Director and “S.R.Curtis” - Director

Condensed consolidated statements of changes in equity

For the six months ended June 30

(expressed in thousands of Canadian dollars)

	Share Capital		Investment Revaluation Reserve	Foreign Currency Translation Reserve		Contributed Surplus	Share based Payment Reserve	Accumulated Deficit		Total		Non-controlling interest (NCI)		Total Equity
Balance at December 31, 2012	197,137		5	(2,010	)	-	15,682	(153,399	)	57,415		(1,796	)	55,619
Transactions with owners:
Reduction of stated capital	(140,000	)	-	-		140,000	-	-		-		-		-
Dividend paid	-		-	-		-	-	(4,990	)	(4,990	)	(460	)	(5,450	)
Shares issued	470		-	-		-	-	-		470		-		470
Total comprehensive income:
Profit for the period	-		-	-		-	-	7,648		7,648		1,627		9,275
Other comprehensive income	-		-	2,919		-	-	-		2,919		(372	)	2,547
Balance at June 30, 2013	57,607		5	909		140,000	15,682	(150,741	)	63,462		(1,001	)	62,461
Balance at December 31, 2013	57,607		-	319		140,000	15,750	(161,651	)	52,025		(51	)	51,974
Transactions with owners:
Dividend paid	-		-	-		-	-	(1,569	)	(1,569	)	(318	)	(1,887	)
Total comprehensive income:
Profit for the period	-		-	-		-	-	4,265		4,265		1,348		5,613
Other comprehensive income	-		-	(133	)	-	-	-		(133	)	(21	)	(154	)
Balance at June 30, 2014 Unaudited	57,607		-	186		140,000	15,750	(158,955	)	54,588		958		55,546

The accompanying notes on pages 6 to 18 are an integral part of these condensed consolidated interim financial statements.

On behalf of the Board: “S.E. Hayden” - Director and “S.R.Curtis” - Director

Condensed consolidated statements of cash flows
(In thousands of Canadian dollars)
For the six months ended June 30,
Unaudited			For the 3 months ended June 30						For the 6 months ended June 30
Cash flows from operating activities	Note		2014			2013			2014			2013

Cash generated by operating activities		12		3,528			5,784			10,396			11,219
Advance payment				-			(1, 018	)		-			(1,987	)
Interest received				-			98			-			165
Interest paid				(29	)		(232	)		(70	)		(363	)
Tax paid				(1,841	)		(1,250	)		(2,441	)		(4,413	)
Cash from operating activities				1,658			3, 382			7,885			4,621

Cash flows from investing activities
Property, plant and equipment additions				(1,550	)		(3, 768	)		(3,582	)		(5,108	)
Net cash used in investing activities				(1,550	)		(3, 768	)		(3,582	)		(5,108	)

Cash flows from financing activities
Dividend paid				(980	)		(2,616	)		(1,887	)		(5,450	)
Proceeds from shares issued				-			288			-			470
Net cash used in financing activities				(980	)		(2,328	)		(1,887	)		(4,980	)
Net increase/(decrease) in cash and cash equivalents				(872	)		(2,714	)		2,416			(5,467	)
Cash and cash equivalents at beginning period				26, 714			25,189			23,426			27, 942
Cash and cash equivalents at end of period		11		25,842			22,475			25,842			22,475

The accompanying notes on pages 6 to 18 are an integral part of these condensed consolidated interim financial statements.

On behalf of the Board: “S.E. Hayden” - Director and “S.R.Curtis” - Director

1 Reporting entity

Caledonia Mining Corporation (the “Company”) is a company domiciled in Canada. The address of the Company’s registered office is Suite 4009, 1 King Street West, Toronto, Ontario, M5H 1A1, Canada. The Condensed Consolidated Financial Statements of the Group as at and for the three months ended June 30, 2014 comprises the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Group is primarily involved in the operation of a gold mine and the acquisition, exploration and development of mineral properties for the exploration of base and precious metals.

2 Basis for preparation

(a) Statement of compliance

These unaudited Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all the information required for full annual financial statements. Accordingly, certain information and disclosures normally included in the annual Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) have been omitted or condensed. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended December 31, 2013.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following item in the statement of financial position:

equity-settled share-based payment arrangements are measured at fair value on grant date.

These consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company. All financial information presented in Canadian dollars has been rounded to the nearest thousand.

3 Use of estimates and judgements

Management makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and assumptions are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual experience may differ from these estimates and assumptions. The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income.

3 Use of estimates and judgements - (continued)

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at December 31, 2013.

Accordingly, the accounting policy relating to the provision has been included below:

The condensed consolidated interim financial statements should be read in conjunction with the Group’s annual financial statements for the year ended December 31, 2013.

4 Significant accounting policies

Except as stated otherwise, the same accounting policies and methods of computation have been applied consistently to all periods presented in these interim financial statements as compared to the Group’s annual financial statements for the year ended December 31, 2013. In addition, the accounting policies have been applied consistently by the Group entities.

(i) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market risk free rate applicable to the currency in which the liability will be incurred. The unwinding of the discount is recognised as finance cost.

(ii) Site restoration

The Group recognises liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to mineral properties along with a corresponding increase in the rehabilitation provision in the period incurred.

Discount rates used are a pre-tax rate that reflects the risk free rate applicable to the currency in which the liability will be incurred and are used to calculate the net present value. The Group’s estimates of rehabilitation costs, which are reviewed annually, could change as a result of changes in regulatory requirements, discount rates, effects of inflation and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to mineral properties with a corresponding entry to the rehabilitation provision. Changes resulting from production are charged to profit and loss for the period. The costs of rehabilitation projects that were included in the rehabilitation provision are charged against the provision as incurred. The cost of on-going current programs to prevent and control pollution is charged against profit and loss as incurred.

5 Blanket Zimbabwe Indigenisation Transaction

On February 20, 2012 the Group announced it had signed a Memorandum of Understanding (“MoU”) with the Minister of Youth, Development, Indigenisation and Empowerment of the Government of Zimbabwe pursuant to which the Group agreed that indigenous Zimbabweans would acquire an effective 51% ownership interest in the Blanket Mine for a paid transactional value of US$30.09 million. Pursuant to the above, the Group entered into agreements with each Indigenisation Shareholder to sell its 51% ownership interest in Blanket Mine as follows:

·	A 16% interest was sold to the National Indigenisation and Economic Empowerment Fund (“NIEEF”) for US$11.74 million.

·	A 15% interest was sold to Fremiro, which is owned by Indigenous Zimbabweans, for US$11.01 million.

A 10% interest was sold to Blanket Employee Trust Services (Private) Limited (BETS) for the benefit of present and future managers and employees for US$7.34 million. The shares in BETS are held by the Blanket Mine Employee Trust (Employee Trust) with Blanket Mine’s employees holding participation units in the Employee Trust.

·	A 10% interest was donated to the Gwanda Community Share Ownership Trust (Community Trust). Blanket Mine undertook and paid a non-refundable donation of US$1 million to the Community Trust.

The Group facilitated the vendor funding of these transactions which are repaid by way of dividends from Blanket Mine. 80% of dividends declared by Blanket Mine are used to repay such loans and the remaining 20% unconditionally accrues to the respective Indigenous Shareholders.

Outstanding balances on the facilitation loans attract interest at a rate of 10% over the 12-month LIBOR. The timing of the repayment of the loans depends on the future financial performance of Blanket Mine and the extent of future dividends declared by Blanket Mine.

The facilitation loans were declared by Caledonia Holdings Zimbabwe (Blanket Mine’s parent company) to a wholly-owned subsidiary of Caledonia Mining Corporation as a dividend in specie on February 14, 2013 and withholding tax amounting to US$1.504 million was paid and expensed on March 5, 2013.

Accounting treatment

The directors of Caledonia Holdings Zimbabwe (Private) Limited (“CHZ”) a wholly owned subsidiary of the Company, performed an assessment, using the requirements of IFRS 10: Consolidated Financial Statements (IFRS 10), and concluded that CHZ should continue to consolidate Blanket Mine and accordingly the subscription agreements will be accounted for as a transaction with non-controlling interests and share based payments.

Accordingly, on the effective date of the transaction, the subscription agreements were accounted for as follows:

5 Blanket Zimbabwe Indigenisation Transaction-(continued)

·	Non-controlling interests (NCI) were recognised on the portion of shareholding upon which dividends declared by Blanket Mine will accrue unconditionally to equity holders as follows:

(a)

20% of the 16% shareholding of NIEEF;

(b)

20% of the 15% shareholding of Fremiro;

(c)

100% of the 10% shareholding of the Community Trust.

·	This effectively means that NCI is recognised at Blanket Mine level at 16.2% of the net assets.

The remaining 80% of the shareholding of NIEEF and Fremiro is recognised as non-controlling interests to the extent that their attributable share of the net asset value of Blanket Mine exceeds the balance on the facilitation loans including interest. At June 30, 2014 the attributable net asset value did not exceed the balance on the respective loan accounts and thus no additional NCI was recognised.

The transaction with the BETS will be accounted for in accordance with IAS 19 Employee Benefits (profit sharing arrangement) as the ownership of the shares does not ultimately pass to the employees. The employees are entitled to participate in 20% of the dividends accruing to the 10% shareholding in Blanket Mine if they are employed at the date of such distribution. To the extent that 80% of the attributable dividends exceed the balance on the BETS facilitation loan they will accrue to the employees at the date of such declaration.

·	The Employee Trust and BETS are structured entities which are effectively controlled and consolidated by Blanket Mine. Accordingly the shares held by BETS are effectively treated as treasury shares in Blanket Mine and no NCI is recognised.

USD 000's	Shareholding			NCI Recognised			NCI subject to facilitation loan			Balance of facilitation loan at 30 June 2014 #		Dec, 31 2013
NIEEF		16	%		3.2	%		12.8	%		11,742		11,742
Fremiro		15	%		3.0	%		12.0	%		11,490		11,360
Community Trust		10	%		10.0	%		-			-		-
BETS ~		10	%		-	*		-	*		7,660		7,573
		51	%		16.2	%		24.8	%	US$30,892		US$30,675

The balance on the facilitation loans is reconciled as follows:

	USD 000’s
Subscription price funded on loan account – at 5 September 2012		30,090
Interest accrued		3,742
Dividends used to repay loans		(2,940	)
Balance at June 30, 2014		30,892

*The shares held by BETS are effectively treated as treasury shares (see above).

~ Accounted for under IAS19 Employee Benefits.

5 Blanket Zimbabwe Indigenisation Transaction – (continued)

# Facilitation loans are accounted for as equity instruments and are accordingly not recognised as loans receivable (see above).

Advance dividends

In anticipation of completion of the underlying subscription agreements, Blanket Mine agreed to an advance dividend arrangement with NIEEF and the Community Trust as follows:

(a)	Advances to the Community Trust against their right to receive dividends declared by Blanket Mine on their shareholding as follows:

A US$2 million payment on or before September 30, 2012;

A US$1 million payment on or before February 28, 2013; and

A US$1 million payment on or before April 30, 2013.

These advance payments have been recorded to a loan account bearing interest at a rate of 10% over the 12-month LIBOR. The loan is repayable by way of set off of future dividends on the Blanket Mine shares owed by the Community Trust.

(b)

An advance payment of US$1.8 million to NIEEF against their right to receive dividends declared by Blanket Mine on their shareholding. The advance payment has been debited to an interest-free loan account and is repayable by way of set off of future dividends on the Blanket Mine shares owned by NIEEF. Whilst any amount remains outstanding on the NIEEF dividend loan account, interest on the NIEEF facilitation loan is suspended.

The movement in the advance dividend loans is reconciled as follows in USD 000’s:

	NIEEF			Community Trust			Total
	US$			US$			US$
Balance at January 1, 2013		1,800			2,062			3,862
Paid		-			2,000			2,000
Interest accrued		-			346			346
Dividends used to repay advance dividends		(1,442	)		(901	)		(2,343	)
Balance at December 31,2013		358			3,507			3,865
Paid		-			-			-
Interest accrued		-			187			187
Dividends used to repay advance dividends		(340	)		(349	)		(689	)
Balance at June 30, 2014		18			3,345			3,363

6 Production costs

	2014		2013

Salaries and wages		5,487		4,897
Consumable materials		9,133		7,937
Site restoration		19		49
Exploration		229		160
Safety		265		340
On mine administration		1,423		1,238
		16,556		14,621

7 Administrative expenses

	2014		2013

Investor relations		227		228
Management contract fee		514		365
Professional consulting fees		418		6
Indigenisation costs in Zimbabwe		-		128
Audit fee		107		204
Legal fee and disbursements		278		262
Accounting services fee		16		18
Listing fees		248		197
Travel		191		171
Donation to scholarship fund and other donations		10		2,030
Directors fees		187		142
Salaries and wages		885		696
Zambian holding costs		346		-
Other		180		115
		3,607		4,552

8 Property, plant and equipment

	Land and buildings		Mineral properties being depreciated		Mineral properties not depreciated		Plant and equipment		Fixtures and fittings		Motor vehicles		Total

Cost

Balance at January 1, 2013		4,534		11,325		10,838		19,346		1,196		1,782		49,021
Additions		3,240		2,695		4,451		979		85		288		11,738
Foreign exchange movement		378		971		1,031		1,151		25		149		3,705
Balance at December 31, 2013		8,152		14,991		16,320		21,476		1,306		2,219		64,464
Additions		-		992		1,191		1,349		47		3		3,582
Foreign exchange movement		232		104		62		134		20		137		689
Balance at June 30, 2014		8,384		16,087		17,573		22,959		1,373		2,359		68,735

8 Property, plant and equipment - (continued)

	Land and buildings		Mineral properties being depreciated		Mineral properties not depreciated		Plant and equipment			Fixtures and fittings		Motor vehicles		Total
Depreciation and Impairment losses

Balance at January 1, 2013		978		2,028		-		7,759			982		803		12,550
Depreciation for the year		272		620		-		2,016			70		298		3,276
Impairment		399		-		13,713		91			-		-		14,203
Foreign exchange movement		85		178		620		20			11		73		987
Balance at December 31, 2013		1,734		2,826		14,333		9,886			1,063		1,174		31,016
Depreciation for the period		282		501		-		1,080			41		179		2,083
Foreign exchange movement		74		45		155		(48	)		6		60		292
Balance at June 30, 2014		2,090		3,372		14,488		10,918			1,110		1,413		33,391
Carrying amounts
At December 31, 2013		6,418		12,165		1,987		11,590			243		1,045		33,448
At June 30, 2014		6,294		12,715		3,085		12,041			263		946		35,344

9 Inventories

			December 31
	2014		2013

Consumable stores		6,840		5,995
Gold in progress		-		871
		6,840		6,866

Inventory is comprised of gold in circuit at Blanket and consumable stores utilised by Blanket Mine. Consumables stores are disclosed net of any write downs or provisions of obsolete items.

10 Trade and other receivables

			December 31
	2014		2013

Bullion sales receivable		1,712		1,662
VAT receivables		879		1,331
Deposits for stores and equipment and other receivables		619		896
Current portion		3,210		3,889

The bullion receivable is received shortly after the delivery of the gold and no provision for non-recovery is required.

11 Cash and cash equivalents

	2014		December 31 2013

Bank balances		25,842		25,222
Cash and cash equivalents in the statement of financial position		25,842		25,222
Bank overdrafts used for cash management purposes		-		(1,796	)
Cash and cash equivalents in the statement of cash flows		25,842		23,426

12 Cash flow information

Non-cash items and information presented separately on the cash flow statement:

	2014			2013
		$			$
Profit for the six months		5,613			9,275
Adjustments for:
Net finance costs		70			198
Income tax expense		2,537			3,653
Site restoration		450			40
Depreciation		2,083			1,623
Foreign exchange		(629	)		393
Cash generated by operations before working capital changes		10,124			15 182
Inventories		20			(154	)
Prepayments		(81	)		(112	)
Trade and other receivables		679			(2,850	)
Trade and other payables		(346	)		(847	)
Cash generated by operating activities		10, 396			11,219

13 Related parties

Transactions with key management personnel

Key management personnel compensation:

							Balance outstanding
	6 months to June 30,					As at June 30,
	Note	2014		2013			2014		2013
			$		$			$		$
Management fees, allowances and bonus paid or accrued to a company for management services provided by the Group’s President			449		303			-		-
Rent for office premises paid to a company owned by members of the President’s family.			18		19			-		-

On July 15, 2014 Caledonia served six months notice on Epicure Overseas S.A. for the termination of the contract between Caledonia and Epicure for the provision of the services of Caledonia’s President and Chief Executive Officer. Negotiations are in progress for alternative arrangements to secure the continuing services of the President and Chief Executive Officer.

We note that, because management compensation may be considered to be a related party transaction for purposes of the financial statements, the related party note to the audited financial statements may still continue to make reference to the Epicure contract.

14 Operating Segments

The Group's operating segments have been identified based on geographic areas. The Group has four reportable segments as described below, which are the Group's strategic business units. The strategic business units are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. The following geographical areas describe the operations of the Group's reportable segments: Corporate, Zimbabwe, South Africa and Zambia. The accounting policies of the reportable segments are the same as described in note 4.

The Zimbabwe operating segments comprise an operating gold mine. The Zambia segments consist of the discontinued Nama copper project and cobalt project. The South Africa geographical segment comprises a gold mine under care and maintenance as well as sales made by Greenstone Management Services (Proprietary) Limited to the Blanket Mine.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management report that are reviewed by the Group's CFO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

2014	Corporate			Zimbabwe			South Africa			Zambia			Inter-group eliminations adjustments			Total

External Revenue		-			32,618			3,904			-			(3,904	)		32,618
Royalty		-			(2,285	)		-			-			-			(2,285	)
Production costs		-			(16,635	)		(3,663	)		-			3,742			(16,556	)
Management fee		-			(2,566	)		2,566			-			-			-
Administrative expenses		(1,874	)		(39	)		(1,332	)		(362	)		-			(3,607	)
Depreciation		-			(2,041	)		(106	)		-			64			(2,083	)
Other income					-			5			-			-			5
Foreign exchange gain/(loss)		24			-			374			-			(270	)		128
Finance expense		-			(70	)		-			-			-			(70	)
Segment profit before income tax		(1,850	)		8,982			1,748			(362	)		(368	)		8,150
Income tax expense		(123	)		(1,921	)		(493	)		-			-			(2,537	)
Segment profit after income tax		(1,973	)		7,061			1,255			(362	)		(368	)		5,613
Geographic segment assets:
Current assets		13,769			11,206			11,136			39			-			36,150
Property, Plant and Equipment		55			36,731			345			-			(1,787	)		35,344
Intercompany assets		65,150			1,605			2,778			-			(69,533	)		-
Expenditure on property, plant and equipment		-			3,628			26			-			(72	)		3,582
Geographic segment liabilities :
Current liabilities		(138	)		(3,767	)		(1,518	)		-			-			(5,423	)
Non-current liabilities		-			(9,799	)		(726	)		-			-			(10,525	)
Intercompany liabilities		(4,846	)		(1,058	)		(37,417	)		(26,212	)		69,533			-

14 Operating Segments – (continued)

	Canada		Zimbabwe		South Africa		Zambia		Inter-group eliminations adjustments		Total
External Revenue	-		36,408		4,518		-		(4,518	)	36,408
Royalty	-		(2,486	)	-		-		-		(2,486	)
Production costs	-		(15,212	)	(4,125	)	-		4,716		(14,621	)
Management fee	-		(2,389	)	2,389		-		-		-
Administrative expenses	(1,494	)	(2,188	)	(767	)	-		(62	)	(4,511	)
Depreciation	-		(1,723	)	(12	)	-		112		(1,623	)
Finance income	12		153		-		-		-		165
Finance cost	-		(363	)	-		-		-		(363	)
Write down of mineral properties	-		(41	)	-		-		-		(41	)
Segment profit before income tax	(1,482	)	12,159		2,003		-		248		12,928
Income tax expense	-		(2,961	)	(692	)	-		-		(3,653	)
Segment profit after income tax	(1,482	)	9,198		1,311		-		248		9,275
Geographic segment assets:
Current assets	14,442		12,800		6,513		44		(856	)	32,943
Non- Current assets:
Property, Plant and Equipment	55		28,582		613		12,924		-		42,174
Expenditure on property, plant and equipment	-		3,699		6		1,554		(151	)	5,108
Intercompany balances	58,857		-		4,841		-		(63,698	)	-
Geographic segment liabilities:
Current liabilities	(350	)	(3,964	)	(1,365	)	(7	)	-		(5,686	)
Non-current liabilities	-		(6,706	)	(263	)	-		-		(6,969	)
Intercompany balances	(3,049	)	(2,050	)	(36,324	)	(22,275	)	63,698		-

Major customer

Revenues from Fidelity Printers and Refiners in Zimbabwe amounted to $32,618 for the period ended June 30, 2014. In 2013, revenue from the two refineries used amounted to $36,408.

Directors and Management at August 11, 2014

BOARD OF DIRECTORS	OFFICERS
L.A. Wilson (1) (2) (3) (4) (5) (7) - Chairman	S. E. Hayden
Non- executive Director	President and Chief Executive Officer
New York, United States of America	Johannesburg, South Africa

S. E. Hayden (3) (4) (5) (6) (7)	S. R. Curtis
President and Chief Executive Officer	Vice-President Finance and Chief Financial Officer
Johannesburg, South Africa	Johannesburg, South Africa

J. Johnstone (2) (5) (6) (7)	D. Roets (6) (7)
Retired Mining Engineer	Chief Operating Officer
Gibsons, British Columbia, Canada	Johannesburg, South Africa

S. R. Curtis (4) (5) (7)	Dr. T. Pearton (6) (7)
Vice-President Finance and Chief Financial officer	Vice-President Exploration
Johannesburg, South Africa	Johannesburg, South Africa

J. L. Kelly (1) (2) (3) (7)	J.M. Learmonth (5) (7)
Non- executive Director	Vice-President Business Development
New York, United States of America	Johannesburg, South Africa

R. Patricio (2) (3) (7)	DSA Corporate Services Inc.
Non- executive Director	Company Secretary
Toronto, Ontario, Canada	36 Toronto Street – Suite1000
	Toronto, Ontario, M5C 2C5
J. Holtzhausen (1) (2) (5) (6) (7) - Chairman Audit Committee
Non- executive Director	Board Committees
Cape Town, South Africa	(1) Audit Committee
	(2) Compensation Committee
	(3) Corporate Governance Committee
	(4) Nominating Committee
	(5) Disclosure Committee
	(6) Technical Committee
	(7) Strategic Planning Committee

CORPORATE DIRECTORY as at August 11, 2014

CORPORATE OFFICES	SOLICITORS
Canada - Head Office	Borden Ladner Gervais LLP
Caledonia Mining Corporation	Suite 4100, Scotia Plaza
Suite 4009, 1 King West	40 King Street West
Toronto, Ontario M5H 1A1	Toronto, Ontario M5H 3Y4 Canada
Tel:(1)(416) 369-9835 Fax:(1)(416) 369-0449
info@caledoniamining.com	AUDITORS

South Africa	KPMG Inc.
Greenstone Management Services (Pty) Ltd.	85 Empire Road
P.O. Box 834	Parktown 2193
Saxonwold 2132	South Africa
South Africa	Tel: +27 83 445 1400, Fax: + 27 11 647 6018
Tel: (27)(11) 447-2499 Fax: (27)(11) 447-2554
	REGISTRAR & TRANSFER AGENT
Zambia	Computershare
Caledonia Mining (Zambia) Limited	100 University Ave, 8th Floor,
P.O. Box 36604	Toronto, Ontario, M5J 2Y1
Lusaka, Zambia	Tel:+1 416 263 9483
Tel:(260)(1) 29-1574 Fax(260)(1) 29-2154
	BANKERS
Zimbabwe	Canadian Imperial Bank of Commerce
Caledonia Holdings Zimbabwe (Limited)	6266 Dixie Road
P.O. Box CY1277	Mississauga, Ontario L5T 1A7 Canada
Causeway, Harare
Zimbabwe	NOMAD
Tel: (263) (4) 701 152/4 Fax: (263)(4) 702 248	Numis Securities Limited
	The London Stock Exchange Building
CAPITALIZATION at August 11, 2014	10 Paternoster Square
Authorised: Unlimited	London EC4M 7LT
Shares, Warrants and Options Issued:	Tel: +44 207 260 1000
Common Shares: 52,117,908
Warrants: Nil	JOINT BROKERS (AIM)
Options: 2,796,920	Numis Securities Limited

SHARES LISTED	WH Ireland
Toronto Stock Exchange Symbol “CAL”	24 Martin Lane
NASDAQ OTCQX Symbol "CALVF"	London EC4R ODR
London “AIM” Market Symbol “CMCL”	Tel: +44 207 220 1751

Exhibit 99.2

CALEDONIA MINING CORPORATION

AUGUST 11, 2014

Management’s Discussion and Analysis

This management’s discussion and analysis (“MD&A”) of the consolidated operating results and financial position of Caledonia Mining Corporation ("Caledonia” or the “Company”) is for the fiscal quarter ended June 30, 2014 (“Q2 2014” or the “Quarter”) and the period ended August 11, 2014. It should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements of Caledonia for the six months ended June 30, 2014 (“the Unaudited Condensed Consolidated Financial Statements”) which are available from the System for Electronic Data Analysis and Retrieval at www.sedar.com or from Caledonia’s website at www.caledoniamining.com. The Unaudited Condensed Consolidated Financial Statements and related notes have been prepared in accordance with International Accounting Standard 34 (“IAS 34”) Interim Financial Reporting. In this MD&A, the terms “Caledonia”, the “Company”, “we”, “our” and “us” refer to the consolidated operations of Caledonia Mining Corporation and our subsidiaries unless otherwise specifically noted or the context requires otherwise.

Note that all currency references in this document are to Canadian Dollars, unless otherwise stated.

TABLE OF CONTENTS

Overview

2.	Highlights

3.	Summary Financial Results

4.	Operations at the Blanket Gold Mine, Zimbabwe

4.1.	Safety, Health and Environment

4.2.	Social Investment and Contribution to the Zimbabwean Economy

4.3.	Gold Production

4.4.

Costs

4.5.	Underground

4.6.	Metallurgical Plant

4.7.	Capital Projects

4.8.	Indigenisation

4.9.	Opportunities

4.10.

Outlook

5.	Exploration and Project Development

Investing

Financing

8.	Liquidity and Capital Resources

9.	Off-Balance Sheet Arrangements, Contractual Commitments and Contingencies

10.	Non-IFRS Measures

11.	Related Party Transactions

12.	Critical Accounting Policies

13.	Financial Instruments

14.	Dividend Policy and Other Shareholder Information

15.	Securities Outstanding

16.	Risk Analysis

17.	Forward-Looking Statements

18.

Controls

19.	Qualified Person

OVERVIEW

Caledonia is an exploration, development and mining corporation focused on Southern Africa. Following the implementation of indigenisation at the Blanket Gold Mine (“Blanket” or the “Blanket Mine”) in September 2012, Caledonia’s primary asset is a 49% legal ownership in Blanket, an operating gold mine in Zimbabwe. Caledonia continues to consolidate Blanket, as explained in Note 5 to the Unaudited Condensed Consolidated Financial Statements, accordingly operational and financial information set out in this MD&A is on a 100% basis, unless otherwise specified. Caledonia’s shares are listed in Canada on the Toronto Stock Exchange (symbol - “CAL”), on London’s AIM (symbol - “CMCL”) and are also traded on the American OTCQX (symbol - “CALVF”).

2.	HIGHLIGHTS

	Q2 2013	Q2 2014	H1 2013	H1 2014	Comment
Gold produced (oz)	11,588	11,223	22,060	21,464	Gold production in Q2 2014 was adversely affected by lower head grade and lower tonnage throughput
On Mine cash cost (US$/oz)1	587	624	620	638	On mine costs remain low
All-in sustaining cost (US$/oz)1	959	881	942	903	All-in sustaining cost benefitted from lower on mine costs and reduced capital investment
Gold Sales (oz)	11,588	11,223	23,552	23,433	Gold sales in H1 2014 includes work in progress brought forward from the preceding quarter of 1,969 oz
Average realised gold price (US$/oz)1	1,373	1,271	1,488	1,269	The lower realised gold price in the Quarter compared to Q2 2013 and H1 2013 was primarily due to the lower gold price
Gross profit ($’m)2	8.6	5.6	17.7	11.7	Lower gross profit was mainly due to the lower realised gold prices, ameliorated by the sale in H1 of gold work in progress brought forward
Net profit attributable to shareholders ($’m)	3.1	1.8	7.6	4.3	Lower net profit in Q2 and H1 was primarily due to lower gold sales, lower realised gold price and higher effective taxation rate.
Adjusted basic earnings per share3 (cents)	9.1	3.7	21.0	7.8	Adjusted basic earnings per share excludes foreign exchange profits and losses.
Cash and cash equivalents ($’m)	22.5	25.8	22.5	25.8	Caledonia’s cash is held in Canadian, UK and South African banks.
Cash from operating activities ($’m)	3.4	1.7	4.6	7.9	Strong cash generation in H1 due to sale of work in progress in January.
Payments to the community and Zimbabwe government ($’m)	6.7	3.6	12.3	6.6	Blanket continues to make a substantial contribution to the Zimbabwean government in the form of taxes, royalties and other fees and charges. Payments in 2014 include the 1.5% of the value of the gold processed by Fidelity

1 Non-IFRS measures such as “on-mine cash cost per ounce” “all-in sustaining cost per ounce” and “average realised gold price” are used throughout this document. Refer to Section 10 of this MD&A for a discussion of non-IFRS measures.

2 Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses.

3 Adjusted earnings per share (“EPS”) is a non-IFRS measure which aims to reflect Caledonia’s ordinary trading performance. Refer to Section 10 of this MD&A for a discussion of non-IFRS measures

Indigenisation

Transactions that implemented the indigenisation of Blanket were completed on September 5, 2012 following which Caledonia owns 49% of Blanket and received a Certificate of Compliance from the Government of Zimbabwe which confirms that Blanket is fully compliant with the Indigenisation and Economic Empowerment Act.

As a 49% shareholder Caledonia receives 49% of Blanket’s dividends plus the repayment of the $30 million vendor facilitation loans and a monthly management fee. Caledonia continues to consolidate Blanket for accounting purposes.

Exploration Highlights

Exploration continued at the Blanket Mine focussed on the potential to extend the Blanket mineralisation below the 750 meter level and at certain of its satellite properties. A compilation of recent diamond drill intersections of the mineralised shoots below Blanket section is presented in Section 5.1 of this MD&A. Based on this information, additional inferred resources amounting to approximately 500,000 tonnes at 3.9 g/t was added to the Blanket mine mineral resources disclosed in the 2014 Annual Information Form.

Exploration development and diamond drilling at the GG and Mascot satellite projects have established the existence of multiple mineralized zones with potentially favourable gold grades. Further work is being done to define the extent and viability of these mineralized zones and their metallurgical amenability to processing.

Dividend Policy and Shareholder Matters

On November 25, 2013 Caledonia announced a revised dividend policy in terms of which it intends to pay a dividend of 6 Canadian cents per share in 2014, split into 4 equal quarterly payments of 1.5 Canadian cents per share. The first quarterly dividend was paid on January 31, 2014 and subsequent quarterly dividends were paid at the end of April and July. It is currently envisaged that the existing dividend policy of 6 cents per annum paid in equal quarterly instalments will be maintained in 2015. Caledonia will continue to maintain its strong financial position so that it can implement its stated growth strategy and retain the flexibility to take advantage of any suitable opportunities that may arise without the need to raise third party finance.

Strategy and Outlook

Caledonia’s primary strategy is to continue the existing investment programme at Blanket with the objective of increasing production. Caledonia believes the continuation of this strategy is in the best interests of shareholders because it is expected to increase cash flows and accelerate the repayment of the outstanding facilitation loans. In Q1 2013, Blanket Mine embarked on a strategy to increase gold production over the next 4 years by accelerating the access to resources below 22 Level. The strategy was based on being able to add to existing production sources by accessing new resource blocks in the Blanket section below 22 Level.

Subject to an ongoing evaluation of the investment climate in Zimbabwe, Blanket and Caledonia will also consider additional acquisition opportunities in Zimbabwe on the basis of, inter alia, their fit with the existing operations and their capacity to enhance value for both Blanket’s indigenous shareholders and Caledonia.

Caledonia may also consider using its financial and managerial resources which are outside Zimbabwe to consider any suitable opportunities elsewhere in sub-Saharan Africa.

3.	SUMMARY FINANCIAL RESULTS

The table below sets out the unaudited consolidated profit and loss for the three and six months ended June 30, 2014 and 2013 prepared under IFRS.

Condensed Consolidated Statement of Comprehensive Income (unaudited) (In thousands of Canadian dollars except per share amounts)
	For the 3 months ended June 30						For the 6 months ended June 30 (i)
	2013			2014			2013			2014
		$			$			$			$
Revenue		17,190			15,555			36,408			32,618
Royalty		(1,137	)		(1,090	)		(2,486	)		(2,285	)
Production costs		(6,602	)		(7,768	)		(14,621	)		(16,556	)
Depreciation		(820	)		(1,025	)		(1,623	)		(2,083	)
Gross profit		8,631			5,672			17,678			11,694
Administrative expenses		(3,377	)		(1,760	)		(4,552	)		(3,607	)
Foreign exchange (loss)/gain.		-			(129	)		-			128
Gain on sale of property plant and equipment		-			5			-			5
Results from operating activities		5,254			3,788			13,126			8,220
Finance (expense)/income		(134	)		(29	)		(198	)		(70	)
Profit before income tax		5,120			3,759			12,928			8,150
Income tax expense		(1,375	)		(1,237	)		(3,653	)		(2,537	)
Profit for the period		3,745			2,522			9,275			5,613
Profit/(loss) on foreign currency translation		1,720			(2,288	)		2,547			(154	)
Total comprehensive income for the period		5,465			234			11,822			5,459
Earnings per share (cents)
Basic		5.8			3.5			14.7			8.2
Diluted		5.8			3.4			14.6			8.0
Adjusted earnings per share (cents) (ii)
Basic		9.1			3.7			21.0			7.8

(i)

Results for the six months to June 30 2014 incorporate the re-stated earnings for Q1 2014. Corrected financial statements and MD&A for Q1 2014 have been re-filed

(ii)

Adjusted earnings per share (“EPS”) is a non-IFRS measure which aims to reflect Caledonia’s ordinary trading performance. Refer to Section 10 for a discussion of non-IFRS measures

Revenues in Q2 2014 were lower than Q2 2013 due mainly to the lower realised gold price: 11,223 ounces of gold were sold in Q2 2014, 3% fewer than in Q2 2013. However the average realised gold price in Q2 2014 was US$1,271 per ounce - 7% lower than the average realised price per ounce in Q2 2013. The realised gold price in Q1 and Q2 of 2014 represents the 98.5% of the value of the gold that is received by Blanket in terms of its sale agreement to Fidelity Printers and Refiners Ltd (“Fidelity”). Changes to Zimbabwean legislation in January 2014 required all Zimbabwean gold producers to sell their production to Fidelity. Prior to this change, Blanket sold its gold to a non-Zimbabwean refiner and received 100% of the value of the gold contained. There was no work in progress at the end of Q2 and Q2 sales did not include any work in progress brought forward from the previous quarter. Sales in Q1 2014 included 1,969 ounces of work in progress brought forward from Q4 of 2013. Gold production is discussed in Section 4.3 of this MD&A.

Production costs in the Quarter were $7,768,000, representing an on-mine cash cost4 of US$624 per ounce of gold produced compared with US$651 per ounce in the preceding quarter. The all-in sustaining cost4 per ounce of gold produced in the Quarter was US$888 compared to US$923 per ounce of gold in the previous quarter. Further discussion of production costs is set out in Section 4.4 of this MD&A.

Administrative expenses in the Quarter were $1,760,000 compared to $3,377,000 in Q2 of 2013 (the “comparative period”) and $1,847,000 in the preceding quarter and are analysed in Note 7 to the Unaudited Condensed Consolidated Financial Statements. Administrative expenses in the comparative period included a donation of US$2 million to the Presidential Scholarship Fund as part of Blanket’s Corporate and Social investment Programme. The administrative expense in the Quarter reflects increased wages and salaries resulting from the strengthening of the management team, professional consulting fees and the holding costs of Caledonia’s office in Zambia, which are no longer capitalised. Caledonia’s management team has been strengthened by the appointment of Dana Roets as Chief Operating Officer in August 2013, and the appointment of an individual to assist in the areas of project management and mine design, and an assistant to the CFO.

The foreign currency loss is a non-cash item which reflects the profit or loss arising on the translation into the functional currency of both the Canadian and South African entities where the cash balances they hold are in currencies other than their functional currency.

The taxation charge in Q2 includes Zimbabwean income tax on the profits arising at Blanket, Zimbabwean withholding tax on payments out of Zimbabwe and South African income tax on inter-company profits arising in South Africa. Intercompany profits are eliminated on consolidation, but the tax payable on such profits is not. Caledonia’s South African subsidiary has exhausted its tax losses, and it is therefore likely that in the future Caledonia’s consolidated profit will include an element of South African income tax.

The loss on foreign currency translation differences for foreign operations is a non-cash item which reflects the loss arising on the translation of non-Canadian dollar balance sheets into Canadian dollars for consolidation purposes. The main element of this loss in the Quarter arose from the translation of Blanket’s US dollar denominated balance sheet into Canadian dollars and reflects the devaluation of the US dollar against the Canadian dollar in the Quarter.

The non-controlling interest is the profit attributable to Blanket’s Indigenous Zimbabwean shareholders and reflects their participation in the economic benefits generated by Blanket from the effective date of the indigenisation and is explained in Note 5 of the Unaudited Condensed Consolidated Financial Statements.

The adjusted earnings per share4 aims to reflect Caledonia’s ordinary trading performance and is calculated on the share of profit attributable to Caledonia shareholders excluding foreign exchange profits or losses.

Risks that may affect Caledonia’s future financial condition are discussed in Section 16 of the MD&A.

The table below sets out the consolidated statements of cash flows for the three months to June 30, 2014 and 2013 prepared under IFRS.

4 Non-IFRS measures such as “on-mine cash cost per ounce”, “all-in sustaining cost per ounce” and “adjusted earnings per share” are used throughout this document. Refer to Section 10 of this MD&A for a discussion of non IFRS measures.

Condensed Consolidated Statement of Cash Flows (unaudited) (In thousands of Canadian dollars)
	For the 3 months ended June 30						For the 6 months ended June 30
	2014			2013			2014			2013
Cash flows from operating activities
Cash generated by operating activities		3,528			5,784			10,396			11,219
Advance payment		-			(1, 018	)		-			(1,987	)
Net Interest paid		(29	)		(134			(70	)		(198	)
Tax paid		(1,841	)		(1,250	)		(2,441	)		(4,413	)
Cash from operating activities		1,658			3, 382			7,885			4,621

Cash flows from investing activities
Property, plant and equipment additions		(1,550	)		(3, 768	)		(3,582	)		(5,108	)
Net cash used in investing activities		(1,550	)		(3, 768	)		(3,582	)		(5,108	)

Cash flows from financing activities
Dividend paid		(980	)		(2,616	)		(1,887	)		(5,450	)
Proceeds from shares issued		-			288			-			470
Net cash used in financing activities		(980	)		(2,328	)		(1,887	)		(4,980	)
Net increase/(decrease) in cash and cash equivalents		(872	)		(2,714	)		2,416			(5,467	)
Cash and cash equivalents at beginning period		26, 714			25,189			23,426			27, 942
Cash and cash equivalents at end of period		25,842			22,475			25,842			22,475

Cash generated from operating activities is analysed in note 12 to the Unaudited Condensed Consolidated Financial statements. Cash generated from operating activities was lower in the Quarter compared to the previous quarter due to lower gold sales. Gold sales in the previous quarter included 1,969 ounces of work in progress carried forward from 2013, for which the production costs were incurred in 2013, with a consequential benefit to cash-flows in Q1 of 2014. Tax payments in Q2 included South African income tax arising on inter-company profits and Zimbabwean income tax.

Investment in property, plant and equipment in Q2 of 2014 and the first half of 2014 were lower than in the respective comparative periods. The reduction was due mainly to reduced investment that is required to sustain current operations which reflects the good condition of the plant and equipment following intensive investment in previous years. Blanket’s capital projects are described in Sections 4.7 and 5 of this MD&A.

The dividends paid in the Quarter primarily relate to the quarterly dividend of 1.5 cents per share which was paid by Caledonia on April 30, 2014 in terms of the quarterly dividend policy which was announced in November 2013. The consolidated dividends also includes $318,000 of dividends that were paid to Blanket’s indigenous shareholders after retentions to repay the facilitation loans as described in Section 4.8 of this MD&A.

At June 30, 2014, Caledonia’s cash was held with banks primarily in the United Kingdom, Canada and in South Africa.

The table below sets out the consolidated statements of Caledonia’s financial position at June 30, 2014 and December 31, 2013 prepared under IFRS.

Condensed Consolidated statements of Financial Position (unaudited) (In thousands of Canadian dollars)
	As at	June 30,		December 31,
		2014		2013
			$		$
Total non-current assets			35,344		33,448
Inventories			6,840		6,866
Prepayments			258		177
Trade and other receivables			3,210		3,889
Cash and cash equivalents			25,852		25,222
Total assets			71,494		69,602
Non-current liabilities			10,525		10,094
Trade and other payables			4,254		4,600
Income taxes payable			1,169		1,138
Bank overdraft			-		1,796
Total liabilities			15,948		17,628
Total equity			55,546		51,974
Total equity and liabilities			71,494		69,602

The increase in non-current assets reflects investment at Blanket to sustain the current level of production, investment in Blanket’s capital projects and satellite properties. Blanket’s capital projects are discussed in section 4.7 of this MD&A; Blanket’s exploration and development projects are discussed in section 5 of this MD&A.

Inventories at June 30, 2014 comprise consumable stores, which include the build-up of stock of consumables and other equipment for use at Blanket’s capital projects. Inventories at December 31, 2013 also included $871,000 of gold in progress at December 31, 2013; there was no gold in progress at June 30, 2014.

Trade and other receivables includes Value Added Tax receivable, bullion sales receivables and deposits for stores and equipment as analysed in Note 10 to the Unaudited Condensed Consolidated Financial Statements.

Non-current liabilities comprises a liability for deferred taxation and a provision for rehabilitation at the Blanket and Eersteling5 Mines if and when they are permanently closed.

The following information is provided for each of the eight most recent quarterly periods ending on the dates specified. The figures are extracted from underlying unaudited financial statements that have been prepared using accounting policies consistent with IFRS.

(Thousands of Canadian dollars except per share amounts)	Sept 30, 2012			Dec 31, 2012		Mar 31, 2013		June 30, 2013		Sept 30, 2013		Dec 31, 2013			Mar 3,1 2014		June 30, 2014
Revenue from operations		21,494			17,612		19,218		17,190		16,591		12,114			17,063		15,555
Profit/(loss) after tax from operations		(9,199	)		3,950		5,530		3,055		4,589		(14,354	)		3,091		2,522
Earnings/(loss) per share – basic (cents)		(14	)		6.4		9		5.8		7.2		(27.7	)		4.7		3.5
Earnings/(loss) per share – diluted (cents)		(14	)		6.4		9		5.8		7.2		(27.7	)		4.7		3.4
Cash and cash equivalents		24,615			27,942		25,189		22,475		25,099		25,222			26,714		25,842

Quarterly results fluctuate materially from quarter to quarter primarily due to changes in production levels and gold prices but also due to the recording of impairments and other unusual costs such as indigenisation. Significant changes relating to prior quarters are discussed in the relevant MD&A’s and financial statements.

5 Eersteling Mine is a South African gold property, which has been held on a care and maintenance basis for several years pending the identification of a purchaser.

4.	OPERATIONS AT THE BLANKET GOLD MINE, ZIMBABWE

4.1	Safety, Health and Environment (“SHE”)

The following safety statistics have been recorded for the Quarter and the preceding six quarters.

Blanket Mine Safety Statistics
Incident Classification		Q4 2012	Q1 2013	Q2 2013	Q3 2013	Q4 2013	Q1 2014	Q2 2014
Fatal		0	0	0	1	0	0	0
Lost time injury		3	2	1	7	2	1	2
Restricted work activity		7	0	7	5	9	6	4
First aid		5	4	2	2	0	3	2
Medical aid		1	2	3	2	3	2	2
Occupational illness		0	0	0	0	0	0	0
Total		16	8	13	17	14	12	10
Incidents		10	12	12	11	17	10	6
Near misses		5	3	4	7	3	2	2
Disability Injury Frequency Rate (i)		0.81	0.52	0.25	1.75	0.46	0.24	0.49
Total Injury Frequency Rate (ii)		4.34	2.09	3.25	4.00	3.20	2.86	2.46
Man-hours worked (thousands)		738	767	801	800	865	840	812
(i)	A measurement of total injuries, deaths and permanent disability occurring per 200,000 man-hours worked.
(ii)	A measurement of all accidents that have occurred regardless of injury or not expressed per 200,000 man-hours worked. This includes accidents that could have caused injuries.

The reduction in the incidence of total incidents in the Quarter compared to the previous four quarters reflects management’s continued close attention to this area. Blanket management recognises the continued need to reinforce strict adherence to prescribed operating procedures by all employees. There were no significant adverse environmental issues during the Quarter.

4.2	Social Investment and Contribution to the Zimbabwean Economy

Blanket’s investment in community and social projects which are not directly related to the operation of the mine or the welfare of Blanket’s employees, the payments made to the GCSOT in terms of Blanket’s indigenisation, and payments of royalties, taxation and other duties, charges and fees to the Government of Zimbabwe and its agencies are set out in the table below.

Payments to the Community and the Zimbabwe Government (US$’000’s)
Period	Year	Community and Social Investment		Payments to GCSOT		Payments to Zimbabwe Government		Total
Year 2011	2011		306		-		13,614		13,920
Quarter 1	2012		147		-		3,353		3,500
Quarter 2	2012		38		1,000		5,042		6,080
Quarter 3	2012		108		2,000		6,366		8,474
Quarter 4	2012		123		-		5,808		5,931
Year 2012	2012		416		3,000		20,569		23,985
Quarter 1	2013		5		1,000		4,584		5,589
Quarter 2	2013		2,135		1,000		3,555		6,690
Quarter 3	2013		7		-		3,646		3,653
Quarter 4	2013		-		-		3,569		3,569
Year 2013	2013		2,147		2,000		15,354		19,501
Quarter 1	2014		-		-		3,026		3,026
Quarter 2	2014		5		-		3,617		3,622

The final installment of the advance dividend payments that were payable to GCSOT in terms of Blanket’s indigenisation transaction was made in the second quarter of 2013. No further dividends will be payable to GCSOT until the advance dividends have been repaid by the offset of future dividends on Blanket shares that are owned by GCSOT. From 1 January 2014, Blanket has sold its gold production to Fidelity a subsidiary of the Reserve Bank of Zimbabwe. Blanket is paid 98.5% of the value of the gold it delivers to Fidelity: the balance of 1.5% is retained by Fidelity and is included in the payments shown above.

4.3 Gold Production

Tonnes milled, average head grades, recoveries and gold produced and the average realised price per ounce during July 2014, the Quarter, the preceding 5 quarters and 2012 are shown in the table below.

Blanket Mine Production Statistics
	Year	Tonnes Milled (t)		Gold Head (Feed) Grade (g/t Au)		Gold Recovery (%)		Gold Produced (oz)		Average Realised Price per Ounce of Gold Sold (US$/oz) 6
Year	2012		363,315		4.16		93.7		45,464		1,666
Quarter 1	2013		86,502		4.04		93.3		10,472		1,600
Quarter 2	2013		101,174		3.82		93.2		11,587		1,373
Quarter 3	2013		99,386		4.03		93.6		12,042		1,330
Quarter 4	2013		105,258		3.63		93.1		11,429		1,277
Year	2013		392,320		3.88		93.3		45,527		1,402
Quarter 1	2014		92,846		3.67		93.6		10,241		1,269
Quarter 2	2014		99,229		3.74		94.1		11,223		1,271
July	2014		35,526		3.49		93.1		3,708		1,283

Although below target by 230oz, gold production in the Quarter was higher than the previous quarter due to an increase in ore throughput, gold head grade and gold recovery. Compared to Q 2, 2013 the ore throughput and the gold head grade were slightly lower, the effects of which were offset by improved gold recovery. Gold production in July 2014 continued to be affected by lower grade. Underground production tonnages and grades are discussed further in Section 4.5 of this MD&A; gold recoveries are discussed in Section 4.6 of this MD&A.

6 Non-IFRS measures such as “average realised gold price” are used throughout this document. Refer to Section 10 of this MD&A for a discussion of non-IFRS measures. The average realised price of gold is after deduction of 1.5% of the gold value by Fidelity.

4.4 Costs

A narrow focus on the direct costs of production (mainly labour, electricity and consumables) does not fully reflect the total cost of gold production. Accordingly, cost per ounce data for the Quarter, the preceding quarter and for 2013 and 2012 have been prepared in accordance with the Guidance Note issued by the World Gold Council on June 23, 2013 and is set out in the table below on the following bases:

i.	On-mine Cash Cost per ounce, which shows the on-mine cash costs of producing an ounce of gold;

ii.

All-in Sustaining Cost per ounce, which shows the operating cost per ounce plus additional costs incurred outside the mine (i.e. at offices in Harare, Johannesburg and Toronto) and the costs associated with maintaining the operating infrastructure and resource base (i.e. “Sustaining Capex”) that are required to maintain production at the current levels; and

iii.	All-in Cost per ounce, which shows the all-inclusive Sustaining cost per ounce plus the additional costs associated with activities that are undertaken with a view to increasing production.

Blanket Mine – Costs
US$/ounce sold
	Year 2012	Year 2013	Q1 2014	Q2 2014
On-Mine cash cost (ii)	570	613	651	624
Royalty(i)	116	101	89	89
Community costs relating to ongoing production	-	-	-	-
Permitting costs related to current operations	5	3	2	3
3rd party smelting, refining and transport costs	6	7	1	2
Operating cost per ounce	698	724	743	718
Corporate general and administrative costs (incl. share based remuneration)	90	124	132	143
Reclamation and remediation of operating sites	2	2	2	2
Exploration and study costs	-	2	3	3
Capital expenditure	67	125	43	14
All-in Sustaining Cost per ounce (ii)	857	977	923	881
Costs not related to current production
Community costs	25	49	-	-
Permitting costs	17	2	1	1
Exploration and study costs	-	3	3	3
Capital expenditure	29	78	107	92
All-in Cost per ounce	929	1,109	1,034	977

(i)

Blanket pays a royalty to the Zimbabwean government on gross revenue. Since 1 January 2012 the royalty rate has been 7% prior to which it was 4%

(ii)

Non-IFRS measures such as “On-Mine Cash Cost per Ounce”, “All-in Sustaining Cost per Ounce” and “All-in Cost per Ounce” are used throughout this document. Refer to Section 10 of this MD&A for a discussion of non-IFRS measures.

The on-mine cash cost per ounce of gold sold is calculated on the basis of sales and not production. The cost per ounce in the Quarter at all levels (i.e. on-mine cash cost, operating cost, all-in sustaining cost and all-in cost per ounce) was lower than the previous quarter, notwithstanding the lower sales in the Quarter. On-mine costs benefitted from improved cost control measures which were introduced in the Quarter and reduced cyanide consumption as a result of the introduction of oxygen sparging into the CIL system as discussed in Section 4.6. All-in sustaining costs and All-in costs also benefitted from the reduced levels of capital investment. Lower sustaining capital investment reflects the generally good condition of Blanket’s equipment after several years of intensive investment.

4.5 Underground

AR South continued to be the most important production area during the Quarter with ore being trammed on the 18 Level and 22 Level haulages. Production from Lima and Blanket-Feudal above 9 Level was stopped in the Quarter because the grades in these sections became uneconomic at the current gold price. All infrastructure and services in the areas where production was discontinued have been left intact so that these areas can be re-commissioned if the gold price increases. Production from the above areas will be replaced by ore from two future production sections which are being brought into production earlier than originally planned, viz. Lima above 510 Level and AR South above 380 Level. Production from the new areas is still in the build-up phase, and development in these areas has been intensified to reach full potential by Q4 of 2014.

Blanket mine is currently preparing its annual business plan and budget cycle for 2015. The medium term production scenarios for the next three years are also being reassessed, taking into consideration the continued low gold price, the marginal production areas, the availability of new sources of production and future capital commitments.

The achieved ore grade for the Quarter was higher than for the preceding two quarters which were affected by both external and internal dilution. External dilution was largely caused by ring drilling in long-hole stopes which resulted in sloughing of the stope sidewalls. Internal dilution was mainly due to low grade and barren patches within the ore-bodies. Ring drilling has now been discontinued in the long-hole stopes and has been replaced with holes drilled parallel to the sidewalls. Improved grade control combined with the early termination of mining in low grade areas contributed to the improved average grade in the Quarter compared to the preceding two quarters. As advised in the preceding MD&A, Management believes that an average head grade of between 3.6 and 3.8 g/t Au can be maintained.

Underground development activities continued throughout the Quarter and the total development advance was 1,373 meters compared to a planned advance of 1,584 meters and an advance of 1,392 meters in the preceding quarter. The shortfall against plan was due to the transfer of four machine crews from production development to capital development projects. Installation of the new Centac compressor remains stalled by the inability of the Zimbabwe Electricity Transmission and Distribution Corporation (“ZETDC”), the state-owned electricity distribution company, to service their faulty transformer and equipment. Indications are that the transformer will be operational during Q3.

As advised in a News Release on July 15, 2014, Management expects that production for the 12 months to December 31, 2014 will be approximately 45,000 ounces.

4.6 Metallurgical Plant

During the Quarter, the metallurgical plant continued to operate at better than budgeted efficiency: overall recovery in the Quarter was 94.1% compared with 93.6% in the previous quarter and the budgeted rate of 93.0%. The improved recovery was due to the sparging of oxygen in the CIL system, which improved recovery and also reduced cyanide consumption. The PSA plant which produces oxygen has been re-commissioned and produces oxygen at approximately half of the cost of purchased liquid oxygen. All equipment operated to expectations and no significant unplanned downtime was experienced during the Quarter.

4.7 Capital Projects

The main capital developments are:

the haulage extension on 22 Level from AR Main to Lima; and

the No. 6 Winze Project - Shaft Deepening from 750 to the 1,080 meter level.

Further information on each of these Projects is set out below.

22 Level Haulage Extension

The 22 Level haulage extension will link the Blanket and Lima Sections over a distance of 2,000 metres on the 22 Level (750 meters below surface) and will allow for the accelerated commencement of mining in any new mining areas defined above 750 meters. Crosscuts from the 22 Level Haulage are also being developed to provide drilling platforms for the exploration drilling below 750 meters for resource definition purposes. Work on the 22 Level Haulage extension project and its associated crosscuts is being carried out simultaneously with normal mining production.

During the Quarter, the 22 Level haulage advanced a further 82 metres towards Lima (153 meters in the preceding quarter) against a plan of 144 meters. Work on the haulage was temporarily suspended to allow for additional work on the Eroica diamond drill cross cut from which exploration drilling into the Eroica zone below 750 meters will be carried out.

No. 6 Winze Project - Shaft Deepening to 1080 m

The No. 6 Winze project will provide access to the 3 Blanket resource bodies below 22 Level, i.e. Blanket 2 Ore Body, Blanket 4 Ore Body and Blanket Quartz Reef. The pre-production capital cost of this project is estimated to be US$5 million, which will be funded from Blanket’s internal cash flows. Work on this project continues using a crew which specialises in mechanised shaft sinking. Sinking of the new shaft extension has reached 800 metres, however progress on sinking has been hampered by the temporary inability to clear waste rock within one shift after each blast which has resulted in the daily planned advance being reduced from 1.8m to 1.2m. The Cactus Grab which is used to load the waste mechanically is being modified to rectify the problem. Waste loading is currently done by hand.

4.8 Indigenisation

Transactions that implemented the Indigenisation of Blanket were completed on September 5, 2012 following which Caledonia owns 49% of Blanket and has received a Certificate of Compliance from the Government of Zimbabwe which confirms that Blanket is fully compliant with the Indigenisation and Economic Empowerment Act.

As a 49% shareholder Caledonia receives 49% of Blanket’s dividends plus the repayment of vendor facilitation loans which were extended by Blanket to certain of the Indigenous Shareholders and which carry interest at LIBOR plus 10%. The vendor facilitation loans are repaid by way of dividends from Blanket Mine. 80% of the dividends declared by Blanket Mine which are attributable to the beneficiaries of the vendor facilitation loans are used to repay such loans and the remaining 20% unconditionally accrues to the respective Indigenous Shareholders.

The outstanding balance of the facilitation loans as at June 30, 2014 was US$30.9 million (December 31, 2013, US$30.7 million). The slight increase in the balance of the facilitation loans reflects the fact that Blanket’s dividend payments in the first six month which were used to repay the facilitation loans were less than the interest which accumulated on the loans. The overall level of the facilitation loans at June 30, 2014 is broadly as anticipated when the indigenisation transactions were concluded in September 2012. The vendor facilitation loans are not shown as receivables in Caledonia’s Audited Financial Statements because in terms of accounting standards, these loans are effectively equity instruments as their only means of repayment is via dividend distributions from Blanket. Caledonia continues to consolidate Blanket for accounting purposes. Further information on the accounting effects of indigenisation at Blanket is set out in Note 5 to the Audited Financial Statements and in a Frequently Asked Questions page which is available on Caledonia’s website.

4.9 Opportunities

Indigenisation: following the implementation of the indigenisation agreement set out in Section 4.8 of this MD&A Blanket, as a fully indigenised entity can implement its organic growth strategy and, in addition, may be able to take advantage of acquisition opportunities that could arise in Zimbabwe.

·	Increased production: Blanket’s existing reserves and resources could support a further increase in production, provided the necessary investments in resource development can be made.

Surplus capacity: The Blanket Mine currently has a daily average mining capacity of over 1,200tpd; the hoisting capacity is approximately 3,000tpd; the crushing and milling plant has the capacity to process approximately 1,450tpd (increasing to approximately 3,000tpd after scheduled investment) and the Carbon-in-Leach plant has capacity of 3,800 tonnes per day. It is believed that there would be sufficient capacity to process any additional throughput arising from an increase in mining production with moderate capital investment and incurring only consumable costs to treat any increased throughput.

Exploration success: Blanket’s main exploration objectives are the 22 Level Haulage Project and the related exploration of the down-dip extensions of the known mineralised zones and the satellite exploration projects at the GG Project and the Mascot Project Area. Depending on future exploration success, Blanket may be able to further increase its targeted production levels.

4.10 Outlook

In Q1 2013, Blanket Mine embarked on a strategy to increase gold production over the next 4 years by accelerating the access to resources below 22 Level. The strategy was based on being able to add to existing production sources by accessing new resource blocks in the Blanket section below 22 Level.

Since this plan was initiated, the gold price has fallen from approximately US$1,700 per ounce to the current level of approximately US$1,300 per ounce, and projections for future gold prices have also been significantly reduced. As set out in Section 4.5 of this MD&A, gold production has been adversely affected by lower than anticipated grades caused largely by unavoidable dilution within certain mineral reserve blocks and which has resulted in rescheduling of production areas and hence target gold production guidance for 2014 being reduced from 48,000 ounces to approximately 45,000 ounces. In addition, there is upward pressure on taxes and regulatory fees in Zimbabwe and the regulatory environment in Zimbabwe remains subject to unexpected adverse changes. Although Blanket mine remains cash generative, the combined effect of the lower gold price (exacerbated by the 1.5% of the gold value that is retained by Fidelity), lower than anticipated gold production and the increased tax burden in Zimbabwe means that the rate of cash generation at Blanket is lower than anticipated. Accordingly, management at Blanket and Caledonia is currently reviewing the medium term capital investment programme at Blanket. The revised planned programme, which is expected to be finalised in Q4 of 2014, may result in revisions to the rate of increase in Blanket’s future production.

Sustaining capital investment in the Quarter was reduced to a very low level, which reflects the generally good condition of Blanket’s equipment after several years of intensive investment. Sustaining investment is likely to increase to normal levels so as to maintain the Blanket’s operating integrity and to cater for the increased sustaining investment that will be required to maintain underground equipment at the increased production tonnages.

5 EXPLORATION AND PROJECT DEVELOPMENT

Caledonia’s primary exploration activities are focussed on the growth and development of Blanket Mine and its satellite properties.

5.1 Blanket Exploration

Exploration activities at Blanket Mine targets the depth extension of the current Blanket Mine ore bodies and involves drilling from 18 and 22 Levels below the current depth of mine activities. Drilling during the Year has located the Blanket “4 Ore Body” on strike of the “2 Ore Body”, which adds substantially to the strike of mineralized zones present in this area and which will be fully evaluated using the access gained via the No. 6 Winze. During the Quarter one further exploration hole was drilled into the Blanket zone below 750 meters. A compilation of recent diamond drill intersections of the mineralised shoots below Blanket section is presented in the table below. Based on this information, additional inferred resources amounting to approximately 500,000 tonnes at 3.9 g/t was added to the Blanket mine mineral resources which was disclosed in the 2014 Annual Information Form.

Exploration drilling into the AR Main zone below 22 Level (750 m) was adversely affected by frequent mechanical breakdowns and the recently acquired diamond drill in this location had to undergo a complete refurbishment before it was able to drill two holes totalling 844 meters against a plan of 2,190 meters. Both of the holes intersected mineralisation confirming the down dip extension of the AR Main body but further drill intersection will be required before a quantitative assessment of the resource can be made.

	COLLAR						INTERSECTION DETAILS
Drill Hole ID	Northing (X)		Easting (Y)		Elevation (Z)		Depth from (m)		Depth to (m)	Intersection Length (m)	Azimuth (°)		Dip (°)		Total Depth (m)	Gold Grade (g/t)		True Thick. (m)

630 B 01/13		2307115		10275		502.2		407.8	413.2	5.40		290.5		37.8	481.7		3.57		4.78

630 B 02.13		2307115		10274		502.1		326.8	333.9	7.05		297.9		2S.1	394.6		5.96		6.71
								353.6	359.6	6.00		29S.4		25.7	394.6		6.03		5.78
								366.7	367.9	1.20		29S.7		24.7	394.6		5.49		1.02

630 B 03/13		2307115		10275		502.1		460.9	462.5	1.62		298.7		42.9	563.0		14.57		1.36
								492.3	495.3	2.95		301.1		40.6	563.0		10.54		254
								503.0	503.5	0.50		301.4		39.7	563.0		15.54		0.43
								526.2	52S.2	2.06		301.0		38.0	563.0		5.55		1.82

630 B 04/13		2307114		10275		502.1		352.0	355.0	3.00		266.2		34.8	498.0		3.28		273

630 B 05/13		2307114		10275		502.2		313.3	317.5	4.20		255.3		31.6	421.6		243		3.91

630 B 06/13		2307114		10275		502.4		377.4	378.0	0.60		255.0		46.8	415.7		209		0.48

630 B 07/13		2307115		10275		502.7		524.0	524.6	0.60		267.8		61.9	532.1		1.59		0.37

630 B 08/13		2306910		10313		501.7		262.5	265.5	3.00		252.6		50.9	366.8		234		9 97
								977 7	2S1.0	3.35		247.6		49.9	366.8		254		257
								308.6	312.2	3.60		247.1		47.0	366.8		231		288
								320.0	321.8	1.80		247.3		46.0	366.8		239		1.45

Caledonia has a conservative approach to accruing new resources into the inferred category: only resource blocks with an estimated grade in excess of the pay limit are taken into inventory.

5.2 Satellite Prospects

Blanket Mine has exploration title holdings in the form of registered mining claims in the Gwanda Greenstone Belt totalling 78 claims, including a small number under option, covering properties with a total area of about 2,500 hectares. Included within these claim areas are 18 previously operated small gold mines which warrant further exploration, i.e. the Satellite Projects. Blanket’s main exploration efforts on these satellite properties are focused at this stage on the GG Project and the Mascot Project Area (which comprises three former mining operations i.e. Mascot, Eagle Vulture and Penzance) which, based on past production records, are likely to have the greatest potential.

GG Project

The GG Project is located approximately seven kilometers southeast of Blanket Mine. Surface drilling programs have been carried out at the GG Project over the past eight years consisting of seventeen diamond-cored holes totalling 4,800m of drilling. Two zones of gold mineralization have been established down to a depth of at least 300m, each with a potential strike length of up to 150m. Current activities involve the definition of the extent and characteristics of this mineralization.

During the previous quarter the development on 120 meter level was completed to approximately 160 meters east of the shaft and four drill cubbies were completed from which horizontal and inclined holes were drilled into the two zones (North and South zones) that were identified by surface drilling. This drilling intersected the identified zones, with the North zone hosting the more extensive mineralization.

Based on the work in the previous quarter, strike development was done in Q2 on 120m level towards the North Zone which exposed a highly altered shear system hosted in a khaki-grey phyllitic lava with ubiquitous acicular arsenopyrite mineralisation and minor pyrite and pyrrhotite as secondary sulphide minerals. Within an envelope 40 metres long by 10 metres wide, gold values average approximately 3.5 g/t. The identified zone displays a “pinch and swell” structure and dips steeply to the north at about 85 degrees. Further diamond drilling continues to investigate the upward and downward extensions of this zone.

Work will resume on sinking the shaft from 120m to 210m, at which stage level development will be done on the 150m, 180m and 210m levels to expose the zone that has been identified on 120m.

As noted in the previous quarter, metallurgical test work continues on fresh material from this zone. The preliminary indications are that material from the GG Project is refractory and does not result in the same gold recovery when treated with Blanket’s metallurgical process. Exploration will continue with the objective of identifying the extent and characteristics of mineralisation at the GG Project so that an assessment can be made of the optimal scale and processing methodology for material from the GG Project.

Mascot Project Area

Mascot was previously mined to a depth of approximately 250 meters, exploiting an east-west trending mineralised body the extent of which decreased at depth but which was accompanied by a doubling in width. Previous surface drilling undertaken by Blanket has indicated the existence of two further mineralised zones, one to the north and one to the south of the mined out area.

In the previous quarter, underground development on Levels 1 and 2 (60m and 90 meters below surface respectively) confirmed the existence of potentially payable mineralisation in the North zone. In Q2 of 2014 development continued along the North Zone on the 150m level adding to the extent of known mineralization. The 150m level will also be used to target a high grade zone on the South Zone.

INVESTING

An analysis of Caledonia’s investment in the Quarter, the preceding quarter and 2013 and 2012 is set out below.

Capital Investment
			2012 Year		2013 Year		2014 Q1	2014 Q2
Total Investment	$	C’000		7,909		11,738	2,032	1,550
Nama Project (i)	$	C’000		3,614		2,637	-	-
Blanket	$	C’000		4,280		9,066	2,032	1,550

(i)

Nama is a base metal exploration project in Zambia which was fully impaired at December 31, 2013.

All investment at Blanket is funded from Blanket’s internal cash flows.

FINANCING

Caledonia financed all its operations using funds on hand and those generated by its operations. No equity financing took place in the Quarter and none is currently planned. Blanket has an unsecured US$2.5 million loan facility in Zimbabwe which is repayable on demand. At June 30, 2014 this facility was undrawn.

8.	LIQUIDITY AND CAPITAL RESOURCES

An analysis of Caledonia’s capital resources as at June 30, 2014 and each of the preceding 5 quarters is set out below.

Liquidity and Capital Resources (Thousands of Canadian dollars)
	As at	Mar 31 2013		June 30 2013		Sept 30 2013		Dec 31 2013		Mar 31 2014		June 30 2014
Gross Cash and cash equivalents in the statement of financial position			25,189		22,475		25,099		25,222		26,714		25,842
Overdraft			-		-		1,204		1,796		-		-
Cash and cash equivalents in the statement of cash flows			25,189		22,475		23,895		23,426		26,714		25,842
Working capital			28,327		27,257		29,389		28,620		31,380		30,626

Movements in Caledonia’s net cash, the overdraft and working capital and an analysis of the sources and uses of Caledonia’s cash are discussed in Section 3 of this MD&A.

The overdraft facility is held by Blanket with a Zimbabwean Bank and is unsecured and repayable on demand.

The Company’s liquid assets as at June 30, 2014 exceed its planned and foreseeable commitments as set out in Section 9 of this MD&A.

9.	OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL COMMITMENTS AND CONTINGENCIES

There are no off balance sheet arrangements apart from the facilitation loans of US$30.9 million which are not reflected as loans for IFRS purposes (refer Note 5 of the Unaudited Consolidated Financial Statements). The company has the following contractual obligations at June 30, 2014.


Payments due by Period (Thousands of Canadian dollars)
	Falling due	Within 1 year		1-3 Years			4-5 Years			After 5 Years		Total
Current liabilities			5,529		-			-			-		5,529
Purchase obligations			530		530	Nil			Nil				530

In addition to the committed purchase obligations set out above, Blanket currently intends to invest approximately US$33 million between May 14, 2014 and December 2017 which is not yet committed. The committed and uncommitted investment will be used to maintain Blanket’s existing operations and capital projects and the satellite projects which are discussed in Sections 4.7 and 5.3 of this MD&A respectively. Committed and uncommitted purchase obligations will be met from the cash generated from Blanket’s existing operations. Caledonia has no obligations in respect of capital or operating leases. As of June 30, 2014, Caledonia had potential liabilities for rehabilitation work on the Blanket and Eersteling Mines7 – if and when those mines are permanently closed – at an estimated discounted cost of $2,022,000 ($1,572,000 – 2013).

10.	NON-IFRS MEASURES

Throughout this document, we have provided measures prepared in accordance with IFRS in addition to some non-IFRS performance measures for investors who use them to evaluate our performance. Since there is no standard method for calculating non-IFRS measures, they are not a reliable way to compare Caledonia against other companies. Non-IFRS measures should be used along with other performance measures prepared in accordance with IFRS. We have defined below the non-IFRS measures we have used in this document and provide a reconciliation of such non-IFRS measures to the IFRS measures we report.

7 Eersteling Mine is a South African gold property, which has been held on care and maintenance basis for several years pending the identification of a suitable purchaser.

Cost per ounce

Non-IFRS performance measures such as “On-Mine cash cost per ounce”, “All-in sustaining cost per ounce” and “All-in cost per ounce” are used in this document. Management believes these measures assist investors and other stakeholders in understanding the economics of gold mining over the life-cycle of a mine. These measures are calculated on the basis set out by the World Gold Council in a Guidance Note published on June 23, 2013 and accordingly differ from the previous basis of calculation. The table below reconciles “On – mine cash cost per ounce”, “All-in sustaining costs per ounce” and “All-in costs per ounce” to the production costs shown in the financial statements which have been prepared under IFRS.

Reconciliation of Cost per Ounce Data to IFRS
	Year 2012			Year 2013			Q1 2014		Q2 2014
Production costs (IFRS) (C$’000’s)		25,653			27,412		8,788		7,768
Less site restoration costs (C$’000’s)		(43	)		(151	)	(9	)	(10	)
Less exploration costs (C$’000’)		(831	)		(393	)	(107	)	(103	)
Reversal of claim fee provision (C$’000’s)		-			970		-		-
Reallocated admin costs		(247	)		(337	)	49		169
Realisation charges		-			(284	)	(16	)	(39	)
Non-Blanket production costs		(121	)		(102	)	(97	)	(114	)
Inter company profit elimination		1,353			1,332		151		(26	)
Adjusted production costs (C$’000’s)		25,764			28,447		8,759		7,645
Exchange rate (C$/US$)		1.00			1.03		1.10		1.09
On-mine Production costs (US$’000’s )		25,769			27,619		7,948		7,007
Gold Sales (oz)		45,181			45,048		12,210		11,223
On-mine cash cost (US$/oz)		570			613		651		624
Royalty (US$’000’s)		5,262			4,544		1,084		999
Permitting costs (US$’000’s)		225			135		30		30
Refining and 3rd party smelting (US$’000’s)		290			301		15		26
Administrative expenses (C$’000’s) (i)		4,055			5,742		1,778		1,760
Exchange rate		1.00			1.03		1.10		1.09
Administrative expenses (US$’000’s)		4,056			5,575		1,613		1,613
Reclamation and remediation of operating sites (US$’000)		90			107		19		19
Exploration and study costs (US$’000’s)		3			85		36		35
Sustaining capital investment (US$’000’s)		3,044			5,653		529		158
All-in Sustaining cost (US$’000)		38,739			44,019		11,274		9,887
Gold sales (oz)		45,181			45,047		12,210		11,223
All-in sustaining cost per ounce (US$/oz)		857			978		923		881
Costs not related to current production
Community costs (US$’000’s)		1,137			2,200		-		-
Permitting (US$’000’s)		785			106		14		14
Exploration (US$’000’s)		15			120		32		31
Capital investment (US$’000’s)		1,306			3,530		1,309		1,029
All-in Costs (US$’000’s)		41,981			49,975		12,627		10,960
Gold Sold (oz)		45,181			45,047		12,210		11,223
All-in Costs per ounce (US$/oz)		929			1,109		1,035		977

Average realised gold price per ounce

“Average realised gold price per ounce” is a non-IFRS measure which, in conjunction with the cost per ounce measures described above, allows stakeholders to assess our performance. The table below reconciles “Average sales price per ounce” to the Revenue shown in the financial statements which have been prepared under IFRS.

Reconciliation of Average Received Gold Price per Ounce to IFRS
	Year 2012			Year 2013			Q1 2014		Q2 2014
Revenue (IFRS) (C$’000’s)		75,221			65,113		17,063		15,555
Less miscellaneous income		-			(947	)	-		-
Revenue from precious metal sales (C$’000s)		75,221			65,113		17,063		15,555
Exchange rate (C$/US$)		1.002			0.97		0.91		0.93
Revenue from precious metal sales (US$’000’s)		75,340			63,216		15,497		14,300
Revenues from sales of silver (US$’000s)		(72	)		(78	)	(3	)	(34	)
Revenues from sales of gold (US$’000s)		75,268			63,138		15,494		14,266
Gold ounces sold		45,181			45,048		12,210		11,223
Average realised gold price per ounce (US$)		1 666			1,402		1,269		1,271

The average realised gold price from Q1 of 2014 is after deduction of 1.5% of the value of the gold delivered to and sold by Fidelity, in terms of Blanket’s sale agreement with Fidelity.

Adjusted earnings per share

“Adjusted earnings per share” is a non-IFRS measure which management believes assists investors in understanding the company’s underlying performance. The table below reconciles “adjusted earnings per share” to the Profit/Loss attributable to Owners of the Company shown in the financial statements which have been prepared under IFRS.

Reconciliation of Adjusted Earnings per Share to IFRS Profit/(Loss) Attributable to Owners of the Company (C$’000’s except per share numbers)
	Q1 2013	Q2 2013	Year 2013			Q1 2014		Q2 2014
Profit/(loss) attributable to owners of the company (IFRS)	4,593	3,055		(3,055	)	3,479		1,840
Blanket Mine Employee Trust adjustment (refer Note 18 to the Consolidated Financial Statements)	-	-		(105	)	(35	)	(56	)
Add back amounts attributable to owners of the company in respect of:
Indigenisation expenses, advance dividends, donations etc.	-	1,640		1,640		-		-
Foreign exchange (profit)/loss	-	-		(1,677	)	(1,311	)	129
Asset impairment	-	-		14,203		-		-
Deferred tax	-	-		2,185		-		-
Withholding tax on distributions in specie	1,531			1,531		-		-
Adjusted profit	6,124	4,695		14,722		2,133		1,913
Weighted average shares (m)	51.5	51.8		51.5		52.1		52.1
Adjusted eps (cents)	11.9	9.1		28.3		4.1		3.7

11.	RELATED PARTY TRANSACTIONS

Caledonia had the following related party transactions which are recorded on the basis of IFRS:

	Six months ended June 30, 2014		Six months ended June 30, 2013
	$	’000	$	’000
Rent paid to Bastian Investments CC, a company owned by members of the President’s family for the rental of the Company’s Johannesburg office facilities. The rental tenancy is on a monthly basis.		18		19

Additional information on related party transactions is set out in note 13 to the unaudited consolidated financial statements. On July 15, 2014 Caledonia served six months notice on Epicure Overseas S.A. for the termination of the contract between Caledonia and Epicure for the provision of the services of Caledonia’s President and Chief Executive Officer. Negotiations are in progress for alternative arrangements to secure the continued services of the President and Chief Executive Officer.

12.	CRITICAL ACCOUNTING POLICIES

Caledonia's accounting policies are presented in the audited consolidated financial statements for the year ended December 31, 2014 which have been publicly filed on SEDAR at www.sedar.com. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts represented in the consolidated financial statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

i) Indigenisation transaction

The indigenisation transaction of the Blanket Mine (1983)(Private) Limited (“Blanket Mine”) required management to make significant judgements and assumptions which are explained in Note 5 of the Annual Financial Statements that are available on SEDAR at www.sedar.com

ii) Site restoration provisions

The site restoration provision has been calculated for the Blanket Mine based on an independent analysis of the rehabilitation costs as performed in 2012 and based on the internal assessment for Eersteling Gold Mining Corporation Limited. Estimates and assumptions are made when determining the inflationary effect on current restoration costs and the discount rate to be applied in arriving at the present value of the provision. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates take into account any material changes to the assumptions that occur when reviewed by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs which will reflect the market condition at the time the rehabilitation costs are actually incurred. The final cost of the currently recognized site rehabilitation provisions may be higher or lower than currently provided for.

iii) Exploration and evaluation (“E&E”) expenditure

The application of Caledonia’s accounting policy for exploration and evaluation expenditures requires judgements when determining which expenditures are recognised as exploration and evaluation assets (“E&E properties”).

Caledonia also makes estimates and assumptions regarding the possible impairment of E&E properties by evaluating whether it is likely that future economic benefits will flow to Caledonia, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available.

iv) Income taxes

Significant estimates and assumptions are required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Caledonia records its best estimate of the tax liability including any related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

Caledonia also applies judgement in recognizing deferred tax assets relating to tax losses carried forward to the extent that there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized or sufficient estimated taxable income against which the losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

v) Share-based payment transactions

Caledonia measures the cost of equity-settled, share based payment transactions with employees, directors as well as with Indigenisation Shareholders (refer note 5 and 21 of the Annual Financial Statements) by reference to the fair value of the equity instruments on the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the appropriate valuation model, considering the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield.

Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of Caledonia’s stock options.

vi) Impairment

At each reporting date, Caledonia determines if impairment indicators exist, and if present, performs an impairment review of the non-financial assets held in Caledonia. The exercise is subject to various judgemental decisions and estimates. Financial assets are also reviewed regularly for impairment.

vii) Functional currency

The functional currency of each entity in Caledonia is determined after considering various primary and secondary indicators which require management to make numerous judgement decisions. The determination of the functional currency has a bearing on the translation process and ultimately the foreign currency translation reserve.

13.	FINANCIAL INSTRUMENTS

Credit risk

The carrying amount of financial assets as disclosed in the statements of financial position and related notes represents the maximum credit exposure.

The trade receivable relate to gold bullion sold to Fidelity Printers and Refiners before quarter end. The amount was settled in July 2014.

Impairment losses

None of the trade and other receivables is past due at the period-end date.

Liquidity risk

All trade payables and bank overdraft have maturity dates that are expected to mature in under 6 months.

Currency risk

As Caledonia operates in an international environment, some of Caledonia’s financial instruments and transactions are denominated in currencies other than the Canadian Dollar. The results of Caledonia’s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of Caledonia are reported in Canadian dollar in Caledonia’s consolidated financial statements.

The fluctuation of the Canadian dollar in relation to other currencies will consequently have an impact upon the profitability of Caledonia and may also affect the value of Caledonia’s assets and liabilities and the amount of shareholders’ equity.

Caledonia has certain financial assets and liabilities denominated in foreign currencies. Caledonia does not use any derivative instruments to reduce its foreign currency risks. To reduce exposure to currency transaction risk, Caledonia maintains cash and cash equivalents in the currencies used by Caledonia to meet short‐term liquidity requirements.

Interest rate risk

Interest rate risk is the risk borne by an interest-bearing asset or liability due to changes in interest rates. Unless otherwise noted, it is the opinion of management that Caledonia is not exposed to significant interest rate risk as it has no debt financing apart from short term borrowings in Zimbabwe. Caledonia’s cash and cash equivalents include highly liquid investments that earn interest at market rates. Caledonia manages its interest rate risk by endeavouring to maximize the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. Caledonia’s policy focuses on preservation of capital and limits the investing of excess funds to liquid term deposits in high credit quality financial institutions.

14.	DIVIDEND POLICY AND OTHER SHAREHOLDER INFORMATION

Caledonia paid its inaugural dividend of 5 Canadian cents per share in February 2013 following a capital re-structure which was approved by shareholders in January 2013 which allowed it to make dividend payments. The inaugural dividend did not relate to any specific accounting period. Caledonia paid a further dividend of 5 Canadian cents per share in April 2013 in respect of the earnings for the year to December 31, 2012

On November 25, 2013 Caledonia announced a revised dividend policy pursuant to which it intends to pay a dividend of 6 Canadian cents per share in 2014, split into 4 equal quarterly payments of 1.5 Canadian cents per share. The first quarterly dividend was paid on January 31, 2014; the second quarterly dividend was paid on April 30, 2014; the third quarterly dividend was paid on July 31, 2014. It is expected that the fourth quarterly dividend for 2014 will be paid on October 30. Caledonia will continue to maintain its strong financial position so that it can implement its stated growth strategy and retain the flexibility to take advantage of any further opportunities that may arise without the need to raise third party finance. It is currently expected that the quarterly dividend policy will continue and that the 2015 dividend will be no less than the aggregate dividend paid in 2014.

Effective December 5, 2013 Caledonia appointed Computershare as its Transfer Agent in Canada and as the Registrar. Following the appointment of Computershare, shareholders in the USA and UK now receive their dividends denominated in US Dollars and Pounds Sterling respectively; all other shareholders will be paid in Canadian dollars. Computershare also offers DRS services for Caledonia shareholders who do not wish to hold their shares in nominee accounts in the name of their financial adviser or stock-broker. Shareholders who wish to participate in the DRS should contact Computershare using the contact details set out below:

Computershare Canada and USA	Toll-free North American Number 1-800-564-6253 For Shareholders outside North America 1-514-982-7555
Computershare UK	+44 (0)870 702 0000

On April 12, 2013, the one-for-ten share consolidation was implemented pursuant to the special resolution passed at the special meeting of Caledonia shareholders held on January 24, 2013.

15.	SECURITIES OUTSTANDING

As at August 11, 2014 Caledonia had 52,117,908 common shares outstanding. Outstanding options to purchase Common Shares (“Options”) are as follows:

Number of Options		Exercise Price ($)		Expiry Date (1)
	1,646,000		1.30	Jan 31, 2016
	30,000		0.70	May 11, 2016
	930,920		0.90	Aug 31, 2017
	190,000		0.72	Nov 21, 2018
	2,796,920

(1)	Options expiring during a “closed period” will have the expiry date extended, in terms of the option plan, by 10 days following the cancellation of the closed period.

As Caledonia’s Option Plan allows the granting of options for the number of Common Shares equal to 10% of the issued shares, Caledonia could grant Options on a further 2,414,878 shares.

16.	RISK ANALYSIS

The business of Caledonia contains significant risk due to the nature of mining, exploration and development activities. Risks such as interest rate, foreign exchange and credit risks are considered in Notes 6 and 24 to the Consolidated Financial Statements for the year ended December 31, 2013. Caledonia’s business contains significant additional risks due to the jurisdictions in which it operates and the nature of mining, exploration and development. Included in the risk factors below are details of how management seeks to mitigate the risks where this is possible.

Liquidity risk: The Company needs to generate capital to be able to continue to invest in properties and projects without raising third party financing. Caledonia currently has significant cash resources and continues to generate sufficient cash to cover all of its anticipated investment needs.

Exploration Risk: The Company needs to identify new resources to replace ore which has been depleted by mining activities and to commence new projects. Blanket has embarked on development and exploration programmes as set out in sections 5.7 and 6. No assurance can be given that exploration will be successful in identifying sufficient mineral resources of an adequate grade and suitable metallurgical characteristics that are suitable for further development or production.

Development Risk: The Company is engaged in development activities at Blanket Mine and the Satellite properties. Construction and development of projects are subject to numerous risks including: obtaining equipment, permits and services; changes in regulations, currency rate changes; labour shortages; fluctuations in metal prices and the loss of community support. There can be no assurance that construction will commence or continue in accordance with the current expectations or at all.

Production Estimates: Estimates for future production are based on mining plans and are subject to change. Production estimates are subject to risk and no assurance can be given that future production estimates will be achieved. Actual production may vary from estimated production for a variety of reasons including un-anticipated variations in grades, mined tonnages and geological conditions, accident and equipment breakdown, changes in metal prices and the cost and supply of inputs and changes to government regulations.

Mineral Rights: The Company’s existing licences and permits are in good standing. The Company has to pay fees etc. to maintain its rights and licence. No assurance can be given that the Company will be able to make payments by the required date or will meet development and production schedules that are required to protect licences.

Metal Prices: The Company’s operations and exploration and development projects are heavily influenced by the prices of gold, which is particularly subject to fluctuation. Caledonia has not adopted any strategies to control the effect of mineral price fluctuations because the Company’s cash resources currently exceed its planned and foreseeable commitments as set out in Section 9.

Increasing input costs: Mining companies generally have experienced higher costs of steel, reagents, labour and electricity and from local and national government for levies, fees, royalties and other direct and indirect taxes. Blanket’s planned growth should allow the fixed cost component to be absorbed over increased production, thereby helping to alleviate somewhat the effect of any further price increases.

Illegal mining: There has been an increase in illegal mining activities on properties controlled by Blanket. This gives rise to increased security costs and an increased risk of theft and damage to equipment. Blanket has received adequate support and assistance from the Zimbabwean police in investigating such cases.

Electricity supply: Zimbabwe produces and imports less electricity than it requires and has insufficient funds to adequately maintain or upgrade its distribution infrastructure. This has historically resulted in frequent interruptions to the power supply at Blanket Mine. Blanket has addressed the issue of interrupted power supply by installing stand-by generators and by entering into an un-interrupted power supply arrangement with the state-owned electricity company in return for paying a premium tariff. However, the continued failure of the state-owned distribution company to maintain its equipment continues to hamper Blanket’s ability to install new equipment at Blanket Mine.

Succession planning: The limited availability of mining and other technical skills and experience in Zimbabwe and the difficulty of attracting appropriately skilled employees to Zimbabwe creates a risk that appropriate skills may not be available if, for whatever reason, the current skills base at the Blanket Mine is depleted. The Caledonia management team has recently been augmented so that, if required, it could provide appropriate support to Blanket if this was required.

Country risk: The commercial environments in which the Company operates is unpredictable. Potential risks may arise from unforeseen changes in government policies and regulations relating to exploration and mining activity, military repression and civil disorder, all or any of which may have a material adverse effect on operations (including the ability to export geological samples for assay and analysis on a timely basis) and/or the ability of Caledonia to receive payments. Management believes that it has minimised such risks by complying fully with all relevant legislation and by obtaining all relevant regulatory permissions and approvals.

Gold marketing arrangements: In terms of regulations introduced by the Zimbabwean Ministry of Finance in January 2014, all gold produced in Zimbabwe must be sold to Fidelity, a company which is controlled by the Zimbabwean authorities. Accordingly, all of Blanket’s production has been sold to Fidelity. Blanket has received all payments due from Fidelity in full and on time. However the requirement to sell to Fidelity increases Blanket’s credit risk because Fidelity has failed to pay Blanket in the past.

17. FORWARD LOOKING STATEMENTS

Information and statements contained in this MD&A that are not historical facts are “forward-looking information” within the meaning of applicable securities legislation that involve risks and uncertainties relating, but not limited to, Caledonia’s current expectations, intentions, plans, and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “target”, “intend”, “estimate”, “could”, “should”, “may” and “will” or the negative of these terms or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Examples of forward-looking information in this MD&A include: production guidance, estimates of future/targeted production rates, planned mill capacity increases, estimates of future metallurgical recovery rates and the ability to maintain high metallurgical recover rates, timing of commencement of operations and Caledonia’s plans and timing regarding further exploration, drilling and development, the prospective nature of exploration and development targets, the ability to upgrade and convert mineral resources to mineral reserves, capital costs, our intentions with respect to financial position and third party financing and future dividend payments. This forward-looking information is based, in part, on assumptions and factors that may change or prove to be incorrect, thus causing actual results, performance or achievements to be materially different from those expressed or implied by forward-looking information. Such factors and assumptions include, but are not limited to: failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, success of future exploration and drilling programs, reliability of drilling, sampling and assay data, assumptions regarding the representativeness of mineralization being inaccurate, success of planned metallurgical test-work, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, changes in government regulations, legislation and rates of taxation, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors.

Potential shareholders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Such factors include, but are not limited to: risks relating to estimates of mineral reserves and mineral resources proving to be inaccurate, fluctuations in gold price, risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, power outages, explosions, landslides, cave-ins and flooding), risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards, employee relations; relationships with and claims by local communities and indigenous populations; political risk; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining or maintaining necessary licenses and permits, diminishing quantities or grades of mineral reserves as mining occurs; global financial condition, the actual results of current exploration activities, changes to conclusions of economic evaluations, and changes in project parameters to deal with un-anticipated economic or other factors, risks of increased capital and operating costs, we are affected by environmental, safety or regulatory risks, expropriation, the Company’s title to properties including ownership thereof, increased competition in the mining industry for properties, equipment, qualified personnel and their costs, risks relating to the uncertainty of timing of events including targeted production rate increase and currency fluctuations. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia reviews forward-looking information for the purposes of preparing each MD&A, however Caledonia undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

18.

CONTROLS

Caledonia maintains adequate systems of internal accounting and administrative controls, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that relevant and reliable financial information is produced.

Segregation of Duties

Management has concluded, and the Audit Committee has agreed that the hiring of additional staff needs to be constantly addressed and assessed in light of risks to ICOFR and the costs associated with additional staff. There have been no changes in the Corporation’s internal controls over financial reporting since the year ended December 31, 2013, that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

The Corporation has a Disclosure Committee consisting of six Directors or officers, and has disclosure controls and procedures which it follows in an attempt to ensure that it complies with all required disclosures on an adequate and timely basis. The Corporation’s Directors and Management, and the Disclosure Committee, are making all reasonable efforts to ensure that the Corporation’s disclosures are made in full compliance with all of the applicable rules, regulations and requirements. All reasonable efforts are also being made to ensure that the Corporation’s disclosure controls and procedures provide reasonable assurance that material information relating to the Corporation, including its consolidated subsidiaries, is made known to the Corporation’s Certifying Officers by others within those entities.

19.	QUALIFIED PERSON

Dr. Trevor Pearton, B.Sc. Eng. (Mining Geology), Ph.D. (Geology), Pr.Sci.Nat., F.G.S.S.A., VP Exploration is the Corporation’s qualified person as defined by NI 43-101. Dr. Pearton is responsible for the technical information provided on this MD&A except where otherwise stated.

Exhibit 99.3

Form 52-109F2

Certification of Interim Filings

Full Certificate

I, Stefan Edward Hayden, Chief Executive Officer of Caledonia Mining Corporation, certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Caledonia Mining Corporation (the “issuer”) for the interim period ended June 30, 2014.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1	Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is an internally developed framework considered appropriate for our group.

5.2

N/A

5.3

N/A

6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2014 and ended on June 30, 2014 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: August 12, 2014

“Stefan Edward Hayden”

_____________________

Stefan Edward Hayden

Chief Executive Officer

Exhibit 99.4

Form 52-109F2

Certification of Interim Filings

Full Certificate

I, Steven Roy Curtis, Chief Financial Officer of Caledonia Mining Corporation, certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Caledonia Mining Corporation (the “issuer”) for the interim period ended June 30, 2014.

5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

(b)

5.1	Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is an internally developed framework considered appropriate for our group.

5.2

N/A

5.3

N/A

6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2014 and ended on June 30, 2014 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.