EX-99.3 5 t12504exv99w3.txt EXHIBIT 99.3 2003 THIRD QUARTER REPORT [CALEDONIA MINING CORPORATION LOGO] CALEDONIA Mining Corporation ================================================================================ UNIT #9, 2145 DUNWIN DRIVE, MISSISSAUGA, ONTARIO CANADA, L5L 4L9 TEL: (905) 607-7543 FAX: (905) 607-9806 WORLD WIDE WEB: HTTP://WWW.CALEDONIAMINING.COM PRESIDENT'S MESSAGE During the quarter, Caledonia commenced drilling on its Rooipoort platinum project in South Africa and completed the first full quarter of operation at the Barbrook Gold Mine. Mining operations at Barbrook reached their targeted tonnes and exceeded the gold grades at the quarter end and are expected to continue for the foreseeable future. Metallurgical gold recoveries have been lower than targeted due to equipment breakdown and highly refractory gold that has not responded to the installed metallurgical process. By early November, additional equipment in the Flotation circuit was installed and commissioned and should improve gold recoveries both in the flotation and resin-in-leach (RIL) gold recovery circuits. During the quarter the mine produced 14,080 tonnes of ore at a grade of 6.82 g/t and the mill processed 10,171 tonnes of feed ore at a grade of 6.53 g/t and produced 19.5 kg gold. During October, the mine produced over 6,000 tonnes of ore grading well in excess of the targeted 6.0 g/t. The South African currency, the Rand continued to strengthen against the US dollar. The currency fluctuation is generally offset by the increase in the US dollar price of gold so that the Rand price of gold continued to remain at about R85,000 per Kg. Caledonia is pleased to announce that Mr. Jacques du Plessis has been appointed as General Manager of Caledonia's African operations. Mr. Du Plessis, a South African citizen, is a Mining Engineer and has had over 30 years experience in the South African mining industry and over 15 years in senior management positions. Mr. Du Plessis will take over the immediate responsibility for the Barbrook and Eersteling gold mines. Caledonia's overall loss for the quarter was $1,072,000 ($0.004 per share). The year-to-date loss was $2,686,000 ($0.012 per share) compared to a loss of $1,373,000 ($0.008 per share) for the same nine-month period in 2002. Caledonia continues to be bullish on the prospects for the precious metals markets and believes that it is well positioned to benefit from any improvement in the gold and platinum sectors. DISCUSSION AND ANALYSIS ON RESULTS OF OPERATIONS South Africa At the Barbrook Gold Mine stope development and production reached the targeted tonnage and exceeded the predicted grade during the quarter. Underground production met and exceeded the target figures due to the opening of new stoping areas. Additional crews were hired and improved underground infrastructure has been installed. Stope preparation in the main stoping areas has been advanced that should ensure that future targeted tonnages are met. The mill operated throughout the quarter but excessive end liner wear restricted throughput to 10,171 tonnes from the targeted 6,000 tonnes per month. Treated gold grades at 6.5 g/t were about 9% above the target. The mill end plates were temporarily repaired and thereafter the mill throughputs reached the target levels. The erratic and high sulphide content of the fresh underground ore led to difficulties in flotation control and reduced the gold recovery. To compensate for variable sulphide feed, an Imhoflot cleaner section has been installed which will further upgrade the flotation concentrate grade and reduce the concentrate mass generated. This addition will also improve the gold leaching recovery in the RIL section. The recently mined ore, although of significantly higher grade contains a much higher level of refractory gold in the form of arsenopyrite than had previously been encountered. This higher grade gold associated mineral gives much lower gold recovery than the more normal quartz, pyrite and pyrrhotite associated gold. Overall plant gold recovery for the quarter was unacceptably low at just over 30% compared to the target of 70%. The gold recovery should increase significantly with the introduction of the Imhoflot cleaner section and improvements in the RIL circuit. Alternative metallurgical equipment is also being investigated and the metallurgical management is being further upgraded. The Rooipoort Exploration Project, approximately 8 kilometres east of Potgietersrus and about 30 km southwest of Caledonia's Eersteling gold mine in the Limpopo province of South Africa is considered to be highly prospective for platinum deposits. Based on the comprehensive desk study completed in the 2nd quarter of this year, that was based on the high resolution airborne geophysics and the down dip drilling on the adjacent farm undertaken by Anglo Platinum/JCI and Falconbridge during the 1970's, an initial stratographic drilling program was developed. This drill program has been costed and contracts for the initial diamond drilling and assaying of the core generated have been negotiated. The previously mentioned desk study has confirmed the likely presence of Merensky like and UG-2 like platinum reefs, and potentially the continuation of the Plat reef mineralization, on the property. These three reefs are the dominant platinum bearing reefs in the Bushveld geological Complex found in the Rooipoort area. A trenching program to investigate these occurrences commenced in late August 2003 and was abandoned due to the depth of soil and colluvium (3 to 15 m) in the area. Sampling, assaying and quality control (QC) programs have been put in place prior to the start of the trenching and the mobilisation of the drills. Drilling commenced in September 2003 and this initial 15-hole program will be completed in the fourth quarter. Further announcements can be expected in the near future. The Eersteling Gold Mine remained on care and maintenance during the quarter. A hydrological survey was carried out in the quarter preparatory to the commencement of shaft dewatering. It is planned that the Eersteling gold mine's return to commercial production will be delayed until the results of the exploration program at Eersteling's Roodepoort property located just east of the Eersteling metallurgical plant are received and evaluated. The Roodepoort property, fully owned by Eersteling, is thought to be prospective for a shallow, open-pit gold deposit. At the Goedgevonden diamond prospect near Stilfontein in North West Province more detailed ground gravimetric and magnetometric surveys were conducted in the 2nd quarter over the pipe and other prospective targets in the area. This survey has indicated the existence of a northward extension to the known pipe that potentially increases its size by 30%. This extension has not been previously tested. On the Eleazar diamond property, 5 km northeast of Goedgevonden a further survey was conducted. This survey, centered over a prominent shallow depression has shown a gravity anomaly that may indicate the presence of a previously unknown kimberlite. Zambia Caledonia and their joint venture partners, Motapa Diamonds Inc., are planning this year's exploration program for the Mulonga Plain joint venture. At the Kashiji Plain licence area a number of aero magnetic generated geophysical anomalies will be evaluated by ground geophysics The next phase of exploration will include further aero-magnetic surveys over a new area of anomalous kimberlite indicator mineral values. An extension of the Kashiji Plain licence area is being sought. Any new targets of merit will then be drill tested. On the Mulonga Plain licence, work will be concentrated in the southeastern portion of the Mulonga Plain anomaly to follow-up on the encouraging geochemical results obtained last year. The complex geomorphic evolution of Mulonga Plain requires a reappraisal of the large amount of accumulated information to more accurately define the appropriate future exploration methodology. Elsewhere in Zambia, the Luamfula, Ngosa and Konkola West prospecting licences were renewed for a two-year period. These licence areas form part of the Kalimba/Nama licence group and are prospective for copper, cobalt and nickel. Interest has been expressed by a Zambian mining company for a source of cobalt/copper concentrate suitable for their Zambian operation. An evaluation is being conducted to determine if such a concentrate could be produced at Nama from the higher cobalt/copper anomaly "A" area. This shallow partially-oxidized "A" deposit was discovered by Caledonia in 1995/1996. The "A" anomaly is only one of several cobalt anomalous areas that combine to a resource of about a billion tonnes of low-grade cobalt/copper shallow mineralization. Nama is located immediately west and adjacent to the Konkola mining area on Zambia's famous Copperbelt. Canada Kikerk Lake The property is located in the Coronation Gulf region of Nunavut. The diamondiferous Potentilla and Stellaria kimberlites were identified on the property in 2001 and 2002 respectively. The summer portion of the 2003 exploration program has now been completed. A total of 100 samples were taken from 6 discrete areas across the claims. This sampling was carried out to follow-up on a number of unexplained indicator mineral and geophysical anomalies through heavy mineral sampling, ground geophysical surveys and prospecting. The samples will be analysed and the information used to determine the termination of indicator mineral trains. As part of the requirements for taking them to lease, all claims were surveyed during the quarter. The Mining Recorder is now reviewing these lease applications. Exploration on the Kikerk Lake property is governed by a joint venture agreement among Ashton Mining of Canada (Ashton), Caledonia and Stornoway Diamond Corporation (Stornoway), the successor company of Northern Empire Minerals Limited. In 2003, Caledonia's joint venture parties have spent an amount of about $575,000 on the Kikerk Lake property. Ashton has a 52.5 percent interest in the property and has exercised an option with Caledonia to increase its interest to 59.5 percent. Stornoway has a 30 percent joint venture interest and has participated in the recent programs. Caledonia has a fully carried interest in the property until a "fully-engineered" feasibility study has been completed. Financing In the quarter, Caledonia raised $5 million, before closing costs, through the sale of up to 20 million units under a private placement financing. Each unit was priced at $0.25 and comprised one common share of Caledonia and one half common share warrant. Each full warrant entitled the holder to purchase one common share of Caledonia at a price of $0.35 for a period of eighteen months from the date of closing. The funds raised are being used to finance full production of the Barbrook Gold Mine, Caledonia's ongoing exploration activities in Southern Africa, and for general corporate purposes. On behalf of the Board of Directors (signed) S.E. Hayden, Chairman of the Board, President and Chief Executive Officer November 25th 2003 FORWARD-LOOKING STATEMENTS This quarterly report contains forward-looking statements based on current expectations. These forward-looking statements entail various risks and uncertainties that could cause actual results to differ materially from those reflected. Risk and uncertainties about Caledonia's business are more fully described in the Management's Discussion and Analysis published in Caledonia's Annual Report, Form 20F and the Annual Information Form. CALEDONIA MINING CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF CANADIAN DOLLARS)
SEPTEMBER 30, DECEMBER 31, (UNAUDITED) 2003 2002 ----------- ------------ ----------- ASSETS Current Cash and short term deposits $ 4,228 $ 1,864 Accounts receivable 269 113 Prepaid expenses 126 117 ------------ ----------- 4,623 2,094 INVESTMENT AT COST 79 79 CAPITAL ASSETS 8,123 7,715 MINERAL PROPERTIES 16,070 14,879 ------------ ----------- $ 28,895 $ 24,767 ------------ ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable $ 916 $ 1,267 Loan payable 25 69 ------------- ------------ 941 1,336 PROVISION FOR SITE RESTORATION 524 506 NON-CONTROLLING INTEREST 774 774 ------------- ------------ 2,239 2,616 ------------- ------------ SHAREHOLDERS' EQUITY (note 1) Share capital 156,596 149,623 Contributed surplus 209 209 Broker compensation warrants 395 177 Deficit (130,544) (127,858) ------------- ------------ 26,656 20,151 ------------- ------------ $ 28,895 $ 24,767 ============= ============
On behalf of the Board: ________________________ Director (signed) J. Johnstone ________________________ Director (signed) F. C. Harvey CALEDONIA MINING CORPORATION CONSOLIDATED STATEMENTS OF DEFICIT (IN THOUSANDS OF CANADIAN DOLLARS)
THREE MONTH PERIOD NINE MONTH PERIOD ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, (UNAUDITED) 2003 2002 2001 2003 2002 2001 ----------- --------- --------- --------- --------- --------- --------- DEFICIT, Beginning of period ($129,472) ($124,364 ($122,812 ($127,858 ($123,527 ($122,332 NET (LOSS) FOR THE PERIOD (1,072) (536) (465) (2,686) (1,373) (945) --------- --------- --------- --------- --------- --------- DEFICIT, End of period ($130,544) ($124,900 ($123,277 ($130,544 ($124,900 ($123,277 ========= ========= ========= ========= ========= =========
CALEDONIA MINING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD NINE MONTH PERIOD ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, (UNAUDITED) 2003 2002 2001 2003 2002 2001 ------------ ------- ------- ------- ------- ------- ------- REVENUE AND OPERATING COSTS Revenue from sales $ 259 $ 2 $ 11 $ 312 $ 32 $ 44 Operating costs 921 143 149 2,225 346 162 ------- ------- ------- ------- ------- ------- GROSS MARGIN (LOSS) (662) (141) (138) (1,913) (314) (118) ------- ------- ------- ------- ------- ------- COSTS AND EXPENSES General and administrative 378 472 257 1,006 1,060 779 Interest 33 - 26 97 24 64 Other expense (income) (note 2) (1) (77) 44 (330) (23) (16) ------- ------- ------- ------- ------- ------- 410 395 327 773 1,061 827 ------- ------- ------- ------- ------- ------- (LOSS) BEFORE NON-CONTROLLING INTEREST (1,072) (536) (465) (2,686) (1,375) (945) Non-controlling interest - - - - (2) - ------- ------- ------- ------- ------- ------- NET (LOSS) FOR THE PERIOD ($1,072) ($ 536) ($ 465) ($2,686) ($1,373) ($ 945) ======= ======= ======= ======= ======= ======= (LOSS) PER SHARE Basic ($0.004) ($0.003) ($0.003) ($0.012) ($0.008) ($0.006) ======= ======= ======= ======= ======= =======
CALEDONIA MINING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD NINE MONTH PERIOD ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, (UNAUDITED) 2003 2002 2001 2003 2002 2001 ----------- ------- ------- ------- ------- ------- ------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net (loss) for the period ($1,072) ($ 536) ($ 465) ($2,686) ($1,373) ($ 945) Items not involving cash Change in provision for site restoration - - - 18 (2) - Non-controlling interest - - - - - - ------- ------- ------- ------- ------- ------- (1,072) (536) (465) (2,668) (1,375) (945) Change in non-cash working capital balances (180) (169) (264) (516) (83) (98) ------- ------- ------- ------- ------- ------- (1,252) (705) (729) (3,184) (1,458) (1,043) ------- ------- ------- ------- ------- ------- INVESTING ACTIVITIES Purchase of investment - - - - (79) - Expenditures on capital assets (214) (159) 51 (408) (186) 51 Expenditures on mineral properties (110) (46) - (1,191) (59) - ------- ------- ------- ------- ------- ------- (324) (205) 51 (1,599) (324) 51 ------- ------- ------- ------- ------- ------- FINANCING ACTIVITIES Loan payable - - - (44) (1,030) - Issue of share capital and compensation warrants net of issue costs 4,671 1,448 668 7,191 4,120 960 ------- ------- ------- ------- ------- ------- 4,671 1,448 668 7,147 3,090 960 ------- ------- ------- ------- ------- ------- INCREASE (DECREASE) IN CASH FOR THE PERIOD 3,095 538 (10) 2,364 1,308 (32) CASH AND CASH EQUIVALENTS, beginning of period 1,133 860 53 1,864 90 75 ------- ------- ------- ------- ------- ------- CASH AND CASH EQUIVALENTS, end of period $ 4,228 $ 1,398 $ 43 $ 4,228 $ 1,398 $ 43 ======= ======= ======= ======= ======= =======
CALEDONIA MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) CERTIFICATION The Chief Executive Officer and the Vice President Finance confirm the veracity and soundness of these financial and operating results and have provided the board of directors with confirmation supporting this. BASIS OF PRESENTATION These financial statements have been prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. The Company's ability to continue as a going concern is dependent upon attaining profitable operations and obtaining sufficient financing to meet its liabilities, its obligations with respect to operating expenditures and expenditures required on its mineral properties. MEASUREMENT UNCERTAINTIES Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring estimates relate to mineral resources, future cash flows associated with capital assets and mineral properties. Management's calculation of mineral resources and cash flows are based upon engineering and geological estimates and financial estimates including gold prices and operating costs. Actual results could differ from those estimated. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company together with all its subsidiaries. The Company's principal consolidated subsidiaries are Barbrook Mines Limited (100% owned) ("Barbrook"), Eersteling Gold Mining Company Limited (96% owned) ("Eersteling") and Caledonia Mining (Zambia) Limited, Caledonia Kadola Limited, Caledonia Nama Limited and Caledonia Western Limited (all 100% owned) (collectively known as "Caledonia Zambia"). FINANCIAL DISCLOSURE NOTE The unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim reporting. In the opinion of management all adjustments required for a fair presentation are included in these statements in accordance with the accounting policies of the Company. The interim consolidated financial statements should be read in conjunction with the year end 2002 audited financial statements for the detailed note disclosure which is not materially different to these interim financial statements. 1. SHARE CAPITAL Issued and Outstanding On January 6, 2003, the Company concluded a private placement financing for $3.0 million gross proceeds comprised of 12,000,000 units. Each unit is comprised of one common share and one half common share purchase warrant issued at $0.25 per unit. In addition, a total of 1,200,000 whole broker warrants were issued with each warrant exchangeable for one whole common share. Whole warrants are exchangeable for shares at $0.33 per share for a period of one year from closing. A total of 6,720,000 units and 672,000 whole broker warrants were closed on December 31, 2002 for gross proceeds of $1,680,000. The balance of the private placement of $1,320,000 was closed on January 6, 2003. The remaining 528,000 broker compensation warrants were issued upon closing at an assigned value of $0.11 per warrant for a total consideration of $58,000. Share issue costs associated with the January 6, 2003 closing amounted to $119,000 and have been charged to share capital. During the third quarter of 2003, the Company concluded a private placement financing for $5.0 million gross proceeds comprised of 20,000,000 units. Each unit is comprised of one common share and one half common share purchase warrant issued at $0.25 per unit. In addition, a total of 2,000,000 whole broker warrants were issued with each warrant exchangeable for one whole common share. Whole warrants are exchangeable for shares at $0.35 per share for a period of eighteen months from the date of closing. The 2,000,000 broker compensation warrants issued upon closing were assigned a value of $0.08 per warrant for total consideration of $160,000. Share issue costs of $540,000 and have been charged to share capital. During the first nine months of the year a total of 7,405,706 common share were issued pursuant to the exercise of common share purchase warrants for total proceeds of $1,446,000 and 106,475 common shares were issued for the exercise of stock options for proceeds of $40,000. As of September 30, 2003 the Company has 244,587,452 common shares outstanding (December 31, 2002 - 211,795,270). The basic loss per share has been calculated based upon a weighted number of common shares outstanding as follows: For the period ended September 30, 2003 - 225,326,974 For the quarter ended September 30, 2003 - 230,502,911 Stock Options Options to purchase common shares have been granted to directors, officers, employees and consultants at exercise prices determined by reference to the market value on the date of grant. Vesting of options is made at the discretion of the board of directors at the time the options are granted. As at September 30, 2003, the Company has stock options outstanding for the purchase of 11,398,700 common shares (as at December 31, 2002 - 12,680,800 common shares). All of the options outstanding are exercisable. A total of 106,475 options were exercised during the first quarter of 2003 for proceeds of $40,000. There were no stock options granted during the first, second or third quarters of 2003. A total of 1,175,625 stock options expired as unexercised during the second quarter. Warrants As of September 30, 2003, the Company has outstanding warrants to purchase an aggregate of 23,136,660 common shares. 2. OTHER EXPENSE (INCOME) Included in other expense (income) is an unrealized foreign exchange gain of $296,000 (2002 - gain of $22,000; 2001 - gain of $46,000) CORPORATE DIRECTORY BOARD OF DIRECTORS S. E. Hayden J. Johnstone F. C. Harvey W. I. L. Forrest C. R. Jonsson OFFICERS S. E. Hayden Chairman of the Board, President and Chief Executive Officer F. C. Harvey Technical Director J. Johnstone Vice-President Operations and Chief Operating Officer S. W. Poad Vice-President Finance and Administration J. Smith Vice-President Exploration HEAD OFFICE CANADA - HEAD OFFICE Caledonia Mining Corporation Unit #9 2145 Dunwin Drive Mississauga, Ontario L5L 4L9 Canada Tel: (905) 607-7543 Fax: (905) 607-9806 SHARES LISTED The Toronto Stock Exchange Symbol "CAL' NASDAQ OTC BB Symbol "CALVF" CAPITALIZATION (September 30, 2003) Authorized: Unlimited number of common shares Issued Common Shares: 244,587,452 Warrants: 23,136,660 Options: 11,398,700 SOLICITORS Borden Ladner Gervais LLP Suite 4100, Scotia Plaza 40 King Street West Toronto, Ontario M5H 3Y4 Canada Tupper, Jonsson & Yeadon 1710-1177 West Hastings Street Vancouver, British Columbia V6E 2L3 Canada AUDITORS BDO Dunwoody LLP Chartered Accountants Suite 3200, 200 Bay Street Royal Bank Plaza, South Tower Toronto, Ontario M5J 2J8 Canada REGISTRAR & TRANSFER AGENT Equity Transfer Services Inc. Suite 420 120 Adelaide Street West Toronto, Ontario M5H 4C3 Canada Tel: (416) 361-0152 Fax: (416) 361-0470 BANK Canadian Imperial Bank Of Commerce 6266 Dixie Road Mississauga, Ontario L5T 1A7 Canada INTERNET Web Site: http://www.caledoniamining.com