Caledonia Update on Operations

FOR:  CALEDONIA MINING CORPORATION

TSX SYMBOL:  CAL
OTC Bulletin Board SYMBOL:  CALVF
AIM SYMBOL:  CMCL

October 23, 2008

Caledonia Update on Operations

TORONTO, ONTARIO--(Marketwire - Oct. 23, 2008) - Caledonia Mining Corporation ("Caledonia")
(TSX:CAL)(OTCBB:CALVF)(AIM:CMCL) wishes to update shareholders on the current status of its operations
and projects. The completion of the Chinese Feasibility Study ("CFS") on the Nama Cobalt Project
("Nama") continues to be delayed, and the Blanket Mine in Zimbabwe has been forced to suspend gold
production due to non-payment of gold and the consequent depletion of the mine's essential consumable
stores and spares.

Nama Project

Completion of the CFS continues to experience delays as previously announced in the 2nd Quarter
Management Discussion and Analysis 2008, due to laboratory delays on both the ongoing metallurgical
tests and assay reporting, the additional drilling required to increase the indicated resource base,
and the uncertainty surrounding the Zambian taxation environment.

The additional drilling program on Anomaly D is now complete and has shown the presence of a series of
broad dykes on the North and West which may constrain the size of the operation as originally
envisaged. The diamond drills have been moved to another target approximately 10 kilometres to the
south-west of Anomaly D, which was identified by magnetic surveys and followed up by fieldwork earlier
this year. This target appears to have the potential to considerably increase the resources, which are
necessary for the new Canadian securities NI 43-101 Report to be used in the completion of the CFS.
The initial drilling programme is expected to be completed by year-end, subject to rain delays and the
prompt receipt of assay results from laboratories. This should result in the completion of a new NI 43-
101 Report which is planned for publication in early 2009.

Initial drilling at Konkola West approximately 25 kilometres south of the Anomaly D area has shown "D-
type" mineralisation. Further field work is in progress to identify whether there is a typical
Copperbelt stratigraphy which, if identified, could be drilled during the wet season.

The existing taxation environment in Zambia, whilst not rendering the project un-economic, imposes an
unreasonably heavy burden on investors in the project. Caledonia continues to have constructive
discussions with the Zambian authorities and has made detailed proposals to the requisite Ministries
and Departments for a more appropriate taxation structure for the Nama project. Caledonia awaits a
response from the Zambian authorities, but has been advised that this is unlikely until after the
Zambian Presidential elections, which are scheduled to take place on October 30, 2008. Nama's future
tax liabilities are a key component of the CFS and affects the project's economic viability.

Whilst Management is doing its best to progress the CFS towards completion, it cannot provide guidance
at this stage on the timing as some of the key elements, especially funding availability, are beyond
Caledonia's control.

Blanket Mine, Zimbabwe

Gold production at the Blanket Mine has been temporarily suspended due to the continuing non-payment
of foreign exchange by the Reserve Bank of Zimbabwe ("RBZ") for the sale of gold delivered to Fidelity
Printers and Refiners ("Fidelity"), a subsidiary of the RBZ. Zimbabwean law requires 100% of gold
produced in the country be sold and delivered to Fidelity regardless of whether previous sales have
been paid for or not.

Despite the economic hardships in Zimbabwe Blanket managed to produce 2,989 ounces of gold in the 2nd
quarter ended June 30, 2008, and 2,208 ounces of gold in the 3rd quarter ended September 30, 2008.
This however depleted its stocks of essential consumable stores, which once exhausted forced Blanket
to suspend production.

Blanket requires regular monthly access to foreign exchange in order to purchase the wide range of
consumables and spares that are essential to the mining and metallurgical production requirements, and
vital for the safety of its workforce.

Caledonia remains committed to its Zimbabwean management, staff and operations. In the interests of
retaining the skills and experience of the Blanket workforce, the suspension of production will not
result in any immediate layoffs. The ability to retain the workforce depends entirely on Blanket being
able to convert sufficient US Dollars owed to it by RBZ into Zimbabwe Dollars at acceptable exchange
rates in order to pay and feed its workforce. During the period of the suspension of production the
workforce will be re-deployed to carry out ongoing maintenance work to protect the operating integrity
of the mine and related infrastructure.

Management believes that Blanket can be brought back into production at recent historical levels of
production relatively quickly once the RBZ effects payment of the US Dollars owed to Blanket.
Moreover, if Blanket can secure prompt and regular access to US Dollars from gold sales to Fidelity,
Blanket could further increase production to a sustainable level of 40,000 ounces per annum by
completion of the No.4 shaft expansion project.

Rooipoort and Mapochsgronde PGM Projects

Caledonia and Mitsubishi Corporation have extended the deadline for the completion of the suspensive
conditions of the Heads of Agreement by four months in order to accommodate transfer and
registration by the South African Department of Mineral and Energy Affairs of the various prospecting
rights into the names of the two companies that will hold the assets for the respective projects. Once
registration has been completed and other conditions are satisfied, the Joint Venture will come into
effect and exploration will commence immediately.

Eersteling

In the unaudited financial statements for the six months to June 30, 2008 Caledonia reported that it
had issued a notice of default to Oretech Resources Inc. ("Oretech") in respect of the purchase by
Oretech of the shares in Eersteling Gold Mining Company Limited. Caledonia has not formally cancelled
the agreement but Oretech has advised that it will not be able to complete the purchase as it could
not raise the required funding.

Healthy Cash Position to Weather Current Economic Turmoil

Following the sale of Barbrook Mines Limited earlier this year, Caledonia maintains sufficient net
cash holdings and is well-placed to weather the prevailing market conditions for some time without
further funding requirements until completion of the Nama CFS demonstrating that the project is
viable.

Next Update

Caledonia will provide a further update to shareholders in the 3rd Quarter Management Discussion and
Analysis which will be distributed to shareholders by November 14, 2008.

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FOR FURTHER INFORMATION PLEASE CONTACT:

Caledonia Mining Corporation
Mark Learmonth
VP Corporate Development and Investor Relations
[phone]
Email: [e-mail]
Website: www.caledoniamining.com

OR

BuckBias
Alex Buck
[phone]

OR

RBC Capital Markets
Martin Eales
[phone]

INDUSTRY:  Manufacturing and Production-Mining and Metals
SUBJECT:   MEX

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Caledonia Mining Corp