MCM.L Regulatory News (MCM)

 ANNOUNCEMENT 18 JULY 2012

DEBT AND EQUITY FINANCING PACKAGE ARRANGED

FURTHER STEPS TOWARDS FINANCING OF THE MAKHADO PROJECT

Coal of Africa Limited ("CoAL" or the "Company") is pleased to announce that it has entered into a financing package with Investec Bank Limited ("Investec"), pursuant to which Investec will make approximately US$58.7 million available to CoAL through a combination of debt and equity funding. Furthermore, CoAL has the right to require Investec to subscribe for up to a maximum of 81,061,507 CoAL shares in tranches over a 12 month period, subject to certain conditions described below.

CoAL Chief Executive John Wallington commented, "This debt and equity financing package signals good support for our long term growth strategy. The funds will be used for expenditure on key items for the Makhado Project, additional funding for the ramp-up of production at the Vele Colliery and for general working capital purposes. Progress continues to be made at Vele with the coking coal test work and the finalisation of the Phase 1 capital project to enable the achievement of the initial target of 1 million tonnes per annum. The public participation process with the communities at Makhado has made significant progress since the formation of a community representative forum that is engaging positively with the Company."

Equity funding arrangements

Under the equity funding arrangement, Investec has today subscribed for a total of 19,148,408 million CoAL shares. Investec will subscribe for 16,850,599 shares at a subscription price of 29.21 pence per share and 2,297,809 shares at 43.70 cents (Australian) per share, representing a 5% discount to the closing price of CoAL shares on AIM of 30.75 pence and the closing price on the ASX of 46.00 cents, respectively, on 17 July 2012. The aggregate consideration for these shares is approximately US$8.7 million.

The Company will also have a right, for a 12 month period, to require Investec to subscribe for additional CoAL shares in tranches, in each case at a time and in an amount to be agreed between CoAL and Investec, at a 5% discount to the closing price of a CoAL share on the trading day prior to the issue of a subscription notice by Investec. The maximum number of shares for which Investec can be required to subscribe for under this arrangement is 81,061,507 CoAL shares (including the shares already subscribed for), being the maximum number of shares that the Company is permitted to issue under its existing 15% authority to allot shares for cash under ASX Listing Rule 7.1.

The Company intends to utilise the funds made available through the equity funding for continuing pre-mining right development expenditure on key items for the Makhado Project, additional funding for the ramp-up of production at the Vele Colliery and otherwise for general working capital purposes.

Debt funding arrangements

CoAL and Investec have also entered into a credit approved term sheet ("Loan Term Sheet") to provide the Company with a US$50 million two-year loan facility (the "Loan"). The Loan is primarily intended to provide the Company with the ability to replace its existing short term US$40 million 364 day revolving finance facility with JP Morgan Chase to a longer tenor of two years and on more favourable terms.

Under the Loan Term Sheet Investec will provide a facility of US$50 million which may, at CoAL's discretion, be settled in cash or shares over a two year term. The availability of the loan is subject to a number of conditions precedent, including the parties having entered into formal loan financing and security documents.

Other arrangements

In connection with the equity funding arrangements, CoAL and Investec have entered into a derivative agreement pursuant to which the parties agree to pay each other on one or more settlement dates determined by Investec (relative to any shares issued under the Subscription Agreement) an amount referenced to any movements in the CoAL share price between the date of issue of the relevant shares under the Subscription Agreement and the relevant settlement date (with payment due to CoAL if there is an upwards movement and with payment due to Investec if there is a downwards movement in the share price). The derivative agreement has a maximum term of 12 months from the date the relevant shares are issued. During this period, Investec will also be entitled to close out the derivative agreement with CoAL for the balance of any CoAL shares that Investec holds at the closing price of those CoAL shares on the trading day prior to the issue of a subscription notice for those shares, together with any interest accrued thereon.

Further funding for Makhado Project

CoAL is also continuing to consider various long term debt and equity financing options in relation to the expected construction and development costs for the Makhado Project following the granting of the mining right, and has involved three international investment banks in this process. This funding would be in addition to the potential investment in and co-funding of the Makhado Project by Exxaro pursuant to Exxaro's option to acquire an interest in up to 30% of the project.

AUTHORISED BY:

John Wallington

Chief Executive Officer

For more information contact:

www.coalofafrica.com

About CoAL:

CoAL is an AIM/ASX/JSE listed coal exploration, development and mining company operating in South Africa. CoAL's key projects include the Vele Colliery (coking and thermal coal), the Greater Soutpansberg Project, including CoAL's Makhado Project (coking coal) and the Mooiplaats and Woestalleen Collieries (both thermal coal).

The Mooiplaats Colliery commenced production in 2008 and is currently ramping up to produce 1.6 Mtpa. The Woestalleen Colliery, acquired through the acquisition of NuCoal Mining (Pty) Limited in January 2010, currently processes approximately 2.5Mtpa of saleable coal for domestic and export markets. The Woestalleen Complex also incorporates three beneficiation plants with a total processing capacity of 350,000 run-of-mine (ROM) feed tonnes per month.

CoAL's Vele Colliery commenced production in Q1 2012. During the initial phase, the operation is targeting 2.7 Mtpa ROM production to produce 1.0Mtpa of saleable coking coal. The Makhado Project, CoAL's flagship project in the Soutpansberg coalfield, is well into the feasibility stage, with a Definitive Feasibility Study having been reviewed by the CoAL Board in March 2012. An application for a New Order Mining Right for the Makhado Project was submitted in January 2011.

In May 2012, CoAL acquired the Chapudi coal project and several other coal exploration properties in the Soutpansberg coal basin in South Africa, subsequently renamed the Greater Soutspansberg Project, from the previous owners, including Rio Tinto. The Greater Soutpansberg Project is a consolidation of nine potential coking and thermal coal assets grouped into three proximate regions, namely Mopane, Makhado and Chapudi. The acquisition of these assets strengthens Coal of Africa's position as one of the most substantial holders of prospecting and mining rights for coking coal in South Africa's Soutpansberg coalfield.