Mc Mining Regulatory News (MCM)

COAL OF AFRICA LIMITED

ABN 98 008 905 388

Notice of General Meeting AND Explanatory Memorandum to Shareholders

Date of Meeting

25 September 2014

Time of Meeting

10 a.m. (London time)

Place of Meeting

Tavistock Communications

8th Floor

131 Finsbury Pavement

London EC2A 1NT

A Proxy Form is enclosed

Please read this Notice and Explanatory Memorandum carefully.

If you are unable to attend the General Meeting please complete and return the enclosed Proxy Form in accordance with the specified directions.

Coal of Africa Limited

ABN 98 008 905 388

Notice of General Meeting

Notice is hereby given that a General Meeting of Shareholders of Coal of Africa Limited ABN 98 008 905 388 will be held at 10 a.m. (London time) on 25 September 2014 at Tavistock Communications, 8th Floor, 131 Finsbury Pavement, London EC2A 1NT for the purpose of transacting the following business referred to in this Notice of General Meeting.

AGENDA

ITEMS OF BUSINESS

1. Resolution 1 - Approval of issue of Shares

To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

"That, for the purpose of Listing Rule 7.1 and all other purposes, the Company approves the allotment and issue of up to 695,000,000 Shares at an issue price of GBP0.055 per Share, as more particularly described in the Explanatory Memorandum accompanying the Notice."

OTHER BUSINESS

For the purposes of this Notice of General Meeting, the following definitions apply:

ASX means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited.

Board means the board of Directors of the Company.

Company means Coal of Africa Limited ABN 98 008 905 388.

Constitution means the Company's constitution, as amended from time to time.

Corporations Actmeans the Corporations Act 2001 (Cth).

Director means a director of the Company from time to time.

Explanatory Memorandummeans the explanatory memorandum accompanying this Notice.

GBP means pounds sterling.

Listing Rulesmeans the Listing Rules of the ASX.

Notice means this Notice of General Meeting.

Resolution means a resolution contained in this Notice.

Shares means fully paid ordinary shares in the capital of the Company.

By order of the Board

Tony Bevan

Company Secretary

Dated: 26 August 2014

How to vote

Shareholders can vote by either:

· attending the meeting and voting in person or by attorney or, in the case of corporate shareholders, by appointing a corporate representative to attend and vote; or

· appointing a proxy to attend and vote on their behalf using the proxy form accompanying this Notice and by submitting their proxy appointment and voting instructions in person, by post or by facsimile.

Voting in person (or by attorney)

Shareholders, or their attorneys, who plan to attend the meeting are asked to arrive at the venue 15 minutes prior to the time designated for the meeting, if possible, so that their holding may be checked against the Company's share register and attendance recorded. Attorneys should bring with them an original or certified copy of the power of attorney under which they have been authorised to attend and vote at the meeting.

Voting by a corporation

A shareholder that is a corporation may appoint an individual to act as its representative and vote in person at the meeting. The appointment must comply with the requirements of section 250D of the Corporations Act. The representative should bring to the meeting evidence of his or her appointment, including any authority under which it is signed.

Voting by proxy

· A shareholder entitled to attend and vote is entitled to appoint not more than two proxies. Each proxy will have the right to vote on a poll and also to speak at the meeting.

· The appointment of the proxy may specify the proportion or the number of votes that the proxy may exercise. Where more than one proxy is appointed and the appointment does not specify the proportion or number of the shareholder's votes each proxy may exercise, the votes will be divided equally among the proxies (i.e. where there are two proxies, each proxy may exercise half of the votes).

· A proxy need not be a shareholder.

· The proxy can be either an individual or a body corporate.

· If a proxy is not directed how to vote on an item of business, the proxy may generally vote, or abstain from voting, as they think fit.

· Should any resolution, other than those specified in this Notice, be proposed at the meeting, a proxy may vote on that resolution as they think fit.

· If a proxy is instructed to abstain from voting on an item of business, they are directed not to vote on the shareholder's behalf either on a show of hands or on the poll and the shares that are the subject of the proxy appointment will not be counted in calculating the required majority.

· Shareholders who return their proxy forms with a direction how to vote but do not nominate the identity of their proxy will be taken to have appointed the Chairman of the meeting as their proxy to vote on their behalf. If a proxy form is returned but the nominated proxy does not attend the meeting, the Chairman of the meeting will act in place of the nominated proxy and vote in accordance with any instructions. Proxy appointments in favour of the Chairman of the meeting, the secretary or any Director that do not contain a direction how to vote will be used where possible to support each of the resolutions proposed in this Notice, provided they are entitled to cast votes as a proxy under the voting exclusion rules which apply to some of the proposed resolutions. These rules are explained in this Notice.

· To be effective, proxies must be lodged by 10 a.m. (London time) on 23 September 2014. Proxies lodged after this time will be invalid.

· Proxies may be lodged using any of the following methods:

- by returning a completed proxy form in person or by delivery or post using the pre-addressed envelope provided with this Notice to:

Coal of Africa Limited

Suite 8, 7 The Esplanade,

Mt Pleasant

Western Australia 6153

Australia 

- by faxing a completed proxy form to the facsimile number provided on the Proxy Form accompanying this Notice.

The proxy form must be signed by the shareholder or the shareholder's attorney. Proxies given by corporations must be executed in accordance with the Corporations Act. Where the appointment of a proxy is signed by the appointer's attorney, a certified copy of the power of attorney, or the power itself, must be received by the Company at the above address, or by facsimile, and by 10 a.m. (London time) on 23 September 2014. If facsimile transmission is used, the power of attorney must be certified.

Shareholders who are entitled to vote

In accordance with Regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001, the Board has determined that a person's entitlement to vote at the General Meeting will be the entitlement of that person set out in the Register of Shareholders as at 10 a.m. (London time) on 23 September 2014. Changes in the register of shareholders after this time will be disregarded in determining the rights of any person to attend and vote at the meeting.

Coal of Africa Limited

ABN 98 008 905 388

EXPLANATORY MEMORANDUM

This Explanatory Memorandum is intended to provide shareholders with sufficient information to assess the merits of the Resolution contained in the accompanying Notice of General Meeting of Coal of Africa Limited ("CoAL" or the "Company").

Certain abbreviations and other defined terms are used throughout this Explanatory Memorandum. Defined terms are generally identifiable by the use of an upper case first letter. Details of the definitions and abbreviations are set out in the Glossary to this Explanatory Memorandum.

Background to Resolution 1

Key terms of the Placement

On 26 August 2014, the Company announced it was proposing to undertake a private placement to raise up to approximately GBP38.225 million (or approximately US$64.9 million) through the issue of up to 695,000,000 new Shares ("Placement Shares") at an issue price of GBP0.055 per Share ("Placement"). A copy of this announcement is attached as Annexure A to this Explanatory Memorandum.

The Placement Shares are proposed to be issued in two separate stages:

· the issue of 251,000,000 Shares ("Stage 1 Placement Shares") to raise a total of approximately GBP13.805 million, conditional upon the fulfilment of the Stage 1 Conditions as defined below ("Stage 1 Placement"); and

· the issue of 444,000,000 Shares ("Stage 2 Placement Shares") to raise a total of approximately GBP24.420 million, conditional upon the fulfilment of the Stage 2 Conditions as defined below ("Stage 2 Placement").

The Placement Shares are proposed to be issued to the entities set out in the table below ("Placees"), pursuant to subscription agreements entered into between the Placees and the Company on or about 26 August 2014 ("Subscription Agreements"):

Under the Subscription Agreements, the Stage 1 Placement is conditional upon the following conditions ("Stage 1 Conditions"):

· the approval by the Company's shareholders of Resolution 1 at the Meeting;

· HEI and M&G each having received confirmation from the Treasurer of the Commonwealth of Australia under the Foreign Acquisitions and Takeovers Act 1975 (Cth) that it has no objection to the acquisition by HEI and M&G of their respective Placement Shares; and

· HEI having received all necessary regulatory approvals within the People's Republic of China for it to acquire its Placement Shares.

The Stage 1 Placement Shares will be issued and paid for within three Business Days of the date on which CoAL notifies the Placees that each of the Stage 1 Conditions has been satisfied.

If any of the Stage 1 Conditions has not been satisfied by 23 November 2014, or such later date as the Company and the Placees agree (not to be later than the Stage 2 Cut-Off Date, as defined below), the Subscription Agreements will automatically terminate and the Placement will not proceed.

Under the Subscription Agreements, the Stage 2 Placement is conditional upon the following conditions ("Stage 2 Conditions"):

· completion of the Stage 1 Placement having taken place ("Stage 1 Completion Condition"); and

· TMM having obtained sufficient funds to purchase its Stage 2 Placement Shares or the Company having found a substitute investor or investors to subscribe for TMM's Stage 2 Placement Shares and each such investor having entered into a subscription agreement with the Company in respect of some or all of TMM's Stage 2 Placement Shares on substantially similar terms to the Subscription Agreements ("TMM Condition").

The Stage 2 Placement Shares will be issued and paid for within three Business Days of the date on which CoAL notifies the Placees that the TMM Condition has been satisfied (unless the TMM Condition is satisfied before the Stage 1 Completion Condition has been satisfied, in which case the Stage 2 Placement Shares will be issued and paid for at the same time as the Stage 1 Placement Shares).

Under the Subscription Agreement with TMM, if TMM has not obtained sufficient funds to purchase its Stage 2 Placement Shares by 1 December 2014, then the Company has the right to terminate TMM's participation in the Stage 2 Placement. In that case, the Company may seek to find one or more other investors to take up TMM's Stage 2 Placement Shares at the issue price of GBP0.055 per Share and otherwise on substantially similar terms.

If the Stage 1 Completion Condition has been satisfied, but the TMM Condition has not been satisfied, by the earlier of (1) 24 December 2014 and (2) the date which is three Business Days earlier than three months after the date of the EGM (the "Stage 2 Cut-Off Date"), then the Stage 1 Placement will proceed but the Stage 2 Placement will not proceed.

The Company will notify ASX as and when it receives notice that a condition has been fulfilled.

CoAL has given certain limited warranties to the Placees under the Subscription Agreements ("Warranties"), and each Placee has the right to terminate its participation in the Placement if it becomes aware that there has been a breach of any Warranty, or any fact or circumstance has arisen which would render any of the Warranties untrue or inaccurate or misleading in any respect which, in the reasonable opinion of the relevant Placee, is material in the context of its investment in CoAL, in each case as if the Warranties were repeated at all times between the date of the Subscription Agreements and completion of the relevant stage of the Placement. If a Placee terminates its Subscription Agreement before the Stage 1 Placement has completed, then each other Placee will also have the right to terminate its Subscription Agreement and the number of Placement Shares may decrease accordingly or the Placement may not proceed at all. If a Placee terminates its Subscription Agreement after the Stage 1 Placement has completed, then each other Placee will have the right to terminate its Subscription Agreement, but only insofar as it relates to their participation in the Stage 2 Placement and CoAL will be entitled to retain the proceeds from the Stage 1 Placement.

The Company has been informed by each of HEI and M&G that they have sought approval from the Foreign Investment Review Board ("FIRB") for the acquisition of their respective Placement Shares. The Company has also been informed by HEI that it has submitted the necessary applications for the regulatory approvals required to satisfy the Stage 1 Conditions.

Shareholdings in the Company

As at the date of this Explanatory Memorandum, the following Placees were substantial shareholders in the Company:

If the Placement proceeds, the shareholdings of the Placees in the Company are expected to be:

Use of Placement proceeds 

Subject to completion, the Company intends to use the proceeds raised from the Placement primarily as follows:

· To settle the outstanding acquisition consideration of the tenements comprised in the Company's Greater Soutpansberg Projects;

· To implement modifications to the existing plant at the Vele Colliery;

· To resolve the current contractual exposure resulting from the take or pay provisions of the throughput agreement between the Company, Terminal De Carvao Da Matola Limitada and Grindrod Corridor Management Proprietary Limited;  

· To settle the Investec Bank Limited working capital facility in accordance with its terms; and

· To fund the Company's expected working capital requirements for the next 18 months.

In addition to the Placement, the Company is seeking to secure funding from the planned disposal of certain non-core assets, including the Mooiplaats Colliery, within the next 18 months, and is reliant on that funding as well as the Placement proceeds to be able to achieve all of the uses stated above. While the Directors are confident of completing one or more of these planned disposals, there can be no guarantee that any of these initiatives will be successful. Further, even if successful, these planned disposals would not provide all the funding required to satisfy the Company's needs without the Placement.

If the Placement is not approved at the Meeting or does not proceed in whole or in part for any other reason, including as a result of any of the other Placement conditions not being satisfied, or the Company is not able to achieve the planned disposal of certain non-core assets including the Mooiplaats Colliery (whether at all or for the expected amount) within the next 18 months, the Company will need to seek funding from other sources to meet its future capital expenditure and working capital needs. While the Company is confident of being able to obtain substitute funding if the planned disposal of certain non-core assets including the Mooiplaats Colliery does not go ahead, it would be significantly more challenging to obtain alternative funding if the Placement proceeds are not received in full, and there can be no guarantee that such funding will be available at all or that, if available, it will be on terms which are commercially acceptable to the Company. It is therefore vitally important to the continued operation of the Company that shareholders vote in favour of Resolution 1 at the Meeting.

If Stage 2 Placement does not proceed

In the event that TMM is not able to obtain sufficient funds to purchase its Stage 2 Placement Shares, the Company has the right to terminate TMM's participation in the Stage 2 Placement and is confident that alternative methods could be implemented to obtain the funds that would otherwise have been provided by TMM.

In particular, the Company has already engaged with third parties who, for timing reasons, have been unable to participate in the Placement and who could possibly absorb TMM's Stage 2 Placement Shares if needed. Additionally, the Company has the ability to issue up to 15% of the Company's total issued share capital without requiring further shareholder approval, which could be utilised if the Stage 2 Placement does not proceed.

The Directors only intend to progress these alternative funding options if the Placement cannot proceed as currently planned. There is no current intention to obtain additional funding beyond the Placement proceeds and the proceeds of planned asset disposals as described above.

RESOLUTION 1 - APPROVAL OF ISSUE OF PLACEMENT SHARES

Resolution 1 seeks shareholder approval to the issue of a maximum of 695,000,000 Shares at an issue price of GBP 0.055 per Share.

Listing Rule 7.1 requires shareholder approval for the proposed Placement. Listing Rule 7.1 broadly provides, subject to certain exceptions, that a listed company must not, without prior approval of its shareholders, issue securities if the number of securities issued, or when aggregated with the number of securities issued by the company during the previous 12 months, exceeds 15% of the number of securities on issue at the commencement of that 12 month period.

Given the issue of the Placement Shares under the Placement will exceed this 15% threshold and none of the exceptions in Listing Rule 7.2 apply, shareholder approval is required in accordance with Listing Rule 7.1.

The effect of Resolution 1 will be to allow the Company to issue the Placement Shares during the period of 3 months after the date of the Meeting (or a longer period if allowed by ASX), without using the Company's 15% annual placement capacity, if the other Placement conditions are satisfied or waived (if applicable).

The following information in relation to the Placement Shares is provided to shareholders for the purposes of Listing Rule 7.3:

(a) the maximum number of Shares the Company will issue is 695,000,000;

(b) the Company will allot and issue the Stage 1 Placement Shares three Business Days after the date on which CoAL is notified that all of the Stage 1 Conditions have been fulfilled and no later than three months after the date of the Meeting unless otherwise extended by ASX granting a waiver to the Listing Rules;

(c) the Company will allot and issue the Stage 2 Placement Shares three Business Days after the date on which CoAL is notified that the TMM Condition has been fulfilled (unless the TMM Condition is satisfied before the Stage 1 Completion Condition has been satisfied, in which case the Stage 2 Placement Shares will be issued and paid for at the same time as the Stage 1 Placement Shares) and no later than three months after the date of the Meeting unless otherwise extended by ASX granting a waiver to the Listing Rules;

(d) the issue price of the Placement Shares is GBP0.055 per Share;

(e) the Placement Shares will be issued to the Placees as set out in the section entitled "Key terms of the Placement" in this Explanatory Memorandum;

(f) upon issue, the Placement Shares will be fully paid ordinary shares in the capital of the Company and rank equally in all respects with the existing fully paid ordinary shares on issue;

(g) the intended use of the Placement funds raised is as set out in the section entitled "Use of Placement proceeds" in this Explanatory Memorandum; and

(h) a voting exclusion statement has been included in the Notice.

BOARD'S RECOMMENDATION

The Board unanimously recommends that shareholders of the Company support the issue of the Placement Shares and vote in favour of Resolution 1 at the Meeting and those Directors who hold Shares intend to vote their Shares in favour of Resolution 1.

1 Based on an exchange rate as at 19 August 2014 of GBP 1: US$1.70.

2 Assumes TMM subscribes for Shares under the Stage 2 Placement.

3 Assumes TMM subscribes for Shares under the Stage 2 Placement.

GLOSSARY

ASX means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited.

Board means the board of Directors of the Company.

Business Day means any day that banks are open for business in London, United Kingdom, and Johannesburg, Republic of South Africa.

Company means Coal of Africa Limited ABN 98 008 905 388.

Constitution means the constitution of the Company, as amended from time to time.

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company from time to time.

Exchange Ratemeans the GBP - Rand or the GBP - US$ (as applicable) midpoint currency spot exchange rate published by Bloomberg at 17:00 (South African time) on (1) in the case of the first stage of the Placement, the Business Day immediately preceding the completion date for the issue of the first stage Placement Shares, and (2) in the case of the second stage of the Placement, the Business Day immediately preceding the completion date for the issue of the second stage Placement Shares.

FIRB has the meaning given in this Explanatory Memorandum.

GBP means pounds sterling.

Listing Rules means the Listing Rules of the ASX.

Meeting means the General Meeting the subject of the Notice.

Notice means the notice of General Meeting which accompanies this Explanatory Memorandum.

Placees has the meaning given in this Explanatory Memorandum.

Placement has the meaning given in this Explanatory Memorandum.

Placement Shareshas the meaning given in this Explanatory Memorandum.

Rand means the South African rand.

Resolution means a resolution proposed pursuant to the Notice.

Shares means fully paid ordinary shares in the capital of the Company.

Stage 1 Placement has the meaning given in this Explanatory Memorandum.

Stage 1 Completion Condition has the meaning given in this Explanatory Memorandum.

Stage 1 Conditions has the meaning given in this Explanatory Memorandum.

Stage 1 Placement Shares means the Shares proposed to be issued under the Stage 1 Placement.

Stage 2 Placement has the meaning given in this Explanatory Memorandum.

Stage 2 Conditions has the meaning given in this Explanatory Memorandum.

Stage 2 Cut-Off Date has the meaning given in this Explanatory Memorandum.

Stage 2 Placement Shares means the Shares proposed to be issued under the Stage 2 Placement.

Subscription Agreementshas the meaning given in this Explanatory Memorandum.

TMM Condition has the meaning given in this Explanatory Memorandum.

US$ means United States dollars.

Warranties has the meaning given in this Explanatory Memorandum.