Mc Mining Regulatory News (MCM)

ANNOUNCEMENT 31 July 2014

REPORT FOR THE QUARTER ENDED 30 JUNE 2014

 Repositioning Coal of Africa

Coal of Africa Limited ("CoAL" or "the Company") which operates in South Africa, together with its subsidiaries, hereby provides its operational report for the quarter ended 30 June 2014. All figures are denominated in United States dollars unless otherwise stated. A copy of this report is available on the Company's website, www.coalofafrica.com. The Company will provide a further update on the release of its Annual Report in September 2014.

Salient Features

· No lost-time injuries recorded during the quarter (FY2014 Q3: one).

· Sedgman continued with the Front End Engineering and Design ("FEED") process for the Vele Colliery plant modification.

· Independent consultants Snowden appointed to undertake a Technical Review of the Vele Colliery, expected to be completed during Q3 CY2014.

· Work continued on the applications for regulatory amendments required for the Vele Colliery plant modifications.

Corporate and Financial Features

· Settlement of the business interruption insurance claim relating to the February 2013 train derailment on the Maputo corridor and receipt of R15.96 million ($1.5 million).

· Receipt of the R5 million ($0.5 million) deposit for the sale of the Opgoedenhoop mining right with the balance of the R20.8 million ($2 million) purchase price due by March 2015.

· Continued interaction with potential funders of the BEE structure which will facilitate the finalisation of their acquisition of a 26% interest in the Makhado Project.

· Discussions on both the outstanding $30 million payment to Rio Tinto and on the Grindrod take or pay liability continued with good progress made during the quarter.

· Available cash at period end of $2 million and restricted cash of $6.7 million.

Post period highlights

· Signature of a term sheet in July 2014 for rehabilitation guarantees facilitating the release of R12 million ($1.1 million) of restricted cash.

Commenting today, Mr David Brown, Chief Executive Officer said: "Significant progress on the disposal of the Mooiplaats Colliery was made during the period with potential purchasers' due diligence processes at an advanced stage. The proceeds from the disposal of Mooiplaats will be used to reduce the Investec working capital facility and partially settle outstanding liabilities and, will complete the disposal process of the thermal coal portfolio. The Company is assessing various additional funding mechanisms which are expected to be finalised during Q3 CY2014, including the replacement of cash-backed rehabilitation guarantees with longer-term insurance facilities. This action and the replacement of the Woestalleen guarantees by the purchaser (which is expected imminently) will facilitate the release of $2.8 million of restricted cash, and ensures that the Company has sufficient funds for the next quarter prior to any of the other initiatives being successful.

The Sedgman FEED, Snowden Technical Review and legislative compliance work undertaken on the Vele Colliery during the quarter will enable the construction of the plant modifications to commence towards the end of CY2014, subject to the project delivering an acceptable return supported by off-take agreements and the requisite funding."

QUARTERLY COMMENTARY

Mooiplaats Colliery - Ermelo Coalfield (74% owned)

The Mooiplaats thermal coal colliery ("Mooiplaats Colliery") was placed on care and maintenance during the September 2013 quarter and recorded no lost time injuries ("LTIs") during the period (FY2014 Q3: nil LTIs).

The Mooiplaats Colliery disposal process continued during the period and the Company is awaiting signed offers and proof of funding from prospective purchasers with a view to completing a transaction during H2 CY2014.

Vele Colliery - Limpopo (Tuli) Coalfield (100% owned)

The Vele coking and thermal coal colliery ("Vele Colliery") recorded no LTIs during the quarter (FY2014 Q3: nil LTIs).

As a result of reduced activity at site pending finalisation of various processes underway relating to the anticipated plant modification, the colliery did not produce or process coal during the quarter. During the period the Snowden Group ("Snowden") commenced with a Technical Review of the Vele Colliery plant modification and Sedgman South Africa ("Sedgman") continued with the FEED process for the plant modification project. Both processes are expected to be completed during Q3 CY2014 and improvements to the existing plant will result in the simultaneous production of semi-soft coking coal and export quality thermal coal. The construction of the plant modification is expected to commence in Q4 CY2014 and be completed by the end of CY2015 with the production ramp-up phase complete in early CY2016.

During the quarter the Company received stakeholder input for the application to amend the Environmental Authorisation in terms of the National Environmental Management Act relating to the Vele plant modification project. No material issues were raised and the Company is confident that the record of decision from the Department of Environmental Affairs will be received during Q3 CY2014. Extensive work on the application to amend the colliery's Integrated Water Use Licence ("IWUL") to include the plant modifications was undertaken during the quarter and this application is expected to be submitted during August 2014. CoAL does not expect that the IWUL application will result in any delays to the construction of the plant modifications or subsequent production as the existing IWUL remains valid.

Discussions with potential customers for the Vele Colliery coal continued during the quarter and the Company expects to convert these into formal off-take agreements in H2 CY2014.

Makhado Coking Coal Project - Soutpansberg Coalfield (100% owned)

The Makhado coking coal project ("Makhado Project") recorded no LTIs (FY2014 Q3: no LTIs) during the quarter.

As required under South African mining legislation, a minimum 26% Black Economic Empowerment ("BEE") shareholding is required for mining and exploration projects. The Company signed a Memorandum of Agreement during the March 2014 quarter to enable a BEE consortium comprising seven local communities to acquire an interest ensuring that the Makhado Project has the requisite corporate structure for the granting of the New Order Mining Right ("NOMR"). Discussions continued with potential funders to facilitate the BEE consortium's acquisition of its interest and the Company anticipates that these will be finalised during H2 CY2014, expediting the granting of the NOMR.

Greater Soutpansberg Project (MbeuYashu) (74% owned)

The MbeuYashu Project recorded no LTIs (FY2014 Q3: no LTIs) during the period.

During the quarter the Company finalised the public participation programmes in relation to the Environmental Impact Assessment phase for the Generaal, Chapudi and Mopane projects, all forming the Greater Soutpansberg Project.

Cash Position

The scaling down of activities at the Company's projects earlier in FY2014 resulted in no cash being received from operating activities during the period (Q3 FY2014: $3.5 million). Cash outflows included production expenses (care and maintenance expenses) of $0.6 million (FY2014 Q3: $0.5 million), spend on Vele of $0.7 million (FY2014 Q3: $0.6 million) and $0.4 million (FY2014 Q3: $0.5 million) paid as a result of the Company's take of pay obligations net of the recovery of logistics costs from third party users at the Matola Terminal in Mozambique. During the period the Company received the first tranche of R5 million ($0.5 million) for the sale of the Opgoedenhoop NOMR, with the balance of the R20.8 million ($2 million) purchase price payable on the earlier of the granting of the water use licence or the one year anniversary of the Section 11 approval, being 27 March 2015.

The estimated cash outflow for the quarter ending September 2014 included in the 5B report (attached to this commentary) is expected to be $4.7 million of which a total of $0.6 million will be spent on development and production, while administration expenses of $3.7 million will be required to cover all other overhead costs. These will be paid from cash balances, proceeds from the sale of non-core assets and the release of restricted cash utilised for rehabilitation guarantees.

Strategic and Corporate Update

During the quarter the Company assessed various interim funding mechanisms which will fund the Vele Colliery plant modifications, settle outstanding liabilities and provide general working capital. The Company is evaluating a number of options that include potential debt funding, potential equity funding, and receipts from the sale of non-core assets. The Company expects the process to be completed during Q3 CY2014.

The Company made significant progress finalising the Turnaround Strategy during the reporting period, including:

1. Sale of Non-Core Assets: Mooiplaats is the only remaining non-core asset available for sale and potential buyers' due diligence processes are at an advanced stage with a successful sale due to be finalised before the end of CY2014. The Company also expects to finalise the previously announced R50 million ($4.8 million) disposal of Holfontein during CY2014, having received an option fee of R5 million ($0.5 million) during December 2013, and will dispose of the remaining shares it holds it holds in AIM listed Bushveld Minerals Ltd, depending on market conditions.

2. Arbitration: The Envicoal arbitration progressed during the quarter and is expected to be completed during the quarter ending September 2014, resolving all material legal claims.

3. Outstanding Rio Tinto and Grindrod liabilities: The Company continued negotiations with Rio Tinto in order to reach an agreement on payment terms for the outstanding $30 million of the Greater Soutpansberg purchase price, acquired during CY2012. This process is expected to be finalised during the September 2014 quarter together with the agreement on the Grindrod take or pay liability.

4. Vele plant modification and off-take agreements: The FEED process for the planned Vele Colliery plant modification continued during the quarter and is scheduled to coincide with the finalisation of the Technical Review and off-take agreements during H2 CY2014.

Authorised by

David Brown

Chief Executive Officer

31 July 2014

For more information contact:

Company advisors:

Investec Bank Limited is the nominated JSE Sponsor

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 /MbeuYashu, including CoAL's Makhado Project (coking and thermal coal).

Tenements held by CoAL and its Controlled Entities

* Form part of the Greater Soutpansberg Project

- Lapsed - Mining Right Application Lodged

-- Valid - Mining Right Application Lodged

~ Tenement located in the Republic of South Africa

^ Tenement located in Western Australia