Mc Mining Regulatory News (MCM)

ANNOUNCEMENT 28 October 2016

REPORT FOR THE QUARTER ENDED 30 September 2016

Progress in identifying cash generating asset

Coal of Africa Limited ("CoAL" or "the Company") which operates in South Africa, together with its subsidiaries, hereby provides its update for the quarter ended 30 September 2016. 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.

Salient Operational Features

· No lost-time injuries ("LTIs") recorded during the quarter (FY2016 Q4: nil).

· The Integrated Water Use Licence ("IWUL") for the Makhado Project remains suspended following an appeal to the Department of Water and Sanitation ("DWS") submitted by the Vhembe Mineral Resources Forum. Discussions continue with the Minister of Water and Sanitation.

· The Company has made significant progress in the identification of possible cash generating assets.

Corporate and Financial Features

· Available cash at period end was US$11.9 million and restricted cash of $0.3million.

QUARTERLY COMMENTARY

Makhado Coking Coal Project ("Makhado Project") - Soutpansberg Coalfield (100% owned - 74% post BBBEE transaction)

The Makhado Project recorded no LTIs (FY2016 Q4: nil) during the quarter.

Makhado's 26-month construction phase is expected to begin as soon as all regulatory approvals are in place (expected during CY2017). This delayed start up reflects the complex environment in which South African mining companies operate. CoAL remains committed to ensuring that the requisite processes are completed as efficiently as possible. Post construction, a further four month ramp-up phase will result in the production of 5.5 million tonnes per annum ("Mtpa") of saleable product.

During FY2016 Q2 the Company was granted a 20-year IWUL for the Makhado project. Following an appeal to the DWS submitted by the Vhembe Mineral Resources Forum and other parties, the IWUL was automatically suspended under Section 148 (2) (b) of the South African National Water Act No 36 of 1998. This appeal had been anticipated, and CoAL is in the process of preparing an urgent representation to the Minister of Water and Sanitation to request that the IWUL remain in full force and effect pending the final conclusion of the appeal by the Water Tribunal.

An interim court interdict seeking to halt any mining or construction activity was issued against the Makhado Project during Q2 FY2014. The matter was heard in the North Gauteng High Court on 3 December 2015 with judgment handed down on Tuesday 8 December 2015 on two matters. The first relates to the condition to compel CoAL to conduct a Strategic Regional Impact Assessment and secondly a review of the Environmental Authorisation ("EA"). The condition compelling CoAL to conduct a Strategic Regional Impact Assessment has been set aside. The interim interdict against the EA remains in place pending the review of the authorisation.

The Company applied to the Department of Mineral Resources ("DMR") and Limpopo Department of Economic Development, Environment and Tourism ("LEDET") to amend the EA, amending the holder of the authorisation from CoAL to Baobab, the legal operating entity of the Makhado Project, thus ensuring the alignment of the ownership of the full suite of regulatory authorisations for the Project within the appropriate vehicle. The Company also applied for an extension of the validity period of the EA. Both the DMR and LEDET have granted the extension of the validity period of the EA for an additional five years and have granted the transfer of the EA from CoAL to Baobab.

CoAL remains committed to the sustainable development of the Makhado Project, whilst recognising its potential to drive significant socio-economic transformation. The Company continues to engage with all stakeholders to ensure the on-going implementation of a co-existent model, seeking co-operation between mining, agriculture and heritage land uses.

Mooiplaats Colliery - Ermelo Coalfield (74% owned)

The Mooiplaats thermal coal colliery was placed on care and maintenance during Q1 2014, and recorded no LTIs during the period (FY2016 Q4: nil).

During the current quarter the Company continued discussions with potential purchasers and is assessing various options regarding a transaction at the colliery. Interested parties are in various stages of the due diligence process.

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

The Vele coking and thermal coal colliery ("Vele Colliery") recorded no LTIs during the quarter (FY2016 Q4: nil).

The IWUL for the Vele Colliery has been renewed for a further 20 years and has also been amended in line with the requirements for the Plant Modification Project ("PMP") at the Colliery.

During H2 2015, the Company commenced a process to obtain approval relating to a non-perennial stream diversion. This decision is anticipated in H2 2016. Once this regulatory approval in respect of the Colliery has been received, the final decision to proceed with the PMP will be placed before the board. This decision will include an assessment of forecast global coal prices.

Greater Soutpansberg Project (MbeuYashu) (74% owned)

The MbeuYashu Project recorded no LTIs (FY2016 Q4: nil) during the period.

No other significant matters to report.

Corporate

The Board has been engaged in identifying potential cash generating acquisition targets over the past quarter. The management team is tasked with engaging with these targets with a view to executing a transaction. CoAL's management team is engaged in discussions with current shareholders and potential investors to ensure any possible acquisition can be appropriately funded. Any process of this nature does not confer certainty and the Company will keep the market updated in a timely manner and on an appropriate basis.

Markets

The coal commodity market has experienced a sensational recovery during CY2016. By the end of September 2016 hard coking coal prices increased by 142% to more than US$210 per tonne as a result of a production shortfall and the recovery of the steel industry. The thermal coal price has also increased by 56% since December 2015. CoAL is optimistic about the opportunities created by the commodity price increase for both its Vele Colliery and the Makhado Project, but it needs to evaluate the sustainability of these prices as part of the investment decisions for these projects.

David Brown, CEO commented: "The current company focus is to obtain a cash generating asset for the group. This will allow the Company access to sufficient funds over time to cover company overheads, pre project development costs for the Makhado Project, and all regulatory charges to ensure the continuation of full compliance on all current assets. The increase in thermal and hard coking coal prices over the last quarter leaves the coal industry with a positive outlook and we are committed to the maximise the benefit of this market for our shareholders."

Authorised by

David Brown

Chief Executive Officer

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

# CoAL's interest will reduce to 74% owned on completion of the Broad Based Economic Empowerment transaction