Mc Mining Regulatory News (MCM)

ANNOUNCEMENT 31 January 2017

REPORT FOR THE QUARTER ENDED 31 DECEMBER 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 31 December 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 (FY2017 Q1: 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.

· Appeal against the Environmental Authorisation ("EA") amendment at the Makhado Project has been dismissed by the South African Minister of the Department of Environmental Affairs.

· Continued progress in the identification of possible cash generating assets.

· The EA for the approval of the stream diversion at Vele Colliery has been awarded by the South African Department of Mineral Resources ("DMR").

Corporate and financial features

· Available cash at period end was US$7.36 million and restricted cash of US$0.3million.

QUARTERLY COMMENTARY

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

The Makhado Project recorded no LTIs (FY2017 Q1: 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. Representation has been made to the Minister of Water and Sanitation and the Water Tribunal to progress the final conclusion of the appeal.

The interim court interdict to halt any mining or construction activity issued against CoAL in respect of the Makhado Project during Q2 FY2014 remains in place. Subsequent to this, the EA for the Makhado Project was transferred from CoAL to Baobab Mining and Exploration (Pty) Ltd, the operating entity for the Makhado Project in July 2016 by the DMR and the Limpopo Department of Economic Development, Environment and Tourism (LEDET). The validity period for the commencement of activities was also further extended for an additional five years. This authorisation is fully executable and will facilitate the commencement of the Makhado Project upon resolution of the IWUL.

CoAL has successfully launched the Makhado Centre of Learning which aims to develop skills within communities to enable access to opportunities offered within the Makhado Project

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 (FY2017 Q1: 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 (FY2017 Q1: 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.

The DMR has recently granted an EA in terms of the National Environmental Management Act ("NEMA") (Act 107 of 1998) and the Environmental Impact Assessment Regulations (2014) for Vele Colliery for stream diversion and associated infrastructural activities.

CoAL awaits the approval of an IWUL from the DWS which is the final approval required to complete the regulatory approvals for the stream diversion in respect of the PMP.

Greater Soutpansberg Project (MbeuYashu) (74% owned)

The MbeuYashu Project recorded no LTIs (FY2017 Q1: nil) during the period.

No other significant matters to report.

Corporate

The Company is in the process of evaluating a number of opportunities to acquire a cash generating asset. We continue to engage with potential funders to ensure any potential opportunity can be appropriately funded. As noted previously any purchase of this nature does not confer any certainty and the Company will keep the market informed in a timely manner. The Company is also aware of the current cash balances and the requirement to fund the last legacy liability in June 2017 and is also in discussions to ensure the payment of this liability can be funded and provide sufficient funding to move forward on the Makhado Project.

Markets

Hard coking coal prices have experienced tremendous movement over the last six months starting at US$86 in June 2016 surging to over US$300 a tonne by the end of the quarter. Post the quarter end of December 2016 the hard coking prices have settled to a more acceptable US$170 per tonne. At the end of the previous quarter the Company expressed concerns on the sustainability of the current pricing, but are more comfortable with the current levels of pricing. The Company is optimistic about the increase in project value that these pricing levels contribute to the future projects.

David Brown, CEO commented: "The focus of the last quarter was on four main elements - firstly to acquire a cash generating asset, secondly to ensure sufficient funding is available to meet all of the Company's obligations, thirdly to continue with obtaining all of the outstanding regulatory requirements for both Vele and Makhado and finally the continued drive to dispose of the Mooiplaats asset. We continue to make progress with each of these developments and look forward to updating the market in due course."

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