Mc Mining Regulatory News (MCM)

ANNOUNCEMENT 28 April 2017

REPORT FOR THE QUARTER ENDED 31 MARCH 2017

OBTAINING A CASH GENERATOR AND PROJECT FUNDING

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 March 2017. 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 Q2: nil).

· Agreements concluded for the acquisition of the Uitkomst Colliery from Pan African Resources Plc ("Pan African") for a purchase price of R275 million (US$20.5million).

· Successful placement of US$2 million by M&G Investment Management Ltd ("M&G") and the conversion of US$9.8 million of the Yishun Brightrise Investment PTE Limited ("YBI") US$10 million loan to equity.

· Successful closure of the sale of Holfontein Investment Proprietary Limited ("Holfontein") to Taung Gold Secunda Proprietary Limited ("Taung Gold").

· Successful completion of a loan agreement for up to R240 million from the Industrial Development Corporation of South Africa ("IDC") for the development of the Makhado Project.

· Granting of an Environmental Authorisation in terms of the National Environmental Management Act ("NEMA") (Act 107 of 1998) and the Environmental Impact Assessment Regulations (2014) to Vele Colliery for stream diversion and associated infrastructural activities.

Corporate and financial features

· Available cash at period end of US$5.1 million and restricted cash of US$0.05million.

QUARTERLY COMMENTARY

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

The Makhado Project recorded no LTIs (FY2017 Q2: 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 Integrated Water Use Licence ("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 Environmental Authorisation ("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 Department of Mineral Resources ("DMR") and the Limpopo Department of Economic Development, Environment and Tourism. 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, 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.

The Company is in the process of securing the surface rights for the Makhado Project. This process in highly complicated as current surface rights are subject to land claims and the Company needs to ensure that due process is followed. The Project is located over five farms.

Mooiplaats Colliery - Ermelo Coalfield (74% owned)

The Mooiplaats thermal coal colliery ("Mooiplaats Colliery") was placed on care-and-maintenance during Q1 2014, and recorded no LTIs during the period (FY2017 Q2: nil).

Due to the increase in coal pricing over the six months, the Company has experienced renewed interest in the Mooiplaats Colliery by potential buyers. Interested parties are at various stages of financial assessment and completion of the due diligence process. The Company is committed to delivering a successful completion of the sale as soon as possible.

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

The Vele coking and thermal coal colliery ("Vele Colliery") recorded no LTIs during the quarter (FY2017 Q2: 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 colliery's Plant Modification Project ("PMP").

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

CoAL awaits the granting of an IWUL by the DWS, which is the final approval required to complete the regulatory approvals for the stream diversion in respect of the PMP. Once all regulatory approvals are in place, the Company will be in a position to consider current market pricing and off-take agreements to conclude on an investment decision favourable to the Company.

Greater Soutpansberg Project (MbeuYashu) (74% owned)

The MbeuYashu Project recorded no LTIs (FY2017 Q2: nil) during the period.

No other significant matters to report.

Acquisition of the Uitkomst Colliery

During the quarter, the Company announced the successful completion of an agreement with Pan African in which CoAL will acquire 100% of the shares in and claims against Pan African Resources Coal Holdings Proprietary ("PAR Coal") for a purchase price of R275 million (US$20.5 million). PAR Coal holds a 91% shareholding in Uitkomst Colliery Proprietary Limited ("Uitkomst").

Uitkomst is a high grade thermal export quality coal deposit with metallurgical applications, which is situated in the Utrecht coalfields in KwaZulu Natal. Uitkomst consists of an existing underground coal mine and a planned life-of-mine extension. The operating mine is easily accessible and well-established. Existing infrastructure such as power supply, water supply, buildings, workshops, weighbridge, water storage and management facilities are all in place. Uitkomst currently employs approximately 520 employees (including contractors).

Uitkomst had a net asset value of R209 million and made operating profits of R21.3 million for the 6 months ended 31 December 2016 as disclosed in the interim financial statements of Pan African.

The acquisition price of R275 million will be settled as follows:

· R125 million (US$9.3 million) payable in cash ("cash consideration");

· R25 million (US$1.8 million) deferred consideration ("the deferred consideration"). The deferred consideration can be repaid by CoAL at any time prior to the 24 month anniversary of the effective date of the acquisition. The deferred consideration will bear interest at the prime rate, and shall be repaid on the second anniversary of the effective date. CoAL shall be entitled to prepay any amounts in respect of the deferred consideration. If not settled after 24 months, the balance outstanding can be settled through the issue of new CoAL shares at the 30-day volume weighted average price as traded on the JSE on the date immediately prior to the date on which Pan African gives its election. To the extent that certain coal bu- in opportunities are not secured by, or with the assistance of Pan African, within two years from the effective date, which would result in CoAL suffering a lower economic benefit, the deferred consideration may be reduced, subject to a maximum of R15 million; and

· 261 287 625 newly issued CoAL shares (equivalent to R125 million) equating to approximately 9.3% of CoAL's total issued share capital.

The Company will fund the cash consideration through internal cash resources and proceeds of an aggregate US$13 million equity investment from Summer Trees Pte Ltd and M&G at a subscription price of R0.52 (US$0.03878) per CoAL share, resulting in the issue of 335 250 000 shares pursuant to agreements with CoAL.

The implementation of the acquisition is both subject to and conditional on the fulfilment of conditions precedent customary for a transaction of this nature and includes, inter alia, the following:

· CoAL obtaining all of the requisite shareholder, AIM, JSE and ASX approvals to implement the acquisition and ancillary transactions;

· Uitkomst entering into a supply of coal agreement on terms acceptable to CoAL;

· Uitkomst being released, in writing, from its obligations as a guarantor in terms of Pan African facility agreements;

· Pan African beeing released from its obligations as guarantor from the financial provisions provided to the DMR and the guarantee been replaced in a manner and form acceptable to CoAL;

· Pan African and CoAL entering into a transitional services agreement;

· The approval by the Competition Authorities under the Competition Act; and,

· Any exchange control approval which might be required from the Exchange Control Authorities, in terms of the Exchange Control Regulations being obtained.

IDC Loan

During the quarter, the Company has entered into a loan agreement with the IDC and Baobab Mining and Exploration Proprietary Limited ("Baobab"), a subsidiary of CoAL and owner of the mining right for the Makhado Project, in terms of which the IDC shall advance loan funding of up to R240 million (approximately US$17.6million) to Baobab for the Makhado Project. The Loan Funding will be used to advance the operations and implementation of the Makhado Project.

The loan funding is subject to the following conditions:

· The IDC advancing to Baobab in two equal tranches of R120 million (approximately US$9.2million) upon written request from Baobab;

· Each Tranche having a three-year repayment period and accruing interest at a real after-tax rate of 16% per annum;

· Subject to the provisions of the Loan Agreement, CoAL standing surety for Baobab's obligations to ensure repayment of the loan amount in instances in which Baobab defaults on such payments;

· CoAL issuing to IDC h warrants (in respect of CoAL shares) pursuant to each advance date as soon as the relevant shareholder approval for the issue has been received. More details regarding the warrants will be provided in due course;

· Baobab and CoAL providing the IDC with warranties, representations and undertakings which are customary in a loan funding agreement of this nature;

· IDC having the right to appoint one director to the Boabab board and to be a member of Makhado Project steering committee during the loan repayment period; and

· Upon each advance date, Baobab issuing new ordinary shares in Baobab to the IDC, equivalent to 5% of the entire issued share capital of Baobab at such time. CoAL's shareholding in Baobab will be diluted accordingly. Notwithstanding such dilution, CoAL will retain a majority shareholding in Baobab.

Corporate

During the period under review, the Company concluded the previously announced sale of 100% of the issued share capital in Holfontein Investments (Pty) Ltd to Taung Gold and received the final settlement of R25 million post quarter-end. The Section 11 transfer of the mineral rights was granted by the DMR in late March 2017.

The Company also received confirmation that Fifth Season (Pty) Ltd is in the process of funding its full and final settlement of the outstanding balance to CoAL regarding the disposal of the previously announced Opgoedenhoop Mining Right. The Company remains confident that the outstanding balance will be received in due course. The capital balance outstanding is approximately R15million, including VAT, but excluding accrued interest.

CoAL has continued to restructure its balance sheet and ensure that it is well positioned to unlock shareholder value through its flagship Makhado Project. As part of this restructuring, the Company recognised that limited cash flow will be generated during the Makhado pre-production phase over the next three to four years. Therefore the Uitkomst acquisition represents a highly compelling and attractive value proposition that CoAL believes to be value accretive and which will provide cash flows to support CoAL as the Company continues to progress the Makhado Project. CoAL believes that Uitkomst will complement the Makhado Project and development project pipeline by:

· Creating a sustainable, multi-product mining group, with a skilled team and excellent resources adding to the development profile;

· Providing positive cash flows from Uitkomst;

· Enlarging CoAL's asset base, which provides a stronger proposition to access the necessary funding required to pursue the development of the enlarged group's growth opportunities; and,

· Positioning CoAL as a potential industry consolidator, with a management team capable of delivery

As part of the continued balance sheet restructuring, the Company has acquired additional funding from an anchor shareholder, M&G. An amount of US$2 million was invested during the period and will be used for working capital. The Company has also successfully converted the majority of the US$10 million loan to shareholder YBI to equity during the period under review. This conversion has a positive impact on the Company's balance sheet and eliminates a large potential future cash outflow. These two transaction resulted in the issue of an aggregate 289 050 199 shares at an issue price of US$0.04081 per share. The remainder of the YBI loan will be converted to equity following shareholder approval at the upcoming EGM,

At the end of March 2017, the Company had an outstanding balance owing to Rio Tinto of US$8.4 million, excluding interest. The Company had a cash balance of US5.1 million, excluding the Holfontein receipt of R25 million (US$1.9 million) as this was only received post quarter-end. The Company is in the process of concluding its first drawdown of the IDC loan funding which should yield approximately US9.2 million.

Markets

The hard coking price has once again rallied on the back of short term supply constraints owing to disruptions caused by weather and infrastructure problems. While we do not consider the current prices to be sustainable in the long term, the current price movement underpins the tightness of world supply and, as such, is positive for longer term pricing.

David Brown, CEO commented: "The last quarter has been filled with overdue good news for CoAL: the successful acquisition of the Uitkomst Colliery, securing the IDC funding; and the completion of the Holfontein Mining Right sale/transfer. The Company is making good progress toward re-entering the market as a coal producer, while focusing on the timeous funding and finalisation of the regulatory and surface right requirements for the Makhado Project".

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