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China Africa Resources plc

("CAF" or the "Company")

Business Restructuring Update, Fundraise and General Meeting

China Africa Resources plc (LON:CAF) the AIM quoted natural resource exploration and development company is pleased to announce a business update including details of a proposed Company restructuring, £1million fundraise and transition into a Rule 15 Cash Shell seeking a reverse takeover transaction primarily focused on the energy metals and minerals sector (together the "Proposals").

The Proposals will be put to shareholders for their formal approval at a general meeting convened for 11.00am on Wednesday 14 December 2016 (the "General Meeting") as outlined below.

Highlights

· The Company's current sole interest, the Berg Aukas Project, held through its wholly owned subsidiary, China Africa Resources Namibia (Pty) Ltd ("CAR Namibia"), is to be distributed to all current shareholders via a special dividend valued at 1.75p per share;

· Board restructuring to be undertaken with the restructured Board comprising Rod Webster (Non-Executive Chairman), Paul Johnson (Chief Executive Officer), John Bryant (Non-Executive Director) and Nick O'Reilly (Non-Executive Director);

· Immediately upon disposal the Company will become a Rule 15 Cash Shell under the AIM Rules for Companies (the "AIM Rules") with six months to complete a qualifying reverse takeover transaction under AIM Rules;

· Any reverse takeover transaction will be in line with an Investing Policy (to be proposed at the General Meeting) focused on the energy metals and minerals sector, and specifically uranium, lithium, cobalt, copper and/or coal opportunities;

· The Company has secured commitments in a placing and subscription (together the "Fundraise") of 46,082,948 New Ordinary Shares at a price of 2.17p (the "Fundraise Price") raising £1,000,000 to support the pursuit of a suitable reverse takeover transaction. The Fundraise Price was agreed at 2.17p to reflect a value for the Company, as effectively a cash shell, pre-financing of £500,000 and an issued share capital comprising 23,076,924 Ordinary Shares;

· Each New Ordinary Share issued as part of the Fundraise will have a warrant attached to acquire an additional Ordinary Share at an exercise price of 4.34p (a 100% premium to the Fundraise Price) with an exercise life of two years from the admission of the New Ordinary Shares to AIM;

· Proposed Chief Executive Officer Paul Johnson to personally invest £50,000 in the proposed Fundraise and in addition the proposed new Board to accept 50% of proposed remuneration in shares at the Fundraise Price.

Cungen Ding, Non-Executive Chairman of China Africa Resources commented: "I am pleased to bring forward the proposals outlined in this announcement. Existing shareholders of the Company will, if the Proposals are approved, benefit from the special dividend of the shares in CAR Namibia, whilst also having access to potential further upside that may be secured through any reverse takeover subsequently completed by the Company.

I would like to thank the proposed retiring directors Li Ming, James Richards, Wuming Wang and Frank Lewis for their service to the Company during what has been a particularly difficult time for the natural resource sector.

I will also be stepping down from the Board as part of the Proposals. I would like to thank existing shareholders for their support of the Company and look forward to the potential value generated through both CAR Namibia and the Company going forward."

Circular and General Meeting

A Circular (the "Circular") will be dispatched to shareholders shortly outlining the full terms of the Proposals and a copy will be available on the Company's website on publication.

The Circular contains full details of the proposed timetable and notice of a General Meeting and should be reviewed carefully by all shareholders at the earliest opportunity.

The General Meeting to approve the necessary resolutions to implement the Proposals is scheduled for 11.00am on Wednesday 14 December 2016 to be held at the offices of Cooley (UK) LLP, Dashwood, 69 Old Broad Street, London, EC2M 1QS. Shareholders are encouraged to attend and vote at this General Meeting and any questions related thereto should be addressed to the Company, contact details being available on the Company's website at www.chinaafricares.com.

Irrevocable undertakings to vote in favour of all the resolutions at the General Meeting have been received in respect of shareholders holding 90.0% of issued share capital. This includes Hong Kong East China Non-Ferrous Mineral Resources Co. Limited ("ECE") which currently holds 15,000,000 shares or 65.0% of current issued share capital and Weatherly International plc ("WTI") which currently holds 5,769,232 shares of 25% of current issued share capital.

In addition irrevocable undertakings to vote in favour of all the resolutions at the General Meeting (save for Resolution 7 where the Directors are excluded from voting) have been received in respect of all current director shareholdings totalling 119,675 shares (0.52% of current issued share capital).

Transaction Summary

A summary of the Proposals is set out below.

(i) The Special Dividend

Your Board has been informed by the new investors that they have no interest in pursuing the Berg Aukas Project as an asset of the Company. The Board have accordingly reviewed the situation and, having consulted with the two major shareholders, recommend that the shares of CAR Namibia be distributed to all Shareholders in the Company.

This will be achieved by the in specie distribution of the shares in CAR Namibia (which holds the Berg Aukas Project) to all Shareholders, as the Directors believe that all current shareholders should share in any future potential.

The proposed disposal effected by the Special Dividend, constitutes a "disposal resulting in a fundamental change of business" under Rule 15 of the AIM Rules. Accordingly, the Special Dividend is conditional upon, inter alia, on approval by Shareholders at the General Meeting.

The Special Dividend is valued at 1.75p per share.

(ii) AIM Rule 15 application

On completion of the Special Dividend, under Rule 15 of the AIM Rules for Companies, the Company will be regarded as an AIM Rule 15 Cash Shell.

Under Rule 15 of the AIM Rules, within six months of the transfer out of CAR Namibia (scheduled to occur in late December 2016 if approved by shareholders), the Company must make an acquisition or enter into commercial arrangements which constitute a reverse takeover under Rule 14 of the AIM Rules ("Reverse Takeover").

Should the Company not complete a Reverse Takeover within the stated six month period the admission of the Company's shares on AIM would be cancelled under the provisions of Rule 41 of the AIM Rules.

(iii) Investing Policy

The proposed new Board is seeking to undertake a Reverse Takeover as outlined above.

The new Board proposes to invest in and/or acquire companies and/or projects within the natural resource sector but with a particular interest in opportunities in the energy metal and minerals sector and with a key focus on opportunities in respect of uranium, lithium, cobalt, copper and coal. Each commodity has a specific relevance to the Energy space in terms of power generation, storage and distribution.

The new Board considers that, as evidenced by the financial support provided by the new investors for the proposals outlined there is a strong demand for energy metal and mineral opportunities on London's AIM.

The new Board will not be limited to a specific geographic focus. In selecting investment opportunities, the new Board will focus on businesses, assets and/or projects that are available at attractive valuations and hold opportunities to unlock embedded value or where, through efficient and focused work, there is the prospect of adding considerable value to each project, for the benefit of shareholders.

Where appropriate, the new Board may seek to invest in businesses where it may influence the business at a board level, add their expertise to the management of the business, and utilise their industry relationships and access to finance.

The Company's interests in a proposed investment and/or acquisition may range from a minority position to full ownership and may comprise one investment or multiple investments. The proposed investments may be in quoted or unquoted companies; be made by direct acquisitions or farm-ins; and may be in companies, partnerships, earn-in joint ventures, debt or other loan structures, joint ventures or direct or indirect interests in assets or projects. The new Board may focus on investments where intrinsic value can be achieved from the restructuring of investments or merger of complementary businesses.

The new Board expects that investments will typically be held for the medium to long term, although short term disposal of assets cannot be ruled out if there is an opportunity to generate an attractive return for Shareholders. The new Board will place no minimum or maximum limit on the length of time that any investment may be held.

The new Board will conduct initial due diligence appraisals of potential businesses or projects and, where they believe further investigation is warranted, intend to appoint appropriately qualified persons to assist.

The new Board believes it has a broad range of contacts through which it is likely to identify various opportunities which may prove suitable. The new Board believes its expertise will enable it to determine quickly which opportunities could be viable and so progress quickly to formal due diligence.

The Company will not have a separate investment manager. The new Board proposes to carry out a comprehensive and thorough project review process in which all material aspects of a potential project or business will be subject to rigorous due diligence, as appropriate. Due to the nature of the sector in which the Company is focused the Company expects a focus on capital returns over the medium to long term. Should opportunities arise for an early cash return to investors, this will be considered by the Board.

It is emphasised that there is no certainty that the Company will be able to secure an acquisition or Reverse Takeover as set out above.

(iv) Board Restructuring

Subject to the approval of the resolutions at the General Meeting, the Company will implement a Board restructuring as follows:

- Cungen Ding (current Non-Executive Chairman), Li Ming (current Non-Executive Director), James Richards (current Senior Independent Non-Executive Director), Wuming Wang (current Non-Executive Director) and Frank Lewis (current Independent Non-Executive Director) will resign as Directors;

- Rod Webster (current Chief Executive Officer) will become Non-Executive Chairman;

- John Bryant will remain as Non-Executive Director;

- Paul Johnson will be appointed as Chief Executive Officer, and;

- Nickolas John O'Reilly will be appointed as a Non-Executive Director.

It is proposed the new Board will each receive fees of £24,000 each per annum, with each director taking 50% of fees in New Ordinary Shares at the Fundraise Price of 2.17p.

In addition the new Board members will each receive 1,500,000 options (6,000,000 options in total) at twice the Fundraise Price (or 4.34p) with a three year exercise life. The options will vest immediately upon grant.

Paul Johnson - Proposed Chief Executive Officer

Paul Johnson (aged 47) is a Chartered Accountant, Associate of the Institute of Chartered Loss Adjusters and of the Chartered Insurance Institute. Paul holds a BSc (Hons) in Management Science from the University of Manchester Institute of Science and Technology.

Paul has held various board roles on AIM including most recently Chief Executive Officer of Metal Tiger plc and he is currently a Non-Executive Director of Thor Mining (LON:THR). He is also Non-Executive Director of Metal NRG (ISDX:MNRG) quoted on the ISDX trading platform.

In accordance with Schedule 2 paragraph (g) of the AIM Rules, Paul Johnson is, or has been, a director or partner of the following companies or partnerships during the previous five years:

Current directorships: Thor Mining plc, Metal NRG plc, Value Generation Limited, Tomas Capital Limited and Value at Risk Limited.

Past directorships: Metal Tiger plc, Metal Capital Limited, Greatland Gold plc, Catalyst Strategies Limited, Open 2 Barter Limited, Commercial Assure Limited, The Vitiligo Society, Catalyst Information Services Limited and Strathmore Accountants Limited.

There are no other disclosures required in relation to Rule 17 or paragraph (g) of Schedule 2 of the AIM Rules.

Nicholas John O'Reilly - Proposed Non-Executive Director

Nicholas John O'Reilly (aged 41) is a geologist with over 14 years' experience in exploration programme valuation, audit, due diligence, design and project management, ranging from grassroots stage through feasibility study to production across all major commodities. With a specialism in the Uranium sector Nicholas has helped take uranium projects from an early conceptual stage, through exploration, and resource definition, to a successful sale, and has worked extensively in Africa and central Asia.

He is a Member of the Australasian Institute of Mining and Metallurgy, a Fellow of the Geological Society of London and currently sits on the Committee of the Association of Mining Analysts.

Nicholas holds an MSc degree in Mineral Project Appraisal from Imperial College London (Royal School of Mines) and a BSc. in Applied Geology from Leicester University.

In accordance with Schedule 2 paragraph (g) of the AIM Rules, Nick O'Reilly is, or has been, a director or partner of the following companies or partnerships during the previous five years:

Current directorships: Mining Analyst Consulting Limited and Singularity ONE (UK) Limited.

Past directorships: None.

There are no other disclosures required in relation to Rule 17 or paragraph (g) of Schedule 2 of the AIM Rules.

(v) Fundraise and Fee Shares Overview

The Company has, conditional only on Admission, raised approximately £1,000,000 by the proposed issue of 46,082,948 new Ordinary Shares (the "Fundraise Shares") at a price of 2.17 pence per share.

The Fundraise Price was based on an agreed £500,000 valuation for the China Africa Resource plc vehicle, post distribution of CAR Namibia and assuming minimal assets and liabilities at that time, and thus before the injection of the £1,000,000 pursuant to the Fundraise. This equates, on a pro forma basis, to 2.17p per share based on the 23,076,924 Ordinary Shares currently in issue.

All Fundraise Shares will be issued together with a warrant to subscribe for one new Ordinary Share at a price of 4.34 pence per new Ordinary Share with an exercise life of two years from the date of Admission of the Fundraise Shares. In addition 500,000 warrants to subscribe for new Ordinary Shares at 4.34p, with an exercise life of two years, will be issued to each of SI Capital Limited and Beaufort Securities Limited as part consideration for their services.

Following the Fundraise, the net cash resources available to the Company will be approximately £1,000,000. The Company estimates that this should provide operating cash for at least 18 months from today's date on the basis of its plans outlined above and on a reduced overhead basis as previously announced.

As part of the Proposals 6,679,724 new Ordinary Shares will be issued in lieu of services related to the transaction and in respect of outstanding fees.

Included within this total are:

- 276,498 new Ordinary Shares to be issued to Frank Lewis (current Non-Executive Director) in respect of accrued but not paid Director's compensation:

- 552,996 new Ordinary Shares to be issued to Rod Webster (proposed Non-Executive Chairman) in lieu of cash remuneration;

- 552,995 new Ordinary Shares to be issued to Paul Johnson (proposed Chief Executive Director) in lieu of cash remuneration;

- 552,996 new Ordinary Shares to be issued to John Bryant (proposed Non-Executive Director) in lieu of cash remuneration;

- 552,995 new Ordinary Shares to be issued to Nick O'Reilly (proposed Non-Executive Director) in lieu of cash remuneration;

- 3,500,000 new Ordinary Shares to be issued to Value Generation Limited, a wholly owned personal service company of Paul Johnson (proposed Chief Executive Officer) in lieu of fees and expenses.

(vi) Proposed Admission and Total Voting Rights

Subject to the passing of the resolutions to implement the Proposals, at the General Meeting, application will be made to the London Stock Exchange Plc for the Fundraise Shares and the Fee Shares to be admitted to trading on AIM ("Admission"). The Fundraise Shares and the Fee Shares are expected to commence trading at 8.00 a.m. on 15 December 2016 and will rank pari passu in all respects with the existing Ordinary Shares save that they will have no entitlement to receive the Special Dividend.

Subsequent to the issuance of the Fundraise Shares and Fee Shares, the Company will have 75,839,596 Ordinary Shares in issue. The Company does not hold any shares in treasury. Accordingly, following admission of the Fundraise Shares, and the Fee Shares the total number of Ordinary Shares and voting rights in the Company is 75,839,596 shares. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Disclosure and Transparency Rules of the UK Financial Conduct Authority.

(vii) Major Shareholder Lock-in Provisions

Irrevocable undertakings with regarding to shareholdings post General Meeting have been received in respect of shareholders holding 90.0% of issued share capital, namely, ECE which currently holds 15,000,000 Ordinary Shares or 65.0% of current issued share capital and WTI, which currently holds 5,769,232 Ordinary Shares or 25% of current issued share capital.

Both Shareholders have agreed to not dispose of any shares in the Company for six months following Admission and for a further six months thereafter should they wish to dispose of any of the Ordinary Shares held by them, to do so under orderly market provisions.

(viii) Related Party

The Company has been advised that, if the Special Dividend was made otherwise than in accordance with the Companies Act (the "Act"), it may have claims against past and present shareholders who were recipients of the Special Dividend and against persons who were directors of the Company at the time of payment of the Special Dividend.

It is therefore proposed that the Company enter into the Shareholders' Deed of Release and the Directors' Deed of Release. The consequence of the entry into these deeds by the Company is that the Company will be unable to make any claims against:

(a) past and present shareholders of the Company who were recipients of the Special Dividend, and;

(b) the Directors and Former Directors.

In each case in respect of the payment of the Special Dividend otherwise than in accordance with the Act. The entry by the Company into the Shareholders' Deed of Release and the Directors' Deed of Release constitute related party transactions (as defined in the AIM Rules).

Given that all members of the Board are interested in the Directors' Deed of Release and some are also interested in the Shareholders Deed of Release, no recommendation on the issue will be made by the Directors, however the Company's nominated adviser, RFC Ambrian Limited, has reviewed the terms on which the releases are to be given are fair and reasonable insofar as the Company's Shareholders are concerned.

(ix) Changes to advisers

Conditional upon Admission it is intended that: (a) RFC Ambrian Limited will resign as nominated adviser and to appoint SPARK Advisory Partners Limited as the Company's nominated advisers (subject to SPARK Advisory Partners Limited completing its required diligence and take-on procedures); and (b) SI Capital Limited and Beaufort Securities Limited will be appointed as joint brokers to the Company.

Further information is available on the Company's website: www.chinaafricares.com