CoAL 2016 results show strong performance

Highlights

• No fatalities and no lost time injuries recorded during the year (FY2015: none).
• Decrease in loss for the period to US$12.97 million (2015: US$14.3 million).
• Consistent progress in the regulatory requirement for the projects; and, Company continues to explore opportunities with regard to the acquisition of a cash generating asset.

Review of Operations Vele Colliery: Limpopo (Tuli) Coalfield (100% owned)

The Vele coking and thermal coal colliery (Vele Colliery) recorded no LTIs during the period. The original Vele Colliery Integrated Water Usage Licence (IWUL) was renewed in January 2016 for a further 20 years, and also amended in line with the requirements for the Plant Modification Project (PMP) at the Colliery.

In January 2017, the South African Department of Mineral Resources (DMR) granted an Environmental Authorisation 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 Department of Water and Sanitation (DWS) which is the final regulatory approval required for the stream diversion in respect of the future mine work plan.

Makhado Coking Coal Project (74% owned)

As required under South African mining legislation, a minimum 26% black economic empowerment (BEE) shareholding is required for mining and exploration projects.

CoAL previously signed a Memorandum of Page | 2 Agreement to enable a Broad Based Black Economic Empowerment consortium comprising seven local communities to acquire a 20% interest in the Makhado Project and the Company has identified suitable BEE shareholders to acquire a further 6% interest in the project. These transactions were formalised in the previous year and will ensure that the Makhado Project has the requisite ownership structure. The NOMR for the Makhado Project was granted in May 2015 as well as a section 11 approval for the transfer of the right to CoAL’s subsidiary, Baobab Mining. The Company was granted the IWUL in January 2016 for the period equal to life of mine. The Company completed a Definitive Feasibility Study (DFS) for Makhado during FY2013 which indicates that the project has 344.8 million mineable tonnes in situ and a 16 year life of mine. The opencast project is expected to produce 12.6Mtpa of ROM coal yielding 2.3Mtpa of hard coking coal and 3.2Mtpa of thermal coal for domestic and export markets. The Makhado project finalised the FEED during the prior financial year. An interim court interdict seeking to halt any mining or construction activity was issued against CoAL during the second quarter of the 2014 financial year. The condition compelling CoAL to conduct a Strategic Regional Impact Assessment has been set aside. The interim interdict against the Environmental Authorisation remains in place pending the review of the authorisation. The Company was granted an IWUL for a period of 20 years but was automatically suspended following an appeal to the DWS submitted by the Vhembe Mineral Resources forum and other parties. Once regulatory approvals and funding is in place, the company will seek to commence construction in calendar year 2018, subject to board approval.

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