Coal of Africa Ltd CZA Annual Consolidated Financial Statements

  Coal of Africa Ltd (CZA) - Annual Consolidated Financial Statements

RNS Number : 5483N
Coal of Africa Limited
01 October 2012






                            COAL OF AFRICA LIMITED

                   ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

                       For the year ended 30 June 2012

         (Expressed in United States dollars unless otherwise stated)

                                      

                                               Page
Directors' Report                                 2
Auditor's Independence Declaration               21
Corporate Governance Statement                   22
Directors' Declaration                           31
Consolidated Statement of Comprehensive Income   32
Consolidated Statement of Financial Position     33
Consolidated Statement of Changes in Equity      34
Consolidated Statement of Cash Flows             35
Notes to the Consolidated Financial Statements   36
Independent Auditor's Report                    104

The directors  of Coal  of Africa  Limited ("CoAL"  or "the  Company")  submit 
herewith the annual report of the  company and the entities controlled by  the 
Company (its subsidiaries), collectively  referred to as  "the Group" or  "the 
Consolidated Entity", for the financial year  ended 30 June 2012. In order  to 
comply with the provisions of the Corporations Act 2001, the directors  report 
as follows:

Information about the directors and senior management

The names and particulars of the directors of the company during or since  the 
end of the  financial year  are set out  below. Unless  otherwise stated,  the 
directors held office during the whole of the financial year:

David Brown             Independent        Mr Brown joins Coal of Africa
                        Non-Executive      following a tenure of 13 years at
                        Chairman           Impala Platinum Holdings Limited
                                           (Implats). He joined the Impala
                        (appointed 6       Group in 1999 and served as chief
                        August 2012)       financial officer and financial
                                           director of Impala Platinum
                                          Holdings Ltd before being appointed
                                           chief executive officer in 2006. He
                                          is currently an independent
                                           non-executive director of Vodacom
                                          Group Limited and has in the past
                                           served as a non-executive director
                                           of Simmer & Jack Limited. Mr Brown
                                           is a Chartered Accountant and
                                           completed his articles with Ernst &
                                           Young, graduating from the
                                           University of Cape Town.

                                           
John           Nicholas Chief Executive    Mr Wallington holds a BSc in Mining
Wallington              Officer            Engineering from the University of
                                           the Witwatersrand in Johannesburg,
                        Executive Director South Africa and has participated
                                           in executive programmes with both
                                           the London Business School and the
                                           Harvard Business School. He joined
                                           the Coal Division of Anglo American
                                           in 1981 and was CEO of the South
                                           African Region before being
                                           appointed as CEO of Anglo Coal
                                           globally. Mr Wallington held the
                                           position of CEO for the Anglo Coal
                                           Division between 2005 and 2008 and
                                           has 30 years experience in the coal
                                           exploration and mining industry.

                                           
Wayne Gregory Koonin    Financial Director Over the past 13 years, Mr Koonin
                                           has gained extensive international
                                          experience working in senior
                                           financial roles for Canadian, South
                                           African, British and Swiss based
                                           exploration, development and
                                           operating mining companies,
                                           covering a variety of commodities,
                                           including coal. As a result, he has
                                           had exposure to various
                                           international accounting standards,
                                           taxation and regulatory
                                           environments, as well as
                                           responsibility for entities listed
                                           on the JSE Limited ("JSE"),
                                           Australian Securities Exchange
                                           ("ASX"), AIM market of the London
                                           Stock Exchange ("AIM") and National
                                           Association of Securities Dealers
                                           Automated Quotations ("NASDAQ").

                                           
Professor Ntshengedzeni Executive Director Professor Alfred Nevhutanda has two
Alfred Nevhutanda                          PhD's (in Education Environment and
                                           Arts   Culture),   a   diploma   in 
                                           Management Studies and an MBA,  has 
                                           been  involved  in   a  number   of 
                                           diversified businesses  and  served 
                                           as a  leader  in  various  academic 
                                           fields, as  well  as  held  various 
                                           political  appointments.   He   has 
                                           acted as an advisor to the King  of 
                                           the Vhavenda, Ministers and Members
                                           of the  Executive  Council  of  the 
                                           ruling party.
Dave John Keir Murray   Independent        Mr Murray  has  held  a  number  of 
                        Non-Executive      senior positions in the global coal
                        Director           industry,    including     Managing 
                                           Director of Ingwe Coal  Corporation 
                                          (formerly     Trans-Natal      Coal 
                                           Corporation     Limited),     Chief 
                                           Executive    of    BHP     Billiton 
                                           Mitsubishi Alliance  and  President 
                                           of Energy Coal Sector Group at  BHP 
                                           Billiton  Limited,  a  position  he 
                                           held until December 2009. Mr Murray
                                           holds a Bachelor of Science  Degree 
                                           (Civil   Engineering)   from    the 
                                           University of  KwaZulu-Natal and  a 
                                           Post  Graduate  Diploma  in  Mining 
                                           Engineering from the University  of 
                                           Pretoria. He has also completed the
                                           Advanced Executive Program from the
                                           University of South Africa.

                                           
Bernard Robert Pryor    Independent        Mr Pryor was  until recently  chief 
                        Non-Executive      executive of Q Resources plc and is
                        Director           a non-executive director of African
                                           Minerals Limited. Between 2006  and 
                        (appointed 6       2010  he   held  senior   executive 
                        August 2012)       positions within Anglo American Plc
                                           as head  of  business  development, 
                                           and CEO  of  Anglo  Ferrous  Brazil 
                                           Inc.

                                           
Peter George Cordin     Independent        Mr  Cordin   has  a   Bachelor   of 
                        Non-Executive      Engineering from the University  of 
                        Director           Western  Australia   and  is   well 
                                           experienced  in   the   evaluation, 
                                           development   and   operation    of 
                                           resource projects within  Australia 
                                           and overseas. He is the Chairman of
                                           ASX listed  Dragon  Mining  Limited 
                                           and non-executive director of Vital
                                           Metals Limited.

                                           
Khomotso Brian Mosehla  Non-Executive      After serving articles at KPMG,  Mr 
                        Director           Mosehla worked  for five  years  at 
                                           African  Merchant   Bank   Limited, 
                                          where he  gained a  broad range  of 
                                           experience,  including   Management 
                                           Buy-Out ('MBO'), Leveraged  Buy-Out 
                                           ('LBO')         and         capital 
                                           restructuring/raising transactions.
                                           In 2003, he established Mvelaphanda
                                           Corporate    Finance,    for    the 
                                           development of Mvelaphanda's mining
                                           and   non-mining   interests.    Mr 
                                           Mosehla served as a director on the
                                           boards   of   several    companies, 
                                           including   Mvelaphanda   Resources 
                                           Limited, and  he is  currently  the 
                                           Chief Executive  Officer of  Mosomo 
                                           Investment   Holdings   Proprietary 
                                           Limited.

                                           



Rudolph    Henry Non-Executive      Mr Torlage is  a Chartered Accountant  and 
Torlage          Director           has over  twenty  years'  experience  with 
                                    ArcelorMittal   South   Africa.   He    is 
                                   currently Executive Director Finance and a
                                    Board   member    of   various    unlisted 
                                    ArcelorMittal Group companies.

                                    

                                    
Richard     John Independent        Mr  Linnell   has  been   active  in   the 
Linnell          Non-Executive      resources and metals fields for over forty
                 Chairman           years   and    has   significant    global 
                                    experience   in   the   development    and 
                 (resigned 6 August marketing of resources and commodities. He
                 2012)              was  the   originator  of   the   Bakubang 
                                    Initiative, a forum designed to revive the
                                    South African  mining industry  and  which 
                                    led to the establishment of the New Africa
                                    Mining Fund, of  which he  is Chairman  of 
                                    Trustees.  He  holds  a  number  of  other 
                                    Directorships.

                                    
Simon      James Independent        Mr Farrell has a Bachelor of Commerce from
Farrell          Executive          the University of Western Australia and an
                                    MBA  from  the   Wharton  School  of   the 
                 Deputy Chairman    University of Pennsylvania. He is a Fellow
                                    of the Australian Society of CPA's and the
                 (resigned 6 August Institute of  Company  Directors.  He  has 
                 2012)              held a  number  of senior  management  and 
                                    Board  positions,   principally   in   the 
                                    resources  sector  over  the  last  twenty 
                                    years.  He  is  currently  a  Director  of 
                                    London  Stock   Exchange  listed   Kenmare 
                                    Resources plc.

                                    
Stephen Bywater  Independent        Mr Bywater has  a distinguished career  in 
                 Non-Executive      the  resources  industry,  developing  and 
                 Director           operating a total  of 14 large-scale  open 
                                    pit and underground mining operations  and 
                 (resigned 6 August their associated  services, logistics  and 
                 2012)              infrastructure. When working for Rio Tinto
                                    Coal Australia,  he  was  Chief  Operating 
                                    Officer,  and  in  this  position  oversaw 
                                    seven  mining  operations,  producing   60 
                                    million tonnes of saleable coal a year. Mr
                                    Bywater has a B.Sc. in Engineering Geology
                                    and Geotechnics from Portsmouth University
                                    and  a   M.Sc.  in   Rock  Mechanics   and 
                                    Excavation        Engineering         from 
                                    Newcastle-upon-Tyne.

                                    
Mikki   Sivuyile Non-Executive      Mr Xayiya has served in various capacities
Macmillan Xayiya Director           in the  African  National  Congress  since 
                                    1977. In  1995,  he  was  appointed  as  a 
                 (resigned 6 August Policy Advisor  - Office  of the  Premier, 
                 2012)              Gauteng  Provincial  Government.  He  left 
                                    public office  and  joined  Mawenzi  Asset 
                                   Managers as Managing Director. In 1998  he 
                                    co-founded Mvelaphanda Holdings. Mr Xayiya
                                    was appointed  as  Executive  Chairman  of 
                                    Mvelaphanda Holdings  with effect  from  9 
                                    June 2009.

                                    





Directorships of other listed companies

Directorships of other listed companies held  by the directors in the 3  years 
immediately before the end of the financial year are as follows:

Director             Company                        Period of directorship
Richard Linnell      GRD Minproc Ltd                2004 - 2009

                     Chrome Corporation Limited     2005 - 2009

                     GMA Resources plc              2003 - 2009

                     SacOil Holdings Limited       2008 - Present

                     Maghreb Minerals plc           2010 - Present

                     IPSA Group plc                 2007 - 2009

                     Brinkley Mining plc            2002 - Present

                     Mag      Industries       Corp 2009 - 2011
                     Incorporated
                                                    2010 - Present
                     Rockwell Diamonds Incorporated
                                                    
Bernard Pryor        African Minerals Limited       2011 - Present

                     Adastra Minerals Inc.          2000 - 2006

                                                    
David Brown          Vodacom Group Limited          2012 - Present

                     Zimplats Holdings Limited      2010 - 2012

                     Impala    Platinum    Holdings 1999 - 2012
                     Limited
                                                    
Simon Farrell        Kenmare Resources plc          2002 - Present

                     Bellzone Mining plc            2010 - 2011

                                                    
John Wallington      Firestone Resources Limited    2009 - Present

                     Keaton Energy Limited          2008 - 2010

                                                    
Wayne Gregory Koonin Platmin Limited                2009 - 2011

                                                   
Professor Alfred     none                           none
Nevhutanda
Peter Cordin         Dragon Mining Limited          2006 - Present

                     Vital Metals Limited           2009 - Present

                                                    
Stephen Bywater      GCM Resources plc              2006 - 2012

                     Caledon Resources plc          2006 - 2011

                     
Dave Murray          Meridien Resources Limited     2012 - Present 1999
                                                    - 2001
                     Billiton Coal
                                                    2001 - 2004
                     BHP Billiton  Coal  Mitsubishi 
                     Alliance                       2005 - 2008

                     BHP   Billiton   Metallurgical 2008 - 2009
                     Coal
                                                    
                     BHP Billiton Energy Coal
Khomotso Mosehla     none                           none

                                                    
Mikki Xayiya         Avusa Limited                  2008 - Present

                     Mvelaphanda Group Limited      2005 - Present

                     Mvelaphanda Resources Limited  2001 - Present

                     Northam Platinum Limited       2009 - Present

                     Ophir Energy plc               2006 - Present

                     
Rudolph Torlage      ArcelorMittal South Africa Ltd 2010 - Present

                                                    



Directors' shareholdings

The following table sets  out each director's relevant  interest in shares  or 
options in shares or debentures of the Company as at the date of this report.

Director          Ordinary shares Listed options Unlisted options
D Brown^(1)                     -              -                -
J Wallington^(2)          250,000              -                -
W Koonin^(3)              230,000              -                -
A Nevhutanda ^(4)          55,000              -                -
D Murray ^(5)                   -              -                -
B Pryor^(6)                     -              -                -
P Cordin ^(7)             871,059              -                -
K Mosehla                       -              -                -
R Torlage                       -              -                -
R Linnell ^(8)          1,704,125              -        2,000,000
S Farrell ^(9)          4,704,941              -        8,000,000
S Bywater                       -              -                -
M Xayiya                        -              -                -
                        7,815,125              -       10,000,000



1. Pending shareholder approval,  Mr Brown will  be issued with  2,500,000 
share options with an exercise price of GBP0.25 and expiring 3 years from date
of issue, vesting immediately  and a further 2,500,000  share options with  an 
exercise price GBP0.375 and expiring 3 years from date of issue, to be  issued 
on 6 August 2015.

2. All shares are held by Mr Wallington directly.

3. All shares are held by Mr Koonin directly.

4. All shares are held by Professor Nevhutanda directly.

5. Mr Murray was  issued a total  of 2,500,000 options  in the prior  year 
(each option having  an exercise price  equal to the  volume weighted  average 
price of the Company's Shares 10 trading  days prior to the issue date and  an 
expiry date 5  years from  the issue  date, 1,000,000  of which  will vest  12 
months after the date of issue, 750,000 of which will vest 24 months after the
date of issue and  the remaining 750,000  vesting 36 months  from the date  of 
issue).

6. Pending shareholder approval,  Mr Pryor will  be issued with  1,000,000 
share options with an exercise price of GBP0.25 and expiring 3 years from date
of issue, vesting immediately  and a further 1,000,000  share options with  an 
exercise price GBP0.375, and expiring 3 years from date of issue, to be issued
on 6 August 2015.

7. 415,759 shares are held  by Cordin Pty Ltd  <No 1 Account> and  458,300 
shares are held  by Cordin Pty  Ltd as trustee  for the Cordin  Superannuation 
Fund. Mr Cordin  is a director  of Cordin Pty  Ltd and a  beneficiary of  the 
trust and Superannuation Fund

8. As  at  date  of  resignation, 751,550  shares  held  by  Terra  Africa 
Investments Limited  of  which Mr  Linnell  is a  beneficiary.  The  remaining 
952,575 shares and the 2,000,000 options are held by Mr Linnell directly.

9. As  at  date of  resignation,  4,704,941  shares are  held  by  Newcove 
International Inc of  which Mr  Farrell is  a director  and shareholder.  The 
8,000,000 options are held by Mr Farrell directly.

Remuneration of directors and senior management

Information about the remuneration of  directors and senior management is  set 
out in the remuneration report of this directors' report, on pages 13 to 19.

Share options granted to directors and senior management

During and since the end of  the financial year, an aggregate 7,572,000  share 
options were granted to the following  directors and senior management of  the 
Company as part of their remuneration:

Directors and senior Number of options Issuing entity    Number of ordinary
management                                              shares under option
S Farrell                    -         Coal of Africa            -
                                          Limited
R Linnell                    -         Coal of Africa            -
                                          Limited
P Cordin                     -         Coal of Africa            -
                                          Limited
S Bywater                    -         Coal of Africa            -
                                          Limited
A Nevhutanda                 -         Coal of Africa            -
                                          Limited
J Wallington                 -         Coal of Africa            -
                                          Limited
D Murray                     -         Coal of Africa            -
                                          Limited
K Mosehla                    -         Coal of Africa            -
                                          Limited
M Xayiya                     -         Coal of Africa            -
                                          Limited
R Torlage                    -         Coal of Africa            -
                                          Limited
W Koonin                     -         Coal of Africa            -
                                          Limited
D Brown^(1)              5,000,000     Coal of Africa        5,000,000
                                          Limited
B Pryor^(2)              2,000,000     Coal of Africa        2,000,000
                                          Limited
R van der Merwe           286,000      Coal of Africa         286,000
                                          Limited
W Hattingh                286,000      Coal of Africa         286,000
                                          Limited



(1) The options granted to Mr Brown on 6 August 2012 are subject to
shareholder approval.

(2) The options granted to Mr Pryor on 6 August 2012 are subject to
shareholder approval.



Company secretary

Ms Shannon Coates  held the position  of Company Secretary  for the  financial 
year and is a qualified lawyer with  over 19 years of experience in  corporate 
law and compliance.

Principal activities

Coal of  Africa  Limited  ('CoAL'  or 'the  Company')  is  a  limited  company 
incorporated in  Australia. Its  common shares  are listed  on the  Australian 
Securities Exchange  ('ASX'), the  AIM  Market of  the London  Stock  Exchange 
("AIM") and  the  Johannesburg  Securities  Exchange  ('JSE').  The  principal 
activities  of  the  Company  and  its  subsidiaries  ('the  Group'  or   'the 
Consolidated  Entity')  are  the  acquisition,  exploration,  development  and 
operation of thermal and metallurgical coal projects in South Africa.



Changes in state of affairs

During the year the Company:

Operational highlights

· Greatly improved safety  performance - 6  lost time injuries  ("LTI's") 
recorded during the year compared to 15 in FY2011.

· 4.930 million  run of mine  ("ROM") tonnes (FY2011:  4.409 million  ROM 
tonnes) of coal produced from the Vuna, Mooiplaats and Vele collieries, up 12%
year on year.

· 4.906 million ROM tonnes (FY2011: 4.997 million ROM tonnes)  processed, 
producing 3.128  million  saleable  tonnes  (FY2011:  3.316  million  saleable 
tonnes) of saleable thermal coal at an overall average yield of 63.8% (FY2011:
66.4%).

· The start of mining operations in October 2011 and plant operations  in 
February 2012 at  the Vele  coking coal  colliery ("Vele  Colliery") with  the 
extraction of 161,107 tonnes of ROM coal during the build-up phase,  producing 
46,066 tonnes of  export quality  thermal coal to  be railed  from the  Musina 
siding for  export via  the  Matola Terminal  in Maputo,  Mozambique  ("Matola 
Terminal").

·  Transfer  of  mining  operations  from  a  contract  mining  to  owner 
management  basis  at  the  Mooiplaats  thermal  coal  colliery   ("Mooiplaats 
Colliery") and the commissioning  of a fifth  underground section resulted  in 
improved production yielding  1.226 million tonnes  of ROM coal,  up 39%  from 
0.883 million tonnes during the previous financial year.

· Granting of  an Integrated  Water Use  Licence ("IWUL")  for the  North 
Block of the Vuna colliery ("Vuna") and the start of mining operations in  the 
new pit resulted in 3.543 million tonnes  of ROM coal (FY 2011: 3.526  million 
tonnes).

· Total group  coal sales  decreased by 2%  year on  year from  3,448,563 
tonnes in FY2011 to 3,373,780 tonnes in FY2012, due primarily to the reduction
of third party ROM and saleable coal available for purchase in the second half
of the financial year, which augmented the prior year sales volumes.

·  Memorandum  of  Agreement  ("MOA")  signed  with  the  South   African 
Department of Environmental Affairs ("DEA")  and South African National  Parks 
("SANParks")  to  ensure  the  conservation  and  integrity  of  the  globally 
significant natural and cultural Mapungubwe  National Park and World  Heritage 
Site("Mapungubwe"), and to  maintain and strengthen  co-operation between  the 
parties at the Vele Colliery.

· Memorandum of  Understanding ("MOU")  signed with  the Save  Mapungubwe 
Coalition ("the  Coalition"),  committing the  parties  to work  together  and 
strengthen  co-operation,  ensuring   the  sustainable   development  of   the 
Mapungubwe cultural landscape.

· Preliminary  review  of  the  Makhado  coking  coal  project  ("Makhado 
Project") Definitive Feasibility Study ("DFS") conducted by the CoAL board  of 
directors ("Coal  Board")  resulting  in submission  thereof  to  Exxaro  Coal 
Proprietary Limited ("Exxaro") allowing it to begin its evaluation process.

· Completion of the full battery of independent tests commissioned by the
Company, including full  scale coking  tests at  ArcelorMittal South  Africa's 
("AMSA") local facilities,  confirming the quality  and technical  feasibility 
for AMSA  (and potentially  other customers)  of the  hard coking  coal to  be 
produced at the Makhado Project.

· Gross tonnes in situ in the Greater Soutpansberg area increased by 429%
from 1.5 billion tonnes to 8.0 billion tonnes.

Regulatory highlights

· Vele  Colliery began  full operations  in October  2011, following  the 
granting  of  the  Environmental  Authorisation  ("EA")  and  lifting  of  the 
suspension of the IWUL.

· Effective  implementation  of the  Environmental  Management  Committee 
("EMC") chaired by SANParks  to monitor environmental  compliance at the  Vele 
Colliery.

· Successful elections held for  the appointment of the Makhado  Colliery 
Community Consultative Forum ("MCCCF") in June 2012, enabling finalisation  of 
the public  consultations required  for the  New Order  Mining Right  ("NOMR") 
application process. 

· Section  11  consent received  in  terms  of the  Mineral  &  Petroleum 
Resources Development Act ("MPRDA") for  the acquisition by Keynote Trading  & 
Investment 108  Proprietary Limited  ("Keynote") of  the entire  issued  share 
capital of  Chapudi  Coal Proprietary  Limited  ("Chapudi") and  Kwezi  Mining 
Exploration Proprietary Limited  ("KME") from Rio  Tinto Minerals  Development 
Limited ("RTMD")and Kwezi Mining Proprietary Limited ("Kwezi").

· Approval for the substitution of  creditor (CoAL for RTMD) in  relation 
to the shareholder claims closing in  respect of the acquisition of claims  in 
Chapudi and KME by CoAL on 27 September 2012.





Funding highlights

· US$159.5 million new equity capital raised, including US$106.0  million 
during the financial year and US$53.5 million subsequent to year-end.

· Discussions  ongoing  regarding  restructuring of  debt  facility  with 
Deutsche Bank and potential discussions  with other financial institutions  on 
additional debt facilities.

· Completion of the  disposal of the  non-core NiMag Proprietary  Limited 
and Metalloy Resources  Investments Proprietary Limited  (together "the  NiMag 
Group")  by  way  of  a  Management  Buy  Out  ("MBO")  for  ZAR54.0   million 
(approximately US$6.5 million).

· Ongoing review of levels of expenditures, active management of  working 
capital  requirements  and  options  to  restructure  or  disposal  of   other 
interests, specifically the thermal coal assets.

Other than the above, there was no significant change in the state of  affairs 
of the Consolidated Entity during the financial year.

Subsequent events

Post year end, the following significant operational events took place:

·  Entering  into  a  financing   package  with  Investec  Bank   Limited 
('Investec'), pursuant  to  which  Investec will  make  approximately  US$58.7 
million available to CoAL through a combination of debt and equity funding  to 
replace the existing US$40.0 million J.P. Morgan 364 day loan facility.  Under 
the equity funding arrangement, Investec subscribed for a total of  19,148,408 
million CoAL shares, 16,850,599 shares at a subscription price of GBP0.29  per 
share and 2,297,809 shares at  A$0.437 per share raising approximately  US$8.7 
million.

· The Company will also have a  right, for a 12 month period, to  require 
Investec to subscribe for additional CoAL shares in tranches, in each case  at 
a time and  in an  amount to  be agreed  between CoAL  and Investec,  at a  5% 
discount to the closing price of a CoAL share on the trading day prior to  the 
issue of a subscription notice by Investec.

· Appointment of Mr David  Brown as Chairman and  Mr Bernard Pryor as  an 
Independent Non-Executive Director on 6 August 2012.

· Resignation  of Mr  Richard Linnell  as Non-Executive  Chairman and  Mr 
Simon Farrell as Executive Deputy Chairman on 6 August 2012.

· Mr Steve Bywater and Mr  Mikki Xayiya, both Non-Executive Directors  of 
the Company, resigned on 6 August 2012.

· Placement of 115,478,798 new  shares with institutional investors at  a 
price of  GBP0.25  per share  to  raise  gross proceeds  of  US$44.8  million. 
80,570,166 were firmly placed 34,908,632 shares conditionally placed requiring
CoAL shareholder approval which was received at a Shareholder General  Meeting 
in September 2012.

There have been  no other events  between 30 June  2012 and the  date of  this 
report which necessitate adjustment to the statements of comprehensive  income 
or statements of financial position at that date. 



Financial review

· US$243.8 million  (FY2011: US$261.4 million)  in revenue generated  for 
the year.  Revenue  from coal  sales  of US$242.5  million  (FY2011:  US$229.2 
million) was 6% higher year on year. With the disposal of the NiMag  operation 
during the year, US$nil million (FY2011: US$31.2 million) was reported in  the 
current year and the profit on disposal of US$1.1 million is reported as  part 
of Other Income.

· Sales of thermal coal decreased  by 2% from 3,448,563 tonnes in  FY2011 
to 3,373,781 in FY2012 and included a  change in the sales mix. The  variation 
in sales mix  resulted in revenue  increasing by 6%  and was offset  by a  27% 
decline in export coal spot prices from approximately US$119 per tonne in June
2011, to approximately US$87 per tonne in June 2012.

· Total gross  profit for the  year of US$33.4  million (FY2011:  US$37.9 
million) and the gross margin percentage of 14% (FY2011: 14.5%) was lower year
on year due to:

o the  gross margin  from coal  sales  increasing by  4% to  US$33.6  million 
(FY2011: US$32.4 million) as a result of  the change in sales prices and  mix, 
offset by higher logistics costs;

o the exclusion  of the  NiMag profit margin  in the  current financial  year 
US$nil (FY2011:  US$5.7  million)  following the  disposal  of  this  non-core 
asset.

· Once off  costs of $5.7  million (FY2011: US$nil)  in the current  year 
relating to additional  legal, technical and  regulatory work associated  with 
the equity placement undertaken in November 2011.

·  Non-cash  charges  of  US$116.0  million  (FY2011:  US$208.7  million) 
including:

o depreciation and amortisation of US$70.0 million (FY2011: US$79.5 million);

o unrealised  foreign exchange  losses of  US$47.0 million  (FY2011:  US$28.8 
million);

o share based payment expense of US$5.0 million (FY2011: US$3.0 million);

o goodwill written off of US$1.2 million (FY2011: US$nil)

o other income of US$6.9 million (FY2011: US$nil) relating to the reversal of
warranty and other provisions in respect of the NuCoal acquisition; and

o net  reversal  of impairment  losses  of US$0.3  million  (FY2011:  US$97.4 
million impairment loss). Impairment  losses on assets  held for sale  totaled 
US$11.6 million in the current year. This was off-set by a partial reversal of
US$11.9 million of  the impairment  loss recognized  on mining  assets in  the 
prior year resulting in a net reversal of US$0.3 million.

· Net loss after tax for the year, including non-cash items, of  US$138.9 
million (FY2011: US$219.0 million) was US$80.1 million lower largely due to no
impairment of assets in FY2012 compared to US$97.4 million in the prior year.

Environmental regulations

The Consolidated  Entity's  operations  are not  subject  to  any  significant 
environmental regulations under either  Commonwealth or State legislation  and 
there has  consequently been  no  breach. The  Group  is subject  to  numerous 
environmental regulations in South Africa, including the Atmospheric Pollution
Prevention Act  (No. 45  of 1965),  Environment Conservation  Act (No.  73  of 
1989), National Water Act (No. 45 of 1965), National Environmental  Management 
Act (No. 107 of 1998), the  National Environmental Management Air Quality  Act 
(No. 39 of 2004) and the environmental provisions in the Mineral and Petroleum
Resources Development Act (No 28 of 2002). There is uncertainty regarding  the 
interrelationship between these  statutes in  the mining context  and as  such 
complete compliance  with all  simultaneously is  often difficult.  The  Board 
believes that the Consolidated  Entity has adequate systems  in place for  the 
management of  its  environmental impacts  but  from time  to  time  statutory 
non-compliances may occur. The Board takes  these seriously and the Board  has 
undertaken a thorough review of all its activities to seek to bring them  into 
compliance.



Dividends

No dividend has been  paid or proposed  for the financial  year ended 30  June 
2012 (2011 - none).

Shares under option or issued on exercise of options

Details of unissued shares under option as at the date of this report are:

                   Number of shares  Class      of Exercise     Expiry date
                     under option    shares        price
Class D  Unlisted          7,000,000 Ordinary         A$1.25    30   September 
Options                                                         2012
Class G Unlisted           1,000,000 Ordinary         A$1.90    30   September 
Options                                                         2012
Class I Unlisted           1,650,000 Ordinary         A$3.25    31 July 2012
Options
Class J Unlisted           5,000,000 Ordinary         A$2.74    30    November 
Options                                                         2014
Class K Unlisted             818,500 Ordinary         A$1.90    30 June 2014
Options
Class C Unlisted           2,500,000 Ordinary         A$1.20    9     November 
Options                                                         2015
1 Option^(1)              50,000,000 Ordinary        GBP0.60    1     November 
                                                                2014
ESOP Unlisted              1,441,061 Ordinary         A$1.40    30   September 
Options                                                         2015
ESOP Unlisted              2,670,000 Ordinary        ZAR7.60    14    February 
Options                                                         2017



1. Option  to subscribe  for 50  million ordinary  shares for  GBP0.60  each 
between 1 November 2010 and 1 November 2014, as approved by shareholders on 22
April 2010, and granted  to Firefly Investments  Proprietary Limited, a  Broad 
Based Black Economic Empowerment ("BBBEE") entity.



The holders of these options do not  have the right, by virtue of the  option, 
to participate  in  any share  issue  of the  Company  or of  any  other  body 
corporate or registered scheme.

Details of shares or interests issued during or since the end of the financial
year as a result of exercise of an option are:

             Number of   Class of Exercise    Amount paid upon    Expiry date
            shares under  shares  price     exercise of options
               option
Exercise of  1,000,000   Ordinary  A$0.50        A$500,000        30 September
Class A                                                           2011
options



Indemnification of officers and auditors

During the  financial year,  the Company  paid a  premium of  $76,881 (2011  - 
35,292) in respect  of a  contract insuring the  directors of  the Company  as 
named above, the company secretary, and all executive officers of the  Company 
and of  any related  body corporate  against a  liability incurred  by such  a 
director, secretary  or  executive officer  to  the extent  permitted  by  the 
Corporations Act 2001.

The Company has not otherwise, during or since the end of the financial  year, 
except to the extent permitted by  law, indemnified or agreed to indemnify  an 
officer or auditor of the Company or  of any related body corporate against  a 
liability incurred by such an officer or auditor.



Directors' meetings

The following  table sets  out the  number of  directors' meetings  (including 
meetings of committees of  directors) held during the  financial year and  the 
number of meetings attended  by each director (while  they were a director  or 
committee member). During the financial year, a total of 8 board meetings were
held,  5  scheduled  and  3  unscheduled,  4  placing  committee  meetings,  2 
nomination and remuneration committee meeting, 3 audit committee meetings  and 
2 safety and health committee meeting were held.

                Board        Placing        Audit      Nomination      Safety,
              Meetings      Committee     Committee        and       Health and
                            Meetings      Meetings    Remuneration   Environment
                                                        Committee     Committee
                                                        Meetings      Meetings
Director    Held Attended Held Attended Held Attended Held Attended Held Attended
R Linnell    8      8      4      4      -      -      -      -      -     1^1
S Farrell    8      7      -      -      -      -      -      -      -      -
J            8      8      4      4      -     1^1     -     1^1     -     2^1
Wallington
W Koonin     8      8      4      4      -     1^1     -     1^1     -      -
ANevhutanda  8      8      -      -      -      -      -      -      -      -
D Murray     8      8      -      -      -      -      2      2      2      2
S Bywater    8      7      -      -      3      3      2      2      -      -
K Mosehla    8      6      -      -      3      1      -      -      2      1
M Xayiya     8      5      -      -      -      -      2      1      -      -
R Torlage    8      8      -      -      3      3      -      -      -      -
P Cordin     8      8      -      -      -      -      -      -      2      2
D Brown      -      -      -      -      -      -      -      -      -      -
^(2)
B Pryor      -      -      -      -      -      -      -      -      -      -
^(2)

1. Attended by invitation only

2. Appointed on 6 August 2012



Non-audit services

Details of  amounts paid  or payable  to the  auditor for  non-audit  services 
provided during  the  year by  the  auditor are  outlined  in note  7  to  the 
consolidated financial statements.

The directors are satisfied that  the provision of non-audit services,  during 
the year,  by the  auditor (or  by another  person or  firm on  the  auditor's 
behalf) is compatible with the  general standard of independence for  auditors 
imposed by the Corporations Act 2001.

The directors are of the opinion that  the services as disclosed in note 7  to 
the consolidated financial statements do not compromise the external auditor's
independence, based  on advice  received  from the  Audit Committee,  for  the 
following reasons:

· all non-audit services have been  reviewed and approved to ensure  that 
they do not impact the integrity and objectivity of the auditor, and

· none  of the  services  undermine the  general principles  relating  to 
auditor independence as set out  in Code of Conduct  APES 110 'Code of  Ethics 
for Professional Accountants' issued by the Accounting Professional &  Ethical 
Standards Board,  including  reviewing or  auditing  the auditor's  own  work, 
acting in a management or decision-making capacity for the Company, acting  as 
advocate for the Company or jointly sharing economic risks and rewards.

Auditor's independence declaration

The auditor's  independence  declaration  is  included on  page  21  of  these 
consolidated financial statements.



Remuneration report (Audited)

This remuneration report, which forms part of the directors' report, sets  out 
information about the remuneration of  Coal of Africa Limited's directors  and 
its senior  management  for  the  financial  year  ended  30  June  2012.  The 
prescribed details for each person covered  by this report are detailed  below 
under the following headings:

· director and senior management details

· remuneration policy

· relationship between the remuneration policy and company performance

· remuneration of directors and senior management

· key terms of employment contracts

The Board is responsible for establishing remuneration packages applicable  to 
the Board members of the Company. The policy adopted by the Board is to ensure
that   remuneration   properly   reflects    an   individual's   duties    and 
responsibilities and that remuneration is competitive in attracting, retaining
and motivating people of the highest calibre.

Directors' remuneration  packages  are  also  assessed in  the  light  of  the 
condition  of  markets  within  which  the  Company  operates,  the  Company's 
financial condition and  the individual's contribution  to the achievement  of 
corporate objectives. Executive Directors are  remunerated by way of a  salary 
or consultancy fees, commensurate with their required level of service.

Total remuneration  for  all Non-Executive  Directors,  excluding  share-based 
payments, as approved by shareholders at the November 2010 General Meeting, is
not to exceed A$1,000,000 per annum (US$1,015,900).

The Board has nominated a Nomination and Remuneration Committee which,  during 
the year and to 6 August was made up as follows: Mr Steve Bywater  (Chairman), 
Mr Mikki Xayiya  and Mr  Dave Murray.  The Company  does not  have any  scheme 
relating to retirement benefits for Non-Executive Directors. Mr Steve  Bywater 
and Mr Mikki Xayiya resigned as directors  on 6 August 2012 and were  replaced 
on the Committee by Mr Bernard Pryor (Chairman) and Mr David Brown.

Director and senior management details

The following persons acted  as directors of the  Company during or since  the 
end of the financial year:

· D Brown  - Independent Non-Executive
Chairman, appointed 6 August 2012

· J Wallington - Chief Executive Officer

· W Koonin - Financial
Director

· Professor A Nevhutanda  - Executive Director

· D Murray  - Senior Independent
Non-Executive Director,

· P Cordin  -
Independent Non-Executive Director

· K Mosehla  - Non-Executive Director

· R Torlage -
Non-Executive Director

· B Pryor  - Independent Non-Executive
Director, appointed 6 August 2012

· R Linnell  -
Non-Executive Chairman, resigned 6 August 2012

· S Farrell  - Executive
Deputy Chairman, resigned 6 August 2012

· S Bywater  - Non-Executive Director,
resigned 6 August 2012

· M Xayiya -
Non-Executive Director, resigned 6 August 2012



The term 'key management' is used in this remuneration report to refer to  the 
following persons.  Except as  noted,  the named  persons held  their  current 
position for  the  whole of  the  financial year  and  since the  end  of  the 
financial year:

· R van der Merwe - Chief Operating Officer

· W Hattingh - General Manager: Commercial





Remuneration policy

The remuneration policy  of CoAL  has been  designed to  align key  management 
personnel objectives with shareholder and  business objectives by providing  a 
fixed remuneration component and offering specific long-term incentives  based 
on key performance areas affecting the consolidated group's financial results.
The Board  of CoAL  believes the  remuneration policy  to be  appropriate  and 
effective in  its  ability to  attract  and  retain the  best  key  management 
personnel to run  and manage the  consolidated group, as  well as create  goal 
congruence between Directors, key management and shareholders.

The Board's policy for determining the  nature and amount of remuneration  for 
key management personnel of the consolidated group is as follows:

·  The  remuneration  structure  is  developed  by  the  Nomination   and 
Remuneration Committee and approved by the Board after professional advice  is 
periodically sought from independent external consultants.

· All key management  personnel receive a base  salary (based on  factors 
such as length of service and experience), options and performance incentives.

· Incentives paid in the form of  cash and options are intended to  align 
the interests of the Directors, key  management and company with those of  the 
shareholders.

The Nomination  and Remuneration  Committee reviews  key management  personnel 
packages annually  by  reference  to  the  consolidated  group's  performance, 
executive performance and comparable information from industry sectors.

The performance  of  key management  personnel  is measured  against  criteria 
agreed annually with each executive and  bonuses and incentives are linked  to 
predetermined performance  criteria. The  performance  criteria vary  and  are 
determined in line with each individual's performance contract. The Board may,
however, exercise its discretion in relation to approving incentives,  bonuses 
and options,  and can  recommend changes  to the  Nomination and  Remuneration 
Committee's recommendations. Any  changes must  be justified  by reference  to 
measurable performance criteria. The policy is designed to attract the highest
calibre of  executives and  reward  them for  performance results  leading  to 
long-term growth in shareholder wealth.

All remuneration paid to key management personnel is valued at the cost to the
Company and expensed.

The Board's policy is  to remunerate Non-Executive  Directors at market  rates 
for time,  commitment and  responsibilities. The  Nomination and  Remuneration 
Committee determines payments to the Non-Executive Directors and reviews their
remuneration annually, based  on market practice,  duties and  accountability. 
The maximum aggregate amount of fees, excluding share-based payments, that can
be paid to Non-Executive Directors is A$1,000,000.

To assist directors with independent judgement, it is the Board's policy  that 
if a director considers it necessary to obtain independent professional advice
to properly discharge the responsibility of  their office as a director  then, 
provided the director first obtains  approval from the Chairman for  incurring 
such expense, the  Company will  pay the reasonable  expenses associated  with 
obtaining such advice.

Options granted under the arrangement do not carry dividend or voting  rights. 
Options are valued using the Black-Scholes methodology.

Performance - based remuneration

The key performance indicators (KPIs) are  set annually, with a certain  level 
of consultation with key management  personnel to ensure buy-in. The  measures 
are specifically tailored to the area each individual is involved in and has a
level of control over. The KPIs  target areas the Board believes hold  greater 
potential for group expansion and profit, covering financial and non-financial
as well as short and long-term goals.

Performance in relation to the KPIs  is assessed annually, with bonuses  being 
awarded depending on the number and deemed difficulty of the KPIs achieved.



Relationship between remuneration policy and Company performance

The remuneration policy has been tailored to increase goal congruence  between 
shareholders, Directors and key management.  Two methods have been applied  to 
achieve this  aim, the  first being  a performance-based  bonus based  on  key 
performance indicators,  and the  second being  the issue  of options  to  the 
majority of  Directors  and  key  management to  encourage  the  alignment  of 
personal and shareholder interests.

The tables below set  out summary information about  the Group's earnings  and 
movements in shareholder wealth for the five years to June 2012.

                     Year ended   Year ended  Year ended Year ended Year ended

                    30 June 2012 30 June 2011  30 June    30 June    30 June
                                                 2010       2009       2008
                      US$'000      US$'000
                                               US$'000    US$'000     A$'000
Revenue                  243,842      261,425     98,376     17,120     53,774
Net loss before tax      150,551      218,106    178,656      9,613     10,324
Net loss after tax       138,908      219,003    167,758      9,849     11,244
                     Year ended   Year ended  Year ended Year ended Year ended

                    30 June 2012 30 June 2011  30 June    30 June    30 June
                                                 2010       2009       2008
Share   price    at       A$1.08       A$1.68     A$1.57     A$4.14     A$1.07
start of year
Share price at  end       A$0.24       A$1.08     A$1.68     A$1.60     A$4.18
of year
Basic  and  diluted         0.23         0.41       0.37       0.02       4.08
loss per share (US$
cents)





Remuneration of directors and key management personnel

Details of the nature and amount of each major element of the remuneration  of 
each director and senior management personnel for the year are:

              Short term employee benefits  Post-employment  Other    Share-     Total   Share
                                               benefits       long                       based
                                                              term     based             % of
                                                            benefits payments            Total
              Salary    Bonus^5     Non    Super-annuation         Options /            
              and fees            -monetary                           Shares
                                benefits                                              
                                                                        
2012                                 $            $                                     
                  $                                                      $
                            $                                  $                   $       %
Non-Executive
Directors
R Linnell^1     124,997         -         -               -        -   567,816   692,813    82
P Cordin        112,538         -         -          10,128        -   283,916   406,582    70
S Bywater^2     119,774         -         -               -        -         -   119,774     -
D Murray        103,064         -         -           9,276        -         -   112,340     -
M Xayiya^3       45,529         -         -               -        -         -    45,529     -
K Mosehla        60,706         -         -               -        -         -    60,706     -
R Torlage        60,706         -         -               -        -         -    60,706     -
Executive
Directors
S Farrell^4     567,872         -         -               -        - 1,135,632 1,703,505    67
J Wallington    692,334   378,885         -               -        -   154,874 1,226,093    13
W Koonin        428,848   379,567         -               -        -   108,412   916,827    12
A Nevhutanda    155,202    21,778         -               -        -         -   176,980     -
              2,471,571   780,230         -          19,404        - 2,250,651 5,521,855    41
Key
management
R van der

Merwe          469,878   154,335         -               -        -   178,500   802,712    22
W Hattingh      302,416   104,950         -               -        -   133,431   540,797    25
                772,294   259,284         -               -        -   311,931 1,343,509    23
              3,243,864 1,039,514         -          19,404        - 2,562,581 6,865,364    37





Remuneration of directors and key management personnel (continued)

              Short term employee benefits  Post-employment  Other    Share-     Total   Share
                                               benefits       long                       based
                                                              term     based             % of
                                                            benefits payments            Total
              Salary   Bonus^(2)    Non    Super-annuation         Options /            
              and fees            -monetary                           Shares
                                benefits                                              
                                                                        
2011                                 $            $                                     
                  $                                                      $
                            $                                  $                   $       %
Non-Executive
Directors
R Linnell        89,025         -         -               -        -         -    89,025     -
P Cordin         56,383         -         -           5,074        -         -    61,457     -
S Bywater        56,383         -         -               -        -         -    56,383     -
H Verster         5,850         -         -               -        -         -     5,850     -
D Murray         82,702         -         -           7,443        -   472,951   563,096    84
K Mosehla             -         -         -               -        -         -         -     -
M Xayiya              -         -         -               -        -         -         -     -
R Torlage             -         -         -               -        -         -         -     -
Executive
Directors
S Farrell       544,046   173,105         -               -        -   482,152 1,191,303    40
J Wallington    636,160         -         -               -        -         -   636,160     -
B Sergeant      400,900   129,582         -               -        -   241,076   771,558    31
W Koonin         95,424         -         -               -        -         -    95,424     -
A Nevhutanda    160,532    35,960         -               -        -         -   196,491     -
              2,127,405   338,647         -          12,517        - 1,196,179 3,666,747    33
Key
management
R van der       451,417   118,128         -               -        -   411,468   981,013    42

Merwe
W Hattingh      301,426    43,060         -               -        -   150,156   494,642    30
                752,843   161,188         -               -        -   561,624 1,475,655    38
              2,880,248   499,835         -          12,517        - 1,757,803 5,142,402    34

1. Mr Linnell resigned as Non-Executive Chairman on 6 August 2012.

2. Mr Bywater resigned as Non-Executive Director on 6 August 2012.

3. Mr Xayiya resigned as Non-Executive Director on 6 August 2012.

4. Mr Farrell resigned as Executive Deputy Chairman on 6 August 2012.

5.  Discretionary  bonuses  awarded  to  the  executive  directors  and  key 
management were approved by the board.

No director or key management appointed  during the period received a  payment 
as part of his consideration for agreeing to hold the position.



Share-based payments granted as compensation for the current financial year

During the financial year, the following share-based payment arrangements were
in existence:

                                                     Grant date
                                                          value

Option series          Number Grant date Expiry date        AUD   Vesting date
Class A unlisted
options             7,000,000 28/06/2006  30/09/2011     A$0.13   28 June 2006
Class D unlisted
options             7,000,000 05/06/2007  30/09/2012     A$0.45    5 June 2007
Class G unlisted
options             1,000,000 10/04/2008  30/09/2012     A$1.54     10/04/2008
Class I unlisted
options             1,650,000 01/12/2008  31/07/2012     A$0.49           ^(1)
Class J unlisted
options             3,000,000 08/12/2009  30/11/2014     A$0.58 30/11/2009^(2)
Class K unlisted
options               482,500 25/02/2010  30/06/2014     A$0.92           ^(3)
Class C unlisted
options             2,500,000 09/11/2010  09/11/2015     A$0.59           ^(4)
ESOP unlisted
options               288,000 04/02/2011  30/09/2015     A$0.91           ^(5)
ESOP unlisted
options               572,000 16/09/2011  14/02/2017    ZAR3.46           ^(6)
                   23,492,500

^(1) The options were granted to Mr van  der Merwe on 1 December 2008 and  all 
expired on 31 July  2012. 560,000 options vested  on 1 December 2008,  500,000 
options vested on 1 December 2009 and the remaining 590,000 options vested  on 
1 December 2010.

^(2) The 3,000,000  share options  were granted to  Mr Farrell  on 8  December 
2009. 2,000,000 of  the options vested  on 29 January  2011 and the  remaining 
1,000,000 options vest one year after the granting of the Makhado Project  New 
Order Mining Right.

^(3) These options were issued to  employees and one third vested  immediately 
on granting, 25  February 2010, one  third on  1 July 2010  and the  remaining 
third on 1 July 2011.

^(4) Mr Murray was issued a total  of 2,500,000 options with an expiry date  5 
years from the issue date,  1,000,000 of which will  vest 12 months after  the 
date of issue, 750,000 of  which will vest 24 months  after the date of  issue 
and the remaining 750,000 vesting 36 months from the date of issue.

^(5) These options were issued to  employees and one third vested  immediately 
on granting, 4 February 2011, one third on 30 September 2011 and the remaining
third on 30 September 2012.

^(6) These options were  issued to employees  and one third  vested on 1  July 
2012, one third on 1 July 2013 and the remaining third on 1 July 2014.

The following grants  of share-based  payment compensation  to key  management 
personnel relate to the current financial year:

                       During the financial year






                                    % of            % of compensation for the
           Option    Number Number  grant % of grant        year consisting of
Name       series   granted vested vested  forfeited                   options
R van  der ESOP     286,000      -    n/a                                   22
Merwe      unlisted
           options                               n/a
W Hattingh ESOP
           unlisted
           options  286,000      -    n/a        n/a                        25

During the year, none of the  key management personnel exercised options  that 
were granted to them as part of their compensation.



Share-based payments granted as compensation for the current financial year
(continued)

The following  table  summarises  the  value  of  options  to  key  management 
personnel granted, exercised or lapsed during the year:

               Value of options Value of options    Value of options lapsed at
Name      granted at grant date at exercise date             the date of lapse
R van der            ZAR989,560                -                             -
Merwe
W Hatting            ZAR989,560                -                             -
R Linnell             A$260,000                -                     A$260,000
P Cordin              A$130,000                -                     A$130,000
S Farrell             A$520,000                -                     A$520,000

Key terms of employment contracts

The Company has entered into formal contractual employment agreements with the
Non-Executive Deputy Chairman, the Chief  Executive Officer and the  Financial 
Director only  and not  with any  other member  of the  Board. The  employment 
conditions of the Non-Executive Deputy  Chairman, the Chief Executive  Officer 
and Financial Director are:

1. Mr Farrell's agreement commenced on 1  July 2009 and is for a 3.5  year 
fixed term,  at an  annual remuneration  of A$550,000.  The agreement  may  be 
terminated on 1 month written  notice and in the  event of termination by  the 
Company, the remaining term  of the agreement must  be paid out. Mr  Farrell's 
agreement was terminated on 6 August 2012 and $240,259 was paid to Mr  Farrell 
in terms of his employment agreement.

2. Mr Wallington's agreement commenced on 31 May 2010 and is for a 3  year 
fixed term, at an  annual remuneration of  GBP400,000. Subject to  shareholder 
approval and the  satisfaction of certain  capital performance conditions,  Mr 
Wallington is  also entitled  to receive  up to  250,000 shares  following  12 
months service, up  to 500,000 shares  following 24 months  service and up  to 
500,000 shares following 36 months service. The agreement may be terminated on
3 month's written notice.

3. Mr Koonin's agreement  commenced on 1  April 2011 and is  for a 5  year 
fixed term,  at  an  annual remuneration  of  GBP300,000  (2011:  GBP240,000). 
Subject to  shareholder  approval  and the  satisfaction  of  certain  capital 
performance conditions, Mr Koonin  is also entitled to  receive up to  175,000 
shares following 12 months service, up  to 350,000 shares following 24  months 
service, up  to 350,000  shares following  36 months  service, up  to  350,000 
shares following  48 months  service and  up to  350,000 shares  following  60 
months service. The agreement may be terminated on 3 month's written notice.



The employment  conditions of  the following  specified executives  have  been 
formalised in employment contracts:

1. Mr  Van  der  Merwe is  employed  by  CoAL in  the  capacity  of  Chief 
Operations Officer, at an annual  remuneration of R3.2 million. The  permanent 
employment contract  commenced on  1  August 2008  and  may be  terminated  by 
written notice of one month.



2. Mr Hattingh  is employed by  CoAL in the  capacity of General  Manager: 
Commercial,  at  an  annual  remuneration  of  R2.1  million.  The   permanent 
employment contract  commenced on  1 January  2010 and  can be  terminated  by 
written notice of one month.

This directors' report is signed in accordance with a resolution of  directors 
made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the Directors



John Wallington

Chief Executive Officer

28 September 2012





The Board  of Directors  of Coal  of  Africa Limited  is responsible  for  the 
establishment of a corporate governance framework that has regard to the  best 
practice recommendations set by the  ASX Corporate Governance Council.  CoAL's 
objective is  to  achieve  best  practice  in  corporate  governance  and  the 
Company's Board, senior  executives and employees  are committed to  achieving 
this objective.

This statement summarises  the corporate governance  practices that have  been 
adopted by  the  Board. In  addition  to  the information  contained  in  this 
statement, the Company's  website atwww.coalofafrica.comcontains  additional 
details of its corporate governance procedures and practices.

1.1 ASX Best Practice Recommendations

The ASX Listing  Rules require  listed companies  to include  in their  Annual 
Report a statement disclosing the extent to which they have complied with  the 
ASX  best   practice   recommendations   in   the   reporting   period.   The 
recommendations are  not  prescriptive  and  if a  company  considers  that  a 
recommendation is inappropriate having regard to its particular circumstances,
the company has the flexibility not to adopt it. Where the Company considered
it was not appropriate to  presently comply with a particular  recommendation, 
the reasons are set out in the relevant section of this statement.

The Board  has  adopted  a  Corporate Governance  policy  that  (except  where 
expressly noted below) complies with  the Corporate Governance Principles  and 
Recommendations with 2010  Amendments ("ASX  Principles"),,established by  the 
ASX Corporate Governance Council. This Corporate Governance policy has been in
effect for the entire reporting period.

1.2 Board of Directors

Role and Responsibilities of the Board

The role of  the Board is  to provide  leadership for and  supervision of  the 
Company's senior management.  The Board provides  the strategic direction  of 
the Company and  regularly measures  the progression by  senior management  of 
that strategic direction.

The key responsibilities of the Board include:

(a) overseeing the Company, including its control and accountability systems;

(b) appointing the chief executive officer, or equivalent, for a period and on
terms as the  Directors see  fit and,  where appropriate,  removing the  chief 
executive officer, or equivalent;

(c) ratifying the appointment and,  where appropriate, the removal of  senior 
executives, including the chief financial officer and the company secretary;

(d)  ensuring  the   Company's  Policy   and  Procedure   for  Selection   and 
(Re)Appointment of  Directors is  reviewed in  accordance with  the  Company's 
Nomination Committee Charter;

(e) approving  the  Company's  policies  on  risk  oversight  and  management, 
internal compliance and control, Code of Conduct, and legal compliance;

(f) satisfying itself that senior management has developed and implemented  a 
sound system of risk management and internal control in relation to  financial 
reporting risks  and  reviewed the  effectiveness  of the  operation  of  that 
system;

(g) assessing  the effectiveness  of  senior management's  implementation  of 
systems for managing material business risk including the making of additional
enquiries and  to  request assurances  regarding  the management  of  material 
business risk, as appropriate;

(h) monitoring, reviewing and challenging senior management's performance  and 
implementation of strategy;

1.2 Board of Directors (continued)

Role and Responsibilities of the Board (continued)

(i) ensuring appropriate resources are available to senior management;

(j) approving  and monitoring  the progress  of major  capital  expenditure, 
capital management, and acquisitions and divestitures;

(k) monitoring the financial performance of the Company;

(l) ensuring the integrity of the Company's financial (with the assistance of
the Audit  and Risk  Committee,  if applicable)  and other  reporting  through 
approval and monitoring;

(m)  providing  overall  corporate   governance  of  the  Company,   including 
conducting regular  reviews  of the  balance  of responsibilities  within  the 
Company to ensure division of functions remain appropriate to the needs of the
Company;

(n)  appointing   the   external   auditor   (where   applicable,   based   on 
recommendations of the Audit and Risk Committee) and the appointment of a  new 
external auditor when any vacancy  arises, provided that any appointment  made 
by the  Board must  be ratified  by shareholders  at the  next annual  general 
meeting of the Company;

(o) engaging with the Company's external auditors and Audit and Risk Committee
(where there is a separate Audit and Risk Committee);

(p) monitoring compliance with all of the Company's legal obligations, such as
those obligations relating to the environment, native title, cultural heritage
and occupational health and safety; and

(q) making  regular  assessment  of whether  each  non-executive  Director  is 
independent  in  accordance  with  the  Company's  Policy  on  Assessing   the 
Independence of Directors.

In accordance with ASX Principle 1, the Board has established a Board  Charter 
which sets  out functions  reserved to  Board and  those delegated  to  senior 
executives. This Charter is available on the Company's website. The Board  has 
delegated responsibilities and authorities to management to enable  management 
to conduct the Company's day to day activities. Matters which are not  covered 
by these delegations, such as  approvals which exceed certain limits,  require 
Board approval.



1.2 Board of Directors (continued)

Board composition

The Board  is comprised  of three  executive Directors  and six  non-executive 
Directors.

The Company's website contains details on the procedures for the selection and
appointment of  new  Directors and  the  re-election of  incumbent  Directors, 
together with  the  Board's  policy  for the  nomination  and  appointment  of 
Directors.

ASX Principle 2 recommends the Board establish a Nomination Committee to focus
on the  selection and  appointment practices  of the  Company. It  is  further 
recommended that the Nomination Committee have a formal Charter.

The Company has a  Nomination & Remuneration Committee  which is comprised  of 
three independent non-executive Directors and which undertakes the  nomination 
functions for the Company. The Nomination & Remuneration Committee has adopted
a formal  Nomination  and Remuneration  Committee  Charter, available  on  the 
Company's website, which  includes information  on the  Company's approach  to 
selection and appointment of Directors.

The composition  of the  Board is  reviewed at  least annually  to ensure  the 
balance of skills and experience is appropriate. The current Directors have  a 
broad range of qualifications, experience and expertise in mining  exploration 
and production and in  the corporate and finance  industries. The Board is  of 
the view that  the current  composition comprises the  mix of  skill sets  and 
experience it is looking  to achieve in membership  of the Board. The  skills, 
experience and expertise of Directors are set out in the Directors' Report.

The names of the Directors in office at the date of this Report, the date they
were appointed  if  appointed during  the  year, their  status  as  executive, 
non-executive and/or independent  Directors and whether  they are retiring  by 
rotation and seeking re-election  by shareholders at  the 2012 Annual  General 
Meeting, are set out in the Directors' Report.

Independence of non-executive directors

The Board considers an independent Director to be a non-executive Director who
meets the  criteria  for  independence set  out  in  Principle 2  of  the  ASX 
Corporate  Governance  Principles  and   Recommendations.  In  determining   a 
Director's independence, the Board considers the relationships that may affect
independence, as set out in Box 2.1 of the ASX Principles.

Materiality for  these  purposes  is based  on  quantitative  and  qualitative 
thresholds, set out in the Board Charter available from the Company's website.
In summary, the Board has agreed on the following guidelines for assessing the
materiality of matters:

1.3 Materiality - Quantitative

Balance sheet items

Balance sheet items  are material if  they have a  value of more  than 10%  of 
pro-forma net asset.

Profit and loss items

Profit and loss items are material if they will have an impact on the  current 
year operating result of 10% or more.



1.4 Materiality - Qualitative

Items are also material if:

(a) they impact on the reputation of the Company;

(b) they involve a breach of legislation;

(c) they are outside the ordinary course of business;

(d) they could affect the Company's rights to its assets;

(e) if accumulated they would trigger the quantitative tests;

(f) they involve a contingent liability that would have a probable effect  of 
10% or more on balance sheet or profit and loss items; or

(g) they will have an  effect on operations which is  likely to result in  an 
increase or decrease in net income or dividend distribution of more than 10%.

1.5 Material Contracts

Contracts will be considered material if:

(a) they are outside the ordinary course of business;

(b) they contain exceptionally onerous provisions in the opinion of the Board;

(c) they  impact on  income or  distribution in  excess of  the  quantitative 
tests;

(d) there is a likelihood that either party will default, and the default  may 
trigger any of the quantitative or qualitative tests;

(e) they  are  essential  to the  activities  of  the Company  and  cannot  be 
replaced, or cannot be replaced without an increase in cost of such a quantum,
triggering any of the quantitative tests;

(f) they contain or trigger change of control provisions;

(g) they are between or for the benefit of related parties; or

(h) they otherwise trigger the quantitative tests.

The Board has reviewed and considered  the positions and associations of  each 
of the Directors  in office at  the date of  this report and  consider that  a 
majority of the  Directors are  not independent. Messrs  David Brown,  Bernard 
Pryor, Peter Cordin  and David Murray  are considered independent.  Executive 
Directors Messrs John Wallington  and Wayne Koonin  and Alfred Nevhutanda  and 
non-executive  Directors  Khomotso  Mosehla   and  Rudolph  Torlage  are   not 
considered independent.

Notwithstanding that the current  composition of the Board  does not meet  the 
requirements of  ASX  Principle 2  as  a majority  of  the Directors  are  not 
independent, the Board considers that the composition of the Board is adequate
for the Company's current size and operations, and includes an appropriate mix
of skills and  expertise, relevant to  the Company's business.  The Board  has 
formed the view that  the individuals on  the Board can,  and do make  quality 
judgments in the best interests of the Company on all relevant issues.

1.6 Independent professional advice

The Board has adopted  a formal policy on  access to independent  professional 
advice  which  provides  that  Directors  are  entitled  to  seek  independent 
professional advice  for  the purposes  of  the proper  performance  of  their 
duties. The advice is at the Company's expense and advice so obtained is to be
made available to all Directors.

1.7 Meetings

The Board held  5 scheduled and  3 unscheduled meetings  during the  reporting 
year. Senior management attended and made presentations at the Board  Meetings 
as considered appropriate and were available for questioning by Directors.

The attendance of Directors  at Board meetings during  the year ended 30  June 
2012 is detailed in the Directors' Report.

1.8 Evaluation of Board and Senior Executive performance

A process has been established to  review and evaluate the performance of  the 
Board, individual Directors and  senior executives. The  Board is required  to 
meet annually with the  specific purpose of reviewing  the role of the  Board, 
assessing the  performance of  the  Board and  individual Directors  over  the 
previous 12 months and  examining ways in which  the Board can better  perform 
its duties.  Membership of  the Board  has recently  been refreshed  and as  a 
result, the Company  has deferred its  annual Board review  to enable the  new 
Board the opportunity to work together as a group prior to such review.

The Managing Director is responsible for assessing the performance of the  key 
executives within  the Company.  This is  performed through  a formal  process 
involving a formal meeting with each senior executive.

1.9 Remuneration

ASX Principle 8  recommends the  Board establish a  Remuneration Committee  to 
focus on appropriate remuneration policies. It is further recommended that the
Remuneration Committee have a formal Charter.

The Company has a Nomination and Remuneration Committee which is comprised  of 
3 independent non-executive  Directors and which  undertakes the  remuneration 
functions for the Company. The Nomination & Remuneration Committee has adopted
a formal Remuneration Committee Charter,  available on the Company's  website, 
which includes  information  on  the Company's  approach  to  remuneration  of 
Directors (executive and non-executive) and senior executives.

In accordance with  Principle 8,  executive Directors and  key executives  are 
remunerated by way of  a salary or consultancy  fees, commensurate with  their 
required level of services. Non-executive  Directors receive a fixed  monthly 
fee for their  services. Total aggregated  non-executive Directors' fees  are 
currently capped at A$1,000,000 per annum.

The Company  does not  have any  scheme relating  to retirement  benefits  for 
non-executive Directors.

See the Remuneration Report for details of remuneration paid to Directors  and 
key executives during the year.



1.10 Risk Management

In accordance with ASX Principle 7, the Company has a policy for the oversight
and management of material business risks, which is available on the Company's
website.

The Board  is  responsible  for  approving  the  Company's  policies  on  risk 
oversight and management and satisfying  itself that management has  developed 
and implemented a sound system of risk management and internal control.

Implementation of the risk management system and day-to-day management of risk
is the responsibility of the Managing Director, with the assistance of  senior 
management, as required.

The  Managing  Director   has  responsibility   for  identifying,   assessing, 
monitoring and managing risks. The Managing Director is also responsible  for 
identifying any material changes to  the Company's risk profile and  ensuring, 
with approval of  the Board, the  risk profile  of the Company  is updated  to 
reflect any material change.

The Managing Director is  required to report  on the progress  of, and on  all 
matters associated with,  risk management  on a  regular basis,  and at  least 
annually.  During  the  reporting  period,  the  Managing  Director  regularly 
reported to the Board as to  the effectiveness of the Company's management  of 
its material business risks.

Further, in  accordance with  Principle  7, the  Managing Director  and  Chief 
Financial Officer have confirmed in writing to the Board that:

(a) the  Company's financial  reports present  a true  and fair  view, in  all 
material respects,  of  the  Company's  financial  condition  and  operational 
results are in accordance with relevant accounting standards;

(b) the above confirmation is founded on a sound system of risk management and
internal compliance and control which implements the policies of the Board;

(c) the Company's risk management and internal compliance and control  system 
is operating efficiently and effectively in all material respects.

1.11 Financial Reporting

ASX Principle 4 recommends the Board establish an Audit Committee to focus  on 
issues relevant to the integrity of  the Company's financial reporting. It  is 
further recommended the Audit Committee have a formal Charter.

The Company has established an Audit and Risk Committee which is comprised  of 
a majority of independent non-executive Directors.

The role of the Audit and Risk Committee is to:

(a) monitor  and  review the  integrity  of  the financial  reporting  of  the 
Company, reviewing significant financial reporting judgments;

(b) review  the  Company's  internal  financial  control  system  and,  unless 
expressly addressed by a separate risk committee or by the Board itself,  risk 
management systems;

(c) monitor, review and oversee the external audit function including matters
concerning appointment and remuneration, independence and non-audit services;

(d) monitor and review compliance with the Company's Code of Conduct; and

(e)  perform  such  other  functions   as  assigned  by  law,  the   Company's 
Constitution, or the Board.

The Audit and  Risk Committee has  adopted a formal  Audit and Risk  Committee 
Charter, available from the Company's  website, which promotes an  environment 
consistent with best practice financial reporting.

1.12 Safety, Health and Environment Committee

The role of  the Safety,  Health and Environment  Committee is  to assist  the 
Board in  the  effective discharge  of  its responsibilities  in  relation  to 
health, safety and environmental ("HSE") issues for CoAL, and the oversight of
risks relating to these issues. The Committee's responsibilities include to:

(a) Understand the risks of HSEC issues involving CoAL's activities;

(b) Ensure  that the  systems  and processes  for identifying,  assessing  and 
managing HSE risks of CoAL are adequately monitored;

(c) Regularly  review  and ensure  compliance  with the  HSE  strategies  and 
policies of CoAL's and the supporting Management systems and processes;

(d) Monitor developments in relevant  HSE related legislation and  regulations 
and monitor  CoAL's compliance  with relevant  legislation, including  through 
audits.

1.13 Code of Conduct

The Board  encourages  appropriate standards  of  conduct and  behaviour  from 
Directors, officers, employees and contractors of the Company.

The Board  has  adopted  a  Code  of Conduct  in  relation  to  Directors  and 
employees, available  from the  Company's  website. This  Code of  Conduct  is 
regularly reviewed and  updated as necessary  to ensure that  it reflects  the 
highest standards of behaviour and professionalism and the practices necessary
to maintain confidence in the Company's integrity.

A fundamental  theme  is that  all  business affairs  are  conducted  legally, 
ethically and with strict observance of the highest standards of integrity and
propriety.

1.14 Securities Trading

As required by Listing Rule 12.12, the Board has adopted a Securities  Trading 
Policy which  regulates  dealings  by  Directors,  offices  and  employees  in 
securities issued by the Company.

Under the  policy, which  is available  on the  Company's website,  Directors, 
officers and employees of the Company must not, whether in their own  capacity 
or as an agent for another, subscribe for, purchase or sell, or enter into  an 
agreement to subscribe for,  purchase or sell, any  securities (ie. shares  or 
options) in the Company, or procure another person to do so:

(a) if  that  Director,  officer  or employee  possesses  information  that  a 
reasonable person would expect to have a material effect on the price or value
of the securities if the information was generally available;

(b) if the Director,  officer or employee knows  or ought reasonably to  know, 
that:

· the information is not generally available; and

· if it were generally available, it  might have a material effect on  the 
price or value of the securities in the Company; and

(c) without the written acknowledgement of the Chair.



1.14 Securities Trading (continued)

Further, Directors,  officers  and  employees  must  not  either  directly  or 
indirectly pass on this kind of information to another person if they know, or
ought reasonably to  know, that this  other person  is likely to  deal in  the 
securities of the Company or procure another person to do so.

The policy regulates trading by key management personnel within defined closed
periods, as well as  providing details of trading  not subject to the  policy, 
exceptional circumstances in which key  management personnel may be  permitted 
to trade  during a  prohibited period  with prior  written clearance  and  the 
procedure for obtaining written clearance.

Directors,  officers  and  employees  must  not  enter  into  transactions  or 
arrangements which  operate  to limit  the  economic risk  of  their  security 
holding  in  the   Company  without  first   seeking  and  obtaining   written 
acknowledgement from the Chair.

Executives are also prohibited from entering into transactions or arrangements
which limit the economic risk of participating in unvested entitlements.

1.15 Privacy

The Company  has  resolved to  comply  with the  National  Privacy  Principles 
contained in the Privacy Act  1988, to the extent  required for a company  the 
size and nature of CoAL.

1.16 Continuous Disclosure

In accordance with ASX  Principle 5, the Board  has an established  Continuous 
Disclosure Policy which is available from the Company's website.

The Company promotes timely  and balanced disclosure  of all material  matters 
concerning the Company and recognises that all investors should have equal and
timely access  to  material  information. The  Company  has  adopted  certain 
procedures  to  ensure  that  it  complies  with  its  continuous   disclosure 
obligations and has  appointed a  Responsible Officer who  is responsible  for 
ensuring the procedures are complied with.

1.17 Shareholder Communication

In accordance with ASX Principle 6, the Board has established a communications
strategy which is available from the Company's website.

The Board  aims to  ensure that  the shareholders  are informed  of all  major 
developments affecting the  Company. All shareholders  receive the  Company's 
annual report, and may  also request copies of  the Company's half-yearly  and 
quarterly reports.

The   Company   maintains   a   website   atwww.coalofafrica.comand    makes 
comprehensive information available  on a regular  and up to  date basis.  The 
Company  provides  shareholder  materials  directly  to  shareholders  through 
electronic means. A  shareholder may  request a  hard copy  of the  Company's 
annual report to be posted to them.

Shareholders are encouraged  at annual  general meetings to  ask questions  of 
Directors and senior management and also the Company's external auditors,  who 
are requested to attend the Company's annual general meetings.



1.18 Diversity

On 30 June 2010, the ASX  Corporate Governance Council introduced a number  of 
new  recommendations  in  respect  of  diversity.  These  changes  apply  for 
financial years commencing  on or after  1 January 2011,  being the  financial 
year ending 30 June 2012 for CoAL.

On 30 June 2010, the ASX  Corporate Governance Council introduced a number  of 
new  recommendations  in  respect  of  diversity.  These  changes  apply  for 
financial years commencing  on or after  1 January 2011,  being the  financial 
year ending 30 June 2012 for CoAL.

The Company is  committed to developing  a diverse workforce  and providing  a 
work environment in which all employees are treated fairly and with  respect. 
To this  end, the  Company has  in  place an  Employment Equity  Policy  which 
details its commitment to being an  equal opportunity employer and is in  line 
with the South  African Mining  Charter and Employment  Equity legislation  in 
South Africa.  A copy  of the  Employment Equity  Policy is  available on  the 
Company's website.

The Mining Charter requires that a company establish measurable objectives for
achieving gender  diversity and  assess such  objectives and  progress  toward 
achieving them.The targets set for CoAL include 10% female representation  in 
core  mining  positions.  Employment  Equity  targets  as  these  relate   to 
designated groups (one of which is women) are included as part of the business
key performance  areas  which  are  included  in  all  management  performance 
contracts.

As at  the date  of this  report, the  proportion of  women employees  in  the 
organisation is:

Employees 17%

Senior Executive 16%

Board:  0%





The directors declare that:

a) in the directors' opinion, there are reasonable grounds to believe  that 
the Company will  be able to  pay its debts  as and when  they become due  and 
payable;



b) in  the directors'  opinion, the  attached financial  statements are  in 
compliance with International Financial Reporting Standards, as stated in note
2.1 to the financial statements;



c) in the directors' opinion, the attached financial statements and  notes 
thereto are in accordance with the Corporations Act 2001, including compliance
with accounting standards  and giving a  true and fair  view of the  financial 
position and performance of the Consolidated Entity; and



d) the directors have been given the declarations required by s.295A of the
Corporations Act 2001





Signed in  accordance with  a resolution  of the  directors made  pursuant  to 
s.295(5) of the Corporations Act 2001.

On behalf of the Directors



John Wallington

Chief Executive Officer

28 September 2012

                               Year ended               Year ended

                              30 June 2012             30 June 2011
                         Note    $'000                    $'000
Revenue                   5        243,842          261,425
Cost of sales - direct           (210,429)                           (223,483)
Gross profit                        33,413         37,942
Depreciation and          6       (70,000)                            (79,521)
amortisation
Foreign exchange losses   6       (48,871)                            (29,923)
Employee benefits         6       (35,690)                            (21,362)
expense
Other expenses                    (32,067)                            (26,134)
Take or pay port                   (1,570)                                   -
obligation
Operating lease expenses           (1,449)                             (1,874)
Goodwill written off               (1,191)                                   -
Impairment reversals /    6            324                            (97,400)
(losses)
Other gains and losses    6            412            (498)
Other income                         7,984                                   -
Operating loss                   (148,705)                           (218,770)
Finance income            8          1,128        2,486
Finance costs             8        (2,974)                             (1,822)
Loss before tax                  (150,551)                           (218,106)
Income tax credit /       9         11,643                               (897)
(charge)
Net loss for the year            (138,908)                           (219,003)
Other comprehensive
income
Exchange differences on           (21,051)         119,470
translating foreign
operations
Total comprehensive loss         (159,959)                            (99,533)
for the year
Loss attributable to:
 Owners of the               (138,908)                           (219,003)
Company
 Non-controlling                     -       -
interests
                                 (138,908)                           (219,003)
Total comprehensive loss
attributable to:
 Owners of the               (159,959)                            (99,533)
Company
 Non-controlling                     -        -
interests
                                 (159,959)                            (99,533)
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