Coal of Africa Ltd CZA Quarterly Report

  Coal of Africa Ltd (CZA) - Quarterly Report

RNS Number : 0417Q
Coal of Africa Limited
01 November 2012










ANNOUNCEMENT
31 OCTOBER 2012



                REPORT FOR THE QUARTER ENDED 30 SEPTEMBER 2012

 Strategic investment agreement signed by Beijing Haohua Energy Resource Co.
  Limited and CoAL for US$100 million creates an improved capital structure

Coal of  Africa  Limited  ("CoAL"  or "the  Company")  the  coal  exploration, 
development and mining company  operating in South  Africa, together with  its 
subsidiaries, is pleased  to provide  its operational report  for the  quarter 
ended 30 September 2012. A copy of  this report is available on the  Company's 
website, www.coalofafrica.com.

Salient features

· Six lost  time injuries ("LTI's")  during the quarter  (FY2012 Q4:  two) 
primarily as a  result of a  vehicle accident at  the Mooiplaats thermal  coal 
colliery ("Mooiplaats Colliery") injuring four employees.

· 1,268,575 tonnes (FY2012  Q4: 1,315,849 tonnes) of  run of mine  ("ROM") 
coal and 548,798  tonnes (FY2012 Q4:  578,868 tonnes) of  export quality  coal 
produced at Woestalleen and the Mooiplaats Colliery.

· Extraction  of  ROM coal  for  the  quarter doubled  to  254,760  tonnes 
(FY2012Q4: 126,199 tonnes) at the Vele coking and thermal coal colliery ("Vele
Colliery").

· Reduction in  export coal  sales during  the quarter  to 224,972  tonnes 
(FY2012 Q4: 411,005 tonnes) due to softer demand and lower throughout capacity
at the Matola Terminal in Maputo, Mozambique ("Matola Terminal").

· On-going pressure on index linked RB1 export quality thermal coal prices
with further declines from an average  of US$94/tonne in the quarter ended  30 
June 2012 to  an average  of US$87/tonne for  the quarter  ended 30  September 
2012.

· One  year  binding  term-sheet concluded  with  Eskom  Holdings  Limited 
("Eskom"), the South African state  owned electricity utility, for the  supply 
of up to 1.14 million tonnes of coal on more favourable terms.

· Six week wage related strike at the Mooiplaats Colliery by the  National 
Union of Mineworkers ("NUM") with an agreement to end the strike signed on  31 
October 2012.

· Completion  of  annual  wage negotiations  and  agreement  reached  with 
workers at Woestalleen on 7 September 2012.

Project Highlights

· Updating  the  reviewed  Makhado Project  Definitive  Feasibility  Study 
("DFS") in progress.

· Exxaro Coal Proprietary  Limited ("Exxaro") elects  not to exercise  the 
pre-emptive right to acquire a 30% interest in the Makhado Project.

Financial Highlights

· Raising  of US$53.5  million  in equity  capital completed  during  the 
quarter comprising US$8.7 million from Investec Bank Limited ("Investec")  and 
US$44.8 million from a share issue.

·  Agreement  concluded  with  Beijing  Haohua  Energy  Resource  Company 
Limited's ("BHE") wholly-owned subsidiary,  Haohua Energy International  (Hong 
Kong) Company  Limited ("HEI"),  to  subscribe for  US$100.0 million  of  CoAL 
shares at GBP0.25 per share, subject to certain conditions precedent.

· Acquisition of  the Rio  Tinto Minerals  Development Limited's  ("RTMD") 
Chapudi Project shareholder claims was finalised and the payment terms of  the 
US$13.6 million  (after taking  account of  the US$2.0  million deposit)  were 
revised. The payment previously due  on 1 October 2012  will be paid in  three 
tranches: US$5.6  million due  on  1 November  2012  and, payments  of  US$4.0 
million on 31 December 2012 and 28 February 2013 respectively.

· Available cash at period end of US$30.3 million.

Corporate Highlights

· Appointment of David Brown  as Non-Executive Chairman and Bernard  Pryor 
as Non-Executive Director of the Company.



Post Period Highlights



· Memorandum  of  Agreement  ("MoA") signed  with  the  Nzhelele  Farmers 
Association ("Nzhelele Farmers") on the creation of additional water  required 
for the Makhado Project.

· US$20.0 million  received into  an escrow  account to  be held  pending 
Foreign Investment Review Board ("FIRB") approval (required for foreign direct
investments into Australian companies).



Commenting today, Mr John  Wallington, Chief Executive  Officer of CoAL  said: 
"In order  to  mitigate  weaker  international  coal  pricing  pressures  that 
persisted during the quarter, the Company remains focused on implementing cost
control measures  at its  operations  with the  aim  of conserving  funds  and 
reducing operating losses.



Shareholders, together with Investec, continued to support the Company  during 
the quarter  providing  US$53.5  million in  additional  equity.  Following  a 
process to identify a potential strategic long-term business partners for  the 
business, Beijing  Haohua Energy  agreed to  invest US$100.0  million in  CoAL 
endorsing  the  Company's  long-term  growth  and  expansion  strategy.   Upon 
completion, the  funds  will be  used  to  upgrade the  processing  plant  and 
complete the production build-up at the Vele Colliery, enabling the project to
simultaneously produce semi-soft  coking coal and  thermal middlings coal  for 
the international and  domestic markets. Further  opportunities exist for  the 
Company  to  benefit  from  BHE's  technical  expertise  and  experience  when 
developing the Greater Soutpansberg Projects. 



The recent labour unrest  in the South  African mining sector  is a cause  for 
concern and  the  Mooiplaats Colliery  experienced  a six  week  wage  related 
strike. Agreement with  the union  was reached today  to end  the strike.  The 
Woestalleen and Vele collieries remained operational during this period, based
on agreed wage settlements.



The appointments of David Brown as Non-Executive Chairman and Bernard Pryor as
Non-Executive Director occurred at a  critical juncture in the development  of 
the Company and they have added valuable input since their appointment.  Based 
on the  strengthened balance  sheet, our  excellent project  pipeline and  new 
strategic partners Beijing Haohua Energy, we  look forward to the future  with 
confidence."



QUARTERLY COMMENTARY

Market context

Index linked RB1  export quality  thermal coal prices  remain under  pressure, 
declining by 19.8% from US$106 per tonne on 1 January 2012 to US$85 per  tonne 
on 30 September 2012. During the  quarter under review, prices averaged  US$87 
per tonne compared to US$94 per tonne in the previous quarter.

The South African rand  remained volatile during the  nine month period to  30 
September 2012, trading  between ZAR7.46  and ZAR8.56 against  the US  dollar. 
During the quarter, the average exchange  rate weakened by 1.8%, from  ZAR8.10 
in the June 2012 quarter to ZAR8.25 in the current quarter, partly  mitigating 
the decline in coal prices. 

Strike action  extended  across various  parts  of the  South  African  mining 
industry  during  the  quarter  to  include  the  Mooiplaats  Colliery   which 
experienced a 6 week  wage related strike resulting  in the Company  declaring 
"force majeure".

Operational Summary

Export sales from  the Matola Terminal  decreased to 224,972  tonnes from  the 
previous quarter's 411,005 tonnes, due to softer market conditions as well  as 
and delays in unloading trains due to mechanical issues and reduced throughput
capacity at  the Matola  Terminal. Coal  sold to  the inland  market  remained 
relatively constant at  187,499 tonnes  (FY2012 Q4:187,500  tonnes). Sales  to 
Eskom declined 23.3% due to the deferral of coal deliveries until negotiations
for a new off-take  agreement were completed in  August 2012. The Company  and 
Eskom agreed to a  new one year 1.14  million tonne off-take agreement  during 
the quarter on more favourable terms and,  the delivery of coal under the  new 
contract commenced during August 2012.





September 2012 quarter (tonnes) Woestalleen Mooiplaats    Vele     Total
ROM production                      993,632    274,943 254,760 1,523,335
ROM coal purchased                        -          -       -         -
Total coal processed                719,138    286,139 252,023 1,257,300
Overall yield                         70.4%      69.7%       *         -
Total coal produced                 682,973    199,578  72,325   954,876
Export coal                         380,906    167,892  72,325   621,123
Middlings coal                      302,067     31,686       -   333,753
Total coal sales                    320,766     75,718       -   621,456
Export**                                  -          -       -   224,972
Inland                              144,311     43,188       -   187,499
Eskom                               176,455     32,530       -   208,985



June 2012 quarter (tonnes) Woestalleen Mooiplaats    Vele     Total
ROM production                 971,017    344,832 126,199 1,442,048
ROM coal purchased                   -     78,167       -    78,167
Total coal processed           808,613    420,446 113,272 1,342,331
Overall yield                    64.1%      69.9%       *         -
Total coal produced            518,307    293,890  42,299   854,496
Export coal                    362,845    216,023  42,299   621,167
Middlings coal                 155,462     77,867       -   233,329
Total coal sales               326,964    132,848       -   870,817
Export**                             -          -       -   411,005
Inland                         132,214     55,286       -   187,500
Eskom                          194,750     77,562       -   272,312

                               

* Vele Colliery yields will be included once production reaches steady state

**Export  sales  include  thermal  coal  sales  from  Woestalleen,  Mooiplaats 
Colliery and the Vele Colliery

Strategic Partner - Beijing Haohua Energy Resource Co. Limited

On 29 September, BHE, through its subsidiary HEI, submitted a binding offer to
provide  the  Company  with  US$100.0  million  of  equity  funding  with  the 
transaction to be executed in two stages:

· an initial placement of US$20.0 million ("Initial Placement"); and

· a conditional placement of US$80.0 million ("Conditional Placement").

The Initial Placement allows HEI to subscribe for US$20.0 million of  ordinary 
shares in CoAL  at a subscription  price of  GBP0.25 per share,  to be  issued 
under the Company's general authority to issue shares, and is subject to  FIRB 
approval being  received  by 31  January  2013.  Submission by  BHE  for  FIRB 
approval took place on 23 October 2012 and a decision could be anticipated  on 
or before 22 November 2012, following the  standard review period of up to  30 
days.

On 30  October 2012,  US$20.0 million  was received  into the  escrow  account 
pending FIRB approval at which time the funds will be released to the Company.
Under the  Conditional Placement,  HEI will  subscribe for  a further  US$80.0 
million of shares at GBP0.25 per share, subject to the following conditions:

· approval  by  50%  of  the Company's  shareholders  of  the  Conditional 
Placement for the issue of the shares and the waiving of the requirement for a
mandatory offer when HEI's interest in the Company exceeds 19.9%;

· relevant approvals from the Peoples' Republic of China ("PRC"); and

· all other necessary regulatory and statutory approvals.

The transaction is also subject to the following conditions:

· a price adjustment mechanism will occur whereby, if PRC approval is not
obtained, the Initial Placement share issue price will be increased to GBP0.35
per share, reducing the number of shares issued; and

· if by 31  January 2013 the  conditions have not  been fulfilled or  it 
appears that the conditions will not be fulfilled, HEI and CoAL have agreed to
co-operate and consider other  arrangements pursuant to which  HEI is able  to 
provide funding  support to  CoAL. To  further facilitate  the development  of 
CoAL's projects, HEI  has undertaken  to assist, on  favourable terms,  future 
funding required by the Company.

Following the Initial Placement, HEI will hold 5.82% of CoAL's ordinary shares
and subsequent to the Conditional  Placement will hold approximately 23.6%  of 
the issued capital (assuming the shares are issued at GBP0.25 each). HEI  will 
also be entitled to nominate two directors  to the CoAL board and the  parties 
have commenced discussions regarding co-operation on commercial, technical and
operational matters enabling the Company to draw on BHE's expertise during the
development of the Makhado Project as well as the Chapudi, Mopane and  Makhado 
Extension projects.

Investec Financing Package

During the quarter,  Investec subscribed  for 19,148,408  million CoAL  shares 
raising approximately US$8.7 million and provided a credit approved term sheet
for a US$50.0 million  two-year cash collaterised  loan facility. The  Company 
continues to  evaluate the  proposal for  the  loan facility  as part  of  its 
broader approach for potential debt financing for the business.



Equity issue

During the  period  the Company  successfully  placed 115,478,798  shares  for 
GBP0.25 per share raising US$44.8 million.  A total of 80,570,166 shares  were 
issued pursuant to CoAL's  15% general allowance to  issue shares in terms  of 
ASX Listing Rule 7.1 and the remaining 34,908,632 ordinary shares were  issued 
following approval by shareholders at a General Meeting on 11 September 2012.

Deutsche Bank US$50 million pre-export trade finance facility

In March 2010,  the Company entered  into a US$50.0  million pre-export  trade 
finance facility with Deutsche Bank A.G. (the "Facility") secured over  CoAL's 
thermal coal  assets, production  and  off-take agreements.  In terms  of  the 
Facility, the total gross amount of the Facility will reduce by one twelfth or
US$4.2 million per  month, commencing in  October 2012, until  the end of  the 
Facility period.  At the  end  of the  quarter,  US$37.5 million  (FY2012  Q4: 
US$32.5 million) had been drawn against the Facility.

In anticipation of the commencement of the reduction of the Facility under the
terms of  the agreement  and the  breach  of certain  of the  Facility  equity 
covenants as  at 30  June  2012, discussions  to potentially  restructure  the 
Facility have commenced.

Cash and Available Facilities

Production, logistics and administration expenditure at the thermal operations
and corporate expenses were funded from operational cash flows, borrowings and
existing cash on  hand during the  September 2012 quarter.  Timing of  working 
capital flows and increased stock levels resulted in a rise in working capital
funding requirements during the quarter.

The Company  had 327,156  tonnes of  export quality  coal at  the end  of  the 
quarter (June 2012: 165,376  tonnes), including 135,916  tonnes at the  Matola 
Terminal (June  2012: 53,857  tonnes). The  delivery of  further coal  to  the 
Matola Terminal was affected by  temporary outages of offloading equipment  at 
the port during September 2012, which returned to normal operating capacity in
October 2012.

Projected exploration  and  development  expenditure  for  the  next  quarter, 
utilising operating  cash  flows  as  well as  funds  made  available  through 
shareholder and HEI's equity subscriptions, include:

· finalisation of the Makhado Project DFS to incorporate the production of
middlings thermal  coal  as  well  as the  underground  mining  of  resources 
accessible from the deeper section of the opencast pit and extending into  the 
Generaal property (part of the Makhado Extension project area);

· technical  and exploration  work on  various tenements  in the  Chapudi, 
Mopane and Makhado Extension project areas;

·  continuing  with  limited  expenditure  for  the  acquisition  of  farm 
properties, water, power  and consulting  work prior  to the  granting of  the 
Makhado Project new order mining right ("NOMR");

· capital expenditure for the plant  upgrade and working capital for  site 
ramp-up of production at the Vele Colliery;

· operational expenditure at the thermal coal assets; and

· corporate costs and for general working capital.

Operational update

Woestalleen Complex - Witbank Coalfield (100%)

The Woestalleen  processing  facility recorded  no  LTI's during  the  quarter 
(FY2012 Q4: nil LTI's) as did the Vuna Colliery (FY2012 Q4: one LTI).

ROM coal produced by the Vuna  Colliery increased by 2.3% from 971,017  tonnes 
in the June 2012 quarter to 993,632 tonnes in the current period. A portion of
the #1 seam ROM coal mined at the colliery was delivered to Eskom as raw  coal 
and the remaining ROM coal mined was processed to both an export grade product
and a middlings product for Eskom.

During the quarter  719,138 tonnes (FY2012  Q4: 808,613 tonnes)  of coal  were 
processed which  was  89,475  tonnes  lower than  the  previous  period.  The 
decrease in  coal  processed is  as  a result  of  an increase  in  ROM  coal 
available for sale to Eskom. Consequently ROM coal stock levels increased from
39,078 tonnes  at the  end  of June  2012  to 137,559  tonnes  at the  end  of 
September 2012.  During  the period  Woestalleen  produced 682,973  tonnes  of 
saleable coal (FY2012 Q4: 518,307), up 31.8% quarter on quarter, comprising:

· 380,906 tonnes (FY2012 Q4: 362,845 tonnes) of export quality coal, and

· 302,067 tonnes (FY2012 Q4: 155,462 tonnes) of middlings product and  raw 
coal supplied to Eskom.

In-pit sampling at the  Vuna Colliery resulted in  selective mining of the  #1 
coal seam leading to increased quantities of raw coal being available for sale
to Eskom and the overall yield increasing to 70.4% (FY2012 Q4: 64.1%).

The Company continues to evaluate potential options to extend the life of  the 
Woestalleen complex in anticipation of the depletion of the available ROM from
the Vuna  Colliery North  Block by  April 2013.  Eskom recently  announced  an 
initiative to redirect approximately 20.0 million tonnes per annum ("Mtpa") of
coal currently transported to the power stations by road, which will in future
be transported  by rail,  reducing the  cost of  transport and  the  secondary 
impact on the national roads. To date, 37 trains have been loaded on behalf of
Eskom as part  of the pilot  study and  initiatives are underway  by Eskom  to 
increase the throughput volumes at Woestalleen.

Mooiplaats Colliery - Ermelo Coalfield (100%)

Four of the six LTI's recorded  at the Mooiplaats Colliery during the  quarter 
(FY2012 Q4: one LTI) resulted from an accident involving a single mine vehicle
transporting employees.  The  accident  highlighted the  requirement  for  the 
improvement  of  safety  management  at   the  mine  and  focus  thereon   has 
intensified.

On 25  September  2012,  the  representative trade  union  at  the  Mooiplaats 
Colliery, NUM, embarked on protected strike action in relation to annual  wage 
negotiations. The colliery employs 368 people,  of which 176 are NUM  members. 
The Company proposed a fair wage and benefit offer intended to reduce the  gap 
with the  South African  Chamber of  Mines wage  rates. The  proposal was  not 
accepted and NUM applied for,  and was awarded, a  certificate to embark on  a 
legal strike. An  additional mediation process  was unsuccessful resulting  in 
the workers proceeding with the strike action and operations at the Mooiplaats
Colliery ceased. Declaration of "force majeure" took place at the commencement
of the strike and on  31 October 2012, a wage  agreement was reached with  the 
union.



Production at the Mooiplaats Colliery continues to be impacted by  challenging 
geological conditions  that led  to  a 20.3%  decrease  in ROM  production  to 
274,943 tonnes (FY2012 Q4:  344,832 tonnes). There was  no ROM coal  purchased 
during the quarter (FY2012  Q4: 78,167 tonnes) and  together with the  reduced 
ROM production as a result of  the strike, coal processed declined 31.9%  from 
420,446 tonnes 286,139 tonnes. A total of 199,578 saleable tonnes (FY2012  Q4: 
293,890 tonnes) were produced during the quarter, comprising:

· 167,892 tonnes (FY2012 Q4: 216,023 tonnes) of export quality coal; and

· 31,686  tonnes  (FY2012 Q4:  77,867  tonnes) of  middlings  product  for 
Eskom.

CoAL continued its discussions with  Vunene Proprietary Limited ("Vunene")  to 
resolve the double granting over approximately 128ha of the mining area  which 
is included  in  the Mooiplaats  Colliery  and Vunene  NOMR.  As part  of  the 
initiative to  address  the long  term  viability of  the  operation,  various 
strategic restructuring alternatives including, but not limited to,  potential 
partnerships or mergers that may create synergistic value are underway.

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

Vele Colliery recorded no LTI's during the quarter (FY2012 Q4: nil LTI).

The build-up of production  continued during the  quarter with 254,760  tonnes 
(FY2012 Q4: 126,199 tonnes) of ROM coal produced as the open-cast pit advanced
into areas  more suitable  for the  production of  both semi-soft  coking  and 
export grade  thermal coal.  A total  of 252,023  tonnes (FY2012  Q4:  113,272 
tonnes) of  coal was  processed  during the  period, producing  72,325  tonnes 
(FY2012 Q4: 42,299 tonnes) of saleable export quality thermal coal. During the
period, the Vele Colliery  continued to produce an  export grade thermal  coal 
product sold to offset costs and  avoid the build-up of semi-soft coking  coal 
product stockpiles not washed to market specification.

The Company awaits  the results  of the  detailed bulk  tests on  the 10%  ash 
coking  coal  product  previously  completed  at  ArcelorMittal  South  Africa 
Limited's Vanderbijlpark and Newcastle facilities.



Capital expenditure

The discard  from washing  the  Vele Colliery  semi-soft  coking coal  can  be 
processed through a second stage wash plant to produce either an export  grade 
thermal coal product or an Eskom  middlings product. The planned expansion  to 
the processing plant will facilitate the following:

· simultaneous production of semi-soft coking coal and a middlings thermal
coal product;

· enhance  the recovery  of the  coking  coal fine  fraction due  to  the 
friable nature of the coal;

· achieve the  full ramp-up  to the  targeted processing  capacity of  2.7 
Mtpa; and

· improve the mine's operational and financial performance through  higher 
yields of the coking coal products.



The project has been divided into two phases:

· Phase 1 - de-watering of the ultra-fines by installing filter presses to
eliminate the need for the temporary slurry pond.

· Phase 2  - convert  the front-end  of the plant  from a  temporary to  a 
permanent facility and simultaneously produce a middlings/thermal coal product
along with the semi-soft coking coal. This phase also includes modification to
the fines circuit  to improve  product quality  and generate  a fine  fraction 
middlings product  as  well  as,  the  introduction  of  froth  flotation  for 
beneficiating ultra-fines.

The plant upgrade will be financed using a combination of debt and cash. Phase
1 is scheduled to be completed during the first quarter of CY2013 and phase  2 
commencing in CY2012 is scheduled for completion in H2 CY2013.

Environmental and regulatory compliance

As previously  reported  and  as  part  of  the  Vele  Colliery  Environmental 
Authorisation, the Environmental Management  Committee and sub-committees  are 
operating effectively and include representatives from the relevant government
departments,   non-governmental    organisations,   municipalities,    farming 
communities and other stakeholders.

Makhado Coking Coal Project - Soutpansberg Coalfield (100%)

Exxaro Option

In 2009, the  Company and Exxaro  signed the Option  to Participate  Agreement 
(the "Option  Agreement")  to  enable CoAL  to  acquire  detailed  exploration 
information previously compiled  by Iscor.  As part of  the Option  Agreement, 
Exxaro retained the  right to  participate in  up to  30% of  the equity  (the 
"Option") in the  Makhado Project.  At the end  of the  Option period,  Exxaro 
informed CoAL that  after consideration  of the  various alternative  projects 
currently in  their  growth  pipeline,  combined  with  the  current  negative 
sentiments regarding the global and local macroeconomic growth outlook; Exxaro
will be focusing on existing projects.





Product testing

Independent testing  of the  Makhado Project  bulk sample  confirmed  previous 
results that the  coal can  be classified  as a  hard coking  coal. The  tests 
further confirmed that  the 10% ash  product performs well  relative to  other 
hard coking coals based on Coke  Strength Reaction, Coke Reactivity Index  and 
Reflectance and that the coal has  a higher than average fluidity,  dilatation 
and vitrinite content.

Definitive Feasibility Study

Subsequent detailed technical reviews  with Exxaro and  results of the  coking 
coal tests led to the expansion of the scope of the DFS to include the thermal
coal fraction and the potential for underground mining portions of the Makhado
Project. The Company expects that the  additional work completed on the  draft 
DFS will result in the release of a Makhado Project Bankable Feasibility Study
("BFS") in early CY2013.

NOMR Application

The Company continues to  make progress in respect  of the regulatory  matters 
associated with its  application for the  NOMR for the  Makhado Project.  The 
Company's preferred strategy is to implement Black Economic Empowerment at  an 
operational level and to ensure better alignment with important  stakeholders, 
including the interested and affected  communities. The company is  evaluating 
empowerment structures at  the operating company  level which will  ultimately 
incorporate and give  effect to the  Makhado Project and  NOMR, following  the 
receipt of the requisite  Ministerial approval in terms  of section 11 of  the 
Mineral and Petroleum Resources Development Act. Progress is also being  made 
in respect of the acquisition of properties required for infrastructure, plant
and operations for the project.

Water Requirements

CoAL and the Nzhelele Farmers signed a MoA on 23 October 2012 for the  Makhado 
Project, in respect of the "creation" and  use of water in the Nzhelele  River 
catchment area of Limpopo  Province, South Africa. The  key objectives of  the 
MoA are:

· improve the assurance of water supply to the Makhado Project and  other 
water users; and



· facilitate  the  Makhado  Project obtaining  a  bulk  water  allocation 
without negatively  affecting  the  availability  of  water  for  agricultural 
purposes.



In terms of the MoA, the  Nzhelele Farmers have surrendered portions of  their 
water-use entitlements  facilitating  a  bulk water  supply  for  the  Makhado 
Project. The parties have  undertaken to form a  technical working group  with 
the aim of identifying  projects which would create  "new water" to  replenish 
the allocation  surrendered by  the farmers.  The MoA  strives to  ensure  the 
co-existence  of  mining,   local  communities   and  agriculture   maximising 
socio-economic development in the region.



Greater Soutpansberg Project

During  the  quarter  CoAL  continued  with  the  process  of  compiling   the 
exploration and technical data  on the Chapudi,  Mopane and Makhado  Extension 
projects, and will commence with  the remainder of the exploration  programmes 
on these properties. A total of 39 small diameter holes and 42 large  diameter 
holes are expected to be drilled over the next six months and further  updates 
on the technical results will follow in due course.



Rio Tinto Chapudi coal asset acquisition



The share purchase agreement to acquire the Rio Tinto Chapudi coal assets  was 
amended to allow for the sale of equity and the sale of shareholders'  claims, 
totalling US$75.0 million, to close separately.



The equity portion closed on 10 May  2012 and the amount of US$29,357,545  was 
paid. The balance of the equity purchase price of US$30.0 million will  become 
payable on the earlier of the receipt of a NOMR on any of the properties  that 
form part  of the  transaction or,  two years  from the  date upon  which  the 
conditions precedent for the equity sale were fulfilled.



The shareholders' claims portion closed on 28 September 2012 and the amount of
US$13,642,455 (net of  the US$2.0  million deposit and  interest thereon)  was 
originally payable  to RTMD  on  1 October  2012.  CoAL has  renegotiated  the 
payment terms whereby the amount will be payable as follows:



· US$5,634,740 on 1 November 2012; and



· US$4,000,000 on 31 December 2012 and 28 February 2013 respectively.



Disposal of the Holfontein Project

The Company previously agreed to sell the wholly owned Holfontein thermal coal
project ("Holfontein  Project")  to  Govhani  Consulting  Proprietary  Limited 
("Govhani") for  a  total  consideration of  ZAR100.0  million  (approximately 
US$13.0 million) plus a continuing  payment to CoAL of ZAR2.00  (approximately 
US$0.26) per tonne  of saleable  coal produced  by the  project. Govhani  have 
completed a BFS for the Holfontein Project and discussions between the parties
to finalise the transaction, subject  to Govhani obtaining project  financing, 
are on-going.

Corporate Activity

During the quarter,  shareholders appointed  David Brown  as as  Non-Executive 
Chairman and Bernard Pryor as Non-Executive  Director of CoAL. Mr Brown  joins 
the Company  following almost  14 years  at Impala  Platinum Holdings  Limited 
where he  was  most recently  Chief  Executive Officer  since  2006. He  is  a 
Chartered Accountant and  currently an independent  non-executive director  of 
Vodacom Group  Limited. Mr  Pryor was  until recently  chief executive  of  Q 
Resources plc and is a Non-Executive Director of African Minerals Limited.  He 
previously held senior executive positions within Anglo American Plc including
head of business development, and CEO of Anglo Ferrous Brazil Inc.







Richard Linnell,  previously  Chairman,  Deputy  Chairman  Simon  Farrell  and 
Directors, Steve Bywater and Mikki Xayiya resigned from the CoAL board, and we
thank them for their contribution.

Authorised by

JOHN WALLINGTON

Chief Executive Officer

31 October 2012









For more information contact



John Wallington Chief Executive Coal of Africa                          +27 11
                Officer                                                 575
                                                                        4363
Wayne Koonin    Financial       Coal                                 of +27 11
                Director        Africa    575
                                                                        4363
Shannon Coates  Company         Coal of Africa                          +61 89
                Secretary                                               322
                                                                        6776
Sakhile Ndlovu  Investor        Coal of Africa                          +27 11
                Relations                                               575
                                                                        6858
Jos             Financial    PR Tavistock                               +44 20
Simson/Emily    (United                                                 7920
Fenton          Kingdom)                                                3150
Chris  Sim/Neil Nominated       Investec Bank plc   +44 20
Elliot          Adviser                                                 7597
                                                                        5970
Robert Smith    JSE Sponsor     Investec Bank Limited                   +27 11
                                                                        286
                                                                        7000
Charmane        Financial    PR Russell & Associates              +27 11
Russell/Jane    (South                                                  880
Kamau           Africa)                                             3924
                                                                        or

                                                                        +27 82
                                                                        372
                                                                        5816



About CoAL:

CoAL is an AIM/ASX/JSE listed coal exploration, development and mining company
operating in  South Africa.  CoAL's  key projects  include the  Vele  Colliery 
(coking and thermal coal), the Greater Soutpansberg Project, including  CoAL's 
Makhado Project (coking  coal) and the  Mooiplaats and Woestalleen  Collieries 
(both thermal coal).

The Mooiplaats Colliery commenced production in 2008 and is currently  ramping 
up to  produce  1.6  Mtpa.  The Woestalleen  Colliery,  acquired  through  the 
acquisition  of  NuCoal  Mining  (Pty)  Limited  in  January  2010,  currently 
processes approximately  2.5Mtpa  of saleable  coal  for domestic  and  export 
markets. The Woestalleen Complex also incorporates three beneficiation  plants 
with a total processing capacity of 350,000 run-of-mine (ROM) feed tonnes  per 
month.

CoAL's Vele  Colliery commenced  production  in Q1  2012. During  the  initial 
phase, the operation is targeting 2.7  Mtpa ROM production to produce  1.0Mtpa 
of saleable coking coal. The Makhado  Project, CoAL's flagship project in  the 
Soutpansberg coalfield,  is well  into  the feasibility  stage, with  a  draft 
Definitive Feasibility Study having been reviewed  by the CoAL Board in  March 
2012. An application for a New Order Mining Right for the Makhado Project  was 
submitted in January 2011.

In May 2012,  CoAL acquired the  Chapudi coal project  and several other  coal 
exploration properties  in  the  Soutpansberg  coal  basin  in  South  Africa, 
subsequently renamed  the  Greater  Soutpansberg Project,  from  the  previous 
owners,  including  Rio   Tinto.  The  Greater   Soutpansberg  Project  is   a 
consolidation of nine potential  coking and thermal  coal assets grouped  into 
three proximate regions, namely Mopane,  Makhado and Chapudi. The  acquisition 
of these  assets strengthens  Coal of  Africa's position  as one  of the  most 
substantial holders of prospecting and mining rights for coking coal in  South 
Africa's Soutpansberg coalfield.

The updated resource  estimates are  presented in detail  in the  "Independent 
Technical Statement  for  Greater Soutpansberg  Projects  for Coal  of  Africa 
Limited, 31st May 2012" ("Technical Statement") prepared by Venmyn Rand  (Pty) 
Ltd  ("Venmyn"),  which  is   available  on  the   Coal  of  Africa   website, 
www.coalofafrica.com.

                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


MSCLFFLVIVLLVIF -0- Nov/01/2012 07:00 GMT
 
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