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David Brown, CoAL Chief Executive Officer

Coal of Africa Limited (CoAL) has entered into a loan agreement with the Industrial Development Corporation of South Africa (IDC).

The IDC and Baobab Mining and Exploration Proprietary Limited, a subsidiary of CoAL and owner of the mining right for the Makhado Project, in terms of which the IDC shall advance loan funding up to ZAR240 million (about US$17.6million) to Baobab for use in the Makhado Project (Loan Funding).

“Whilst final agreements have now been executed, the transaction with the IDC was initially agreed in December 2016, and is reflective of the Company’s position at that time. The funding of pre-project activities at Makhado is welcomed as we progress the project towards a construction start subject to regulatory and funding requirements. We continue to focus on the upliftment and dismissal of the appeal against the Integrated Water Use Licence and securing the remaining surface rights of the project. This is a defining step towards the bringing the project to reality. We welcome the IDC as a supportive shareholder in the Makhado project who will work with CoAL to promote future success,” says David Brown, CoAL Chief Executive Officer.

The Loan Funding will be used to advance the operations and implementation of the Makhado Project, CoAL’s flagship project.

Salient Features

–   The IDC will advance to Baobab in two equal tranches of R120 million (one hundred and twenty

million rand) (approximately US$8.8million) upon written request from Baobab;

–   Upon the third anniversary of each advance from IDC to Baobab, Baobab will be required to repay to

IDC the amount advanced to it plus the amount equal to a real after tax internal rate of return equal to

16% of the amount of each advance to Baobab (collectively the “Required Amount”);

–   Baobab shall be permitted to request of IDC that it prepay some or all of the Required Amount before

the scheduled repayment date;

–   Subject to the provisions of the Loan Agreement CoAL shall stand as surety for Baobab’s obligations

to make payment of the Required Amount in instances in which Baobab defaults on such payments;

–   CoAL shall issue IDC with warrants (in respect of CoAL shares) pursuant to each advance date as soon as the relevant shareholder approval for the issue of such warrants occurs, in accordance with





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