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WSL - Wescoal Holdings Limited - Acquisition of The Elandspruit Reserve and

Release Date: 10/08/2010 09:01:59      Code(s): WSL
WSL - Wescoal Holdings Limited - Acquisition of The Elandspruit Reserve and     
further cautionary announcement                                                 
Wescoal Holdings Limited                                                        
(Incorporated in the Republic of South Africa)                                  
(Registration number 2005/006913/06)                                            
(JSE code: WSL      ISIN: ZAE000069639)                                         
("Wescoal" or "the company")                                                    
Shareholders are referred to the cautionary announcement dated 30 June 2010.    
Wescoal Mining (Pty) Limited, a wholly owned subsidiary of Wescoal has, subject 
to the conditions precedent set out below, purchased from South African Mining  
Management (Pty) Limited, the shares and loan accounts of its wholly owned      
subsidiary Nungu Trading 341 (Pty) Limited ("Nungu"). Nungu owns specified      
assets and prospecting rights situated on Portions 4 and 23 Elandspruit 291 JS  
("Elandspruit reserve") ("the proposed acquisition").                           
Following on the success of its Khanyisa Mine acquisition and the bullish long  
term view on the coal industry, Wescoal has outlined its objectives as follows: 
Position Wescoal to become a primary coal producer with a strong trading arm    
rather than the historical coal trading company with a production facility;     
Ensure sustainability of the mining activities and the results produced;        
Aim to mine four million tons of run of mine ("ROM") per annum;                 
Increase beneficiated product available to the trading division and into the    
inland market; and                                                              
Increase product available for Eskom.                                           
This acquisition will contribute to achieving each of these goals as the 11, 6  
million ton resource will allow Wescoal to establish a fully fledged mining     
operation with beneficiation facilities including a washing plant capable of    
processing 1, 8 million tons of ROM per annum. In addition, it is envisaged     
that, crushing and screening plants, together with middlings from the washing   
plant, will be capable of producing 1- 2 million tons of Eskom product per      
annum. The expected life of mine is six years, however the stated resources     
cover approximately 65% of the property and further drilling should extend the  
life of mine beyond the current six year level.                                 
DESCRIPTION OF THE ELANDSPRUIT RESERVE                                          
Elandspruit 291 JS, portions 4 and 23, are situated approximately five          
kilometres southwest of Middelburg, Mpumalanga adjacent to the Shanduka         
Townlands coal mine and bordered by the R555 Witbank/Middelburg Road. It is a   
Greenfields project with an indicated resource of 11,611,559 tons of thermal    
coal, the bulk of which can be mined through the opencast method.               
The prospecting right was granted in October 2006 with prospecting being done to
an indicated resource level. Of this indicated resource, 4.3 million tons is    
metallurgical type coal, 4.1 million tons thermal coal suitable for the inland  
and/or export markets with the remainder being Eskom type product.              
The mining right application for the project was submitted in 2008, accepted by 
the Department of Mineral Resources in January 2009 and it is expected that the 
mining right will be granted in the next few months. This will ensure that      
mining operations will begin before the reserves at Khanyisa are depleted.      
On 5 August 2010 Wescoal concluded an agreement ("acquisition agreement") for   
the purchase of Nungu, subject to the fulfilment of the conditions precedent in 
6 below, with effect from 1 December 2010 ("effective date").                   
The purchase consideration for Nungu is R45 million, payable as follows:        
R25 million on the effective date, payable in cash; and                         
The balance of the purchase price will be payable by the issue of 17 391 304 new
ordinary Wescoal shares at 115 cents per share.                                 
FUNDING OF THE PROPOSED ACQUISITION                                             
The cash portion of the purchase price will be funded from existing cash        
resources of the company.                                                       
The proposed acquisition is subject to the fulfilment of inter alia the         
following conditions precedent:                                                 
Approval by Wescoal`s board of directors ;                                      
Wescoal obtaining all the necessary regulatory approvals, including Competition 
Commission approval;                                                            
Wescoal completing a due diligence investigation to its satisfaction on the     
Elandspruit reserve and Nungu;                                                  
Wescoal receiving a Competent Persons Report in connection with the resources of
the Elandspruit reserve;                                                        
Nungu furnishing Wescoal with written approval from the Department of Mineral   
and Energy Affairs for the transfer of the shares in Nungu to Wescoal; and      
Nungu concludes agreements, to the satisfaction of Wescoal, with the surface    
rights owners of the property to obtain the right of access to the Elandspruit  
reserve for mining purposes.                                                    
PRO FORMA FINANCIAL EFFECTS                                                     
Financial effects will be published as soon as the information has been obtained
from Nungu.                                                                     
The acquisition is classified as a Category 1 transaction. Shareholders will be 
informed once the circular is mailed of the date of the general meeting to      
approve the transaction.                                                        
9.   FURTHER CAUTIONARY ANNOUNCEMENT                                            
Shareholders are advised to continue exercising caution in dealing in the       
company`s securities on the JSE until such time as the financial effects of the 
transaction are published.                                                      
Exchange Sponsors                                                               
10 August 2010                                                                  
Date: 10/08/2010 09:01:59 Supplied by www.sharenet.co.za                     
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