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Buffalo Coal Corp - Managements Discussion And Analysis For The 3 And 12 Months Ended 31 Dec 2015

Release Date: 30/03/2016 16:01:00      Code(s): BUC     
BUFFALO COAL CORP.
(previously Forbes & Manhattan Coal Corp.)
(Registration number: 001891261)
(External company registration number: 2011/011661/10)
Share code on the Toronto Stock Exchange: BUF
Share code on the JSE Limited: BUC
ISIN: CA1194421014
"Buffalo Coal" or "the Company"

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the three and twelve months ended December 31, 2015
(Presented in South African Rands)

BASIS OF PREPARATION

The following Management's Discussion and Analysis ("MD&A") relates to the financial condition and results of
operations of Buffalo Coal Corp. and its subsidiaries ("we", "our", "us", "BC Corp", the "Company" or collectively the
"Group") for the three and twelve months ended December 31, 2015 and should be read in conjunction with the
audited annual consolidated financial statements for the years ended December 31, 2015 and December 31, 2014.
The financial statements and related notes have been prepared in accordance with International Financial Reporting
Standards ("IFRS"). Certain non-IFRS measures are discussed in this MD&A which are clearly disclosed as such.
Additional information and press releases have been filed electronically through the System for Electronic Document
Analysis and Retrieval ("SEDAR") and are available online under the Buffalo Coal Corp. profile at www.sedar.com.

From March 1, 2014, the Company and its subsidiaries changed their financial year-ends from February 28 to
December 31.

This MD&A reports our activities through March 29, 2016 unless otherwise indicated. References to CY2015 and
CY2014 mean the financial years ended December 31, 2015 and December 31, 2014, respectively. References to
CYQ4 2015, CYQ3 2015, CYQ2 2015 and CYQ1 2015 mean the three months ended December 31, 2015, September
30, 2015, June 30, 2015 and March 31, 2015, respectively and references to CYQ3 2014, CYQ2 2014 and CYQ1 2014
mean the three, three and four months ended December 31, 2014, September 30, 2014 and June 30, 2014.

Unless otherwise noted all amounts are recorded in South African Rands ("R" or "Rands"). References to "C$" mean
Canadian Dollars and to "US$" mean United States Dollars. Amounts stated in Canadian Dollars or US Dollars are
translated at the date of transaction, unless otherwise stated. These other amounts stated in Canadian Dollars were
translated at C$1:R11.2052 and amounts in US Dollars were translated at US$1:R15.5419.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This MD&A contains forward-looking information under Canadian securities legislation. Forward-looking information
includes, but is not limited to, information with respect to the Company's expected production from, and further
potential of, the Company's properties; financial and operational planning and strategic goals; the Company's ability
to raise additional funds; the timing and amount of advances under existing loan facilities; the future price of
minerals, particularly coal and overall market conditions for resource issuers; the estimation of mineral reserves and
mineral resources; conclusions of economic evaluations; the realization of mineral reserve estimates; the timing and
amount of estimated future production; costs of production; capital expenditures; success of exploration activities;
mining or processing issues; currency exchange rates; government regulation of mining operations; labour relations
and future collective agreements; and environmental risks. In general, forward-looking information can be identified
by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words
and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken",
"occur" or "be achieved". Forward-looking information is based on the opinions, estimates and assumptions of
management as of the date such statements are made and the Company can give no assurance that such opinions,
estimates and assumptions are correct. Estimates regarding the anticipated timing, amount and cost of exploration,
and development and production activities are based on assumptions underlying mineral reserve and mineral
resource estimates and the realization of such estimates. Capital and operating cost estimates are based on extensive
research of the Company, purchase orders placed by the Company to date, recent mining costs and other factors.

Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking information. Such factors include: risks
relating to the requirement for additional capital; production estimate risks; the price of coal; labour and
employment risks; cost estimate risks; mineral legislation risks; title to mineral holdings risks; power supply risks; risks
relating to the depletion of mineral reserves; litigation risks; South Africa country risks; infrastructure risks;
environmental risks and other hazards; risks relating to dependence on key personnel; dependence on outside
parties; exploration and development risks; risks relating to foreign mining tax regimes; insurance and uninsured
risks; competition risks; the Company's securities may experience price volatility; risks relating to owning foreign
assets; currency fluctuation risks; and the Company's directors and officers may have conflicts of interests. Although
management of the Company has attempted to identify important factors that could cause actual results to differ
materially from those contained in forward-looking information, there may be other factors that cause results not to
be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate,
as actual results and future events could differ materially from those anticipated in such information. Accordingly,
readers should not place undue reliance on forward-looking information. The Company does not undertake to update
any forward-looking information, except in accordance with applicable securities laws.

OVERVIEW OF THE COMPANY

BC Corp is a coal mining and supply company operating in South Africa. On December 17, 2015, the shares of the
Company were delisted from the Toronto Stock Exchange ("TSX") and on December 18, 2015 trading commenced on
the TSX Venture Exchange ("TSXV"). In South Africa, on December 23, 2015, the shares of the Company were delisted
from the Main Board of the JSE Limited ("JSE") and on December 24, 2015, trading commenced on the Alternative
Exchange ("AltX") operated by the JSE. BC Corp trades under the symbol "BUF" on the TSXV and "BUC" on the AltX.

In July 2010, the Company acquired 100% of the shares in Buffalo Coal Dundee Proprietary Limited ("BC Dundee"), a
South African company, with an interest in two operating coal mines in South Africa ("BC Dundee Properties"). The
BC Dundee Properties comprise the Magdalena bituminous mine ("Magdalena") and the Aviemore anthracite mine
("Aviemore"). BC Dundee's Magdalena opencast operation reached the end of its life in March 2015 and the Group is
now engaged only in underground coal mining. BC Dundee indirectly holds a 70% interest in the BC Dundee
Properties through its 70% interest in Zinoju Coal Proprietary Limited ("Zinoju"), which holds all of the mineral rights
with respect to the BC Dundee Properties. The remaining 30% interest in Zinoju is held by South African Black
Economic Empowerment ("BEE") partners. BEE is a statutory initiative on behalf of the South African government,
enacted to increase access by historically disadvantaged South Africans ("HDSA") to the South African economy by
increasing HDSA ownership in South African enterprises.

Magdalena is located 22 kilometers from the town of Dundee in KwaZulu-Natal, South Africa and encompasses
approximately 1 844 hectares. As reported in the Company's National Instrument 43-101 report, Magdalena, which
until March 2015 consisted of the Magdalena underground mine and the Magdalena opencast operation, had an
estimated mineable coal resource, all in the measured resource category, of an estimated 50.29 million tons of in situ
coal with an estimated volume of 33.52 million cubic meters as at October 1, 2012. From October 1, 2012 to
December 31, 2015, 3.56 million tons of run of mine ("ROM") was extracted from Magdalena at an average
extraction rate of 50%.

The Magdalena underground mine has an estimated total production capacity of 100 000 tons of bituminous coal per
month. Additional sections have been introduced into the underground mine to maintain this capacity with the
opencast operation having closed in March 2015. One of the Company's two processing plants is located on the
Magdalena property.

Aviemore is located eight kilometers from the town of Dundee in KwaZulu-Natal and encompasses approximately
5 592 hectares. As reported in the Company's National Instrument 43-101 report, Aviemore had a mineable
measured and indicated coal resource of 35.35 million tons of in situ coal with an estimated volume of 23.57 million
cubic meters as at October 1, 2012. From October 1, 2012 to December 31, 2015, 1.45 million tons of ROM was
extracted from Aviemore at an average extraction rate of 55%.

The Aviemore underground mine has an estimated production capacity of 45 500 tons of anthracite per month.

BC Dundee's head office is located in the town of Dundee and is known as the Coalfields site. The second processing
plant is located at Coalfields, as is the Company's rail siding.

BC CORP RESOURCES
Below is an extract of the National Instrument 43-101 Resource statement dated October 1, 2012 as disseminated on
SEDAR. Mr. SP Muller (B.Eng (Mining), M.Eng (Project Management), Pr.Eng, SAIMM), a qualified person as defined in
National Instrument 43-101 has read and approved the scientific and technical information included in this table. The
table sets forth the mineable coal resource estimate for the BC Dundee Properties.

                                     Mineable Coal Resources for the BC Dundee Properties as at October 1, 2012
                                  
                                   Resource                                                                                                   
                                       Seam         Resource     Seam    Volume       RD  Tonnage     Ash     Fixed        CV   Inherent    
      Area         Seam               Width   Classification    Width                                        Carbon             moisture    Sulphur   Volatiles   Yield
                                  Cut-Off m         Category        m     Mm(3)   t/m(3)       Mt       %         %     MJ/Kg          %          %           %       %
Magdalena 
                 Gus                    0.8         Measured     1.90      8.48      1.5    12.72   14.89     65.79     29.46       1.23       1.62       17.76   77.52
                 Alfred                 0.8         Measured     2.10     10.72      1.5    16.08   15.62     66.21     30.16       1.39       1.48       16.76   79.02
Magdalena                  
Underground      Combined               0.8         Measured     4.10     13.98      1.5    20.97   14.77     67.84     29.25       1.39       1.55       15.27   82.98
                                          Total  Measured                 33.18      1.5    49.77   15.08     66.79     29.60       1.35       1.55       16.39   80.31
                 Gus                    0.8         Measured     1.90      0.10      1.5     0.16   22.35     54.28     25.63       1.83       1.68       21.52   89.01
Magdalena        Alfred                 0.8         Measured     2.00      0.24      1.5     0.36   26.58     51.97     23.53       1.93       1.90       19.51   95.04
Opencast 
                                          Total  Measured                  0.34      1.5     0.52   25.30     52.67     24.16       1.90       1.83       20.12   93.22
                 Gus                    0.8         Inferred     1.50      1.97      1.5     2.96   21.24         -     22.11       0.98       1.84       13.19     100
Hilltop          Alfred                 0.8         Inferred     1.60      5.64      1.5     8.46   21.07         -     22.24       0.94       1.86       13.47     100
                                         Total Inferred                    7.61      1.5    11.42   21.11         -     22.21       0.95       1.85       13.40     100
Aviemore 
Aviemore Mine    Gus                    0.8         Measured     1.80      0.82      1.5     1.23   13.34     77.76     30.15       1.84       2.01        7.19   74.31
                 Total Measured                                            0.82      1.5     1.23   13.34     77.76     30.15       1.84       2.01        7.19   74.31
Leeuw Mining & 
                 Gus                    0.8        Indicated     1.72      9.72      1.5    14.58   13.55     77.53     29.00       2.21       1.80        6.73   63.51
Exploration 
Zinoju Coal      Gus                    0.8        Indicated     1.72     13.03      1.5    19.54   13.46     75.51     28.93       2.59       1.60        8.28   57.00
                 Total Indicated                                          22.75      1.5    34.12   13.50     76.37     28.96       2.43       1.69        7.62   59.78
                 Total Measured & Indicated                               23.57      1.5    35.35   13.49     76.42     29.00       2.41       1.70        7.60   60.29
Leeuw Mining & 
Exploration      Gus                    0.8         Inferred     1.72      1.09      1.5     1.63   14.97     74.78     27.29       1.77       1.41        8.50   55.98
Zinoju Coal      Gus                    0.8         Inferred     1.72      8.99      1.5    13.48   14.14     74.72     28.85       2.49       1.71        8.64   59.60
                 Total Inferred                                           10.08      1.5    15.11   14.23     74.75     28.69       2.41       1.68        8.63   59.23

Notes:
1.  Coal Resources are inclusive of Coal Reserves.
2.  Coal Resources are inclusive of tons mined since the effective date of October 1, 2012.
3.  Tons and qualities have been rounded and this may result in minor adding discrepancies.
4.  The coal qualities are stated for the ash content ("Ash"), fixed carbon, calorific value ("CV"), inherent moisture, 
    sulphur content ("Sulphur"), volatile matter ("Volatiles") and yield.
5.  The coal qualities assays were determined on an air-dried moisture basis.
6.  A 15% geological loss has been applied to the Gross in situ tons.
7.  The declared tabulation of coal resources prepared by Minxcon has been prepared in accordance with the NI 43-101 reporting 
    code and is compliant with this Code.
8.  A cut-off seam thickness of 0.8 m has been applied to the Gross in situ Coal Resource statements.
9.  The Coal Resources for the Magdalena and Aviemore areas are calculated on 1.7 t/m(3) float density coal quality values and the 
    Hilltop Coal Resources are calculated on raw coal quality values.                                           
10. The coal density for all areas is 1.5 t/m(3).
11. The Hilltop data received from the Client did not include fixed carbon values.
12. The mining right to Leeuw Mining & Exploration properties has been transferred to Zinoju.

From October 1, 2012 (the date of the National Instrument 43-101 Resource statement) to December 31, 2015, the
following ROM has been extracted (1):
-      Magdalena opencast (t):          689 377
-      Magdalena underground (t):     2 870 803
-      Aviemore (t):                  1 453 531

The information above was read and approved by Mr SP Muller (B.Eng (Mining), M.Eng (Project Management),
Pr.Eng, SAIMM), a qualified person as defined in National Instrument 43-101.

(1) At an average extraction factor of 50% for Magdalena and 55% for Aviemore mine.

CONSOLIDATED OPERATIONAL AND FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2015 AND THE
QUARTER ENDED DECEMBER 31, 2015

The operational highlights and summarized financial results for the year ended December 31, 2015 and the quarter
ended December 31, 2015 are presented below as compared to the financial year ended December 31, 2014, the
quarter ended December 31, 2014 and the quarter ended September 30, 2015. The Group achieved ROM production
of 1.7Mt, saleable production (excluding calcine) of 972kt and sales of 949kt for the year ended December 31, 2015.

                                                  12 months    10 months                   3 months
                                                      ended        ended                      ended
                                               December 31, December 31,  December 31, December 31, September 30,
Operational results                                    2015         2014          2015         2014          2015
ROM (t)                                           1 732 205    1 234 126       328 527      366 066       408 570
- Aviemore (t)                                      472 994      386 659       108 065      110 647       124 563
- Magdalena (t)                                   1 259 211      847 467       220 462      255 419       284 007
Saleable production (excluding calcine) (t)         972 065      743 983       181 307      210 097       261 953
- Anthracite (t)                                    299 126      233 740        69 603       64 459        79 288
- Bituminous (t)                                    672 939      510 243       111 704      145 638       182 665
Yield on plant feed (excluding calcine) (%)           55.4%        59.9%         52.5%        58.8%         57.1%
- Anthracite (%)                                      63.7%        61.4%         65.0%        61.3%         66.9%
- Bituminous (%)                                      52.4%        59.5%         46.9%        57.8%         53.7%
Sales (t)                                           949 369      844 510       184 215      258 177       243 131
- Anthracite (t)                                    227 274      269 529        59 441      114 426        47 475
- Bituminous (t)                                    688 569      534 315       117 800      133 363       188 688
- Calcine (t)                                        33 526       40 666         6 974       10 388         6 968
Saleable inventory tons                              70 241       31 426        70 241       31 426        67 429
- Anthracite (t)                                     65 863       13 635        65 863       13 635        57 498
- Bituminous (t)                                      2 297       14 834         2 297       14 834         8 550
- Calcine (t)                                         2 081        2 957         2 081        2 957         1 381

                                                  12 months    10 months                   3 months
                                                      ended        ended                      ended
                                               December 31, December 31,  December 31, December 31, September 30,
Financial results                                      2015         2014          2015         2014          2015
Revenue (R'millions)                                  631.0        593.8         127.2        185.2         159.9
EBITDA (R'millions) (*)                              (71.0)       (23.4)        (14.3)          3.1        (24.2)
Average selling price per ton sold (R)                  665          703           691          717           658
Cash cost of sales per ton (R)                          669          666           688          636           696
Cash (utilized in)/ generated from
operating activities (R'millions)                    (63.9)       (24.6)        (51.4)          5.3           2.0
Cash utilized in investing activities
(R'millions)                                         (55.5)      (113.8)        (12.4)       (57.6)        (11.5)
Cash generated from financing
activities (R'millions)                               127.6        136.0          69.0         59.1           1.1
CAD:ZAR (average)                                      9.97         9.80         10.65         9.88          9.93
USD:ZAR (average)                                     12.76        10.83         14.23        11.22         12.98

(*) See Non-IFRS Performance Measures section of this MD&A.

OVERVIEW OF THE PERIOD AND OUTLOOK FOR THE GROUP

Markets

The Group supplies high quality bituminous coal and anthracite to both the export and domestic markets.

In terms of export capacity, the group has export allocation of 204 500 tons through Quattro at the Richards Bay Coal
Terminal ("RBCT"), together with the related rail allocation from Transnet Freight Rail. Product is also exported from
the Navitrade Terminal in Richards Bay through contracts structured with customers with export allocations at this
terminal.

Bituminous

The API 4 coal index, the benchmark pricing index for coal exports meeting the RB1 specification, is currently at 
levels around US$53 per ton. The index has decreased from US$61 per ton since the beginning of 2015, although the Rand
has weakened significantly against the US Dollar from US$1:R11.61 to US$1:R15.54 over this period, which has
supported the Group's revenues. Over the past year, approximately 21% of the Group's sales have comprised export
bituminous sales which have been priced against the API 4 coal price index. The short- to medium-term outlook for
the API 4 coal price index is currently in backwardation (source IHS/McCloskey), although the decreasing price
continues to be mitigated to some extent by a weak Rand. The Group has also mitigated its exposure to downside in
the index by restructuring some of its major bituminous export contracts to short term Rand denominated fixed price
contracts in early 2016.

On the domestic front, the bituminous coal market has remained reasonably steady, with marginal growth in prices
but a continued stable outlook in terms of offtake volumes for the upcoming year. Domestic coal supply contracts are
typically structured at a negotiated coal price over a twelve month period.

Anthracite

The anthracite market is highly correlated with the metals industry where anthracite is primarily used as a reductant.
Anthracite supply contracts are typically structured at a negotiated price and are not indexed.

Domestic and export anthracite markets have weakened over the past few quarters, in terms of both demand and
pricing, and the Group is currently pursuing various marketing opportunities for all anthracite and calcine products
with a number of parties.

South Africa is one of the world's largest ferrochrome and ferroalloy producers. Domestic demand has collapsed as a
result of a weakening of these markets, and is expected to remain depressed during 2016. Domestic product can
potentially be redirected into the export market in the short term, although at significantly lower prices.

Due to the current economic climate, the Group is focusing all efforts on securing new market opportunities for both
anthracite and bituminous products.

Operational

Restructuring of Business

Over the past two years, like many of its peers, BC Dundee has been operating under extremely difficult financial
circumstances. This has been as a result of a number of factors, but principally arising from operational difficulties at
the Magdalena underground mine, together with the end of the life of mine of the lower cost Magdalena opencast
reserve being reached in March 2015. This, combined with the reduction in export coal prices over this period and
the weakening of the domestic and export anthracite markets, has necessitated various restructuring initiatives by BC
Corp in all aspects of its business, to support and turn-around the current financial position of the Group.

One of the key changes resulting from the restructuring was the introduction of a mining contractor, STA Coal Mining
Company Proprietary Limited ("STA") at Magdalena, as set out in further detail below. This contract de-risks BC Corp
from a cost perspective should targets not be achieved. BC Dundee continues to mine Aviemore, which performs
consistently well in terms of volumes and costs, as well as to operate the Company's two processing plants and
siding.

With the restructured cost base, and subject to no further decline in prices, bituminous products are expected to
generate small cash margins in 2016. Anthracite products continue to generate good profits, subject to marketing
opportunities.

Other restructuring initiatives have included:

-   The closure of the entire Canadian head office in 2014, including the termination of service contracts with a
    large number of senior management staff in both Canada and Johannesburg resulting in net savings of
    approximately R15.0 million per annum.
 
-   Raising a total of US$31.0 million (approximately R481.8 million) from Resource Capital Fund V L.P. ("RCF"), to
    support the Group's working capital requirements and to implement a capital expenditure program to
    replace old and unreliable equipment. US$29.0 million (approximately R450.7 million) was raised by way of a
    convertible loan between September 2013 and July 2015, and US$2.0 million (approximately R31.1 million)
    was raised by way of a private placement to RCF in December 2015 ("the Private Placement") (refer below for
    further information on the raising of additional capital from RCF).

-   Restructuring of BC Dundee's debt facilities with Investec Bank Limited ("Investec") to provide cash relief to
    BC Dundee in terms of servicing and covenant reporting requirements until December 2015. In December
    2015, Investec agreed to increase the Group's working capital facility, to restructure the capital repayment
    due in December 2015 and to waive the breach of the covenants as at December 31, 2015 (refer below for
    further information on the additional financing raised from Investec).

-   Ongoing cost cutting initiatives and improved cost controls implemented in all aspects of the Group over the
    past two years as markets have deteriorated in terms of both demand (primarily anthracite) and pricing
    (primarily bituminous).

-   A retrenchment process undertaken in terms of Section 189A of the South African Labour Relations Act, No
    66 of 1995 ("LRA") which was concluded in March 2015 resulting in an approximate 25% reduction in the
    labour complement at a total cost of R13.7 million ("March Retrenchment Process").

-   In May 2015, BC Dundee initiated a second Section 189A retrenchment process focusing on Magdalena. In
    terms of this Section 189A process, the majority of employees at Magdalena were retrenched in October
    2015 at a total cost of R3.8 million, with the majority subsequently being re-employed by STA as described
    below ("October Retrenchment Process").

-   The appointment by Zinoju of STA, a contract mining company, to increase volumes at Magdalena at a fixed
    rate per ton (including replacing the tons lost as a result of the end of the life of mine of the Magdalena
    opencast reserve), in order to sustain the group's production and sales levels. BC Dundee does not currently
    have the ability to fund the capital requirements for additional mining sections.

-   In addition to the contract mining agreement, STA has purchased BC Dundee's two new continuous miners,
    which will provide funding of R43.0 million to BC Dundee over the next few months to assist in its turn-
    around back to a sustainable cash position. Zinoju, BC Dundee and STA have further entered into an
    agreement with BC Corp, in terms of which Zinoju is entitled, at its election, to settle an agreed portion of
    STA's contract mining fees through the issuance of common shares of BC Corp ("Common Shares") to STA
    ("the Equity Portion") (refer below for further detail on the arrangements between Zinoju, BC Dundee, BC
    Corp and STA).

Refer to Legal proceedings below with regards to the application brought by the Association of Mineworkers and
Construction Union ("AMCU") against BC Dundee and Zinoju in relation to the March Retrenchment Process.

Despite the numerous challenges which BC Corp has faced over the past two years, with the support of RCF, Investec
and STA, the Group believes it is able to move forward despite continued depressed markets.

Agreement with STA to perform contract mining services at Magdalena

Zinoju and BC Dundee have signed a contract mining agreement with STA, effective October 31, 2015, for STA to mine
four sections at Magdalena on a fixed Rand per ton contract, for an initial term of three years, with the option for a
further two year extension. As a result of this agreement, STA has employed the majority of the employees who
were retrenched by BC Dundee in terms of the October Retrenchment Process, resulting in minimal staff becoming
redundant.

BC Dundee and Zinoju have also entered into an agreement to sell two continuous miners to STA. The selling price
has been partially settled by STA by way of offset against amounts due to STA in terms of the previous agreement
between the parties, and the balance will settled by way of a reduction in the contract mining rate going forward,
until such time as the selling price has been settled in full.

Zinoju, BC Dundee and STA have further entered into an agreement with BC Corp, in terms of which the Company is
entitled, at its election, to settle an agreed portion of STA's contract mining fees through the issuance of Common
Shares to STA. The Equity Portion will be calculated monthly based on production levels at Magdalena, with the
Common Shares priced at the higher of the 20-day volume weighted average price ("VWAP") per Common Share, and
any minimum pricing restriction applicable to the stock exchanges on which BC Corp is listed. The Common Shares
will be issued to STA at the end of each calendar quarter, subject to regulatory approvals. The parties have agreed
that the percentage of Common Shares held by STA will not exceed 9.9% of BC Corp's outstanding shares at any point
in time.

STA has appointed a nominee to act as a non-executive director on the board of directors of BC Dundee.

Other

As announced on August 4, 2015, a fall of ground ("FOG") occurred at Magdalena during July 2015. No employees
were affected by the incident, and the partial loss of raw coal production lasted approximately two weeks for the 
first affected section and just under a month for the second affected section. The FOG occurred in a worked out area of
the mine which was being used as an access way for the conveying of coal from two of the four production sections
to surface. The FOG necessitated that the Company accelerate its planned relocation of a portion of the conveyor
infrastructure to a new surface access adit. This adit had been recently established for that purpose and had been
used for several months already for the transport of working crews to two underground sections.

The new adit has been designed to significantly shorten the underground infrastructure to surface. An overland
conveyor has subsequently been established to reduce the costs of moving coal from the new adit to the processing
plant.

In early September 2015, a FOG occurred in the two mining sections then being mined by STA and as a result, the
sections were abandoned and moved to new sections of the mine. The first section came back into production in
mid-September with the second section being brought back into production in late September 2015. Production at
the two new sections was relatively sluggish for a period due to poor roof conditions as well as capacity constraints
on the conveyor belts as the two STA sections were utilising the same belt conveyors as the two sections mined at
that time by BC Dundee. This constraint was subsequently addressed through the establishment of the appropriate
infrastructure to handle the necessary production volumes.

RCF Loan Facilities

The Company has raised an aggregate US$29.0 million convertible loan from RCF. The original convertible loan
facility of US$6.0 million ("RCF Original Convertible Loan") and the bridge loan facility of US$4.0 million ("RCF Bridge
Loan") were entered into in September 2013 and February 2014 respectively, and on July 3, 2014, BC Corp closed the
final tranche of US$15.0 million resulting in an aggregate US$25.0 million convertible loan facility ("RCF US$25 million
Loan") ("First Amended RCF Agreement").

On March 27, 2015, BC Corp entered into a second amended and restated convertible loan agreement with RCF
("Second Amended RCF Agreement") and secured an additional US$4.0 million loan facility which was advanced as a
bridge loan ("2015 Bridge Loan"). On June 19, 2015, upon the Company receiving shareholder approval at the annual
and special meeting of shareholders, the 2015 Bridge Loan rolled over into the RCF US$25 million Loan, under the
same terms and conditions except for the amendments to the interest rate and conversion price on the full US$29.0
million facility ("RCF Convertible Loan") as set out below.

The 2015 Bridge Loan bore interest at a rate of 15% per annum, payable on the maturity date which was the earlier of
the date on which the shareholder approval was received or June 30, 2015. No establishment fees were incurred on
the 2015 Bridge Loan. Upon receipt of the shareholder approval, interest became payable in Common Shares at a
price per share equal to the 20-day VWAP as at the date the payment was due. In addition, the interest rate on the
RCF Convertible Loan was increased to 15% per annum and the conversion price was decreased to C$0.0469, a 25%
discount to the 5-day VWAP as at January 30, 2015.

On December 2, 2015, BC Corp entered into a third amended and restated convertible loan agreement with RCF
("Third Amended RCF Agreement"), whereby RCF has agreed to convert an aggregate of US$20.0 million of the RCF
Convertible Loan into Common Shares over a two-year period at the conversion price of C$0.0469 per Common Share
("RCF Conversion"), subject to a minimum conversion of US$10.0 million in the first year. An initial amount of
US$2.0 million was converted on December 3, 2015 on the closing of the transactions with RCF and Investec as
described herein ("RCF First Tranche Conversion") resulting in 56 963 752 Common Shares being issued to RCF.

The balance of the RCF Convertible Loan remains in place on existing terms, other than the interest being settled
quarterly not monthly, and in respect of certain amendments to the interest provisions as detailed below:

-  Prior to the date of completion of the RCF Conversion, interest will be settled through the issuance of Common
   Shares, priced at the 20-day VWAP. Following the date of completion of the RCF Conversion, interest will be
   payable in cash subject to BC Dundee having paid Investec its scheduled principal repayment for the prior
   quarter. If Investec's principal repayment has not been made, RCF's interest will accrue until such time as
   Investec has been paid, subject to RCF's election for interest to be settled through the issuance of Common
   Shares.
-  The percentage interest rate will be determined as follows:
    - If the 20-day VWAP is greater than C$0.05 per Common Share then the interest rate will be 15%
      per annum;
    - If the 20-day VWAP is less than or equal to C$0.0313 per Common Share then the interest rate
      will be 24% per annum; and
    - If the 20-day VWAP is greater than C$0.0313 but less than C$0.05 per Common Share then the
      interest rate will be calculated as 0.0075/20-day VWAP.

In terms of the Third Amended RCF Agreement, RCF has also released all security held in respect of the RCF
Convertible Loan, including the guarantee from BC Dundee.

As of December 31, 2015, the Company was fully drawn on the US$27.0 million (R419.6 million) RCF Convertible
Loan, after the RCF First Tranche Conversion.

In addition to the above, BC Corp also entered into a subscription agreement with RCF on December 2, 2015,
whereby RCF subscribed for an additional US$2.0 million (approximately R28.7 million) in equity by way of the Private
Placement. Pursuant to the Private Placement, RCF acquired 72 272 480 Common Shares at a price of C$0.0367 per
Common Share.

Investec funding

On December 2, 2015, BC Corp closed a second amended and restated term loan and revolving credit facility with
Investec ("Second Amended Investec Agreement"), whereby Investec agreed to extend BC Dundee's working capital
facility from R30.0 million to R80.0 million, comprising two tranches of R25.0 million each. The conditions to the first
tranche, which included the conclusion of the RCF funding arrangements as set out above, were fulfilled on signing of
the Second Amended Investec Agreement, and R25.0 million was drawn by BC Dundee from the facility in December
2015. The second tranche remained subject to the Company demonstrating its plan to sell the majority of its
anthracite stockpile, which has built up as a result of depressed markets both domestically and globally. The
condition was fulfilled and R25.0 million drawn by BC Dundee in March 2016.

On December 18, 2015, BC Dundee entered into a third amendment to the Investec loan agreement ("Third
Amendment"), in terms of which the repayment schedule for the term loan facility was replaced with a new schedule
with principal repayments commencing on March 31, 2016.

BC Dundee was required to meet specified debt covenants from December 31, 2015 and was in breach of certain of
these covenants at at this date. Upon breach, Investec is entitled to request early payment of the outstanding debt,
however when it became apparent that the covenants were to be breached, Investec was approached and has
waived the breach of the covenants as at December 31, 2015.

Legal proceedings

As mentioned above, AMCU brought an application against BC Dundee and Zinoju in the Labour Court of South Africa
pertaining to the March Retrenchment Process. The matter was heard by the Court on April 14, 2015, and on April 24,
2015, the LRA dismissed the application brought by AMCU with costs. AMCU has appealed the judgment and the
appeal was heard by the Labour Appeal Court on November 4, 2015. The outcome of this hearing is still pending.

On April 10, 2015, BC Dundee received notice that AMCU had referred a dispute to the Commission for Conciliation,
Mediation and Arbitration ("CCMA") in respect of the substantive fairness of the March Retrenchment Process, which
dispute was heard on May 18, 2015. The CCMA referred the matter to the Labour Court. AMCU had until August 17,
2015 to make a further application, however no submission was made before this deadline, and this matter is now
closed.

On April 20, 2015, the trustees of the Avemore Trust brought an application in the High Court of South Africa against,
among others, the South African Minister of Mineral Resources ("the Minister"), BC Dundee and Zinoju in respect of
Mining Right 174 ("MR174"). In terms of the application, the trustees of the Avemore Trust challenged the decision
by the Minister, subsequent to an internal appeal process concluded during September 2014, to grant a converted
mining right to BC Dundee and to grant consent for the cession of the converted mining right to Zinoju. There have
been various settlement offers between the parties, but should settlement not be reached, BC Dundee and Zinoju
intend to oppose the application. The Company's legal team, including senior counsel have advised of a defendable
case in terms of Avemore Trust's approach to the matter. The legal process on this matter is currently ongoing.

On August 27, 2015, notice was received from the Minister that Mining Right 301 ("MR301") had been withdrawn
together with the approval by the Regional Manager of the Environmental Management Plan in respect of MR301
(the "Ministerial Decision"). The reasons given by the Minister for the Ministerial Decision are procedural issues in
respect of the award process, in relation to an objection received from Avemore Trust in October 2013 against the
awarding of the right.

On September 15, 2015, a urgent court order was granted, pending final determination, for the Ministerial Decision
to be of no force and effect, to interdict the Minister from awarding MR301 to any other party and for the Company
to continue to mine in terms of MR301. A review application was instituted by the Company in October 2015 to
obtain final relief in the form of an order setting aside the Ministerial Decision, and the Company's legal team,
including senior counsel have indicated a strong likelihood of the review application being successful. The legal
process on this matter is currently ongoing.

TSX and JSE Main Board Delistings and Commencement of Trading on the TSXV and AltX

In May 2015, the TSX advised the Company that it had been placed under a remedial delisting review in terms of
meeting the continued listing requirements of the TSX in the following areas: (i) the Company's financial condition
and operating results, and (ii) the market value of publicly held listed securities of the Company. In September 2015,
the Company applied to voluntarily delist its Common Shares from the TSX.

The Common Shares were delisted from the TSX effective as of the close of trading on December 17, 2015 and
commenced trading on the TSXV from the opening of trade on December 18, 2015 under the Company's existing
stock symbol, "BUF".

In addition, on December 21, 2015 the JSE approved the transfer of the Company's listing on the JSE from the Main
Board to the AltX with effect from December 24, 2015. Accordingly, the Common Shares were delisted from the
Main Board of the JSE with effect from the close of business on December 23, 2015 and were listed on the AltX from
the opening of trade on December 24, 2015 under the Company's existing stock symbol, "BUC".

In January 2016, the Company was notified by the Compliance and Disclosure Department of the TSXV that it has
been placed on notice for transfer to the NEX Board of the TSXV ("NEX") for failure to meet the public float continued
listing requirements of the TSXV. The Company has until July 7, 2016 to provide satisfactory submissions on the issue
and intends to work with the TSXV throughout the review period in an effort to restore compliance with TSXV
continued listing requirements.

Changes in directors and officers

On July 23, 2015, the Company announced the resignation of Ms. Lorraine Harrison as Corporate Secretary of BC
Corp, effective July 24, 2015. On that date, the Company appointed Ms. Sarah Williams as Corporate Secretary 
of BC Corp.

On September 1, 2015, the Company announced the appointments of Mr. Edward Scholtz and Mr. John Wallington to
the Board of Directors. The appointments of Mr. Scholtz and Mr. Wallington followed the resignations of Mr. John
Dreyer and Mr. Michael Price who stepped down as directors of the Company.

STRATEGY AND FUTURE PLANS FOR THE DECEMBER 2016 FINANCIAL YEAR

The Group's long term vision is to build a high quality bituminous and metallurgical coal mining and supply company.
Future production growth is set to be twofold, firstly through expansion and optimization of the existing BC Dundee
operations and secondly through acquisition in the Southern African region.

In the current economic climate, compounded by the impact of the events of the years ended December 31, 2015
and 2014, including the flooding incident at Magdalena underground which halted production for close to a month in
2014, the tragic fatality at Aviemore in the same year and the necessity of having to initiate two retrenchment
processes in less than 12 months, the short term strategy of the Group is an internal focus on a turn-around back to
profitability to ensure the creation of a sustainable foundation to take forward.

The Group will continue to pursue attractive expansion opportunities where it is believed that such opportunities will
be synergistic and value enhancing to the existing business, while not removing the focus on the existing Dundee
operations. In particular, the Magdalena opencast reserve reached the end of its life of mine in March 2015, and the
Company continues to seek replacement tonnages in the area.

The Company's key strategic goals for the year ending December 31, 2016 are summarized below:

General

-    Continued focus on cost containment at both an operational and corporate level, and a return to profitability
     and positive cash generation.
-    Focus on achieving production targets through forward planning and improvement of operational efficiencies.
-    Explore opportunities to increase revenue by sourcing new market opportunities for both anthracite and
     bituminous products.
-    Increase rail and port allocation to further gain exposure to seaborne bituminous and anthracite export
     markets, where feasible and profitable.
-    Increase the awareness of safety to reduce the number of lost time injuries ("LTI").

Magdalena

-    Working to improve production and productivity at Magdalena together with STA.
-    Replacement of the lower cost Magdalena opencast resource which has reached the end of its life of mine,
     through the acquisition of opencastable resources in the area or bought in coal at appropriate qualities and
     pricing.

Aviemore

-    Relocate the adit at the mine in order to mitigate the risks of litigation (refer to Legal Proceedings above) and
     to create more economical and efficient access to the life of mine of Aviemore.
-    Progress the exploration program and feasibility study for the expansion of Aviemore to a 1Mt per year
     producer ("Impati"), subject to market conditions.

Wash plants

-    Improve wash plant recovery rates from current levels by improving efficiencies of the wash plants and
     reducing contamination at source, particularly in respect of Magdalena.

-   Investigate product upgrade potential.
-   Consider tollwashing opportunities for other mining operators in the area.

Expansion opportunities

-   An internal scoping study for the expansion of Aviemore has been completed, the results of which appear
    favourable and management recommends the study to proceed to the next stage, subject to market
    conditions.
-   The Company is exploring various opportunities to secure additional opencast reserves in the northern
    KwaZulu-Natal region.
-   The Company is exploring opportunities to buy in coal at appropriate qualities and pricing to increase volumes.
-   The Company will also continue to explore the potential for acquisition of further high quality bituminous and
    metallurgical coal projects (both greenfield and producing) in the Southern African region.

The ability of the Company to increase production amounts has not been the subject of a feasibility study and there is
no certainty that any expansion proposals will be economically feasible.

OPERATIONAL RESULTS

The operational results are for the twelve months ended December 31, 2015 compared to the ten months ended
December 31, 2014.

ROM Production

Total ROM production for the year ended December 31, 2015 was 1.7Mt compared to 1.2Mt produced in the period
ended December 31, 2014. The monthly average ROM production for the year ended December 31, 2015 was 144kt
compared to 123kt produced in the period ended December 31, 2014, up by 17.0%.

ROM production from Magdalena operations, underground and opencast combined, for the year ended December
31, 2015 was 1 259kt, compared to 847kt produced in the period ended December 31, 2014, which equates to an
average of 105kt per month for the year ended December 31, 2015 compared to 85kt for the period ended December
31, 2014, up by 23.8%. ROM production for the year ended December 31, 2015 comprised 1 185kt from the
underground operations and 74kt from the opencast as compared to 633kt and 214kt respectively, in the period
ended December 31, 2014. The increase in tons is as a result of additional tons mined by STA during the current year
as well as an improvement in production from the two sections operated by BC Dundee before the FOGs referred to
above in BC Dundee's and STA's sections respectively. With regards to the FOG that occurred during July 2015, the
loss of production from the two BC Dundee sections lasted approximately two weeks for the first section and just
under a month for the second section. The FOG in September 2015 occurred in the two STA mining sections, for
which the loss of production lasted approximately a week for the first section and around three weeks for the second
section.

ROM production from Aviemore for the year ended December 31, 2015 was 473kt compared to 387kt produced in
the period ended December 31, 2014.

The monthly average ROM production for the year ended December 31, 2015 was 39.4kt compared to 38.7kt
produced in the period ended December 31, 2014, up by 1.9%. Aviemore continues to perform in line with historic
and budgeted performance levels.

Saleable Production

Saleable coal production for the year ended December 31, 2015 was 972kt (excluding calcine) compared to 744kt in
the period ended December 31, 2014. The monthly average saleable production for the year ended December 31,
2015 was 81kt compared to 74kt produced in the period ended December 31, 2014, up by 8.9% in line with an
increase in ROM production and offset by a reduction in yields.

Saleable calcine product was 31kt for the year ended December 31, 2015 compared to 30kt in the period ended
December 31, 2014, which equates to an average of 2.6kt per month for the year ended December 31, 2015
compared to 3.0kt for the period ended December 31, 2014, a 10.7% decrease.

The total calculated yield from plant feed was 55.4% for the year ended December 31, 2015, compared to 59.9% for
the period ended December 31, 2014.

Towards the end of the period ended December 31, 2014 and continuing into the 2015 year, the yields at Magdalena
wash plant deteriorated due to various factors. The Company has implemented stricter density controls and the
reclaiming of the accumulation of coal around the ROM and product stockpile base areas as previously reported.
Towards the end of the year ended December 31, 2015, the Magdalena wash plant yield was low due to
contamination in respect of the STA contract, for which STA was not compensated. An action plan has been put in
place to ensure the yield improves going forward, the results of which are already being seen in the first quarter of 2016.

Sales

Total sales of bituminous coal and anthracite products for the year ended December 31, 2015 were 949kt compared
to 845kt sold in the period ended December 31, 2014. The monthly average sales for the year ended December 31,
2015 were 79kt compared to 84kt in the period ended December 31, 2014, a decrease of 6.3%.

Bituminous sales for the year ended December 31, 2015 were 689kt, of which 63.4% were export sales and 36.6%
were domestic sales. This compares to 534kt sold in the period ended December 31, 2014 of which 52.5% were
export sales and 47.5% were domestic sales. The monthly average bituminous sales for the year ended December 31,
2015 were 57kt compared to 53kt in the period ended December 31, 2014, an increase of 7.4% in line with an
increase in saleable production.

Anthracite sales (including calcine) for the year ended December 31, 2015 were 261kt, of which 64.1% were export
sales and 35.9% were domestic sales. This compares to 310kt sold in the period ended December 31, 2014 of which
47.7% were export sales and 52.3% were domestic sales. The monthly average anthracite sales for the year ended
December 31, 2015 were 22kt compared to 31kt in the period ended December 31, 2014, down by 29.9%.

The decrease in anthracite sales is mainly as a result of a decline in demand domestically as the Group's major
domestic customers shut operations from mid-2015. The Company is negotiating with export customers to maintain
sales levels.

Logistics

Coal is normally transported by rail and truck to domestic customers, while export coal is transported to RBCT and
the Navitrade Terminal by rail. The Company has 204 500 tons of export allocation at RBCT and utilizes the Navitrade
Terminal through contracts structured with customers with export allocations at the terminal.

Health and Safety

The Company runs an integrated Safety, Health and Environment ("SHE") management system, established using the
OHSAS18001 and ISO14001 frameworks as well as minimum standards, and fully supports the co-existence of safety,
occupational health and the environment within which the Company operates, in order to ensure compliance and
achieve zero harm. The Company values the contribution of a safe and healthy workforce to its overall productivity
and is continually striving towards an incident and injury free workplace. The Company undertakes training and
development initiatives and related ventures on a regular basis in order to improve individual outlook on safety,
health and the environment. The Company currently employs 573 employees, and has 368 contractors on site.

Safety

The Group has achieved more than five thousand fatality free production shifts at Magdalena and the Coalfields wash
plant. Aviemore had one fatal incident during September 2014.

BC Dundee completed the year ended December 31, 2015 with four LTIs, of which three occurred at Magdalena and
one at Aviemore. This compares to nine LTIs during the period ended December 31, 2014, which represents a
significant improvement. The Coalfields wash plant continues to maintain a high standard of safety with no LTIs for
the period.

Data for Health and Safety graph

Year                    Fatalities         LTIFR
2011                             0          8.23
2012                             0          0.33
2013                             0          0.58
2014                             1          0.53
2015                             0          0.35
    
Occupational Health

The health and wellness of BC Corp employees plays a pivotal role in the Company's safety performance as well as
productivity. The main aim of the Company and policy commitment is to ensure that industry milestones for
occupational health are achieved and that the Company continues to strive towards improving the health of its
employees as well as interested and affected parties.

The Company has established a medical surveillance link between exposure and medical examinations by running an
integrated SHE system. The pre-employment periodical as well as exit medical surveillance is linked to the
occupational health programs for noise, airborne pollutants and thermal stress, which are directly linked to minimum
standards of fitness to work. Other occupational hygiene factors are duly considered.

The Company operates its own occupational health facilities, which are staffed with highly qualified and experienced
professionals who render a high level service to direct as well as indirect clients, whilst ensuring legal compliance as
well as compliance with in-house standards. On average, compliance is above 95% on ventilation, occupational
hygiene and occupational medicine systems.

Environmental Management

The Company endeavors to conduct its business in a manner that demonstrates its understanding of the fact that the
environment is borrowed from future generations and as such must be conserved. The Company aims to leave the
environment in a better state than it was prior to the start of operations. Compliance with legal and other
requirements, environmental management plans and requirements on water use licenses as well as managing all
environmental aspects and impacts is one of the key principles of the Company. The Company has its own in-house
environmental management department focusing on the elements of ISO 14001 and ensuring continual improvement.

Minerals Royalty

All operations at BC Dundee are subject to South African law, including the Mineral and Petroleum Resources Royalty
Act, 28 of 2008 ("Royalty Act"). In terms of the Royalty Act, all companies extracting minerals in South Africa are
required to pay royalties at a rate of between 0.5% and 7% based on gross sales, less their allowable deductions,
depending on the refined condition of the mineral resources.

Coal is classified as an unrefined mineral and the percentage royalty payable is therefore calculated according to the
following formula:

% royalty payable = 0.5 + [Earnings before interest and tax/(Gross sales x 9)] x 100

Social Development

A key component of the Company's strategy involves social development and the enrichment of the local community,
which is carried out through the Company's social and labour plans.

The development of people, both employees and local community members, is a fundamental principle in the
business strategy. The Company provides opportunities and resources for employees to be fully developed in job
disciplines that form part of the occupational structures of the Company.

The Company's human resource development includes:

-   Portable skills training for both employees and the community.
-   An Adult Education and Training ("AET") project which aims to improve the literacy rate of employees and
    members of the community. AET learners are offered the opportunity to become functionally literate and
    numerate.
-   A Mathematics, Science and Accounting project which offers tutoring to Grade 12 learners in the mining
    community. The Company recruits competent educators through the Department of Education to offer tuition.
    Through this intervention, Grade 12 results have improved.
-   An internship program for unemployed graduates.
-   A bursary program in mining related fields. The Bursars are given the opportunity to do vacation work, to gain
    experience and do in-service training to meet the graduation requirements.
-   An engineering and mining learnership program.

The Company's local economic development projects include:

-   Advancement of Small, Medium and Micro-sized Enterprises ("SMMEs") within the local community including
    the development of a sewing project and various agricultural projects such as poultry farming.
-   The construction of a creche near the Magdalena mine.
-   The renovation of a primary school in the district.

FINANCIAL RESULTS

Revenue

Coal revenues earned during the year ended December 31, 2015 were R631.0 million compared to R593.8 million
earned during the period ended December 31, 2014. The average revenue per month was R52.6 million in the year
ended December 31, 2015 compared to R59.4 million in the period ended December 31, 2014. During the year ended
December 31, 2015, the Group's sales were 949kt compared to sales of 845kt for the period ended December 31,
2014. The monthly average sales tons for the year ended December 31, 2015 were 79kt compared to 84kt in the
period ended December 31, 2014.

Bituminous sales on average per month for the year ended December 31, 2015 were R14.2 million for domestic (21kt
per month) and R23.3 million for export (36kt per month), compared to an average per month for the period ended
December 31, 2014 of R16.6 million for domestic (25kt per month) and R20.0 million for export (28kt per month).

Anthracite sales (including calcine) on average per month for the year ended December 31, 2015 were R7.9 million
for domestic (8kt per month) and R7.1 million for export (14kt per month), compared to an average per month for
the period ended December 31, 2014 of R13.6 million for domestic (16kt per month) and R9.1 million for export (15kt
per month).

Average selling prices for the year ended December 31, 2015 were R665 per ton compared to an average selling price
of R703 per ton for the period ended December 31, 2014.

The decrease in average revenue for the year ended December 31, 2015 compared to the period ended December
31, 2014 is primarily due to an overall decrease in monthly sales tons during the current year, particularly in respect
of domestic anthracite sales as noted above, which was further worsened by a lower selling price per ton on export
products. The overall selling price per ton has been impacted by a reduction in domestic sales at higher selling prices
as compared to export sales. The export bituminous selling price on certain customers, based on a lower API 4 coal
price index as compared to the comparative period, was offset, to some extent, by a weakening in the Rand during
the current year.

Cost of Sales

Cost of sales for the year ended December 31, 2015 was R711.4 million (cash cost of sales of R669 per ton sold)
compared to R638.0 million (cash cost of sales of R666 per ton sold) for the period ended December 31, 2014. The
average cost of sales per month in the year ended December 31, 2015 was R59.3 million compared to R63.8 million in
the period ended December 31, 2014, a decrease of 7.1% year on year. The Group has succeeded in reducing fixed
costs as a result of the restructuring initiatives (as discussed above under Overview of the Period and Outlook for the
Group section) and continues to be cost conscious in ensuring expenditure is kept to a minimum in order to ensure
the sustainability of the Group. The increase in cash cost of sales per sales ton is as a result of lower average sales
tons during the current year.

Cost of sales includes mining and processing costs, salaries and wages, depreciation and amortization, transportation,
railage, port handling and wharfage costs.

Salaries and wages for the year ended December 31, 2015 amounted to R167.6 million (R177 per ton sold) compared
to R192.7 million (R228 per ton sold) for the period ended December 31, 2014, which equated to a monthly average
of R14.0 million and R19.3 million for 2015 and 2014 respectively, a decrease of 27.6%. The decrease in salaries and
wages was as a result of the retrenchment of approximately 25% of the workforce in terms of the March
Retrenchment Process, and further retrenchments in terms of the October Retrenchment Process. The total number
of employees was 561 at December 31, 2015 compared to 950 at December 31, 2014.

Depreciation and amortization for the year ended December 31, 2015 amounted to R76.2 million (R80 per ton sold)
compared to R75.5 million (R89 per ton sold) for the period ended December 31, 2014. The average depreciation and
amortization per month was R6.3 million in the year ended December 31, 2015 compared to R7.5 million in the
period ended December 31, 2014, a decrease of 15.9%. The decrease is mainly due to a majority of the fair value
adjustments on the acquisition of BC Dundee being fully depreciated during the first half of the period ended
December 31, 2014.

During the year ended December 31, 2015, railage, handling and wharfage expense amounted to R54.5 million (R147
per export ton sold) compared to R46.7 million (R109 per export ton sold). The average expense per month was R4.5
million in the year ended December 31, 2015 compared to R4.7 million in the period ended December 31, 2014, a
decrease of 2.8% year on year.

General and administration expenses

The Company recorded general and administration expenses of R68.7 million (R72 per ton sold) during the year
ended December 31, 2015 compared to R60.0 million (R71 per ton sold) during the period ended December 31, 2014.

The average expense per month was R5.7 million in the year ended December 31, 2015 compared to R6.0 million in
the period ended December 31, 2014, a 5.0% decrease year on year. The expenses include general and
administration expenses relating to BC Dundee's head office at Coalfields and the Company's corporate office in
Johannesburg including Canadian expenses. The reduction in general and administration expenses is due to ongoing
cost cutting initiatives at both operational and corporate levels. Also, a settlement fee of R2.1 million which was
provided for during the financial period ended December 31, 2014, with regards to a Sasfin Bank Limited claim for
advisory fees in relation to the Riversdale Holdings Proprietary Limited acquisition agreement, has subsequently been
settled.

Of the R68.7 million incurred, R54.8 million originated from the South African offices, in both Dundee and
Johannesburg, and R13.9 million related to Canadian expenses. The majority of the expenditure in the corporate
office consists of payroll, legal, and listing related costs.

Other (Expense)/Income - net

During the year ended December 31, 2015, the Group recorded net other expenses amounting to R307.9 million
compared to net other expenses of R22.6 million for the period ended December 31, 2014. Other income and
expense comprises impairment losses, profit on sale of assets, loss on remeasurement of assets, foreign exchange
gains/losses, small scrap sales, discounts received, insurance proceeds, loss on extinguishment of debt, commissions
paid and fair value adjustments on financial assets and conversion option liabilities.

The Company recorded a fair value adjustment gain of R100.6 million for the year ended December 31, 2015 in
relation to the valuation of the conversion option liability (RCF Convertible Loan), the warrant liability (Investec
warrants) and financial assets compared to a gain of R67.0 million for the period ended December 31, 2014.

A net foreign currency exchange loss of R66.9 million was recorded for the year ended December 31, 2015 compared
to a R7.0 million loss for the period ended December 31, 2014, mainly as a result of the weakening of the Rand in
relation to the US Dollar with regards to the RCF Convertible Loan and US Dollar denominated revenues.

In terms of IAS 39, Financial Instruments: Recognition and Measurement, the revised terms of the Second Amended
RCF Agreement were considered substantially different to those of the RCF US$25 million Loan. Consequently, IAS 39
required an extinguishment of the RCF US$25 million Loan and the recognition of a new financial liability. A resultant
loss on extinguishment of debt of R111.8 million was recognised during the second quarter of 2015.

The revised terms of the Third Amended RCF Agreement were also considered substantially different to those of the
Second Amended RCF Agreement. Consequently, IAS 39 again required an extinguishment of the RCF Convertible
Loan and the recognition of a new financial liability. A resultant loss on extinguishment of debt of R84.0 million was
recognised during the last quarter of 2015. These losses had no cash flow impact on the Group.

The Company entered in an agreement to sell two continuous miners to STA (as discussed in the Overview of the
Period and Outlook for the Group section). The carrying value of the two continuous miners exceeded the current fair
value less costs to sell and was therefore written-down to fair value and disclosed as non-current assets held for sale.
A loss on remeasurement of the non-current assets held for sale of R10.8 million was recognized during the year
ended December 31, 2015.

An impairment loss of R137.9 million was recognized for the year ended December 31, 2015 (December 31, 2014:
R90.9 million) in respect of the impairment of property, plant and equipment, as a result of the carrying value of the
BC Dundee Group properties exceeding the estimated recoverable amounts as at September 30, 2015 and December
31, 2015. At both these dates, management identified indicators of impairment and determined the recoverable
amount of the BC Dundee Group on a fair value less costs to sell basis.

Finance Costs/Income-net

The Group recorded net interest and accretion expense of R89.5 million during the year ended December 31, 2015
compared to a net interest expense of R36.4 million for the period ended December 31, 2014. The average expense
per month was R7.5 million in the year ended December 31, 2015 compared to R3.6 million in the period ended
December 31, 2014, an increase of 105.1%.

The majority of the increase in interest and accretion related to the RCF Convertible Loan which increased from
US$22.8 million (R247.2 million) as at December 31, 2014 to US$27.0 million (R419.6 million) as at December 31,
2015 (after the First Tranche Conversion of US$2.0 million on December 3, 2015).

Taxation

The Company recorded income and other tax expense of R15.4 million during the year ended December 31, 2015
compared to a recovery of R54.6 million during the period ended December 31, 2014. Included in the expense for the
year ended December 31, 2015 is a write off of BC Dundee's deferred tax asset of R140.1 million.

Although management believes that the Group will continue as a sustainable business into the foreseeable future
and believes that the Company is a going concern, the fact that taxable losses have been incurred over the past few
years and in consideration of the need to complete multiple restructurings and refinancings, management can no
longer corroborate that it is probable that BC Dundee will have sufficient taxable profit in the foreseeable future to
utilize the assessed loss, which resulted in the write off of the net deferred tax asset.

The tax amount in the year ended December 31, 2015 includes R2.0 million compared to R5.8 million in the period
ended December 31, 2014 that was credited to income tax expense/benefit and is related to the income tax effect of
the depreciation and amortization of the fair value adjustments made with respect to the purchase price allocation
on the BC Dundee acquisition. Income tax is payable at a rate of 28% on taxable income earned in South Africa.

Net loss for the period

The net loss for the year ended December 31, 2015 was R561.8 million, compared to a net loss of R108.4 million for
the period ended December 31, 2014. Contributing to the net loss position for the current year were various
significant non-cash items including an impairment loss of R137.9 million, a loss on extinguishment of debt of R195.9
million, foreign exchange losses of R66.9 million, net gains on the fair value adjustment on financial assets,
conversion option liability and warrant liability of R100.6 million, a remeasurement loss on assets held for sale of
R10.8 million, an increase in interest expense relating to the RCF Convertible Loan which increased from US$22.8
million (R247.2 million) as at December 31, 2014 to US$27.0 million (R419.6 million) as at December 31, 2015 and an
increase in the income tax expense due to the write-off of the net deferred tax asset.

SUMMARY OF QUARTERLY FINANCIAL RESULTS

                                          CYQ4 2015  CYQ3 2015  CYQ2 2015  CYQ1 2015  CYQ3 2014  CYQ2 2014  CYQ1 2014
Revenue (R'000)                             127 208    159 871    179 220    164 700    185 194    188 477    220 170
Cost of sales (excl depreciation and
amortization) (R'000)                       185 039    169 280    176 066    163 119    164 279    190 843    205 300
Depreciation and amortization                17 934     20 106     19 781     18 331     19 442     20 527     37 602
EBITDA (R'000)*                            (14 297)   (24 202)   (12 508)   (19 942)      3 075   (21 034)    (5 486)
Net loss for the period (R'000)           (177 679)  (261 817)   (88 356)   (33 972)      (248)   (70 080)   (38 113)
Net loss per share - Basic and Diluted       (1.00)     (2.48)     (1.16)     (0.55)     (0.00)     (1.41)     (0.97)
Cash generated from/(utilized in)
operating activities (R'000)               (51 398)      1 988   (16 622)      2 150      5 314   (19 710)   (10 251)
Total ROM production (t)                    328 527    408 570    522 266    472 842    366 066    377 266    490 794
Total sales tons (t)                        184 215    243 131    276 842    245 058    258 177    270 838    315 495
Average selling price per ton sold (R)          691        658        647        672        717        696        698
Cash cost of sales per ton (R)                  688        696        636        666        636        704        651
Total assets (R'000)                        558 289    574 058    803 068    817 236    770 027    804 859    763 863
Long-term borrowings (R'000)                569 813    443 732    426 505    347 678    327 497    352 023    188 471

(*) See Non-IFRS Performance Measures section of this MD&A.

SUMMARY OF ANNUAL INFORMATION


                                              December 31, 2015  December 31, 2014   February 28, 2014
Revenue (R'000)                                         630 999            593 841             688 415
Cost of sales (excl depreciation and
amortization) (R'000)                                   635 286            562 679             610 558
Depreciation and amortization (R'000)                    76 151             75 315             100 426
EBITDA (R'000)*                                        (70 952)           (23 445)              11 982
Net loss for the period (R'000)                       (561 825)          (108 441)           (278 065)
Net loss per share - Basic and Diluted                   (5.31)             (2.11)              (7.97)
Cash generated from/(utilized in) operating
activities (R'000)                                     (63 882)           (24 648)             (3 072)
Total ROM production (t)                              1 732 205          1 234 126           1 562 187
Total sales tons (t) (excluding calcine)                915 843            844 510             955 401
Average selling price per ton sold (R)                      665                703                 721
Cash cost of sales per ton (R)                              669                666                 639
Total Assets (R'000)                                    558 289            770 027             836 928
Long-term borrowings (R'000)                            569 813            327 497             149 944
(*) See Non-IFRS Performance Measures section of this MD&A.

FINANCIAL CONDITION REVIEW

A summary of the statements of financial position is shown below:

                                                                       December 31,       December 31,
                                                                               2015               2014
                                                                              R'000              R'000
Property, plant and equipment and intangible assets                         340 650            561 404
Other long-term receivables                                                  41 517             58 869
Cash and cash equivalents                                                    20 365             12 120
Trade and other receivables                                                  75 582             95 475
Other short-term receivables                                                  1 749              3 924
Inventories                                                                  42 226             27 035
Restricted cash                                                              11 200             11 200
Non-current assets held for sale                                             25 000                  -
Total assets                                                                558 289            770 027
Trade and other payables                                                    161 401            170 507
Total borrowings                                                            171 395            146 866
RCF loan facilities                                                         424 132            186 631
Other liabilities                                                            17 656             21 422
Total liabilities                                                           774 584            525 427
Total equity                                                              (216 295)            244 600

Assets

Total assets were R558.3 million at December 31, 2015 compared to R770,0 million at December 31, 2014, a 27.5%
decrease.

As of December 31, 2015, property, plant and equipment had decreased from December 31, 2014 mainly as a result
of an impairment of R137.9 million recorded during the current year, the remeasurement of the continuous miners
sold to STA of R10.8 million and the reclassification of these items to non-current assets held for sale during the
current year (refer to Overview of the Period and Outlook for the Group for further detail).

As of December 31, 2014, other long-term assets included deposits paid for mining equipment which were delivered
during the quarter ended March 31, 2015 and financed using the funds received from RCF, as well as a net deferred
tax asset which arose due to the assessed losses relating to BC Dundee. Although management believes that the
Group will continue as a sustainable business into the foreseeable future and believes that the Group is a going
concern, the fact that taxable losses have been incurred over the past few years and in consideration of the need to
complete multiple restructurings and refinancings, management can no longer corroborate that it is probable that BC
Dundee will have sufficient taxable profit in the foreseeable future to utilize the assessed loss, which has resulted in
the write off of the net deferred tax asset in the current year.

In addition, inventory levels have increased from the prior year, as a result of depressed anthracite markets and
reduced sales of anthracite products during the current year as detailed above.

Liabilities

Total liabilities were R774.6 million at December 31, 2015 compared to R525.4 million at December 31, 2014, a 47.4%
increase.

The most significant movements related to the additional drawdown of US$2.2 million (R25.4 million) from the RCF
US$25 million Loan and US$4.0 million (R49.0 million) from the 2015 Bridge Loan, and the drawdown of R25.0 million
from the increased Investec working capital facility (refer to Overview of the Period and Outlook for the Group for
further detail).

Loans and Borrowings

At December 31, 2015, the Group had outstanding debt with Investec of R190.7 million and US$27.0 million (R419.6
million) outstanding on the RCF Convertible Loan (refer to Overview of the Period and Outlook for the Group for
further detail). The Investec debt consists of R90.0 million outstanding on the term loan facility, R45.4 million on the
bullet facility and R55.2 million outstanding on the working capital facility, all of which facilities were fully drawn at
year end.

The repayment schedule for the Investec loan facilities, the RCF Convertible Loan and trade and other payables, as of
December 31, 2015, excluding the effect of the fair value of the conversion liability and warrant liability, is as follows:

                             Not later than 1    Between 1 and 5    Greater than 5
                                         year              years             years
At December 31, 2015
Borrowings(1)                      25 714 284        164 977 422                 -
RCF loan facilities(2)                      -        419 631 300                 -
Trade and other payables(3)       161 400 972                  -                 -
At December 31, 2014
Borrowings                          6 000 000         96 000 000        60 228 930
RCF loan facilities                         -        264 970 212                 -
Trade and other payables          170 506 885                  -                 -

(1) Borrowings include only the capital amounts outstanding (including rolled up interest on the bullet facility).

(2) The RCF Convertible Loan includes only the capital amount outstanding as of December 31, 2015. Interest is
    assumed to be settled in Common Shares (refer to Overview of the Period and Outlook for the Group above) and has
    therefore been excluded. At December 31, 2015, the Company had accrued for interest owing to RCF for December
    2015, which was settled in Common Shares subsequent to year end (refer to Subsequent Events for further
    information).
    
(3) Trade and other payables exclude non-financial liabilities.

LIQUIDITY AND CAPITAL RESOURCES

The Company had a working capital deficit of R47.2 million as at December 31, 2015 compared to a working capital
deficit of R38.0 million at December 31, 2014 (see Non-IFRS Performance Measures). Working capital has weakened
due to an increase in current borrowings and a decrease in trade and other receivables as a result of a decrease in
revenue during the period.

The condensed consolidated statements of cash flows are summarized below:

                                               12 months ended      10 months ended
                                                  December 31,         December 31,
                                                          2015                 2014
                                                         R'000                R'000
Net cash utilized in operating activities             (63 882)             (24 648)
Net cash utilized in investing activities             (55 451)            (113 781)
Net cash generated from financing activities           127 578              135 966
Change in cash and cash equivalents                      8 245              (2 462)

Operating activities

Cash utilized in operating activities during the twelve months ended December 31, 2015 was R63.9 million compared
to R24.7 million utilized during the ten months ended December 31, 2014.

The net loss for the year ended December 31, 2015 was R561.8 million compared to a net loss of R108.4 million for
the period ended December 31, 2014 as discussed under the Results of Operations section of this MD&A. Non-cash
items included in the net loss for the period were: depreciation and amortization of R76.2 million; net gains on the
fair value adjustment on financial assets, conversion option liability and warrant liability of R102.2 million; loss on
extinguishment of debt of R195.9 million; profit on disposal of property, plant and equipment of R3.6 million; loss on
the remeasurement of non-current assets held for sale of R10.8 million; impairment of property, plant and
equipment of R137.9 million and net unrealized foreign exchange losses of R66.9 million of which the material items
were discussed under the Financial Results section of this MD&A.

The Group's net working capital increased by R13.6 million for the year ended December 31, 2015, in comparison to a
R14.1 million decrease for the financial period ended December 31, 2014.

The net change in working capital reported on the cash flow statement identifies the changes in current assets and
current liabilities that occurred during the period. An increase in a liability (or a decrease in an asset) is a source of
funds; while a decrease in a liability (or an increase in an asset) is a use of funds.

Investing activities

Investing activities utilized R55.5 million in cash during the twelve months ended December 31, 2015 compared to
cash utilized of R113.8 million in the ten months ended December 31, 2014.

During the year ended December 31, 2015, the Group spent R56.0 million on property, plant and equipment relating
to sustaining capital and the purchase of additional equipment financed by RCF (refer to Financing Activities below)
compared to expenditure of R138.2 million for the period ended December 31, 2014. In addition, during the period
ended December 31, 2014, the Group received the settlement of the escrow funds with regards to the Riversdale
Holdings Proprietary Limited dispute.

Financing activities

Financing activities generated R127.6 million during the twelve months ended December 31, 2015 and R136.0 million
during the ten months ended December 31, 2014.

During the year ended December 31, 2015, the Group received R74.4 million from RCF drawn down under the RCF
US$25 million Loan and 2015 Bridge Loan, which was used to purchase additional equipment, for working capital
purposes and to implement the restructurings at BC Dundee. During the current year, Investec agreed to extend BC
Dundee's working capital facility from R30.0 million to R80.0 million, comprising two tranches of R25.0 million each.
The first tranche of R25.0 million was drawn by BC Dundee from the facility in December 2015. During the current
year the company also received R28.7 million from the Private Placement. During the comparative period, the Group
received approximately R139.6 million from RCF under the RCF US$25 million Loan which was used to purchase
additional equipment and for working capital purposes.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS

During the year, the Company entered into the following transactions in the ordinary course of business with related
parties:

                                 December 31, 2015   December 31, 2014
Payments for services rendered
RCF(1)                                   3 408 092           2 966 708
Total                                    3 408 092           2 966 708

The following balances were outstanding at the end of the reporting year:

                                 December 31, 2015   December 31, 2014
Related party payables        
RCF(1)                                   9 284 251           2 758 777
Total                                    9 284 251           2 758 777

These amounts are unsecured, non-interest bearing with no fixed terms of repayment.

1. RCF is a related party to the Company as a result of owning a controlling investment in the Company and having a
   representative, Mr. David Thomas on the Board of Directors of the Company. As set out in the Third Amended RCF
   Agreement, RCF has invoiced the Company for costs incurred relating to the loan facilities, which are disclosed above.
   In addition to these costs, the Company settled interest on the RCF Convertible Loan in Common Shares during the
   year ended December 31, 2015, which amounted to R51.6 million as compared to R17.2 million for the period ended
   December 31, 2014.
   
Compensation of key management personnel

In accordance with IAS 24 - Related-Party Disclosures, key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including
any directors (executive and non-executive) of the Company.

The remuneration of directors and other key members of management personnel (officers) during the period were as
follows:

                                  December 31, 2015   December 31, 2014
Short-term benefits                      16 861 296          13 007 957
Share-based payments                        799 149             302 734
Total                                    17 660 445          13 310 691

On July 30, 2015, C$0.1 million (R1.0 million) worth of restricted stock units ("RSUs") granted to a director but not
issued under the plan were settled through the issuance of Common Shares to the director. Amounts owing to
directors and other members of key management personnel were R0.2 million as of December 31, 2015 (December
31, 2014: R1.5 million).

OTHER

There are no significant other items as at December 31, 2015.

COMMITMENTS AND CONTINGENCIES

Management Contracts

Management contracts in place require that payments of approximately R14.0 million be made upon the occurrence
of a change in control, other than a change of control attributable to RCF. As no triggering event has taken place, no
provision has been recognized as of December 31, 2015.

The Company entered into a retention agreement with key management personnel. The contract contains a
minimum commitment of R5.6 million until December 31, 2016.

STA Contract Mining Agreement

In terms of the STA Contract Mining Agreement, STA is mining four sections at Magdalena underground mine at a
fixed contract mining fee per ton, effective October 31, 2015. The STA Contract Mining Agreement has a three year
term, and the option for a further two year extension if agreed to by all parties.

The STA Contract Mining agreement can be terminated on 60 days notice for which period the Company will be liable
for payment for the tons mined at the fixed rate per ton.

Capital Commitments

Capital expenditures contracted for at the statement of financial position date but not recognized in the consolidated
financial statements are as follows:

                                    December 31, 2015  December 31, 2014
Property, plant and equipment               1 754 679         27 378 909

Included in the R27.4 million disclosed as of December 31, 2014 are commitments relating to the purchase of
machinery and equipment which were funded by equipment advances from RCF.

In terms of Regulation 8.10 of the Mine Health and Safety Act, 29 of 1996 Regulations, the Company is required to
take reasonably practicable measures to ensure that pedestrians are prevented from being injured as a result of
collisions between trackless mobile machines and pedestrians, by way of the installation of proximity devices on
specified machines. The Company is currently investigating its options in this regard. The Company has proposed
the phase in of such devices over a five year period.

Environmental Contingency

The Company's mining and exploration activities are subject to various laws and regulations governing the
environment and mine operations. These laws and regulations are continually changing and generally becoming
more restrictive.

The Company believes its operations are materially in compliance with all applicable laws and regulations. The
Company has made, and expects to make in the future, expenditures to continue to comply with such laws and
regulations.

Outstanding Legal Proceedings

On March 20, 2015, AMCU brought an application against BC Dundee and Zinoju in the Labour Court of South Africa
pertaining to the March Retrenchment Process. The matter was heard by the Court on April 14, 2015, and on April 24,
2015, the LRA dismissed the application brought by AMCU with costs. AMCU has appealed the judgment and the
appeal was heard by the Labour Appeal Court on November 4, 2015. The outcome of this hearing is still pending.

On April 10, 2015, BC Dundee received notice that AMCU had referred a dispute to the CCMA in respect of the
substantive fairness of the March Retrenchment Process, which dispute was heard on May 18, 2015. The CCMA
referred the matter to the Labour Court. AMCU had until August 17, 2015 to make a further application, however no
submission was made before this deadline and this matter is now closed.

On April 20, 2015, the trustees of the Avemore Trust brought an application in the High Court of South Africa against,
among others, the South African Minister of Mineral Resources, BC Dundee and Zinoju in respect of MR174. In terms
of the application, the trustees of the Avemore Trust challenged the decision by the Minister, subsequent to an
internal appeal process concluded during September 2014, to grant a converted mining right to BC Dundee and to
grant consent for the cession of the converted mining right to Zinoju. There have been various settlement offers
between the parties, but should settlement not be reached, BC Dundee and Zinoju intend to oppose the application.
The Company's legal team, including senior counsel have advised of a defendable case in terms of Avemore Trust's
approach to the matter. The legal process on this matter is currently ongoing.

On August 27, 2015, notice was received from the Minister that MR301 had been withdrawn together with the
approval by the Regional Manager of the Environmental Management Plan in respect of MR301. The reasons given
by the Minister for the Ministerial Decision are procedural issues in respect of the award process, in relation to an
objection received from Avemore Trust in October 2013 against the awarding of the right.

On September 15, 2015, a urgent court order was granted, pending final determination, for the Ministerial Decision
to be of no force and effect, to interdict the Minister from awarding MR301 to any other party and for the Company
to continue to mine in terms of MR301. A review application was instituted by the Company in October 2015 to
obtain final relief in the form of an order setting aside the Ministerial Decision, and the Company's legal team,
including senior counsel have indicated a strong likelihood of the review application being successful. The legal
process on this matter is currently ongoing.

SUBSEQUENT EVENTS

Issuance of Share Capital

Subsequent to December 31, 2015, the Company issued additional shares to RCF in settlement of interest owing on
the RCF Convertible Loan for the period December 4, 2015 to December 31, 2015. An additional 14 990 400 Common
Shares were issued at C$0.05.

TSXV Delisting Review

The TSXV advised the Company that it had been placed on notice for transfer to the NEX for failure to meet the
public float continued listing requirements of the TSXV. NEX is a separate board of the TSXV and provides a trading
forum for listed companies that have fallen below the TSXV's ongoing listing standards.

Pursuant to the notice, the Company has until July 7, 2016 to provide satisfactory submissions on the issue. The
Company intends to work with the TSXV throughout the review period in an effort to restore compliance with TSXV
continued listing requirements.

Other Matters

Except for the matters discussed above, no other matters which management believes are material to the financial
affairs of the Company have occurred between the statement of financial position date and the date of approval of
the financial statements.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), has evaluated the
design and effectiveness of the Company's internal controls over financial reporting ("ICFR") and disclosure controls
and procedures ("DC&P") as of December 31, 2015, pursuant to the requirements of Multilateral Instrument 52-109.

Management follows the Integrated Framework (COSO 2013 Framework) published by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO"). The Company has designed appropriate ICFR and DC&P for the
nature and size of its business, to provide reasonable assurance regarding the reliability of financial reporting 
and the preparation of financial statements for external purposes in accordance with applicable accounting standards.

There have been no significant changes to the Company's ICFR and DC&P that occurred during the financial year
ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company's
ICFR and DC&P.

As of December 31, 2015, management believes that the Company's ICFR and DC&P were operating effectively
throughout the financial year.

Because of inherent limitations, ICFR and disclosure controls can provide only reasonable assurances and may not
prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

The Audit Committee of the Company has reviewed this MD&A, and the audited annual consolidated financial
statements for the financial year ended December 31, 2015. The Company's Board of Directors approved these
documents prior to their release.

SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the consolidated financial statements in conformity with IFRS requires the Group's management
to make judgments, estimates and assumptions about future events that affect the amounts reported in the
consolidated financial statements and related notes thereto. Although these estimates are based on management's
best knowledge of the amounts, events or actions, actual results may differ from those estimates and these
differences could be material. The areas which require management to make significant judgments, estimates and
assumptions in determining the carrying values and amounts include, but are not limited to:

Provisions

Significant judgment and use of assumptions is required in determining the Group's provisions. Management uses its
best estimates based on current knowledge in determining the amount to be recognized as a provision. Key
assumptions utilized in the determination of the rehabilitation provision, which is measured at fair value, include the
estimated life of mine, estimates of reserves and discount rates. Fair value is determined based on the net present
value of estimated future cash expenditures for the settlement of the liability that may occur upon decommissioning
of the mine. Such estimates are subject to change based on changes in laws and regulations and negotiations with
regulatory authorities.

Property, plant and equipment, mineral rights and other intangible assets

The Group makes use of experience and assumptions in determining the useful lives and residual values of property,
plant and equipment, mineral rights and other intangible assets (other than goodwill). Management reviews annually
whether any indications of impairment exist. Information that the Group considers includes changes in the market,
economic and legal environment in which the Group operates as well as internal sources of information. Estimates
include but are not limited to estimates of the discounted future after-tax cash flows expected to be derived from the
Company's mining properties, costs to sell the properties and the appropriate discount rate. Reductions in coal price
forecasts, increases in estimated future costs of production, increases in estimated future capital costs, depreciation
of the Rand relative to the US Dollar, reductions in the amount of recoverable mineral reserves and mineral resources
and/or adverse current economics could result in a write-down of the carrying amounts of the Group's assets.

An impairment loss of R137.9 million was recorded for the year ended December 31, 2015, based on management's
estimate of the recoverable amount of the BC Dundee Group properties. The impairment loss resulted in the write
down of property, plant and equipment. If the discount rate had been 1% higher than management's estimates, the
Group would have recorded a further impairment of approximately R27.7 million. If the foreign exchange rate
between the Rand and the US Dollar had been 5% higher than management's estimates, the Group would not have
recognized any impairment at December 31, 2015. An impairment loss of R90.9 million was recorded at December
31, 2014 as a result of management's review, which resulted in the impairment of certain intangible assets and
property, plant and equipment.

Capitalization of exploration and evaluation costs

Management has determined that exploration and evaluation costs incurred during the year have future economic
benefits and are economically recoverable. In making this judgment, management has assessed various sources of
information including but not limited to the geological and metallurgic information, history of conversion of mineral
deposits to proven and probable mineral reserves, scoping and feasibility studies, proximity of operating facilities,
operating management expertise and existing permits.

Taxes and recoverability of potential deferred tax assets

The Company is subject to income, value added, withholding and other taxes in various jurisdictions. Significant
judgment is required in determining the Company's provisions for taxes. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The
Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be
due. The determination of the Company's income, value added, withholding and other tax liabilities requires
interpretation of complex laws and regulations often involving multiple jurisdictions. The Company's interpretation of
taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities.
All tax related filings are subject to government audit and potential reassessment subsequent to the financial
statement reporting period. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the
period in which such determination is made.

In assessing the probability of realizing deferred tax assets recognized, management makes estimates related to
expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing
temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable
tax authorities. In making its assessments, management gives additional weight to positive and negative evidence
that can be objectively verified. Estimates of future taxable income are based on forecast cash flows from operations
and the application of existing tax laws in South Africa.

Share-based payments

Management determines costs for share-based payments using market-based valuation techniques. The fair value of
the market-based and performance-based share awards are determined at the date of grant using generally accepted
valuation techniques. Assumptions are made and judgment used in applying valuation techniques. These assumptions
and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee
turnover rates and future employee stock option exercise behaviors and corporate performance. Such judgments and
assumptions are inherently uncertain. Changes in these assumptions could materially affect the fair value estimates.

Compound financial instruments

The Group has entered into agreements in the form of foreign-currency-denominated convertible loans and warrants
which are accounted for as compound financial instruments. The fair value of the embedded derivative liabilities
(conversion option liability and warrant liability) are determined at the date of the transaction and are fair valued at
each reporting date through profit or loss using generally accepted valuation techniques. Assumptions are made and
judgments are used in applying valuation techniques.

These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield
and risk free rate of return. Such judgments and assumptions are inherently uncertain. Changes in these assumptions
could materially affect the fair value estimates.

Mineral reserve estimates

The figures for mineral reserves and mineral resources are determined in accordance with National Instrument 43-
101, "Standards of Disclosure for Mineral Projects", issued by the Canadian Securities Administrators. There are
numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors
beyond the Group's control. Such estimation is a subjective process, and the accuracy of any mineral reserve or
mineral resource estimate is a function of the quantity and quality of available data and of the assumptions made and
judgments used in engineering and geological interpretation.

Differences between management's assumptions including economic assumptions such as coal prices, foreign
exchange rates and market conditions could have a material effect on the Group's reserves and resources, and as a
result, could also have a material effect on the Group's financial position and results of operation.

Going concern assumption

The consolidated financial statements have been prepared on the basis of accounting principles applicable to a going
concern, which assume that the Group will continue in operation for the foreseeable future and will be able to realize
its assets and discharge its liabilities in the normal course of operations. If the going concern assumption was not
appropriate for these consolidated financial statements then adjustments would be necessary to the carrying values
of assets and liabilities, the reported revenues and expenses, and the statement of financial position classifications.
Such adjustments could be material.

NEW ACCOUNTING POLICIES

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the
International Accounting Standards Board ("IASB") or International Financial Reporting Interpretations Committee
("IFRIC") that are mandatory for accounting periods beginning after January 1, 2015 or later periods.

Amendments to IAS 19, 'Defined Benefit Plans: Employee Contributions' ? These narrow scope amendments apply to
contributions from employees or third parties to defined benefit plans. The objective of the amendments is to
simplify the accounting for contributions that are independent of the number of years of employee service, for
example, employee contributions that are calculated according to a fixed percentage of salary. This amendment has
not had a significant impact on the Group.

Annual Improvements to IFRSs 2010-2012 Cycle:

IFRS 2, 'Share-based Payments' ? The amendments clarify the definition of a 'vesting condition' and separately define
'performance condition' and 'service condition'.

IFRS 3, 'Business Combinations' ? The amendments clarify that a contingent consideration that is classified as an asset
or a liability should be measured at fair value at each reporting date, irrespective of whether the contingent
consideration is a financial instrument within the scope of IFRS 9 or IAS 39 or a non-financial asset or liability. Changes
in fair value (other than measurement period adjustments) should be recognized in profit or loss.

IFRS 8, 'Operating Segments' - The amendments require an entity to disclose the judgments made by management in
applying the aggregation criteria to operating segments, including a description of the operating segments
aggregated and the economic indicators assessed in determining whether the operating segments have 'similar
economic characteristics'; and clarify that a reconciliation of the total of the reportable segments' assets to the
entity's assets should only be provided if the segment assets are regularly provided to the chief operating decision-
maker.

IFRS 13, 'Fair Value Measurements' - The amendments to the basis for conclusions of IFRS 13 and consequential
amendments to IAS 36 and IFRS 9 did not remove the ability to measure short-term receivables and payables with no
stated interest rate at their invoice amounts without discounting, if the effect of discounting is immaterial.

IAS 16, 'Property, Plant and Equipment' and IAS 38, 'Intangible Assets' - The amendments remove perceived
inconsistencies in the accounting for accumulated depreciation/amortization when an item of property, plant and
equipment or an intangible asset is revalued. The amended standards clarify that the gross carrying amount is
adjusted in a manner consistent with the revaluation of the carrying amount of the asset and that accumulated
depreciation/amortization is the difference between the gross carrying amount and the carrying amount after taking
into account accumulated impairment losses.

IAS 24, 'Related Party Disclosure' - The amendments clarify that a management entity providing key management
personnel services to a reporting entity is a related party of the reporting entity. Consequently, the reporting entity
should disclose as related party transactions the amounts incurred for the service paid or payable to the management
entity for the provision of key management personnel services. However, disclosure of the components of such
compensation is not required.

The amendments did not have a significant impact on the Group.

Annual Improvements to IFRSs 2011-2013 Cycle:

IFRS 3 - The amendment clarifies that the standard does not apply to the accounting for the formation of all types of
joint arrangements in the financial statements of the joint arrangement itself.

IFRS 13 ? The amendment clarifies that the scope of the portfolio exception for measuring the fair value of a group of
financial assets and financial liabilities on a net basis includes all contracts that are within the scope of, and accounted
for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or
financial liabilities within IAS 32.

IAS 40, 'Investment Property' - The amendment clarifies that IAS 40 and IFRS 3 are not mutually exclusive and
application of both standards may be required. The guidance in IAS 40 assists preparers to distinguish between
investment property and owner-occupied property. Preparers also need to refer to the guidance in IFRS 3 to
determine whether the acquisition of an investment property is a business combination.

The amendments did not have a significant impact on the Group.

Future Accounting Changes

IFRS 9 -'Financial Instruments' ? effective January 1, 2018
IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial
assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and
measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements
for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a)
impairment requirements for financial assets and b) limited amendments to the classification and measurement
requirements by introducing a 'fair value through other comprehensive income' ("FVTOCI") measurement category
for certain simple debt instruments.

All recognized financial assets that are within the scope of IAS 39, Financial Instruments: Recognition and
Measurement are required to be subsequently measured at amortized cost or fair value. In addition, entities may
make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held
for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss.

With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9
requires that the amount of change in the fair value of the financial liability that is attributable to changes in the
credit risk of that liability is presented in other comprehensive income ("OCI"), unless the recognition of the effects of
changes in the liability's credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. Changes in
fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Under IAS
39, the entire amount of the change in fair value of the financial liability designated as fair value through profit or loss
is presented in profit or loss.

In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an
incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected
credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since
initial recognition.

The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently
available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge
accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk
components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been
overhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedge
effectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk management
activities have also been introduced.

The Group anticipates that the application of IFRS 9 in future may have a material impact on amounts reported in
respect of the Group's financial assets and financial liabilities. However, it is not practicable to provide a reasonable
estimate of the effect of IFRS 9 until the Group undertakes a detailed review.

IFRS 10 ? 'Consolidated Financial Statements' and IAS 28 ? 'Investments in Associates and Joint Ventures' ? effective
date to be determined ? early adoption is permitted
IFRS 10 and IAS 28 were amended in September 2014 to address a conflict between the requirements of IAS 28 and
IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss on
recognition depends on whether the assets sold or contributed constitute a business. The Group does not anticipate
that the application of these amendments will have a material impact on the Group's consolidated financial
statements.

IFRS 11 ? 'Joint Arrangements' ? effective January 1, 2016
IFRS 11 was amended in May 2014 to require business combination accounting to be applied to acquisitions of
interests in a joint operation that constitute a business. The Group does not anticipate that the application of these
amendments will have a material impact on the Group's consolidated financial statements.

IFRS 15 ? 'Revenue from Contracts with Customers' ? effective January 1, 2018
IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS
18, Revenue; IAS 11, Construction Contracts and the related Interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. Under IFRS 15, an entity recognizes revenue when (or as) a performance
obligation is satisfied, i.e. when 'control' of the goods or services underlying the particular performance obligation is
transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios.
Furthermore, extensive disclosures are required by IFRS 15.

The Group anticipates that the application of IFRS 15 in the future may have a material impact on the amounts
reported and disclosures made in the Group's consolidated financial statements. However, it is not practicable to
provide a reasonable estimate of the effect of IFRS 15 until the Group performs a detailed review.

IAS 1 ? 'Presentation of Financial Statements' ? effective January 1, 2016
IAS 1 was amended in December 2014 in order to clarify, among other things, that useful information should not be
obscured by aggregating or disaggregating that information and that materiality considerations apply to all parts of
the financial statements and that even when a standard requires a specific disclosure, materiality considerations do
apply. The Group does not anticipate that the application of these amendments will have a material impact on the
Group's consolidated financial statements.

IAS 27 ? 'Separate Financial Statements' ? effective January 1, 2016
IAS 27 was amended in August 2014 to reinstate the equity method as an accounting option for investments in
subsidiaries, joint ventures and associates in an entity's separate financial statements. The Group does not anticipate
that the application of these amendments will have a material impact on the Group's consolidated financial
statements.

Amendments to IAS 16 ? 'Property, Plant and Equipment', and IAS 38 ? 'Intangible Assets' - Clarification of Acceptable
Methods of Depreciation and Amortization ? effective January 1, 2016
The amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property,
plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an
appropriate basis for amortization of an intangible asset. The presumption can only be rebutted in the following two
limited circumstances: when the intangible asset is expressed as a measure of revenue; or when it can be
demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

Currently, the Group uses the straight-line or units of production method for depreciation and amortization of its
property, plant and equipment, and intangible assets respectively. The Group does not anticipate that the application
of these amendments will have a material impact on the Group's consolidated financial statements.

Annual Improvements to IFRSs 2012-2014 Cycle ? effective January 1, 2016:

IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations' ? The amendments introduce specific guidance
for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or
vice versa). The amendments clarify that such a change should be considered as a continuation of the original plan of
disposal and hence requirements set out in IFRS 5 regarding the change of sale plan do not apply. The amendments
also clarify the guidance for when held-for-distribution accounting is discontinued.

IFRS 7, 'Financial Instruments: Disclosures'- The amendments provide additional guidance to clarify whether a
servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in
relation to transferred assets.

A further amendment removes the phrase 'and interim periods within those annual periods', clarifying that these IFRS
7 disclosures are not required in the condensed interim financial report. However, IAS 34 requires an entity to
disclose 'an explanation of events and transactions that are significant to an understanding of the changes in financial
position and performance of the entity since the end of the last annual reporting period'. Therefore, if the IFRS 7
disclosures provide a significant update to the information reported in the most recent annual report, it would be
expected that the disclosures be included in the entity's condensed interim financial report.

IAS 19, 'Employee Benefits' ? The amendments clarify that the rate used to discount post-employment benefits
obligations should be determined by reference to market yields at the end of the reporting period on high quality
corporate bonds. The assessment of the depth of a market for high quality corporate bonds should be at the
currency level (i.e. the same currency as the benefits are to be paid). For currencies for which there is no deep
market in such high quality corporate bonds, the market yields at the end of the reporting period on government
bonds denominated in that currency should be used instead.

IAS 34, 'Interim Financial Reporting'- The amendment states that the required interim disclosures must either be in
the interim financial statements or incorporated by cross-reference between the interim financial statements and
wherever they are included within the greater interim financial report (e.g. in the management commentary or risk
report).

The other information within the interim financial report must be available to users on the same terms as the interim
financial statements and at the same time. If users do not have access to the other information in this manner, then
the interim financial report is incomplete.

The Group does not anticipate that the application of these amendments will have a significant impact on the Group's
consolidated financial statements.

FINANCIAL INSTRUMENTS

Details of the significant accounting policies and methods adopted (including the criteria for recognition, the bases of
measurement, and the bases for recognition of income and expenses of the Group) for each class of financial asset
and financial liability are disclosed in Note 2 of the annual consolidated financial statements for the years ended
December 31, 2015 and December 31, 2014.

The Company's financial assets and financial liabilities as at December 31, 2015 and December 31, 2014 were as
follows:

Financial instruments                            Loans and       Fair value   Liabilities at             Other          Total
                                               receivables          through       fair value    liabilities at
                                                             profit or loss          through         amortized
                                                                              profit or loss              cost
December 31, 2015 
Trade and other receivables (excluding non- 
financial assets)                               65 247 651                -                -                 -     65 247 651
Investments in financial assets                        -         35 674 589                -                 -     35 674 589
Cash (excluding restricted cash)                20 365 446                -                -                 -     20 365 446
Non-interest bearing receivables                 1 697 948                -                -                 -      1 697 948
Investec borrowings                                      -                -      (2 144 609)     (169 250 278)  (171 394 887)
RCF loan facilities                                      -                -    (124 378 349)     (299 753 846)  (424 132 195)
Trade and other payables (excluding non- 
financial liabilities)                                   -                -                -     (160 102 755)  (160 102 755)
 
Financial instruments                            Loans and       Fair value   Liabilities at     At amortized           Total
                                               receivables          through       fair value             cost
                                                             profit or loss          through   
                                                                              profit or loss   
December 31, 2014
Trade and other receivables (excluding non-
financial assets)                               78 553 015                -                -                -      78 553 015
Investments in financial assets                          -       29 134 182                -                -      29 134 182
Cash (excluding restricted cash)                12 120 081                -                -                -      12 120 081
Non-interest bearing receivables                 1 587 766                -                -                -       1 587 766
Investec borrowings                                      -                -      (8 818 534)    (138 047 902)   (146 866 436)
RCF loan facilities                                      -                -     (54 088 555)    (132 542 252)   (186 630 807)
Trade and other payables (excluding non- 
financial liabilities)                                   -                -                -    (151 541 253)   (151 541 253)

CAPITAL MANAGEMENT

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in
order to provide returns for shareholders and benefits for other stakeholders. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is
calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-
current borrowings as shown in the consolidated statements of financial position) less cash and cash equivalents.
Total capital is calculated as "equity" as shown in the consolidated statements of financial position plus net debt.

The gearing ratios at December 31, 2015 and December 31, 2014 were as follows:

                                       December 31,        December 31,
                                               2015                2014
Total borrowings                        595 527 081         333 497 243
Less: cash and cash equivalents        (20 365 446)        (12 120 081)
Net debt                                575 161 636         321 377 162
Total equity                          (216 294 947)         244 600 498
Total capital                           358 866 689         565 977 660
Gearing ratio                                  160%                 57%

Included within total borrowings is the RCF Convertible Loan of R419.6 million (December 31, 2014: R265.0 million).
The Company's capital management objectives, policies and processes have remained unchanged during the year end
December 31, 2015 except for the Investec facilities and the RCF Convertible Loan.

The Company is not subject to any externally imposed capital requirements with the exception of the RCF Convertible
Loan, the Investec facilities and the capital requirements of the TSXV which requires adequate working capital or
financial resources of the greater of (i) C$50 000 and (ii) an amount required in order to maintain operations and
cover general and administrative expenses for a period of 6 months.

FINANCIAL RISK FACTORS

The Group's activities expose it to a variety of financial risks such as currency risk, price risk, cash flow interest rate
risk, credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of
financial markets and seeks to minimize potential adverse effects on the Group's financial performance.

Risk management is carried out by head office management under policies approved by the Board of Directors. The
Group identifies, evaluates and manages financial risks in close co-operation with the Group's subsidiaries.

Market risk

(a) Foreign exchange risk

The Company's functional currency is the Rand. BC Corp's functional currency was changed on March 1, 2014 from
Canadian Dollars to Rands.

The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures with
respect to the US Dollar and Canadian Dollar. The Group's foreign exchange risk arises primarily from the sale of coal,
based on the API 4 coal price index in US Dollars to foreign customers, external loans denominated in US Dollars and
translation differences arising from the translation of share capital and other equity items.

At December 31, 2015, a 10% increase/(decrease) in the period average foreign exchange rate between the Canadian
Dollar and the Rand would have increased/(decreased) the Group's profit or loss by approximately R13.4 million
(period ended December 31, 2014: R4.1 million).

At December 31, 2015, a 10% increase/(decrease) in the period end foreign exchange rate between the US Dollar and
the Rand would have increased/(decreased) the Group's income by approximately R41.1 million (period ended
December 31, 2014: R28.1 million).

(b) Price risk

The Group is exposed to commodity price risk, primarily due to fluctuations in the API 4 coal price index, by which
certain foreign coal sales are priced. Commodity prices fluctuate on a daily basis and are affected by numerous
factors beyond the Group's control. The supply and demand for commodities, the level of interest rates, the rate of
inflation, investment decisions by large holders of commodities including governmental reserves and stability of
exchange rate can all cause significant fluctuations in commodity prices. Such external economic factors are in turn
influenced by changes in international investment patterns and monetary systems and political developments.

At December 31, 2015, a 10% change in the API 4 coal price index would have resulted in a corresponding change in
export coal revenue of approximately R18.5 million (period ended December 31, 2014: R13.9 million).

(c) Cash flow interest rate risk

The Group's interest rate risk arises from deposits held with banks and interest-bearing liabilities. Borrowings issued
at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash held at variable
rates. During the years ended December 31, 2015 and December 31, 2014 the Group's borrowings at variable rates
were denominated in South African Rands.

Based on the simulations performed, the impact on profit or loss of a 1% shift of interest rates on borrowings would
have been a maximum increase/(decrease) in profit or loss of R1.4 million (period ended December 31, 2014: R1.4
million).

Credit risk

Credit risk is managed at a Group level, except in respect of trade receivables which are managed at an operational
level.

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit
exposures to customers, including outstanding receivables and committed transactions. The Group only transacts
with high quality financial institutions.

Risk control assesses the credit quality of customers, taking into account financial position, past experience and other
factors. The utilization of credit limits is regularly monitored. No credit limits were exceeded during the reporting
period, and management does not expect any losses from non-performance by these counterparties.

Restricted cash totaling R11.2 million is on deposit with First National Bank ("FNB") to be released to the relevant
counterparties if payments are not made to them.

Liquidity risk

Cash flow forecasting is performed by Group finance. Group finance monitors rolling forecasts of the Group's liquidity
requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the
Group's debt/equity financing plans, covenant compliance and external legal requirements. Refer to the Financial
Condition Review section for an analysis of the Group's non-derivative financial liabilities disclosed in maturity
groupings based on the remaining period at the consolidated statement of financial position date to the contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Fair value estimation

Financial instruments carried at fair value are assigned to different levels of the fair value hierarchy, by valuation
method. The different levels have been defined as follows:

-  Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-  Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
   directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

-  Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (level 3).

The following table presents the Group's financial assets and liabilities that are measured at fair value at December
31, 2015 and December 31, 2014:

                                       Level 1         Level 2         Level 3
                                             R               R               R
December 31, 2015
Investment in financial assets      35 674 589               -               -
Conversion option liability                  -     124 378 349               -
Warrant liability                            -       2 144 609               -
December 31, 2014
Investment in financial assets      29 134 182               -               -
Conversion option liability                  -      54 088 555               -
Warrant liability                            -       8 818 534               -

GOING CONCERN

The consolidated financial statements have been prepared on the basis of accounting principles applicable to a going
concern, which assume that the Group will continue in operation for the foreseeable future and will be able to realize
its assets and discharge its liabilities in the normal course of operations. Market conditions have deteriorated
significantly over the year and the Company continues to incur operating losses and is dependent upon reaching
profitable levels of operation in the future to support working capital needs. The performance at Magdalena
deteriorated significantly over the course of the period ended December 31, 2014, which resulted in the Company
implementing a restructuring at BC Dundee in March 2015 and a further restructuring in October 2015 together with
the conclusion of agreements with STA. The arrangements with STA include the provision of contract mining services
by STA at Magdalena effective October 31, 2015, the sale of certain underground mining equipment to STA and an
equity settlement arrangement in terms of which a portion of the contract mining fees will be settled in Common
Shares, in order to further alleviate cash flow pressures. In addition, the Company secured funding from RCF in March
2015 and further funding from both RCF and Investec in December 2015. The Company believes that, barring any
further deterioration in the market and subject to its ability to meet current forecasts, it should be able to generate
positive cash flows in the foreseeable future.

As a result of market conditions, the mining industry in South Africa has experienced labour disruptions and mass
retrenchments over the past two years. Apart from the application brought against the Company by AMCU in respect
of the retrenchment process at BC Dundee, there are currently no other significant labour issues at BC Dundee.
Wage negotiations for the upcoming year have been concluded as at the date of this MD&A. If labour disruptions
were to take place at the Company's mines, it could have a significant negative impact on the operations and financial
results of the Company.

If the going concern assumption was not appropriate for the annual consolidated financial statements then
adjustments would be necessary to the carrying values of assets and liabilities, the reported revenues and expenses,
and the statement of financial position classifications. Such adjustments could be material.

OTHER RISKS AND UNCERTAINTIES

Investing in the Company involves risks that should be carefully considered. The business of the Company is
speculative due to the high-risk nature of coal mining and exploration. Investors should be aware that there are
various risks, including those discussed below, that could have a material adverse effect on, among other things, the
operating results, earnings, properties, business and condition (financial or otherwise) of the Company.

Additional Capital

The continued sustainability of the BC Dundee Properties, including the expansion of mining operations and the
continued sustainability of the Group, may require additional working capital and capital expenditures and therefore
require additional financing. Failure to obtain sufficient financing may result in a delay or indefinite postponement of
development or production on the BC Dundee Properties. Additional financing may not be available when needed or
if available, the terms of such financing might not be favorable and might involve substantial dilution to shareholders.
Failure to raise capital when needed may have a material adverse effect on the Company's business, financial
condition and results of operations.

Production Estimates

BC Corp has prepared estimates of future coal production for its existing and future mines. BC Corp cannot give any
assurance that it will achieve its production estimates. The failure by BC Corp to achieve its production estimates
could have a material adverse effect on any or all of its future cash flows, profitability, results of operations and
financial conditions. The realization of production estimates is dependent on, among other things, the accuracy of
mineral reserve and resource estimates, the accuracy of assumptions regarding coal quality and recovery rates,
ground conditions (including hydrology), the physical characteristics of the coal, the presence or absence of particular
metallurgical characteristics, and the accuracy of the estimated rates and costs of mining and processing.

Actual production may vary from estimates for a variety of reasons, including the actual coal mined varying from
estimates of quality or tonnage; dilution and metallurgical and other characteristics (whether based on
representative samples of coal or not); short-term operating factors such as the need for sequential development of
production panels and the processing of new or adjacent coal qualities from those planned; mine failures or section
failures; industrial accidents; natural phenomena such as inclement weather conditions, floods, droughts, rock slides
and earthquakes; encountering unusual or unexpected geological conditions; changes in power costs and potential
power shortages; shortages of principal supplies needed for mining operations including explosives, fuels, chemical
reagents, water, equipment parts, stonedust, magnetite and lubricants; plant and equipment failure; the inability to
process certain types of coals; labour shortages or strikes; and restrictions or regulations imposed by government
agencies or other changes in the regulatory environment.

Such occurrences could also result in damage to mineral properties or mines, interruptions in production, injury or
death to persons, damage to property of BC Corp or others, monetary losses and legal liabilities in addition to
adversely affecting coal production. These factors may cause a coal reserve that has been mined profitably in the past
to become unprofitable, forcing BC Corp to cease production.

Price of Coal

The Company's profits are directly related to the cost of production, and volume and price of coal sold. Price volatility
could have a significant impact on the future revenues and profitability of the Company.

Coal demand and price are determined by numerous factors that are beyond the control of the Company including
the demand for electricity: the supply and demand for domestic and foreign coal; interruptions due to transportation
delays; air emission standards for coal-fired power plants; regulatory, administrative and judicial decisions; the price
and availability of alternative fuels, including the effects of technology developments; the effect of worldwide energy
conservation efforts, future limitations on utilities' ability to use coal as an energy source due to the regulation
and/or taxation of greenhouse gases; proximity to, capacity of, and cost of transportation facilities; and political and
economic conditions and production costs in major coal producing regions. The combined effects of any or all of
these factors on coal price or volume are impossible for the Company to predict. If realized coal prices fall below the
full cost of production and remain at such level for any sustained period, the Company will experience losses, which
may be significant and as a result the Company may decide to discontinue affected operations forcing it to incur
closure or care and maintenance costs, as the case may be.

Labour and Employment Matters

While the Company believes that it has good relations with both its unionized and non-unionized employees,
production at the Company's mining operations is dependent upon the efforts of the Company's employees and
those of its contractors. Relations between the Company and its employees may be impacted by changes in the
scheme of labour relations that may be introduced by the relevant governmental authorities in whose jurisdictions
the Company carries on business.

During the 2015 year, BC Corp implemented the March Retrenchment Process, resulting in the retrenchment of
approximately 25% of the workforce, followed by the October Retrenchment Process (refer to the Operational
section in Overview of the Period and Outlook for the Group). The Company has completed wage negotiations with
the unions for the forthcoming financial year.

Refer to Legal proceedings in Overview of the Period and Outlook for the Group section above, with regards to the
application against BC Dundee and Zinoju in respect of the March Retrenchment Process.

Cost Estimates

Capital and operating cost estimates made in respect of BC Corp's mines and development projects may not prove
accurate. Capital and operating cost estimates are based on the interpretation of geological data, feasibility studies,
anticipated climatic conditions, other factors and assumptions regarding foreign exchange currency rates and
domestic inflation.

Any such events could affect the ultimate accuracy of such estimates; unanticipated changes in quality and tonnage
of coal to be mined and processed; incorrect data on which engineering assumptions are made; delay in construction
schedules, unanticipated transportation costs; the accuracy of major equipment and construction cost estimates;
labour issues; changes in government regulation (including regulations regarding prices, cost of consumables and
capital goods, royalties, duties, taxes, permitting and restrictions on production quotas on exportation of minerals)
and title claims.

Mineral Legislation

The business of mineral exploration, development, mining and processing is subject to various national and local laws
and plans relating to permitting and maintenance of titles, environmental consents, employee relations, health and
safety, royalties, land acquisitions and other matters. There is a risk that the necessary permits, consents,
authorizations and agreements to implement planned exploration, development or mining may not be obtained
under conditions or within the time frames that make such plans economic, that applicable laws, regulations or the
governing authorities will change or that such changes will result in additional material expenditures or time delays.
In addition, mining legislation in South Africa, including the Mineral and Petroleum Resources Development Act, 28 of
2004 ("MPRDA") is currently under review and the proposed amendments, if passed by Government, could have a
material impact on the Company's operations.

Compliance with regulation 8.10 of the Mine Health and Safety Act, 29 of 1996 may require significant capital outlay
on behalf of the Company and may cause material changes or delays in the Company's intended activities.
Management is currently assessing options to comply with the regulation. These regulations could have a material
impact on the Company's operations.

Title to Mineral Holdings

BC Corp requires licenses and permits from various governmental authorities. BC Corp believes that it holds all
necessary licenses and permits under applicable laws and regulations in respect of the BC Dundee Properties and that
it is presently complying in all material respects with the terms of such licenses and permits. Such licenses and
permits, however, are subject to change in various circumstances. There can be no guarantee that the Company will
be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop or mine
its properties. The validity of ownership of property holdings can be uncertain and may be contested. Although BC
Dundee has attempted to acquire satisfactory title to its properties, risk exists that some titles, particularly titles to
undeveloped properties, may be defective.

Refer to Legal proceedings in Overview of the Period and Outlook for the Group section above, with regards to the
legal processes in respect of MR174 and MR301.

Power Supply

The supply of electric power is not guaranteed in South Africa. Currently the public supply is sufficient to power all of
the operations at the BC Dundee Properties; however South African power supply is limited, with limited reserve
capacity. Moreover, the country has been plagued with a shortage of supply recently, which has led to sporadic
"loadshedding" of power in certain areas of the country. This has and will continue to negatively affect the
production at the mines in terms of lost production and increased costs. The Company has procured diesel power
generators for backup power to the various sub-stations that have been installed on the surface and underground at
the BC Dundee Properties.

Additionally, any production expansion plan for the BC Dundee operations would be dependent on additional
electrical supply, and the majority of new build projects in the country are behind schedule. While the Company has
taken steps to meet the need for additional supply of electricity from the public utility (Eskom), there can be no
assurance that the BC Dundee Properties will not be negatively affected by the power supply situation on either an
operating or cost basis, or both.

Depletion of Mineral Reserves

The Company must continually replace mining reserves depleted by production to maintain production levels over
the long-term. There is no assurance that the Company's exploration programs will result in any new commercial
mining operations or yield new reserves to replace or expand current reserves.

Litigation

All industries, including the mining industry, are subject to legal claims, with and without merit. Legal proceedings
may arise from time to time in the course of the Company's business. Such litigation may be brought against the
Company or one or more of its subsidiaries in the future from time to time or the Company or one or more of its
subsidiaries may be subject to another form of litigation. Defense and settlement costs of legal claims can be
substantial, even with respect to claims that have no merit. As of the date hereof, except as disclosed in the Overview
of the Period and Outlook for the Group section above, no other material claims have been brought against the
Company, nor has the Company received an indication that any claims are forthcoming.

Due to the inherent uncertainty of the litigation process, the process of defending such claims (or any other claims
that may be brought against the Company) could take away from management time and effort and the resolution of
any particular legal proceeding to which the Company or one or more of its subsidiaries may become subject could
have a material effect on the Company's financial position and results of operations.

South Africa Country Risks

The operations of the Company are subject to risks normally associated with the conduct of business in South Africa.
Risks may include, among others highlighted herein, problems relating to labour disputes, delays or invalidation of
governmental orders and permits, corruption and fraud, uncertain political and economic environments, civil
disturbances and crime, arbitrary changes in laws or policies, foreign taxation and exchange controls, opposition to
mining from environmental or other non-governmental organizations or changes in the political attitude towards
mining, limitations on foreign ownership, limitations on repatriation of earnings, infrastructure limitations and
increased financing costs.

There have been recent calls in South Africa for the nationalization and expropriation without compensation of
domestic mining assets. Any such development would have a significant adverse effect on the Company.

The labour situation in South Africa has been unstable across the mining industry, and in particular in the platinum
industry, where strikes in early 2014 lasted around five months, followed by a month long strike in the metal and
engineering sector. There is a risk that this instability extends into other sectors, including the coal sector. 
There have also been retrenchments carried out by numerous companies across the industry.

During the year ended December 31, 2015, the Company implemented the March Retrenchment Process, resulting in
the retrenchment of approximately 25% of the labour complement, and the October Retrenchment Process, in terms
of which the majority of retrenched employees were employed by STA. Wage negotiations for the upcoming year
have been completed.

HIV is prevalent in Southern Africa and tuberculosis is prevalent in the KwaZulu-Natal Province of South Africa, where
the Company's operations are situated. Employees of the Company may have or could contract either of these
potentially deadly illnesses. The prevalence of HIV and tuberculosis could cause substantial lost employee man-hours
and may influence the Company's ability to source skilled labour. The above risks may limit or disrupt the Company's
business activities. Also, the Company's mining operations must remain compliant with South African mining laws,
including, inter alia, the MPRDA and the Mining Charter, the conditions imposed by the licenses held by the
Company, and the BEE participation requirements. However, no assurance can be given that the Company will be
able to meet the objectives of South African mining laws going forward, including the 26% HDSA ownership objective
and compliance with the requirements of the Mining Charter. There is also no guarantee that the interests of the
Company will be wholly aligned with the interests of its (direct or indirect) BEE shareholders.

Infrastructure

Mining, processing, development and exploration activities depend, to one degree or another, on adequate
infrastructure. Reliable roads, bridges, power sources and water supply are important determinants that affect
capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference
in the maintenance or provision of such infrastructure could adversely affect the Company's operations, financial
condition and results of operations.

Environmental Risks and Other Hazards

All phases of the Company's operations will be subject to environmental regulation in South Africa. Environmental
legislation in many countries is evolving and the trend has been toward stricter standards and enforcement,
increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects
and increasing responsibility for companies and their officers, directors and employees.

Compliance with environmental laws and regulations may require significant capital outlays on behalf of the
Company and may cause material changes or delays in the Company's intended activities. There can be no assurance
that future changes in environmental regulations and the manner in which the regulatory authorities enforce these
regulations will not adversely affect the Company's business, and it is possible that future changes in these laws or
regulations could have a significant adverse impact on some portion of the Company's business, causing the Company
to re-evaluate those activities at that time.

Mining involves various other types of risks and hazards, including: industrial accidents; processing problems; unusual
or unexpected geological structures; structural cave-ins or slides; flooding; fires; and periodic interruptions due to
inclement or hazardous weather conditions. These risks could result in damage to, or destruction of, mineral
properties, production facilities or other properties, personal injury, delays in mining, increased production costs,
monetary losses and possible legal liability.

Dependence on Key Personnel

The Company is dependent on a relatively small number of key personnel. The Company currently does not have key
person insurance on these individuals. Due to the Company's relatively small size, the loss of these persons or the
Company's inability to attract and retain additional highly skilled employees required for the operation of the
Company's activities may have a material adverse effect on the Company's business or future operations.

Dependence on Outside Parties

The Company has relied upon consultants, engineers, contractors and others and intends to rely on these parties for
exploration, extraction, development, construction and operating expertise. Substantial expenditures are required to
develop coal properties, to establish mineral reserves through drilling, to carry out environmental and social impact
assessments, to develop processes to extract coal and, in the case of new properties, to develop the exploration and
infrastructure at any particular site. If such parties' work is deficient or negligent or is not completed in a timely
manner, it could have a material adverse effect on the Company.

Effective October 31, 2015, STA is mining four sections at Magdalena. The Company retains legal and operational
responsibilities for these mining operations and must maintain adequate oversight and involvement to ensure
compliance and optimum performance by STA.

Exploration and Development

The exploration and development of coal deposits involves significant risks, which even a combination of careful
evaluation, experience and knowledge may not eliminate. While the discovery of a mineable deposit may result in
substantial rewards, few properties that are explored are ultimately developed into producing mines.

Major expenses may be required to establish additional reserves, to develop metallurgical processes and to construct
mining and processing facilities at a particular site. It is impossible to ensure that the current exploration programs
planned by the Company will result in profitable commercial mining operations, and significant capital investment is
required to achieve commercial production from successful exploration efforts. There is no certainty that exploration
expenditures made by the Company will result in discoveries of commercial mineable quantities. Exploration for coal
is highly speculative, involves substantial expenditures, and is frequently non-productive.

Tax and Foreign Mining Tax Regimes

The Company is subject to income, value added, withholding and other taxes in various jurisdictions. Significant
judgment is required in determining the Company's provisions for taxes. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The
Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be
due. The determination of the Company's income, value added, withholding and other tax liabilities requires
interpretation of complex laws and regulations often involving multiple jurisdictions. The Company's interpretation of
taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities.
All tax related filings are subject to government audit and potential reassessment subsequent to the financial
statement reporting period. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the
period in which such determination is made.

Mining tax regimes in foreign jurisdictions are subject to differing interpretations and are subject to constant change.
The Company's interpretation of taxation law as applied to its transactions and activities may not coincide with that
of the tax authorities. As a result, transactions may be challenged by tax authorities and the Company's operations
may be assessed, which could result in significant additional taxes, penalties and interest. In addition, proposed
changes to mining tax regimes in foreign jurisdictions could result in significant additional taxes payable by the
Company, which would have a negative impact on the financial results of the Company.

Insurance and Uninsured Risks

The Company's business is subject to a number of risks and hazards generally, including: adverse environmental
conditions; industrial accidents; labour disputes; unusual or unexpected geological conditions; ground or slope
failures; cave-ins; changes in the regulatory environment; and natural phenomena such as inclement weather
conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or production
facilities, personal injury or death, environmental damage to the Company's properties or the properties of others,
delays in mining, monetary losses and possible legal liability. The businesses and properties of the Company are
insured against loss or damage, subject to a number of limitations and qualifications. Such insurance will not cover all
the potential risks associated with a mining company's operations. The Company may also be unable to maintain
insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be
available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as
environmental pollution or other hazards as a result of exploration and production is not generally available to the
Company or to other companies in the mining industry on acceptable terms.

The Company might also become subject to liability for pollution or other hazards that may not be insured against or
that the Company may elect not to insure against because of premium costs or other reasons. Losses from these
events may cause the Company to incur significant costs that could have a material adverse effect upon its financial
performance and results of operations.

A process was initiated with the Company's insurers and underwriters to recover all or a portion of the costs relating
to the flooding incident at Magdalena in the final quarter of the period ended December 31, 2014, in terms of which
a settlement was reached between the parties.

Competition

The mining industry is intensely competitive. Significant competition exists for the acquisition of properties producing
or capable of producing coal. The Company may be at a competitive disadvantage in acquiring additional mining
properties because it must compete with other individuals and companies, many of which have greater financial
resources, operational experience and technical capabilities than the Company. The Company may also encounter
increasing competition from other mining companies in its efforts to hire experienced mining professionals. Increased
competition could adversely affect the Company's ability to attract necessary capital funding or acquire suitable
producing properties or prospects for mineral exploration in the future.

The Company's Securities May Experience Price Volatility

Securities markets have a high level of price and volume volatility, and the market price of securities of many
companies have experienced wide fluctuations in price that have not necessarily been related to the operating
performance, underlying asset values or prospects of such companies. Factors unrelated to the financial performance
or prospects of the Company include macroeconomic developments in North America and globally, and market
perceptions of the attractiveness of particular industries. There can be no assurance that continued fluctuations in
coal prices will not occur. As a result of any of these factors, the market price of the securities of the Company may
not accurately reflect the longer term value of the Company.

As of the date of this MD&A, RCF owns 264 025 857 Common Shares representing approximately 89.3% of the
currently issued and outstanding Common Shares. Assuming RCF converts an additional US$18.0 million of the
remaining US$27.0 million RCF Convertible Loan before December 31, 2017 (as required by the Investec funding
terms), and the remaining US$9.0 million of the RCF Convertible Loan on June 30, 2019, interest on the RCF
Convertible Loan is settled quarterly in Common Shares at the maximum interest rate of 24% per annum for the full
term and STA is issued Common Shares on a quarterly basis for the Equity Portion until such time as STA holds 9.9%
of the Company, RCF would hold 92.7% of the issued and outstanding Common Shares on June 30, 2019 on a fully
diluted basis. This excludes the effects of potential dilution of the exercise of the Investec warrants, which are
currently out of the money.

There is a risk that the Company's securities will not trade on the open market due to a majority holding by one entity.

Foreign Assets

All of the assets of the Company are located in jurisdictions outside of Canada. As a result, it may be difficult for
shareholders resident in Canada or other jurisdictions to enforce judgments obtained against the Company in
Canada.

Currency Fluctuations

Currency fluctuations may affect the Company's costs and margins. Adverse fluctuations in the South African Rand
relative to the US Dollar and the Canadian Dollar and other currencies could materially and adversely affect the
Company's profitability, results of operation and financial position.

The Company's Directors and Officers may have Conflicts of Interests

Certain of the Company's directors and officers also serve as directors and/or officers of other companies involved in
natural resource exploration, development and production and as directors and/or officers of RCF being the major
shareholder of the Company. Consequently there exists the possibility that such directors may be in a position of
conflict in respect of proposed transactions or the operation of the Company.

The directors and officers of the Company are required by law to act honestly and in good faith with a view to the
best interests of the Company and to disclose any interests that they may have in any project or opportunity of the
Company. If a conflict of interest arises at a meeting of the Board of Directors of the Company, any director in a
conflict will be required to disclose his or her interest and abstain from voting on such matter.

NON-IFRS PERFORMANCE MEASURES

The Company has included in this document certain non-IFRS performance measures that are detailed below. These
non-IFRS performance measures do not have any standardized meaning prescribed by IFRS and, therefore, may not
be comparable to similar measures presented by other companies. The Company believes that, in addition to
conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the
Company's performance. Accordingly, they are intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The
definition for these performance measures and reconciliation of the non-IFRS measures to reported IFRS measures
are as follows:

Working Capital

Working capital includes current assets and current liabilities, excluding provisions and non-financial instruments.

                                                   December 31,       December 31,
                                                           2015               2014
                                                          R'000              R'000
Current assets
Cash and cash equivalents                                20 365             12 120
Trade and other receivables                              75 581             95 475
Inventories                                              42 226             27 035
Non-interest bearing receivables                          1 698              1 588
Taxation receivable                                          52              2 337
                                                        139 922            138 555
Current liabilities
Trade and other payables                                161 401            170 507
Current portion of borrowings                            25 714              6 000
                                                        187 115            176 507
Net working capital                                    (47 193)           (37 952)

Consolidated EBITDA

Consolidated EBITDA is defined as earnings before interest, tax, depreciation and amortization and adding back the
following: Impairment or reversal of an impairment of an asset, fair value adjustments to financial instruments, stock-
based compensation, foreign exchange gains and losses, and non-recurring transaction expenses or income.

The reconciliation of operating loss to EBITDA is as follows:

                                         12 months     10 months
                                             ended         ended                 3 months ended
                                      December 31,  December 31,  December 31, December 31, September 30,
R'000                                         2015          2014          2015         2014          2015
Operating loss for the period            (457 018)     (126 694)     (149 809)     (22 329)     (193 392)
Depreciation and amortization               76 152        75 463        17 935       17 229        20 106
Impairment of receivables                      (1)       (1 687)             -        (228)             -
Impairment of property, plant and
equipment and intangible assets            137 889        90 882        14 558       90 882       123 331
Fair value adjustments of financial
assets and conversion option             (102 226)      (68 675)      (13 681)     (83 344)      (16 158)
Loss on extinguishment of debt             195 880             -        84 038            -             -
Loss on remeasurement of non-
current assets held for sale                10 833             -             -            -        10 833
Stock-based compensation                       799           303           173            -           134
Foreign exchange gains & losses             66 740         6 963        32 489          864        30 944
EBITDA                                    (70 952)      (23 445)      (14 297)        3 075      (24 202)

Headline earnings/(loss) per share

Headline earnings/(loss) is a profit measure required for JSE-listed companies as defined by the South African
Institute of Chartered Accountants. Headline earnings/(loss) per share is a basis for measuring earnings per share
which accounts for all the profits and losses from operational, trading, and interest activities, that have been
discontinued or acquired at any point during the year. Excluded from this figure are profits or losses associated with
the sale or termination of discontinued operations, fixed assets or related businesses, or from any permanent
devaluation or write off of their values.

Reconciliation of loss for the periods to headline loss is disclosed below:

                                                          12 months ended        10 months ended
                                                             December 31,           December 31,
                                                                     2015                   2014
Loss for the period                                         (561 824 654)          (108 440 811)
Net profit on disposal of property, plant and equipment       (3 601 936)                238 843
Headline loss for the period                                (565 426 590)          (108 201 968)
Headline loss per share - basic and diluted                        (5.34)                 (2.10)

SUMMARY OF SECURITIES AS AT MARCH 29, 2016

As at March 29, 2016 the following Common Shares, Common Share purchase options and share purchase warrants
were issued and outstanding:

-   295 719 449 Common Shares;
-   5 864 048 Common Share purchase options with exercise prices ranging from C$0.0387-C$4.10 with a
    weighted average remaining contractual life of 3.74 years;
-   34 817 237 warrants with a strike a price of C$0.1446 maturing on July 3, 2019.

LIST OF DIRECTORS AND OFFICERS

Craig Wiggill              Director, Chairman of the Board of Directors
Robert Francis             Director
Edward Scholtz             Director
David Thomas               Director
John Wallington            Director
Malcolm Campbell           Chief Executive Officer
Sarah Williams             Chief Financial Officer and Corporate Secretary

March 30, 2016

Sponsor
Questco (Pty) Ltd



Date: 30/03/2016 04:01:00 Supplied by www.sharenet.co.za                     
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