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Buffalo Coal Corp - Interim Managements Discussion And Analysis - Quarterly Highlights For The Three Months Ended 31 March 2016

Release Date: 13/05/2016 13:56:00      Code(s): BUC     
BUFFALO COAL CORP.
Registration number: 001891261
External company registration number: 2011/011661/10
Share code on the TSX Venture Exchange: BUF
Share code on the JSE Limited: BUC
ISIN: CA1194421014
"Buffalo Coal" or "the Company"

BUFFALO COAL CORP.
INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS ? QUARTERLY HIGHLIGHTS
For the three months ended March 31, 2016
(Presented in South African Rands)

BASIS OF PREPARATION

The following Interim Management's Discussion and Analysis ? Quarterly Highlights ("Interim MD&A") relates to the financial
position and results of operations of Buffalo Coal Corp. and its subsidiaries ("our", "BC Corp", the "Company" or collectively the
"Group") for the three months ended March 31, 2016 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 Management's Discussion and Analysis
for the year ended December 31, 2015 and the unaudited condensed interim consolidated financial statements for the three
months ended March 31, 2016. The condensed interim consolidated financial statements ("Interim Results") and related notes
have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are in compliance with IAS 34,
Interim Financial Reporting. Certain non-IFRS measures are discussed in this Interim 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.

This Interim MD&A reports our activities through May 12, 2016 unless otherwise indicated. References to FY2016 mean the
future year ending December 31, 2016 and FY2015 mean the financial year ended December 31, 2015. References to Q1 2016
mean the three months ended March 31, 2016 and Q4 2015, Q3 2015, Q2 2015 and Q1 2015 refer to the three months ended
December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.

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:R11.4384 and
amounts in US Dollars were translated at US$1:R14.8330.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Interim 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. The Company is listed on the TSX Venture Exchange
("TSXV") and the Alternative Exchange ("AltX") operated by JSE Limited ("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.

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.

Bituminous

The API 4 coal index, the benchmark pricing index for coal exports meeting the RB1 specification, is currently at levels of around
US$53 per ton and has remained steady at this level throughout the quarter. The short-to-medium term outlook for the API 4
coal price index remains in backwardation (source IHS/McCloskey). Although the Rand weakened significantly against the US
Dollar in January 2016 which mitigated some of the risk in a decline in API 4, it subsequently gained some ground against the US
Dollar, closing at US$1:R14.83 at quarter-end.

During Q1 2016, the Group has 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.

Anthracite

Domestic and export anthracite markets remain weak, in terms of both demand and pricing, and are expected to remain
depressed throughout 2016. During Q1 2016 the Group negotiated a short-term blended anthracite and bituminous contract
with a major export customer, which will reduce existing anthracite stockpiles. Furthermore, the Group secured a contract for
sized anthracite of which the majority of the contracted tons were railed in Q1 2016. The Group continues to pursue various
marketing opportunities for all anthracite and calcine products with a number of parties, although at reduced prices when
compared to historic levels.

Investec Borrowings

On December 2, 2015, BC Corp closed a second amended and restated term loan and revolving credit facility with Investec Bank
Limited ("Investec") ("Second Amended Investec Agreement"), whereby Investec agreed to extend BC Dundee's working capital
facility from R30.0 million to R80.0 million, in two tranches of R25.0 million each.

The conditions to the first tranche, which included the conclusion of the funding arrangements with Resource Capital Fund V L.P.
("RCF") as reported in the MD&A for FY2015, 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 built up as a result of depressed markets
both domestically and globally. The condition was fulfilled to Investec's satisfaction during Q1 2016 and R25.0 million was drawn
by BC Dundee in March 2016.

Due to continued cash constraints, Investec was approached during Q1 2016 for a further deferral of the term loan facility
repayment due on March 31, 2016. On March 31, 2016, BC Dundee entered into a fourth amendment to the Investec loan
agreement in terms of which the repayment schedule for the term loan facility was replaced with a new schedule with principal
repayments commencing on June 30, 2016. In addition, surplus cash at quarter-end, in excess of R30.0 million, will be used to
reduce the R80.0 million working capital facility back to R30.0 million and a clause was included restricting outflows of funds from
BC Dundee between April 1, 2016 and June 30, 2016, unless prior written consent is obtained from Investec.

BC Dundee was required to meet specified debt covenants at March 31, 2016 and was in breach of certain of these covenants 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
March 31, 2016.

TSXV delisting review

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. Subsequent to
Q1 2016, the Company issued shares to STA Coal Mining Company Proprietary Limited ("STA") pursuant to an agreement entered
into in FY2015 with STA ("STA Equity Settlement Agreement") to settle a portion of STA's contract mining fees through the
issuance of common shares in BC Corp ("Common Shares") to STA, which has increased the Company's public float. As of the date
of this Interim MD&A, RCF holds 89.0% of the issued and outstanding Common Shares, and there is a public float of 9.4%.

CONSOLIDATED OPERATIONAL RESULTS FOR THE QUARTERS ENDED MARCH 31, 2016 AND MARCH 31, 2015

The operational highlights for the quarter ended March 31, 2016 compared to the quarters ended March 31, 2015 and
December 31, 2015 are presented below. The Group achieved run of mine ("ROM") production of 377kt, saleable production
(excluding calcine) of 229kt and sales of 198kt for the quarter ended March 31, 2016.

                                                                                        3 months ended
                                                                             March 31,       March 31,    December 31,
Operational results                                                               2016            2015            2015
ROM (t)                                                                        377 079         472 842         328 527
- Aviemore (t)                                                                 118 351         119 231         108 065
- Magdalena (t)                                                                258 728         353 611         220 462
Saleable production (excluding calcine) (t)                                    229 485         236 941         181 307
- Anthracite (t)                                                                87 549          72 806          69 603
- Bituminous (t)                                                               141 936         164 135         111 704
Yield on plant feed (excluding calcine) (%)                                      58.6%           51.9%           52.5%
- Anthracite (%)                                                                 68.1%           62.0%           65.0%
- Bituminous (%)                                                                 54.0%           48.4%           46.9%
Sales (t)                                                                      197 752         245 058         184 215
- Anthracite (t)                                                                59 566          68 187          59 441
- Bituminous (t)                                                               133 896         165 681         117 800
- Calcine (t)                                                                    4 290          11 190           6 974
Saleable inventory tons                                                         91 875          40 102          70 241
- Anthracite (t)                                                                77 678          16 979          65 863
- Bituminous (t)                                                                13 659          21 162           2 297
- Calcine (t)                                                                      538           1 961           2 081

An analysis of the operational results for the quarter ended March 31, 2016 compared to the quarter ended March 31, 2015 is
discussed below:

ROM Production

Total ROM production for Q1 2016 was 377kt compared to 473kt produced in Q1 2015, a decrease of 20.3%.

ROM production from Magdalena underground for Q1 2016 was 259kt compared to 354kt produced in Q1 2015 from the
underground and opencast operations combined, a decrease of 26.8%. ROM production for Q1 2015 comprised 280kt from the
underground operations and 74kt from the opencast. As previously disclosed, the opencast operation was fully depleted in
March 2015. During Q1 2015, the Company had four underground sections operating at Magdalena, together with one sweeping
section and one section operated by STA, as well as the opencast operation as compared to only four sections being mined at
Magdalena by STA during Q1 2016.

ROM production from Aviemore for Q1 2016 was 118kt compared to 119kt produced in Q1 2015, a minimal decrease quarter on
quarter. Aviemore continues to perform in line with historic and budgeted performance levels.

Saleable Production

Saleable coal production for Q1 2016 was 229kt (excluding calcine) compared to 237kt in Q1 2015, a decrease of 3.2%, which is in
line with the decrease in ROM production and offset by an improved yield.

Saleable calcine product was 3.0kt for Q1 2016 compared to 8.5kt in Q1 2015, a decrease of 64.7%, primarily as a result of market
demand.

The total calculated yield from plant feed was 58.6% for Q1 2016 compared to 51.9% for Q1 2015. During FY2015, the yields at
Magdalena wash plant deteriorated due to various factors. An action plan was put in place to ensure the yield improved, the
results of which were seen in the first quarter of 2016. Adjustments were made to key components of the wash plant to account
for a finer ROM material, as well as for increased contamination in ROM as a result of mining conditions.

Sales

Total sales of bituminous coal and anthracite products for Q1 2016 were 198kt compared to 245kt sold in Q1 2015, a decrease of
19.3%.

Bituminous sales for Q1 2016 were 134kt, of which 55.3% were export sales and 44.7% were domestic sales compared to 166kt
sold in Q1 2015 of which 65.4% were export sales and 34.6% were domestic sales, a decrease of 19.2% in line with a decrease in
bituminous saleable production.

Anthracite sales (including calcine) for Q1 2016 were 64kt, of which 77.5% were export sales and 22.5% were domestic sales
compared to 79kt sold in Q1 2015 of which 52.1% were export sales and 47.9% were domestic sales, down by 19.6%. 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 continues to negotiate with export customers to maintain sales levels.

Health and Safety

The Group 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 Group operates, in order to ensure compliance and to work towards the achievement of zero
harm. The Group 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 Group undertakes training and development initiatives and related ventures
on a regular basis in order to improve each individual's outlook on safety, health and the environment. The Group currently
employs 567 employees, and has 418 contractors on site.

The Group has achieved more than five thousand fatality free production shifts at Magdalena and the Coalfields wash plant. The
last fatality recorded for both these areas was in 2004. Aviemore had one fatal incident during September 2014.

The Group has not had a very good start to 2016 with four Lost Time Injuries ("LTIs") having been recorded to the date of this
report.

CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTERS ENDED MARCH 31, 2016 AND MARCH 31, 2015

                                                                                       3 months ended
                                                                          March 31,         March 31,      December 31,
Financial results                                                              2016              2015              2015
Revenue (R'millions)                                                          142.5             164.7             127.2
Net Revenue (R'millions) (*)                                                  138.3             152.0             114.2
Adjusted EBITDA (R'millions) (*)                                                4.6            (19.9)            (14.3)
Average selling price per ton sold (R)                                          721               672               691
Cash cost of sales per ton (R)                                                  620               666               688
Cash (utilized in)/ generated from operating activities
(R'millions)                                                                 (17.7)               2.2            (51.4)
Cash utilized in investing activities (R'millions)                            (6.4)            (19.2)            (12.4)
Cash generated from financing activities (R'millions)                          25.0              57.5              69.0
CAD:ZAR (average)                                                             11.52              9.48             10.65
USD:ZAR (average)                                                             15.82             11.74             14.23

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

An analysis of the financial results for the quarter ended March 31, 2016 compared to the quarter ended March 31, 2015 is
discussed below:

Net Revenue

The Group restructured several of its offtake contracts during Q1 2016 from a free on board shipping ("FOB") basis to short-term
Rand denominated free carrier ("FCA") contracts, resulting in revenue not being directly comparable quarter on quarter. The
Group has therefore compared net revenue after export costs, which has been defined under the Non-IFRS Performance
Measures section of this Interim MD&A. Net revenues earned during Q1 2016 were R138.3 million compared to R152.0 million
earned during Q1 2015, a decrease of 9.0%. During Q1 2016, the Group's sales were 198kt compared to sales of 245kt for
Q1 2015.

Net bituminous revenue for Q1 2016 was R40.4 million for domestic (60kt) and R43.1 million for export (74kt), compared to
R38.5 million for domestic (57kt) and R63.9 million for export (108kt) for Q1 2015.

Anthracite revenue (including calcine) for Q1 2016 was R14.4 million for domestic (14kt) and R40.4 million for export (50kt),
compared to R36.2 million for domestic (27kt) and R13.4 million for export (41kt).

Average selling prices for Q1 2016 were R721 per ton compared to an average selling price of R672 per ton for Q1 2015.

The decrease in net revenue for Q1 2016 compared to Q1 2015 is primarily due to an overall decrease in sales tons during the
current quarter, particularly in respect of domestic anthracite sales as noted above, and also a decrease in export bituminous
sales due to a reduction in saleable tons. In Q1 2016, the overall selling price per ton was impacted due to the sale of a sized
anthracite parcel at a higher selling price per ton. This was offset by a reduction in domestic anthracite sales which are sold at
higher selling prices as compared to bituminous sales.

Cost of Sales

Cost of sales for Q1 2016 was R139.0 million (cash cost of sales of R620 per ton sold) compared to R181.4 million (cash cost of
sales of R666 per ton sold) for Q1 2015, a decrease of 23.4%. The Group has succeeded in reducing fixed costs as a result of
restructuring initiatives and continues to be cost conscious in ensuring expenditure is kept to a minimum in order to ensure the
sustainability of the Group. Salaries and wages decreased by R20.7 million due to the restructurings implemented during the
prior year and the introduction of STA as a mining contractor, offset by an increase in mining contractor fees of R17.9 million.
Railage, port handling and wharfage costs decreased by R8.5 million, which was due to the restructuring of several customer
contracts from a FOB to FCA basis.

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

General and administration expenses

The Company recorded general and administration expenses of R16.2 million during Q1 2016 compared to R19.6 million during
Q1 2015, a 17.2% decrease quarter on quarter. 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 the restructurings implemented during the prior year and cost control
measures in place at both operational and corporate levels.

Other Income/(Expense) - net

During Q1 2016 the Group recorded net other income amounting to R23.3 million compared to net other income of R4.4 million
during Q1 2015, an increase of 426.5%. Other income and expense comprises profit on sale of assets, foreign exchange
gains/losses, discounts received, commissions paid and fair value adjustments on financial assets and conversion option
liabilities.

The Company recorded a fair value adjustment gain of R10.0 million for Q1 2016 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
R6.8 million recorded in Q1 2015.

A net foreign currency exchange gain of R12.5 million was recorded in Q1 2016 compared to a R0.4 million net foreign currency
exchange loss for Q1 2015, mainly as a result of the strengthening of the Rand in relation to the US Dollar from
December 31, 2015 to March 31, 2016 with regards to the RCF convertible loan.

Finance Costs/Income-net

The Group recorded net interest and accretion expense of R21.9 million during Q1 2016 compared to a net interest and accretion
expense of R16.7 million for Q1 2015, an increase of 31.1%. The majority of the increase in interest and accretion related to the
RCF convertible loan which increased in Rand terms from R334.6 million (US$27.7 million) as at March 31, 2015 to R400.5 million
(US$27.0 million) as at March 31, 2016 as a result of a weaker Rand in Q1 2016 as compared to Q1 2015.

FINANCIAL CONDITION REVIEW

A summary of the Company's financial position is shown below:

                                                                                                March 31,       December 31,
                                                                                                     2016               2015
                                                                                                    R'000              R'000
Property, plant and equipment                                                                     332 831            340 650
Other long-term receivables                                                                        43 962             41 517
Cash and cash equivalents                                                                          21 228             20 365
Trade and other receivables                                                                        91 031             75 582
Other short-term receivables                                                                        1 821              1 749
Inventories                                                                                        48 182             42 226
Restricted cash                                                                                    11 200             11 200
Non-current assets held for sale                                                                        -             25 000
Total assets                                                                                      550 256            558 289
                                                         
Trade and other payables                                                                          128 702            161 401
Total borrowings                                                                                  196 863            171 395
RCF loan facilities                                                                               409 051            424 132
Other liabilities                                                                                  20 792             17 656
Total liabilities                                                                                 755 408            774 584
Total equity                                                                                    (205 152)          (216 295)
                                                         
Assets

Total assets were R550.3 million at March 31, 2016 compared to R558.3 million at December 31, 2015, a 1.4% decrease.

The most significant movement related to the decrease in non-current assets held for sale. During the prior year, the Company
entered in an agreement to sell two continuous miners to STA, which were subsequently reclassified as non-current assets held
for sale. One of the continuous miners was sold during the prior year, with the other being sold during Q1 2016.

This decrease was offset by an increase in trade and other receivables as a result of improved revenues in Q1 2016 relative to
Q4 2015 and an increase in anthracite inventory on hand due to market conditions as set out above.

Liabilities

Total liabilities were R755.4 million at March 31, 2016 compared to R774.6 million at December 31, 2015, a 2.5% decrease.

The most significant movement related to the the increase in borrowings by the R25.0 million drawn down from the Investec
working capital facility, offset by a decrease in trade and other payables, due to the use of funds drawn down from the Investec
working capital facility to settle outstanding amounts with creditors.
At March 31, 2016, the Group had outstanding debt with Investec of R216.0 million and US$27.0 million (R400.5 million)
outstanding on the RCF convertible loan. The Investec debt consists of R90.0 million outstanding on the term loan facility,
R45.6 million on the bullet facility and R80.4 million outstanding on the working capital facility, all of which were fully drawn at
quarter-end.

CASH FLOW REVIEW

The condensed consolidated statements of cash flows are summarized below:

                                                                                                             3 months ended
                                                                                                      March 31,         March 31,
                                                                                                           2016              2015
                                                                                                          R'000             R'000
Net cash (utilized in)/generated from operating activities                                             (17 742)             2 150
Net cash utilized in investing activities                                                               (6 395)          (19 202)
Net cash generated from financing activities                                                             25 000            57 522
Change in cash and cash equivalents                                                                         863            40 470

Operating activities

Cash utilized in operating activities during the three months ended March 31, 2016 was R17.7 million compared to R2.2 million
generated during the three months ended March 31, 2015.

The net loss for the quarter ended March 31, 2016 was R12.1 million compared to a net loss of R34.0 million for the quarter
ended March 31, 2015. Non-cash items included in the net loss for the quarter were: depreciation and amortization of
R16.3 million (Q1 2015: 18.3 million); net gains on the fair value adjustment on financial assets, conversion option liability and
warrant liability of R10.0 million (Q1 2015: R6.8 million); profit on disposal of property, plant and equipment of a negligible
amount (Q1 2015: loss of R3.0 million) and net unrealized foreign exchange gains of R12.5 million (Q1 2015: losses of
R0.4 million).

The Group's net working capital increased by R19.5 million for the quarter ended March 31, 2016, in comparison to a
R19.8 million decrease for the quarter ended March 31, 2015. 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 R6.4 million in cash during the quarter ended March 31, 2016 compared to cash utilized of
R19.2 million during the quarter ended March 31, 2015.

During the quarter ended March 31, 2016, the Group spent R5.0 million on property, plant and equipment relating to sustaining
capital compared to expenditure of R28.6 million for the quarter ended March 31, 2015 relating to sustaining capital and the
purchase of additional equipment with the funds received from RCF under the RCF convertible loan agreement.

Financing activities

Financing activities generated R25.0 million during the quarter ended March 31, 2016 and R57.5 million during the quarter ended
March 31, 2015.

During the quarter ended March 31, 2016, the Group drew down R25.0 million from the Investec working capital facility as
discussed under the Overview of the Period section of this Interim MD&A, which was used for working capital purposes. During
the comparative period, the Group received approximately R57.5 million from RCF under the RCF convertible loan agreement
which was used to purchase additional equipment and for working capital purposes.

RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2016 and March 31, 2015, the Company entered into the following transactions in the
ordinary course of business with related parties:

                                                                                                   3 months ended
                                                                                          March 31, 2016     March 31, 2015
Payments for services rendered       
RCF (1)                                                                                          114 784            370 201

The following balances were outstanding as at March 31, 2016 and March 31, 2015:

                                                                                                     3 months ended
                                                                                          March 31, 2016     March 31, 2015
Related party payables        
RCF (1)                                                                                        1 077 120            381 346

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 and restated
convertible loan agreement with RCF, 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 quarter ended March 31, 2016, which amounted to R11.1 million as compared to R8.7 million for the quarter ended
March 31, 2015.

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 three months ended
March 31, 2016 and March 31, 2015 was as follows:

                                                                                               3 months ended
                                                                                      March 31, 2016     March 31, 2015
Short-term benefits                                                                        3 837 106          4 204 717
Share-based payments                                                                         149 916                  -
Total                                                                                      3 987 022          4 204 717

Amounts owing to directors and other members of key management personnel were RNil as of March 31, 2016 (March 31, 2015:
R0.5 million).

OUTSTANDING LEGAL PROCEEDINGS

On March 20, 2015, the Association of Mineworkers and Construction Union ("AMCU") brought an application against BC Dundee
and Zinoju in the Labour Court of South Africa pertaining to the retrenchment process undertaken in terms of Section 189A of the
South Africa Labour Relations Act ("LRA") which was concluded in March 2015. 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. On May 11, 2016, the Labour Appeal
Court dismissed AMCU's appeal with no order as to costs.

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 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, an 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 March 31, 2016, the Company issued additional shares to RCF in settlement of interest owing on the RCF
convertible loan facilities for the period January 1, 2016 to March 31, 2016. An additional 42 009 840 Common Shares were
issued at C$0.05.

Subsequent to March 31, 2016, the Company issued shares to STA pursuant to the STA Equity Settlement Agreement. An
additional 6 136 353 Common Shares were issued at C$0.05.

South African Revenue Service ("SARS") Correspondence

Subsequent to March 31, 2016, BC Dundee received a notification from SARS with regards to an investigation conducted by them
on diesel refunds claimed by BC Dundee under the South African Customs and Excise Act, 91 of 1964. As per the notification, the
SARS Commissioner intends to disallow diesel refunds in the amount of R12.2 million for the period December 2012 to February
2016. BC Dundee is currently drafting a response to the SARS Commissioner in order to defend its refund claims.

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 Interim Results.

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, 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. Refer to the annual Management's Discussion and Analysis for the year ended December 31, 2015
for a list of the Company's risks and uncertainties. In terms of risks relating to Mineral Legislation, the new draft South African
Mining Charter has been gazetted for public comment during April 2016.

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.

                                                                                    March 31,           December 31,
                                                                                         2016                   2015
                                                                                        R'000                  R'000
Current assets
Cash and cash equivalents                                                              21 228                 20 365
Trade and other receivables                                                            91 031                 75 581
Inventories                                                                            48 182                 42 226
Non-interest bearing receivables                                                        1 821                  1 698
Taxation receivable                                                                       -                       52
                                                                                      162 262                139 922
Current liabilities
Trade and other payables                                                              128 702                161 401
Current portion of borrowings                                                          27 692                 25 714
                                                                                      156 394                187 115
Net working capital                                                                     5 868               (47 193)


The Company had a working capital surplus of R5.9 million as at March 31, 2016 compared to a working capital deficit of
R47.2 million at December 31, 2015. Working capital has improved due to the settlement of trade and other payables and an
increase in trade and other receivables and inventory.

Consolidated Adjusted EBITDA

Consolidated adjusted 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 profit/(loss) to adjusted EBITDA is as follows:

                                                                                         3 months ended
                                                                            March 31,       March 31,   December 31,
R'000                                                                            2016            2015           2015
Operating profit/(loss) for the period                                         10 638        (31 867)      (149 809)
Depreciation and amortization                                                  16 343          18 331         17 935
Impairment of receivables                                                           -             (1)              -
Impairment of property, plant and equipment and
intangible assets                                                                   -               -         14 558
Fair value adjustments of financial assets and conversion
option liability                                                              (9 956)         (6 844)       (13 681)
Loss on extinguishment of debt                                                      -               -         84 038
Stock-based compensation                                                          150               -            173
Foreign exchange (gains) & losses                                            (12 537)             439         32 489
Adjusted EBITDA                                                                 4 639        (19 942)       (14 297)

Net Revenue

The Group restructured several of its revenue contracts during Q1 2016 from an FOB shipping basis to short-term Rand
denominated FCA contracts, resulting in revenue not being directly comparable quarter on quarter. Below is a reconciliation of
revenue as disclosed in the Interim Results for the quarters ended March 31, 2016 and March 31, 2015 to net revenue which
excludes all railage, port handling and wharfage related costs:

                                                                                         3 months ended
                                                                            March 31,       March 31,   December 31,
R'000                                                                            2016            2015           2015
Revenue                                                                       142 488         164 700        127 208
Railage, port handling and wharfage                                             4 221          12 700         13 032
Net revenue                                                                   138 267         152 000        114 176

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/(loss) 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:

                                                                                                 3 months ended
                                                                                           March 31, 2016      March 31, 2015
Loss for the period                                                                          (12 093 561)        (33 971 990)
Net profit/(loss) on disposal of property, plant and equipment                                      6 053         (2 965 030)
Headline loss for the period                                                                 (12 087 508)        (36 937 020)
Headline loss per share - basic and diluted                                                        (0.04)              (0.60)


SUMMARY OF SECURITES AS AT MAY 12, 2016

As at May 12, 2016 the following Common Shares, Common Share purchase options and share purchase warrants were issued
and outstanding:

-      343 865 642 Common Shares;
-      5 789 048 Common Share purchase options with exercise prices ranging from C$0.0387-C$2.77 with a weighted average
       remaining contractual life of 3.54 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

May 12, 2016

Sponsor: Questco Proprietary Limited



Date: 13/05/2016 01:56:00 Supplied by www.sharenet.co.za                     
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