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Buffalo Coal Corp - Condensed Interim Consolidated Financial Statements For The Three And Six Months Ended June 30 2017 And June 30 2016

Release Date: 23/08/2017 17:19:00      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"

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the three and six months ended June 30, 2017 and June 30, 2016 (Presented in South African Rands)

Condensed Interim Consolidated Statements of Financial Position (Presented in South African Rands)

                                                                                                    June 30,      December 31,         June 30,
                                                                                                        2017              2016             2017
                                                                                                                                       (Note 1)
                                                                                   Notes                   R                 R               C$
Assets                                  
Non-current assets                                  
Property, plant and equipment                                                                    302 977 747       311 730 638       30 133 433
Investment in financial assets                                                         6          45 180 153        41 633 486        4 493 509
Other receivables                                                                                  4 044 004         4 032 570          402 207
Long-term restricted cash                                                                         11 200 000        11 200 000        1 113 925
Total non-current assets                                                                         363 401 904       368 596 694       36 143 074
Current assets                                  
Trade and other receivables                                                                       79 378 414        84 773 344        7 894 785
Inventories                                                                                       49 439 306        35 222 250        4 917 114
Non-interest bearing receivables                                                                   1 957 962         1 902 205          194 734
Cash and cash equivalents                                                                          9 859 750        13 753 934          980 627
Total current assets                                                                             140 635 432       135 651 733       13 987 260
Total assets                                                                                     504 037 336       504 248 427       50 130 334
Equity and liabilities                                  
Capital and reserves                                  
Share capital                                                                          5       1 080 282 567     1 075 881 497      107 442 288
Currency translation reserve                                                                   (219 945 085)     (219 945 085)     (21 875 206)
Reserves                                                                                          12 990 075        13 308 821        1 291 961
Accumulated retained loss                                                                    (1 097 727 033)   (1 095 286 547)    (109 177 272)
Equity (deficiency) attributable to owners of the                                  
company                                                                                        (224 399 476)     (226 041 314)     (22 318 229)
Non-controlling interest                                                                           4 339 142         4 339 142          431 561
Total equity (deficiency)                                                                      (220 060 334)     (221 702 172)     (21 886 668)
Non-current liabilities                                  
RCF loan facilities                                                                              325 707 029       336 288 222       32 394 032
Conversion option liability                                                            6           7 233 962        31 905 346          719 472
Asset retirement obligation                                                                       27 832 950        26 694 012        2 768 198
Total non-current liabilities                                                                    360 773 941       394 887 580       35 881 702
Current liabilities                                  
Trade and other payables                                                                         163 432 576       158 262 414       16 254 610
Current portion of borrowings                                                          4         185 070 022       161 016 413       18 406 616
Warrant liability                                                                      6              50 209           344 627            4 994
Current tax liability                                                                              9 117 476         8 775 360          906 802
Current portion of asset retirement obligation                                                     5 653 446         2 664 205          562 278
Current liabilities                                                                              363 323 729       331 063 019       36 135 300
Total liabilities                                                                                724 097 670       725 950 599       72 017 003
Total equity (deficiency) and liabilities                                                        504 037 336       504 248 427       50 130 334
                                  
Commitments and contingencies                                                       1, 7

Approved on behalf of the Board:

Signed, "Craig Wiggill"                                                Signed, "Robert Francis"

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income
(Presented in South African Rands)

                                                                           6 months                         3 months                   6 months
                                                                             ended                            ended                       ended
                                                                    June 30,        June 30,        June 30,          June 30,         June 30,
                                                                        2017            2016            2017              2016             2017
                                                                                                                                       (Note 1)
                                                     Notes                 R               R               R                 R               C$

Revenue                                                          325 866 155     298 547 480     154 442 360       156 059 107       32 409 859
Cost of sales                                                  (317 957 435)   (302 925 383)   (159 910 950)     (163 918 749)     (31 623 276)
Gross profit/(loss)                                                7 908 720     (4 377 903)     (5 468 590)       (7 859 642)          786 583
Other income/(expense) - net                             3        44 857 584      80 651 809      24 599 183        57 308 623        4 461 427
General and administration expenses                             (32 641 424)    (32 002 099)    (17 192 696)      (15 815 446)      (3 246 437)
Profit before the undernoted                                      20 124 880      44 271 807       1 937 897        33 633 535        2 001 573
Finance income                                                     1 043 080         811 010         625 968           379 854          103 741
Finance expense                                                 (22 794 521)    (43 749 814)     (9 522 866)      (21 454 598)      (2 267 088)
Profit/(loss) before income tax                                  (1 626 561)       1 333 003     (6 959 001)        12 558 791        (161 774)
Income tax                                                       (1 107 529)     (1 945 461)               -       (1 077 688)        (110 151)
(Loss)/profit for the period                                     (2 734 090)       (612 458)     (6 959 001)        11 481 103        (271 925)
Other comprehensive loss                                                   -               -               -                 -                -

Total comprehensive (loss)/profit for the period                 (2 734 090)       (612 458)     (6 959 001)        11 481 103        (271 925)
    
(Loss)/profit attributable to:    
- Owners of the parent                                           (2 734 090)       (612 458)     (6 959 001)        11 481 103        (271 925)
- Non-controlling interest                                              -               -                  -                 -                -
                                                                 (2 734 090)       (612 458)     (6 959 001)        11 481 103        (271 925)
   
   
Net (loss)/profit per share - basic and diluted                       (0.01)          (0.00)          (0.02)              0.03           (0.00)
   
Headline (loss)/profit per share - basic and diluted                  (0.01)          (0.00)          (0.02)              0.03           (0.00)
   
Weighted average number of common shares outstanding:   
- Basic                                                          398 250 175     316 411 592     399 916 419       339 409 951      398 250 175
- Diluted                                                        398 250 175     316 411 592     399 916 419       339 409 951      398 250 175

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

Condensed Interim Consolidated Statements of Changes in Equity
(Presented in South African Rands)

                                                                                                      Attributable to owners of the Group
                                                                                                        Reserves
                                                                                                                                                                                         
                                                                                                                                                                             
                                                    No. of shares            Share        Option    Equity-settled    BEE option        Accumulated        Currency             Total          Non-     Total equity
                                                           issued          capital       reserve      non-employee       reserve      retained loss     translation                     controlling     (deficiency)
                                                                                                  benefits reserve                                          reserve                        interest
                                             Notes                               R             R                 R            R                   R               R                 R             R                R
Balance at December 31, 2015                          280 729 049    1 038 096 502     7 653 184                 -     9 073 711    (1 055 512 401)   (219 945 085)     (220 634 089)     4 339 142    (216 294 947)
Shares issued in relation to RCF convertible       
loan                                                   57 000 240       19 600 805             -                 -             -                  -               -        19 600 805             -       19 600 805
Shares issued to STA                                    6 136 353        3 485 300             -                 -             -                  -               -         3 485 300             -        3 485 300
Stock-based compensation                                        -                -       225 888         2 645 590             -                  -               -         2 871 478             -        2 871 478
Stock options expired/cancelled                                 -                -   (3 757 259)                 -             -          3 757 259               -                 -             -                -
Net loss for the period                                         -                -             -                 -             -          (612 458)               -         (612 458)             -        (612 458)
Balance at June 30, 2016                              343 865 642    1 061 182 607     4 121 813         2 645 590     9 073 711    (1 052 367 600)   (219 945 085)     (195 288 964)     4 339 142    (190 949 822)
Shares issued in relation to RCF convertible       
loan and private placement to RCF                      41 909 400        9 563 390             -                 -             -                  -               -         9 563 390             -        9 563 390
Shares issued to STA                                    9 027 980        5 135 500             -                 -             -                  -               -         5 135 500             -        5 135 500
Stock-based compensation                                        -                -      (49 374)         (470 300)             -                  -               -         (519 674)             -        (519 674)
Stock options expired/cancelled                                 -                -   (2 012 619)                 -             -          2 012 619               -                 -             -                -
Net loss for the period                                         -                -             -                 -             -       (44 931 566)               -      (44 931 566)             -     (44 931 566)
Balance at December 31, 2016                          394 803 022    1 075 881 497     2 059 820         2 175 290     9 073 711    (1 095 286 547)   (219 945 085)     (226 041 314)     4 339 142    (221 702 172)
Shares issued to STA                             5      8 711 056        4 401 070             -                 -             -                  -               -         4 401 070             -        4 401 070
Stock-based compensation                                        -                -        35 798          (60 940)             -                  -               -          (25 142)             -         (25 142)
Stock options expired/cancelled                                 -                -     (293 604)                 -             -            293 604               -                 -             -                -
Net loss for the period                                         -                -             -                 -             -        (2 734 090)               -       (2 734 090)             -      (2 734 090)
Balance at June 30, 2017                              403 514 078    1 080 282 567     1 802 014         2 114 350     9 073 711    (1 097 727 033)   (219 945 085)     (224 399 476)     4 339 142    (220 060 334)

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

Condensed Interim Consolidated Statements of Cash Flow
(Presented in South African Rands)
                                                                               6 months ended
                                                                  June 30,           June 30,       June 30,
                                                                      2017               2016           2017
                                                                                                    (Note 1)
                                                                         R                  R             C$
Cash flows from operating activities
Cash generated from/(utilized in) operations                     7 151 077       (13 800 683)        711 229
Interest received                                                1 043 080            811 010        103 741
Interest paid                                                  (9 654 746)       (10 501 052)      (960 237)
Taxation paid                                                    (833 954)          (286 018)       (82 943)
Net cash (utilized in) operating activities                    (2 294 543)       (23 776 743)      (228 210)
Cash flows from investing activities
Investment in financial assets                                 (2 720 385)        (2 559 158)      (270 563)
Purchase of property, plant and equipment                     (20 329 113)        (9 238 707)    (2 021 884)
Proceeds from the disposal of property, plant and equipment          5 614              6 053            558
Movement in non-interest bearing receivables                      (55 757)          (149 386)        (5 544)
Net cash (utilized in) investing activities                   (23 099 641)       (11 941 198)    (2 297 433)
Cash flows from financing activities
Drawdowns from working capital facility                         21 500 000         25 000 000      2 138 337
Net cash generated from financing activities                    21 500 000         25 000 000      2 138 337
Net decrease in cash and cash equivalents                      (3 894 184)       (10 717 941)      (387 306)
Cash and cash equivalents at the beginning of the period        13 753 934         20 365 446      1 367 933
Cash and cash equivalents at the end of the period               9 859 750          9 647 505        980 627

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

Notes to the Condensed Interim Consolidated Financial Statements
For the periods ended June 30, 2017 and June 30, 2016
(Presented in South African Rands)

1 BASIS OF PREPARATION

The unaudited condensed interim consolidated financial statements (the "Interim Results") of Buffalo Coal Corp. ("BC Corp" or the
"Company") and its subsidiaries (the "Group") for the periods ended June 30, 2017 and June 30, 2016 have been prepared in accordance 
with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), as issued by the 
International Accounting Standards Board ("IASB") and have been prepared in accordance with accounting policies based on the 
IFRS standards and International Financial Reporting Interpretations Committee ("IFRIC") interpretations and are in compliance 
with IAS 34, Interim Financial Reporting.

The Interim Results have not been audited by the Group's external auditors. The Interim Results do not include all the information
and disclosures required in the consolidated annual financial statements and should be read in conjunction with the Group's
consolidated annual financial statements for the year ended December 31, 2016, which have been prepared in accordance with IFRS.
The Group has adopted the required new or revised accounting standards in the current period, as further set out in note 2 below,
none of which had a material impact on the Group's results.

The preparation of the Interim Results requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In preparing these
Interim Results, the significant judgments made by management in applying the Group's accounting policies and the key sources of
estimation and uncertainty were the same as those applied to the consolidated
annual financial statements for the year ended December 31, 2016.

References to "R", "Rands" mean South African Rands, "C$" mean Canadian Dollars and to "US$" mean United States Dollars.
References to Q2 2017 mean the 3 months ended June 30, 2017.

Going Concern

The Interim Results 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. In prior years, in response to conditions at the time, the Group implemented various restructurings at 
Buffalo Coal Dundee (Pty) Ltd ("BC Dundee") including two retrenchment processes and the conclusion of agreements with 
STA Coal Mining Company Proprietary Limited ("STA"). The arrangements with STA include the provision of contract mining services by 
STA at Magdalena ("STA Contract Mining Agreement"), the sale of certain underground mining equipment to STA and an equity settlement 
arrangement ("STA Equity Settlement Agreement") in terms of which a portion of the contract mining fees will be settled through the 
issuance of common shares of the Company ("Common Shares"), in order to alleviate cash flow pressures.  In addition, the Company secured 
additional funding from Resource Capital Fund V L.P. ("RCF") and Investec Bank Limited ("Investec") in December 2015, of which the last 
tranche was drawn in March 2016.  During Q2 2017, Investec agreed to release R22.0 million undrawn Working Capital Facility funds, which 
was subject to agreement being reached on the revised terms and conditions to the term loan and revolving credit agreement (refer to note 4). 
Although the Group has implemented various restructuring initiatives, the Group continues to experience operational challenges. 
The Group remains dependent upon sustaining profitable levels of operation, as well as the continued support of Investec, RCF and other 
stakeholders and believes that subject to its ability to meet current forecasts, it should be able to generate positive cash flows in the 
foreseeable future. The Company is in the process of negotiating further amendments to the term loan and revolving credit agreement with Investec.

As at June 30, 2017, the Company had a shareholders' deficiency of R220.1 million (December 31, 2016:
R221.7 million), a working capital deficiency of R217.0 million (December 31, 2016: R192.7 million) and for the six month period
ended June 30, 2017, had a net loss of R2.7 million (June 30, 2016: loss of R0.6 million). The Group continues to be in breach of
certain covenants with respect to its borrowings from Investec at June 30, 2017. The Company was in default of the scheduled R7.5
million repayments of the term loan facility at March 31, 2017 and June 30, 2017, and default notices were received from Investec in
this regard as well as the breach in covenants. On November 22, 2016, Investec provided a forbearance letter stating that it does not
intend to exercise its rights to request early payment of the outstanding debt; however, no waiver has been provided and Investec
has reserved its right to review this decision periodically, with no obligation to keep the Company advised in this regard. There is no
assurance that the Company will be able to meet its covenants in the future, or that Investec will provide future waivers, if required.
These matters constitute material uncertainties which cast significant doubt as to whether the Group can continue as a going concern.

If the going concern assumption was not appropriate for the Interim Results of the Group 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.

Convenience rate translation

The Company's functional and presentation currency is Rands. The Canadian Dollar amounts provided in the Interim Results
represent supplementary information solely for the convenience of the reader. The financial position as of
June 30, 2017 and the financial results for the six months period ended June 30, 2017 were translated into Canadian Dollars using a
convenience translation at the rate of C$1:R10.0545, which is the exchange rate published on Oanda.com as of June 30, 2017. Such
presentation is not in accordance with IFRS and should not be construed as a representation that the Rand amounts shown could be
readily converted, realized or settled in Canadian Dollars at this or at any other rate.

2    NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

The following standards, amendments and interpretations are issued and effective for the first time for the 6 months ended June
30, 2017:

IAS 7 ? Disclosure Initiative
The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities
arising from financing activities. The amendment did not have a significant impact on the Group.

IAS 12 ? Recognition of Deferred Tax Assets for unrealized losses
The amendments were issued to clarify the requirements for recognising deferred tax assets on unrealised losses. The amendments
clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset's tax base. They
also clarify certain other aspects of accounting for deferred tax assets.

The amendments clarify the existing guidance under IAS 12. They do not change the underlying principles for the recognition of
deferred tax assets. The amendment did not have a significant impact on the Group.

3    OTHER INCOME/(EXPENSE) ? NET

                                                                           6 months                     3 months                 6 months
                                                                             ended                        ended                     ended
                                                                     June 30,        June 30,     June 30,        June 30,       June 30,
                                                                         2017            2016         2017            2016           2017
                                                                                                                                 (Note 1)
                                                                            R               R            R               R             C$
Foreign exchange gain - net                                        17 420 998      12 867 018    9 156 348         330 354      1 732 650
Fair value adjustment on financial assets                             827 105       1 157 079      331 664          43 957         82 262
Fair value adjustment on conversion option and warrant liability   24 048 926      65 107 090   13 396 042      56 264 463      2 391 848
Other income                                                        2 560 555       1 520 622    1 715 129         669 849        254 666
                                                                   44 857 584      80 651 809   24 599 183      57 308 623      4 461 427

4    INVESTEC BORROWINGS

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 and second tranche were fulfilled and drawn in
December 2015 and March 2016 respectively. 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.

Due to continued cash constraints, Investec was approached during the first quarter of 2016 for a 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 term loan and
revolving credit agreement ("Fourth Amendment") 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 each 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 to BC Corp between April 1,
2016 and June 30, 2016, unless prior written consent was obtained from Investec. To date, no cash has been swept to reduce the
working capital facility.

Investec was again approached for a deferral of the term loan facility repayment due on June 30, 2016. On June 30, 2016,
BC Dundee entered into a fifth amendment to the term loan and revolving credit agreement ("Fifth Amendment") in
terms of which the repayment schedule for the term loan facility was replaced with a new schedule with principal repayments
commencing on September 30, 2016. Investec extended the restriction on the outflows of funds from BC Dundee to BC Corp to
September 30, 2016, unless prior written consent was obtained from Investec.

On each of September 30, 2016 and December 31, 2016 the Company made the term loan facility repayments of R7.5 million.


The Magdalena mine current LOM has a main development panel, which is Panel 417. Drilling results in panel 417 revealed a dyke
of 22 meters thick, with a 13.5 meter down-throw. In terms of the life of mine planning for Magdalena, the mine had to develop
through this dyke in order to access the LOM block towards South-West of the reserves, to establish additional pit-room. Funding
was required for this development, and Investec was approached to make the undrawn R22.0 million Working Capital Facility
available for this purpose.

On April 13, 2017, BC Dundee entered into a sixth amendment to the term loan and revolving credit agreement and the undrawn
working capital facility balance was made available for drawdown. The terms of the 6th amendment were as follows:

    -   The Panel 417 project implementation shall be reviewed and its completion verified by a Project Oversight Committee
        appointed by Investec.
    -   Investec agrees to not exercise its rights arising from events of default until July 14, 2017.
    -   Investec will review the terms and conditions of the facility after July 14, 2017, with a view to agreeing terms and
        conditions of an extension of the final maturity date for a period of no less than 2 years, subject to the project having been
        successfully completed to the Project Oversight Committee's satisfaction.
    -   Investec will release the R22.0 million as working capital for the purpose of ensuring the project is completed timeously.
    -   A Life of Mine Royalty ("LOMR") shall be payable to Investec on all bituminous coal sales with effect from July 1, 2017,
        calculated at a rate of 3.54% on all bituminous coal sold which was mined from the Magdalena reserve.
    -   If all amounts owing under the facility are paid on or before June 30, 2018, the Company shall pay Investec a fee equal to
        the greater of the aggregate amount of the LOMR which was payable until the date of repayment, and R22.0 million,
        minus the aggregate amount of the LOMR which was paid to Investec up to that date. The LOMR shall be terminated if the
        facilities are fully repaid before June 30, 2018.

As of the date of these Financial Statements, the Company has drawn R79.7 million from the working capital facility.

BC Dundee was required to meet specified debt covenants at March 31, 2017 and June 30, 2017 and was in breach of certain of
these covenants at these dates. Such breach constitutes an event of default under the debt agreement whereby Investec is entitled
to request early payment of the outstanding debt. On November 22, 2016, Investec provided a forbearance letter stating that it does
not intend to exercise its rights to request early payment of the outstanding debt; however, it has reserved its right to review this
decision periodically, with no obligation to keep the Company advised in this regard.

Due to continued cash constraints, the scheduled R7.5 million repayments of the term loan facility were not made on March 31,
2017 and June 30, 2017, constituting an event of default. Default notices were received from Investec in this regard as well as the
breach in covenants.

Due to Investec being entitled to request early payment of the outstanding debt, as a result of the breach in covenants referred to
preceding, management has determined that the total Investec debt of R185.1 million be classified as current borrowings.

The Company is in the process of negotiating the 7th amendment to the term loan and revolving credit agreement.

5    ISSUANCE OF COMMON SHARES TO STA

On February 22, 2017 and June 13, 2017, the Company issued Common Shares to STA pursuant to the STA Equity Settlement
Agreement entered into during the financial year ended December 31, 2015. An additional 4 286 908 and 4 424 148 Common Shares
were issued at C$0.05 (February 22, 2017: R0.50 and June 13, 2017: R0.48).

6    FINANCIAL INSTRUMENTS AT FAIR VALUE

The following table presents the group's financial assets and liabilities that are measured at fair value at June 30, 2017 and
December 31, 2016:
                                              
                                                                                     Level 1           Level 2       Level 3
                                                                                           R                 R             R
June 30, 2017                                              
Investment in financial assets                                                    45 180 153                 -             -
Conversion option liability                                                                -         7 233 962             -
Warrant liability                                                                          -            50 209             -
December 31, 2016                                              
Investment in financial assets                                                    41 633 486                 -             -
Conversion option liability                                                                -        31 905 346             -
Warrant liability                                                                          -           344 627             -

On July 3, 2014, BC Dundee finalized a restructuring of the Investec loan facilities ("First Amended Investec Agreement"). In
connection with the First Amended Investec Agreement, Investec subscribed for 34 817 237 warrants in the Company with a strike
price of C$0.1446, the proceeds of which, if exercised, will be applied against settlement of the Investec five-year senior secured
loan facility of R50.0 million (the "Bullet Facility"). RCF has the right to acquire the warrants from Investec at agreed pricing until July
3, 2019.

The Bullet Facility and the warrants have been treated as a compound financial instrument, as the Bullet Facility could effectively be
settled through the issuance of Common Shares. Furthermore, an embedded derivative exists due to the warrants being
denominated in Canadian Dollars and the functional currency of the Company being Rands. The Bullet Facility has been recognized in
two parts, a component liability and a warrant liability. The component liability will be accreted to its face value of R40.5 million
using the effective interest rate method at approximately 35.5%.

The initial carrying value of the warrant liability was obtained using the Black-Scholes option pricing model and the following
assumptions: expected volatility of 100.0%, life of 5.0 years, risk-free interest rate of 1.71% and an expected
dividend yield of 0%.

The fair value of the warrant liability at June 30, 2017 was obtained using the Black-Scholes option pricing model and the following
assumptions: expected volatility of 81.6%, life of 2.0 years, risk-free interest rate of 1.1% and an expected dividend yield of 0% (year
ended December 31, 2016: expected volatility of 83.9%, life of 2.5 years, risk-free interest rate of 0.8% and an expected dividend
yield of 0%).

The RCF Convertible Loan has been recognized in two parts, a component liability and a conversion option liability. An embedded
derivative exists due to the convertible loan facility being denominated in US Dollars, the conversion feature being exercisable in
Canadian Dollars and the functional currency being Rands. The component liability will be accreted to its face value of US$27.0
million (approximately R352.4 million) (year ended December 31, 2016: US$27.0 million (approximately R371.0 million)) using the
effective interest rate method at approximately 5.3% (year ended December 31, 2016: 5.3%).

The initial carrying value of the conversion option liability at each advance was obtained using the Black-Scholes option pricing
model and the following assumptions: expected volatility between 51% and 107%, life of between 3.9-5.0 years, risk-free interest
rate of 0.5%-1.5% and expected dividend yield of 0%.

The fair value of the conversion option liability at June 30, 2017 was obtained using the Black-Scholes option pricing model and the
following assumptions: expected volatility of 81.6%, life of 2.0 years, risk-free interest rate of 1.0% and expected dividend yield of 
0% (year ended December 31, 2016: expected volatility of 90.8%, life of 2.5 years, risk-free interest rate of 0.8% and expected dividend 
yield of 0%).

7    COMMITMENTS AND CONTINGENCIES

Director Agreement

An agreement with a director requires that payment of approximately R3.0 million be made upon the occurrence of a change of
control, other than a change of control attributable to RCF. As no triggering event has taken place, no provision has been recognised
as of June 30, 2017.

STA Contract Mining Agreement

In terms of the STA Contract Mining Agreement, STA is mining four sections at Magdalena at a fixed contract mining fee per tonne,
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. In terms of the STA Equity Settlement Agreement, a portion of the contract mining fees will be
settled in Common Shares, in order to alleviate cash flow pressures.

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

Capital Commitments

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

                                                                                           June 30,    December 31,      June 30,
                                                                                              2017             2016          2017
                                                                                                 R                R            C$
Property, plant and equipment                                                            7 777 522        2 919 134       773 534
                                                        
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 and Regulatory 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.

Effective November 20, 2015, regulations governing financial provisions for asset retirement obligations was transitioned from the
Mineral and Petroleum Resources Development Act ("MPRDA") to the National Environmental Management Act ("NEMA"). There is
currently substantial uncertainty regarding the revised requirements for financial provisions pursuant to NEMA. Management is
currently seeking clarification of the revised requirements in order to determine the expected impact of the change, which may
result in a significant increase to the asset retirement obligation. One of the key changes in the requirements is that closure cost
assessment now has to be based on a "Sudden Closure" assessment and third party rates whereas pursuant to the MPRDA, it was
based on the end of mine life and prescribed rates. Uncertainty exists around the transitional arrangements although the
implementation date of the new Act is expected to be February 20, 2019.

Outstanding Legal Proceedings

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. Settlement was reached between the parties on 25 May 2017, and the application is
now expected to be withdrawn by the Avemore Trust. While this is expected to occur by mid-December of 2017 at the latest, it has
not occurred as of the date of the approval of these financial statements.

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. On
March 23, 2016, Avemore Trust filed a counter application for the Ministerial Decision to be remitted for consideration by the
Minister. Settlement was reached between the parties on 25 May 2017, and the application is now expected to be withdrawn by the
Avemore Trust. While this is expected to occur by mid-December of 2017 at the latest, it has not occurred as of the date of the
approval of these financial statements.

Settlement with the Avemore Trust was reached on the following terms:

    -   R2.0 million on settlement of historic issues as well as an additional R280 thousand (being VAT on the amount of R2.0
        million).
    -   17.5k litres of water to be stored to allow the continued use of the borehole on the property.
    -   R2.50/tonne on future production, subject to a minimum monthly amount of R25 thousand.

South African Revenue Service ("SARS") Correspondence

During the year ended December 31, 2016, BC Dundee received a letter of demand 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 has disallowed diesel refunds in the amount of R14.7 million (including interest and penalties)
for the period December 2012 to February 2016. The Company applied to SARS to suspend payment, however this request was
denied. As per a request received from SARS, payment was made in three equal instalments of R4.9 million between March 2017
and May 2017. The Company has disputed the disallowance of diesel refunds and believes it has a defendable case.

During the year ended December 31, 2016, Zinoju received correspondence from SARS after conducting an audit of the 2012 to 2014
tax returns, disallowing an expense claimed in the 2012 tax return. The total exposure is approximately R3.0 million plus penalties of
R1.5 million and interest of R1.8 million, all of which have been provided for as at June 30, 2017. The Company raised an objection to
SARS disputing the penalties and interest levied, however the objection was disallowed. The Company has lodged an appeal to the
SARS Commissioner to defend its case and is awaiting feedback from SARS. During August 2017, SARS advised that they have offset
VAT refunds of R4.3million due to Zinoju against this tax liability.

8    SUBSEQUENT EVENTS

Restructuring of Investments

Following the transition of financial provisions for asset retirement obligations to NEMA, Zinoju performed a closure cost
assessment for financial provisions based on sudden closure, which resulted in a shortfall between the Trust investment balance
and the closure cost assessment. This triggered a review of the structure of the financial provisions in Zinoju.

After careful consideration of the alternative structures, it was proposed that Zinoju amend their method of financial provisioning
from a Trust fund method to an Insurance solution. The ultimate goal is to ensure that Zinoju provide the DMR with the required
financial guarantees for the mining rehabilitation liability calculated in terms of NEMA.

Zinoju was required to make an additional R4.1 million (excluding VAT) cash contribution in July 2017 to the insurance facility, which
increased the investment to R49.1 million. The shortfall of R13.9 million will be funded over the Life of Mine through the growth in
the investment, resulting in no further cash contributions required for the R63.0 million financial guarantees issued to the DMR,
provided there are no changes to the closure cost liability. It is expected that the existing Trust fund will be dissolved and the funds
transferred to Centriq Insurance Company limited during August 2017.

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.

August 22, 2017
Sponsor: Questco Proprietary Limited
Date: 23/08/2017 05:19:00 Supplied by www.sharenet.co.za                     
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