Wescoal’s voluntary strategic and operational update WESCOAL HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number 2005/006913/06) Share code: WSL ISIN: ZAE000069639 (“Wescoal” or “the Company” or "the Group") Wescoal’s voluntary strategic and operational update WESCOAL CONTINUES TO BUILD ON 2016 SUCCESSES Strategic update Wescoal has leapt into 2017 on the back of FY17 half year profits (unaudited) reported in November 2016, up more than 500 percent having delivered across the board on its commitments. Heading up the Group’s bouquet of successful milestones: a long term contract that calls for some 7.8 million tons of coal to be delivered to Eskom over the next 5 years; HDSA ownership increasing to more than 51 percent and the injection of R178 million equity; export contracts of more than 1 million tons per annum; and strengthening of the management team Wescoal’s coal supply agreement (“CSA”) with Eskom which commenced on 1 November 2016 will ensure uninterrupted coal supply for the next 5 years. Some 7.8 million tons of coal beneficiated at Wescoal’s Processing Plant will be delivered to Eskom during the life of the CSA. This equates to approximately 165 000 tons of run of mine (“ROM”) coal per month from Elandspruit Colliery. Wescoal’s stated intent was to conclude a BEE transaction by end December 2016 (“the BEE Transaction”). On 20 December 2016 shareholders were advised that the Company had successfully concluded and implemented its BEE Transaction. The Company has now secured at least 51% direct black ownership for the next five years. Additionally, the BEE Transaction injected R178 million capital into the business which has been earmarked for use in acquisitions. Export contracts for more than 1 million tons per annum over the next three years have also been concluded. These contracts have significantly de-risked and diversified future revenue streams. A number of management appointments in key functions were made during calendar year 2016. These high calibre professionals have not only helped revitalise the organisation, but they have also contributed toward a transformed business leadership team. Management’s priorities remain to strive for safe and reliable operations, solid and predictable financial performances, re-alignment of the trading business to Wescoal’s needs and to maximise value from the existing asset base. Planning and executing projects in a conservative, risk-based manner will continue to form the basis on which Wescoal will manage and realise value from its growth plans. Growth plans Wescoal remains an active participant in the consolidation of the domestic junior coal mining sector with respect to reviewing value enhancing opportunities. Recently concluded Eskom and export coal sale contracts, coupled with an equity injection from the BEE Transaction, have positioned Wescoal very well to further its inorganic growth ambitions of acquiring additional coal resources and interests in key logistic infrastructure. Organic growth options revolve around expanding Elandspruit and operationalising the Khanyisa Colliery. These growth initiatives support Wescoal’s 8 million ton per annum of ROM aspirations and revenue diversification strategy. Operational update Operationally, Wescoal continues to perform in line with expectations, consistent with the achievements during the first half of FY17. Mining division No reportable accidents were recorded during the period 1 April 2016 to 31 December 2016. The Elandspruit complex continues to deliver on its promise and will continue to be a core value enhancing contributor to the Group. A number of projects were successfully completed resulting in steady state ROM production increasing from 165 000 tons per month to more than 200 000 tons per month and beneficiation capacity increasing to 190 000 tons per month. Work on the small underground mining initiative has progressed well and first coal was extracted during November 2016. It is expected that the underground activities will reach its targeted steady state production of 25 000 tons per month during February 2017. The Intibane Colliery was effectively operationalised in October 2016 and now meets the production requirements of secured off-take agreements. Mining activities at the Khanyisa Colliery are only subject to consent from the Department of Mineral Resources. The integrated Khanyisa Colliery has a targeted production rate of approximately 100 000 tons per month. The financial year to date ROM production is approximately 2.4 million tons. Trading division The trading division continues to operate resiliently under difficult business conditions. Business re- alignment initiatives have to date resulted in the closure of the Port Elizabeth depot and realignment of the Western Cape operations. This work is expected to be complete by mid-2018 and will result in a more robust and simplified trading division. Total sales are in line with that of prior years and the business continues to carefully manage credit risk. Financial update The Company continues to focus on strong cash flow and working capital management. The balance sheet has strengthened significantly over the past 18 months, with the Group now in a net cash position following the BEE Transaction. The capital structure is being optimised with a view to taking advantage of growth opportunities and rewarding shareholders. The Company declared two dividend tranches in 2016 namely: final dividend of R10 million for FY16 and a special dividend of R10 million declared during September 2016. 12 January 2017 Sponsor Nedbank Corporate and Investment Banking Investor Relations & Communications Singular IR Date: 12/01/2017 01:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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